Social Policy

Falvo – 10 Things to Know About Yellowknife’s Northern Property Conundrum

Blogger and researcher Nick Falvo comments on Northern Property’s decision to “tighten” its policy on renting to income assistance recipients.

On May 20, I was a guest on The Trailbreaker (CBC North) with host Loren McGinnis discussing a controversial decision by Northern Property, the NWT’s largest for-profit residential landlord.  The 8-minute podcast is available here.

Northern Property has been in the news lately for announcing that it will “tighten” its policies on renting units to recipients of income assistance.  According to a company spokesperson:  “two-thirds of its tenants currently on income assistance are behind in rent payments.”

Here are 10 things to know about this conundrum:

1.  Rental housing in Yellowknife is expensive.  Average rent for a two-bedroom unit in Yellowknife is $1,600.  (For more on Yellowknife’s housing market, see this report.)  If $1,600 sounds high to most readers, it ought to:  average rent for a two-bedroom apartment in Toronto is approximately $1,200; in Vancouver, it’s less than $1,300.  (To see rent levels in other Canadian municipalities, have a look at this spreadsheet.)

2. There is unemployment in the NWT.  Like most Canadian jurisdictions, there are not enough jobs in the NWT to keep all working-age people employed, and the NWT has an official unemployment rate of almost 9%. With that in mind, it should not come as a surprise to most readers that a substantial percentage of the NWT’s population receives “income assistance” (which in other jurisdictions is known generically as social assistance).  In 2012, a “single employable” person on income assistance in the NWT received just over $17,000 a year to live on; a single person with a disability received just under $22,000; and a single parent received just under $27,000.  (For more on these rates, see this 2013 publication.)  While these figures may sound high, readers should remember that average monthly rent for a Yellowknife two-bedroom apartment is $300 higher than in Vancouver and $400 higher than in Toronto.

3. Northern Property is big.  Northern Property owns almost three-quarters of rental properties in YellowknifeIn a recent interview, the company’s vice-president of residential operations said “we have a business to run…” (which, I would argue, is another way of saying “we have profit to make”).  And businesses, as we all know, often seek to maximize their profits.  Key question:  To what extent should the territorial government rely on a for-profit firm to own and operate units for low-income tenants?

4. Northern Property may be in a monopoly situationWhy is average rent in Yellowknife considerably higher than in Vancouver or Toronto?  Admittedly, harsh climate, the high cost of construction and high utility costs explain part of this differential; but I’m not entirely convinced that these factors explain everything (especially considering that median monthly rent for a two-bedroom apartment in Whitehorse is just $900).  If one or two other for-profit entities were to enter Yellowknife’s rental housing market (with some encouragement from the Government of the NWT) would Northern Property keep charging rent at the current levels?

5. The for-profit vs. non-profit debate is old.  The role of the private sector in the provision of housing for low-income households has been debated for decades.  I have argued before that a key advantage of non-profit entities (such as the YWCA Yellowknife) owning and operating rental units is that they have a clear interest in keeping rent levels low for their tenants over the long term.  For more on this debate, see this blog post.

6. The Government of the NWT can pay now or pay later.  It is more cost effective to provide a subsidy for a household to live in an apartment than it is to deal with the downstream effects of homelessness.  For example, a $6,000 annual subsidy from government could keep a person housed in a privately-owned rental unit in Yellowknife.  But keeping that same person in an emergency shelter might cost three times that amount.  And if a person loses their housing and ends up in jail, it might cost 10 times that amount. (For more on the “costs of homelessness,” see this 2005 report and this 2012 report.)

7. This problem may get worse.  I believe that the current tension between Northern Property and the recipients of income assistance will only intensify, for two reasons.  First, the apartment vacancy rate in Yellowknife is approximately 4% right now, which is relatively high by historical standards.  In such a context, one would expect a landlord to be relatively eager to fill units.  Going forward, should vacancy rates dip down to 2% or 1%, one would expect a landlord to be less eager to fill units, meaning that it would not be unreasonable for Northern Property to become even more selective in terms of tenants.  Second, the federal government has recently tightened eligibility rules for Employment Insurance (EI) in Yellowknife.  Effective October 14, in order to quality for EI, workers in Yellowknife will have to have “worked 700 hours in the previous 52 weeks, up from 420 hours…[while b]enefits will only be able to be collected for a maximum of 36 weeks instead of 45…”

