For more than seven decades, housing availability in the mountain town of Jasper, Alta., has been a challenge.

Although the total number of dwellings is slowly growing, in the past 10 years, the rental units in the primary market – units built specifically as rental – has declined as some units have transitioned into condo ownership. The shortfall in the number of dwellings needed to meet demand in Jasper has gone from 235 units in 2002 to roughly 700 in 2022.

“In Jasper, housing has always been in short supply,” says the town’s mayor, Richard Ireland. “Over the years, efforts have been made to correct that, but the problem seems to just continue regardless of all the steps that have been taken.”

These steps have consisted in asking Parks Canada to release land for the construction of both market and non-market, or subsidized and co-op housing.

Located on a national park, Jasper’s town boundary is constrained by Parks Canada’s regulations to limit the townsite’s physical expansion and protect the environment.

To ensure the town’s population remains in balance with the 118,222 square metres of developable land allocated to Jasper, Parks Canada requires that only those who work or run a business are eligible to live there – and releases parcels as needed.

“We’ve been able to get housing that’s more affordable and stays that way,” Mr. Ireland says. “But even with all the units that have been built, the pressure continues.”

In the face of skyrocketing visitor numbers, the need for more staff in Jasper is growing, and the availability of well-maintained, affordable housing for workers in Canada’s second most popular national park seems to be reaching a breaking point.

Since 2014, vacancy rates in Jasper’s primary rental market have remained close to zero, driving rents up by 30 per cent over the same period.

Christine Reyes (whose name has been changed to protect her identity) and her boyfriend share a one-bedroom apartment in Cavell Apartments, the town’s first purpose-built rental complex developed to provide staff accommodation in the 1970s.

Originally from the Philippines, Ms. Reyes moved to Cavell Apartments in the fall of 2021. Since then, the couple’s rent has gone up by 20 per cent – from $1,075 to $1,270 – and further increases are expected in 2023.

“What we’re paying now is just enough for us to make [ends meet],” Ms. Reyes says, noting she pays an additional $185 a month in parking, storage and pet fees. “I have family back home that I’m sending money to. I don’t think I could send money if rent [goes] up.”

In February, some tenants of Cavell Apartments received a letter from property management, informing them rents would be rising by about 40 per cent this year. The notice cites inflation, interest rates, as well as supply and demand as the drivers of such an increase.

While the proposed hike for existing tenants has been reconsidered, a bachelor suite in the complex was listed in March for a monthly rent of $1,604.50 – a rate akin to downtown Vancouver’s average rent for the same type of unit.

The property management company did not respond to requests for comment.

In a town where a significant share of renters are employed in the tourism industry, and whose hourly wage averages $18.36 (roughly $1.80 less than in B.C.), spending more than $900 a month in rent isn’t a viable option.

For local businesses, this challenge means they have to step in and absorb some of the cost of housing on behalf of their staff.

To ensure she can hire full-time staff year-round, Lynn Wannop, owner of Coco’s Café, has rented a two-bedroom unit in Cavell Apartments for nearly a decade. “That apartment makes it so that I can hold on to staff in the winter, when it’s really slow,” she explains.

Currently, she pays $1,225 a month in rent for the unit, and charges her staff $500 to live there. But in the face of the proposed increases, she wouldn’t have a choice but to continue to pay whatever rate the landlords ask. “As a business owner I have to suck it up and pay,” Ms. Wannop says. “I can’t operate my business without it.”

But spending more in staff housing costs means Ms. Wannop can’t raise wages either.

“I want my staff to be able to afford to live,” she says. “But I can’t afford to pay them any more.”

Moreover, Jasper’s housing shortfall doesn’t only drive rents up – it also creates challenges for tenants who end up living in sub-par accommodations for a lack of alternatives within their budget.

Since November, Max Martin and four friends have shared a five-bedroom, two-bathroom bungalow in the middle of town. While the group pay what they consider a reasonable amount in rent, the condition of the home is precarious.

“We have mould that [the landlords] have refused to come help fix,” Mr. Martin says, adding that “we went without heating for almost seven weeks.”

According to recent inspection reports from Alberta Health Services and the Jasper Fire Department, the dwelling presents critical safety issues, including windows that don’t open, exterior doors that can’t be locked for a lack of keys, faulty heating, and no smoke alarms.

In Mr. Martin’s view, Jasper’s tight rental market allows landlords to take advantage of young workers who, like him, come from overseas attracted by the natural beauty of the Rocky Mountains.

“People should be held accountable for their actions and the choices they make,” Mr. Martin says. “Especially when it comes to other people’s lives. As a landlord you’re in a privileged position where you can have a house that provides you passive income to let live and do what you want.”

But more supply is on the way.

Last December, a new purpose-built rental complex finally received a development permit, six years after the project was first announced. However, a building permit application is yet to be received by Parks Canada (the developer has until Dec. 13 to apply for this permit).

