Investing in Rental Stock: How the Industry is Renewing Existing Rental Buildings

*An original version of this article was first published in the summer 2022 edition of The Key magazine.

British Columbia is filled with countless aging purpose-built rental buildings (PBRs) constructed between the 1950s and 1980s, many of them nearing the end of their functional life and in dire need of significant upgrades. For landlords planning to invest in their existing rental stock, there are several conditions that are vital to the success of a large building upgrade: a reliable and experienced contractor, access to necessary capital, and maybe most importantly, a legislative environment that incentivizes continuous investment in rental housing stock.

What to expect during construction?

The Key reached out to long-time LandlordBC partner and Associate Member Brighter Mechanical, a BC company that specializes in re-piping buildings, to gain insight of what to expect during a construction project of your residential property. With nearly 35 years of experience Brighter is an expert in their field and many of LandlordBC members have worked with their team in the past on projects that both rejuvenated and extended the life of existing rental stock.

Recently Brighter worked on re-piping a 12-storey apartment building in Vancouver’s West End neighbourhood. The high-rise apartment building was constructed in the early 1960s, and like many buildings of this age, it was experiencing an increase in water related problems and ultimately required multiple re-piping projects done simultaneously. The owners of the building, members of LandlordBC, reached out to Brighter to undertake multiple necessary upgrades that were completed without any tenant displacement.

Brighter Mechanical recommends that any large project should start with an information meeting that informs tenants about the scope of work, schedules, and provides all necessary contact information. It is highly recommended that the company you hire is a specialist in their field and provides excellent customer service by working hard to mitigate the impact on tenants’ day-to-day lives, such as minimizing the times and duration that the water is shut off, ensuring that water is back on and that all fixtures (taps, toilets, showers, dishwashers) are working and usable by 5:00pm each day.  Frequent communication with residents is essential to ensure there are no surprises on a project that can take weeks to complete. Some building owners may also find that this is the least disruptive time to upgrade some in-suite fixtures, hallway lighting and repaint hallways and ceilings.

Upgrades in occupied buildings

For owners concerned about displacing tenants during a large improvement project such as re-piping, there is great news – it is rarely necessary to relocate tenants when the project is underway, and industry best-practices suggest avoiding doing so barring exceptional circumstances. Frequent communication with your tenants is essential to an overall positive experience so keep the communication door open and encourage tenants to come forward should they have any concerns or questions. At the end of the project, do a follow up with your tenants to ensure all is in good working order and provide tenants with an opportunity to ask questions or point out any work that needs to be finished or fixed.

How can government help?

We applaud our members who invest in existing rental stock as it is not always a simple process and requires significant planning and considerable capital investment. A re-piping project, for example, can range anywhere from $5,000 to $15,000 per each unit. Hence, we need a legislative environment that supports and encourages investment in existing rental buildings.

Last year, the BC Government implemented the Additional Rent Increase (ARI) for capital expenditures, a major win for the rental housing sector as it provides rental property owners with an important tool for recovering some of the costs associated with necessary capital expenditures of rental housing. LandlordBC has advocated for this tool for many years and has collaborated with the Residential Tenancy Branch in its implementation. The outcome confirms our commitment to advocacy on behalf of our members and the broader rental housing sector and reaffirms our position as a trusted advisor to the Government.

ARI encourages landlords to invest in rental housing without having to carry the full financial burden of such significant expenditure. This is also a major win for tenants, who now can take part in this transparent and accessible process and have increased security of rental tenure.

While the ARI is a great tool for our industry, more needs to be done to encourage investment in existing buildings. We need governments at all levels to incentivize investments in existing rental stock, which are costly and time consuming. Increasingly, landlords are seeing significant increases in the costs associated with operating PBRs, while simultaneously experiencing increased regulation and rent controls that drastically inhibit investment in rental housing. Without government incentives and supports, landlords will find it challenging to keep up with the costly upgrades required to upgrade aging apartment buildings, thereby threatening the security of tenants at a time when vacancy rates are at an all-time low.