8. The Government of the NWT could expand the TRSP.  The Government of the Northwest Territories’ has something called the Transitional Rent Supplement Program (TRSP), which currently provides subsidies of up to $500 per month for low-income households who currently rent from for-profit landlords.  The subsidy is paid directly to the landlord.  At present, eligible tenants can only receive assistance through the program for a maximum of two years.  Also, people who are currently in arrears with a public housing provider in the NWT are ineligible for the TRSP.  As a short-term remedy for the current Northern Property challenge, why not extend the maximum period of TRSP receipt to three years?  And why not use some discretion when assessing an applicant’s arrears situation with public housing, keeping in mind that some tenants fall into arrears through no fault of their own?

9. The Government of the NWT could fund more head leases.  Another possible way to respond to the current situation (at least in the short term) would be for the Northwest Territories Housing Corporation to provide additional funding for the Yellowknife Housing Authority (a non-profit entity that administers social housing in Yellowknife) to enter into additional ‘head lease’ arrangements with Northern Property.  In such situations, the Yellowknife Housing Authority is the de facto tenant on units; it has a lease with the for-profit landlord (Northern Property) as well as a sub-lease with the household residing in the unit.  With a 4% vacancy rate, now would be a relatively good time for the Yellowknife Housing Authority to enter into negotiations.  A year from now, if the vacancy rate is lower, Northern Property might be less eager to engage.

10. Over the long term, the role of the federal government is crucial.  If there’s a constant theme in Canadian housing policy, it’s that vastly more housing gets built for low-income persons when the federal government plays a leadership role with respect to funding. (For more on the role of the federal government in housing throughout Canada, see this blog post.)  Going forward, this role must be borne in mind as residents of the NWT look for long-term solutions to the lack of affordable housing.  As I wrote last year: “much of Canada’s social housing stock exists because of funding agreements that have been in place for several decades.  Typically, these agreements were to last anywhere from 35 to 50 years, and have involved commitments from senior levels of government to fund operating costs (including the ongoing cost of hydro and maintenance).

With much of Canada’s social housing having been built in the late 1960s, some of these agreements have already begun to expire; and many more agreements are set to expire over the next decade.  The Harper government has been quite silent on what (if anything) it plans to do about this emerging problem.” Though this declining federal funding applies directly to housing that is owned and operated by non-profit entities (such as the Northwest Territories Housing Corporation) this will have serious repercussions for Yellowknife’s broader housing market going forward.  Indeed, as I also wrote last year: “Expiring operating agreements will hit Canada’s northern territories especially hard, due largely to the fact that operating costs for housing in northern jurisdictions are higher than in other parts of Canada.”  For an overview of the potential impact of expiring operating agreements on Canada’s northern territories, see this 2007 report by Luigi Zanasi.

Acknowledgements. I wish to thank George Lessard, Steve Pomeroy and Luigi Zanasi for assistance with this blog post.  Any errors are mine.

Postscript.  In 2011—under the supervision of Dr. Frances Abele and in partnership with Arlene Haché—I wrote two policy reports, one on affordable housing in the NWT, and another on homelessness in Yellowknife.  Both reports can be accessed here.

Nick Falvo is a Ph.D. candidate at Carleton University.

Photo credit: “yellowknife at twilight” by Agent Magenta under a creative commons license.

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  • Trevor Teed

    Northern Property earns $18.11-million in Q1

    2014-05-13 17:09 MT – News Release

    Mr. Robert Palmer reports


    Northern Property Real Estate Investment Trust has released financial results for the three months ended March 31, 2014. Northern Property reported first quarter funds from operations per unit of 49 cents.

    Todd Cook, president and chief executive officer, commented: “Our financial results for the quarter were negatively impacted by both the severe weather across Canada, weaker hotel and execusuite performance, and stubbornly higher vacancy in Yellowknife and Fort McMurray. We remain focused on improving the results of our existing portfolio and have allocated significant resources and efforts to leasing, customer service and the maintenance of our properties. As we move into the spring and summer months, we are starting to see signs of improvements in the portfolio that should translate into better performance in the upcoming quarters.”