Featuring 144,822 square feet of apartments spread between two buildings, this development is expected to make a dent on Jasper’s housing gap when completed – but it’s unlikely that new market units can support the affordability levels required by tourism and hospitality staff.

Because market housing is subject to speculation and financialization, providing rental housing at rates commensurate to the wages of workers isn’t always possible, as returns for shareholders take priority.

“This model prays on power imbalances and problems that were already in place,” says Laura Murphy, research coordinator at the University of Alberta’s Affordable Housing Solutions Lab. “Especially in Alberta, where tenants are really dependent on landlords … because we don’t have lot of protections for tenants.”

In Alberta there are no limits to how much landlords can hike rents, as long as these increase only once a year.

To address this, Ms. Murphy suggests governments invest in non-market housing, as this “has proven to work time and time and again.”

Currently, there are about 155 non-market units in Jasper, but only 21 of them are rentals – and the landlord’s agreement with the municipality to provide housing at below market rates in the latter ends in 2029.

Like anywhere else in Canada, to boost the supply of suitable housing that remains affordable in perpetuity, Jasper requires support from senior levels of government.

“[In] 2023, council has budgeted a $5-million debenture to assist housing, but we will need some other partners to do that,” Mr. Ireland says. “We now need matching funds from either the province or the feds. We’ve gone to the province and made that application, so we will see what comes of that.”

On March 22, the municipality announced it would receive $6.5-million from the provincial and federal governments.

Combined with private investment, this new funding is expected to create 40 affordable units.

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The swift collapse of Silicon Valley Bank earlier in March put a spotlight on potentially painful losses lurking at banks from trillions of dollars in commercial-real-estate loans on their books.

It also sparked debate over what piles of older loans on commercial properties might be worth now that low interest rates and peak real-estate prices have vanished, and as stress in the banking system makes credit more scarce.

The sale of $72 billion in assets from the failed Silicon Valley Bank by regulators at a $16.5 billion discount, which pencils out to about 77 cents on the dollar, offers a glimpse into a new clearing price for commercial-real-estate loans.

“The way I look at it is: [that] the Silicon Valley Bank trade created a baseline for the market,” David Blatt, chief executive at CapStack Partners, a credit fund that buys commercial-real-estate loans from banks and originates short-term bridge loans and mezzanine debt.

“To me, that’s the top end, not the bottom end, for commercial-real-estate loans,” said Blatt, who studied the bank’s loan exposure.

Unlike stocks or bonds, loans in the estimated $5.5 trillion commercial-property market don’t sell in a transparent way, which means pegging their values can be difficult.

To be sure, not all of the sold assets of Silicon Valley Bank were related to commercial real estate. The bank reported about $13 billion of real-estate exposure at the end of 2022, according to a quarterly filing, which categorized about $2.6 billion as loans on commercial real estate.

Still, Blatt and other commercial-real-estate veterans steeped in previous bank-failure cycles told MarketWatch the sale provides a “mark” in terms of where loans actually changed hands in the wake of two regional-bank failures.

​”Everybody is dusting off their old playbook,” said Jack Mullen, founder of Summer Street Advisors, a commercial-real-estate advisory firm that’s been involved in multibillion-dollar workouts. “There just hasn’t been much distress for years.”

Toll of higher rates

As with bonds, the Federal Reserve’s rapid pace of interest-rate hikes has cut the value of older, low-coupon commercial-real-estate loans. Mullen ​said recent bank failures also make it harder for banks to “sweep it all under the rug,” which ​likely means more loan sales by banks.

“People are not going to let it carry into next year,” he said. “On the regulatory side, it’s coming right to the front of the line. People are supermindful of it.”

Richard Hill, head of real-estate strategy and research at Cohen & Steers, recently argued in a report that while banks hold an estimated 45% of all commercial mortgages, the debt isn’t a systemic risk for banks.

“We previously argued that [a decline of 10% to 20% in commercial-property prices] was reasonable to expect, and we now believe it could be 20–25%,” Hill wrote. He also said higher loan standards in the wake of the 2007–08 global financial crisis can provide lenders a cushion if property values fall.

In the reeling office sector, however, the value of older office buildings in Manhattan could tumble 70%, said Stijn Van Nieuwerburgh, a professor of real estate and finance at Columbia University’s business school, in a talk Thursday about turning older offices into homes hosted by the Volcker Alliance.

“Forty percent of that is just coming from interest rates alone,” Van Nieuwerburgh said, adding that remote work, current regulations and other pressures on the office-building market contribute to the value drop.

Write-down implied

Real-estate investors also will be watching the sale of $60 billion of Signature Bank loans. Newmark Group Inc. was hired to market the assets from the failed bank that were excluded in a previous sale of its holdings.

“What everybody has been operating under is this hold-to-maturity veneer,” Blatt said of banks that have continued to value loans at 100 cents on the dollar, or par.

“There’s just no way these things get resolved at par,” Blatt said. With the discounted sale of Silicon Valley assets, “the write-down is kind of implied.”

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