    Mr. Cook continued: “We completed 110 units in Regina and Iqaluit as part of our development program. The lease-up is progressing according to plan, and we expect to see these assets contributing positively to the financial performance in the second quarter. The new 39-unit building in Iqaluit was recently leased up with full occupancy on May 15, 2014. These developments continue to be accretive for us on a FFO basis, as well as creating asset value. We have also commenced development of 418 units in Lloydminster, Grande Prairie and Fort St. John so far this year. We continue to work towards our goal of developing 600 to 800 multifamily units per year.”

    (thousands of dollars except per-trust-unit and percentage amounts)

    For the three months ended March 31,
    2014 2013

    Total revenue $45,408 $41,911
    NOI 23,872 23,428
    Net and comprehensive income 18,113 17,341
    FFO 15,493 15,877
    FFO per trust unit, diluted $0.49 $0.50
    FFO payout ratio 81.5% 77.2%
    Distributions declared 12,620 12,259
    Distributions per trust unit $0.40 $0.38

    Funds from operations

    For the first quarter of 2014, FFO decreased slightly from 2013 as a result of little quarter-over-quarter growth in net operating income. NOI was impacted by higher vacancy, mainly in Fort McMurray, Alta., and Yellowknife, NWT, and increased utility costs from a severe winter due mostly to increased consumption. As experienced by most REITs, the harsh weather in the first three months of the year had a negative impact on results with an estimated $900,000 of additional utility expense or three cents of FFO. In addition, financing costs increased when compared with the first quarter of 2013 as mortgage interest expense increased due to the higher number of leveraged properties.

    Total residential vacancy loss for the three months ended March 31, 2014, was 8.8 per cent compared with 6.4 per cent for the same period of 2013 and 6.7 per cent in the fourth quarter of 2013.

    Stabilized vacancy is a measure used by management to determine the vacancy performance of its stabilized properties. A property is considered non-stabilized if it is from a recent acquisition, a building that is in the lease-up phase of a new development or any property that requires significant capital improvement. All other properties are considered stabilized. Stabilized vacancy for the three months ended March 31, 2014, was 7.8 per cent. Incentives are being used to attract and retain residents, a significant capital and maintenance program is under way, and progress is being made; however, meaningful improvement is not expected until the second half of 2014.


    During the three months ended March 31, 2014, five residential units were acquired in Iqaluit, Nunavut, bringing the total to 9,905 multifamily units at the end of the first quarter of 2014. In addition, during the three months ended March 31, 2014, Northern Property purchased 30,000 square feet of commercial space in St. John’s, Nfld., the fourth building of the office park complex in suburban St. John’s, Nfld.


    The first quarter of 2014 saw the completion of the 189-multifamily-unit project in Regina, Sask., with the last 71 units being completed in February. The lease-up of the project is progressing with approximately 70 per cent of the total project currently leased. The project was completed for a total cost of $26.7-million or $142,000 per unit and an expected cap rate approaching 8 per cent. On completion, a fair value increase of $5.6-million or $30,000 per unit was recognized for accounting purposes.

    In addition, during the first quarter of 2014, Northern Property completed 39 multifamily units in Iqaluit, Nunavut. The lease-up of the building has started and is expected to be completed during the second quarter of 2014. The building was completed for a total cost of $9.2-million or $235,000 per unit, with an expected cap rate of 9.7 per cent.

    Debt to gross book value, debt service coverage ratio and interest coverage ratio are considered non-generally accepted accounting principles measures and do not have any standardized meaning as prescribed by GAAP.

    Debt to gross book value has increased to 45.5 per cent at March 31, 2014, up from 45.0 per cent at Dec. 31, 2013, as up-financing capacity was used to finance acquisitions and developments. During the three months ended March 31, 2014, Northern Property completed $29.6-million in mortgage financings and renewals with a weighted-average interest rate of 3.32 per cent and a term to maturity of 5.5 years. The proceeds were used to repay existing mortgages and finance acquisitions and developments.

    Distributions to trust unitholders

    During the three months ended March 31, 2014, Northern Property declared monthly cash distributions of 13.17 cents per trust unit. For the first quarter of 2014, Northern Property declared distributions totalling $12.6-million (March 31, 2013: $12.2-million). The December, 2013, distribution and a portion of the January, 2014, distribution, paid in February, 2014, were dividends from NorSerCo.

    Normal course issuer bid

    During the three months ended March 31, 2014, the REIT purchased and subsequently cancelled 78,000 trust units under its NCIB for total consideration of $2.2-million. Since the commencement of the NCIB in August, 2013, 210,000 units have been purchased for a total value of $5.7-million. Northern Property is authorized to purchase, in a 12-month period, up to 3,067,458 trust units, representing 10 per cent of its public float.

    Stapled unit structure

    Northern Property terminated its stapled unit structure after the close of markets on Jan. 31, 2014, and as a result, the NorSerCo common shares were delisted (the NorSerCo common shares have traded as part of a stapled security) from the Toronto Stock Exchange. Trust units are now listed on the TSX in substitution for the stapled securities under the trading symbol NPR.UN. Cash taxes in the quarter were $246,000 as a result of the dissolution.

    Financial statements

    Northern Property’s unaudited condensed consolidated financial statements, the notes thereto, and management’s discussion and analysis for the three months ended March 31, 2014, can be found on Northern Property’s website or on SEDAR.

    Results conference call

    Northern Property’s conference call will take place on May 14, 2014, at 11 a.m. Mountain Time, 1 p.m. Eastern Time. Participating on the call will be Mr. Cook (chair), president and chief executive officer, and Robert Palmer, chief financial officer. Investors and analysts are invited to participate in the call by calling 1-888-231-8191 or 647-427-7450. You will be required to provide the conference call operator with the conference ID No. 26009984 prior to being admitted to the call. A recorded playback of the call will be available from May 14, 2014, to May 21, 2014, by calling 416-849-0833 or 1-855-859-2056, passcode No. 26009984. The recording will also be available on the REIT’s website on May 14, 2014.

    We seek Safe Harbor.

    © 2014 Canjex Publishing Ltd. All rights reserved.

  • Trevor Teed

    This company is a public traded company. All of its financial records are available online. it is worth approximately 3/4 of a billion dollars but it is, at least in Yellowknife, essentially a slum landlord. The government should have a better standard of what companies are allowed to rent to clients.

  • Aged_English_Teacher

    A nice 2-bedroom 1-bath condo will cost you around $1700-$1800 per month in Yk, in mortgage, taxes, insurance and operating costs. Anyone in Yk who can actually afford the rent on a 2 br should probably buy (income over $60K annually). NP’s rents may or may not be extortionately high in relation to their costs. As Trevor points out, a brutally cold winter had a nasty impact on heating costs in the north, and NP are a REIT. The real question may be for the construction industry: why are construction costs so staggering high in Yk?

  • arcticrobin

    Mr. Falvo makes the statement: “If one or two other for-profit entities were to enter Yellowknife’s
    rental housing market (with some encouragement from the Government of
    the NWT) would Northern Property keep charging rent at the current
    I can only think that they would keep the rates the same because anyone else coming into the community would see that an existing company can charge these high rates and they would believe they could too. Having lived in Yellowknife for many years I discovered that even though there was alleged competition in many markets it wasn’t true competitions is was more like a duopoly where bot businesses ganged up on the consumer.

  • Lifelong taxpayer

    This pandering crap is why we import labour and have fit 20 year olds on welfare, when did Canadians stop being responsible for ourselves? With such logic I guess I’ll pop by the bank and tell them I won’t be paying my loan cause my EI cheque is held up by a Canada post strike. I’ll just direct them to this article.

  • Guest

    They are notably the worst rental company in YK.. We have rented from them. They are bad.. Try Midwest if you are looking for a place to rent however keep in mind that renting an apartment in YK is basically paying a mortgage. If you are intending of going to YK for any period of time that is longer than a few years you are better off investing into a mortgage and paying into equity. When you decide to leave YK (which isn’t very long lately due to the extreme cost of living along with putting up with extreme cold temeratures) you will at least get some of your investment back.

  • Jack

    median monthly rent for a two-bedroom apartment in Whitehorse is just $900. It is only $950 in Yellowknife according to these figures…. not a convincing point

  • veritussubito1

    If anyone feels that Northern Property et al have an oligopoly, you have some recourse. Ask the federal Competition Bureau to investigate the situation. I know that they have ordered some corporations to divest themselves of properties and to limit themselves to a certain percentage share of the market (NWT in this case). If they ignore the CB’s ruling, a fair chunk of their profits will help to boost the Canadian economy. You can go online and read up on some of the fines various corporations have paid in the past. Who knows (besides me), you may see some dirt on even the NWT, Nunavut and the Yukon. Sometimes they publish names and positions in corporations i.e. more than 15 minutes of unwanted (in)fam(y). Have fun, it warms you in cold weather!