By Jon Stovell, Reliance Properties
The provincial government’s decision to cap the 2023 rent increase to a maximum of 2 percent, 3.4 per cent below inflation, the pandemic-time rent freezes, and municipal development policies are making future rental housing projects financially unviable and will ultimately be destabilizing for the rental housing sector and impact the maintenance of the existing critical rental stock. The unintended consequence of this political move will discourage landlords and investors from building much needed new rental stock, which is certainly something that both our municipal and provincial governments are very keen to engage the private sector to do.
Nobody is isolated from inflation and rental housing providers are also experiencing increases in costs in their rental housing business well beyond inflation; in many cases property taxes, utilities, maintenance, and labour expenses have risen dramatically faster than inflation in recent years.
Most of the rental housing in our province is provided by the private sector and that’s not going to change anytime soon. The rental housing that was first built in the region between the 1940s and 1970s was built by private owners as an investment. Financialization of housing is nothing new and it has always been a private business. Ninety per cent of our rental housing is owned by private businesses. In fact, Minister David Eby and Premier John Horgan have said that it is very important that rent increases be permitted in order to maintain rental housing stock and encourage future investments in the sector.
Unfortunately, the concept of building rental housing in the city is no longer financially feasible due to the challenging economic conditions such as the radical increase in construction costs and interest rates together with the continuous political interventions in the rental regulations. For example, very recently the City of Vancouver tried to implement vacancy control for SROs and it was actually overturned by senior court because these types of rent controls are not the privy of municipal government. As a result of continuous interventions in rental regulations by municipalities and the province, one of our own projects in Downtown Vancouver, a proposed 25-storey mixed-use rental tower will now move forward as 100% condominiums. This is a loss of over 150 future secured market rental homes in Vancouver that will now be replaced by condominium homes.
Suggestions that landlords can recoup their expenses with extra rental increases are also incorrect. Unfortunately, the idea of the above-permitted rental increases under the special expenses category is something that almost no landlord has been successful in doing because all the expenses must be incurred, documented and an application has to be made to the Residential Tenancy Branch. Only then is a decision made whether any increase is approved. Therefore, landlords aren’t going to make speculative increases in these costs. In addition, these extra allowable rent increases don’t cover general inflation costs anyways. The truth is that capping the 2023 rent increases is going to put the market behind in terms of operating existing buildings and bringing new rental stock to the market.
If housing is a human right then we and society as a whole should be funding any subsidies needed for tenants through our taxation system and our social safety net. We shouldn’t be expecting to have the private sector that fundamentally operates on the basis of return on investment to provide over 90 per cent of the rental housing stock while also trying to force those private businesses to subsidize tenants with below market rents.
Tenants should be asking the government where is the promised renter’s rebate? Twice the NDP government promised it, in two different elections. This promised rebate is a collective expense that we will pay as a society to help vulnerable renters while now the government is transferring subsidies and forcing private investors to subsidize tenants. When it comes to subsidies, the government needs to also focus on vulnerable renters, those who really need that assistance, so that subsidies are not given to all people who rent, many of whom are very well paid and have great jobs.
We shouldn’t forget that in 2018 the provincial government created the provincially appointed Rental Housing Task Force that studied the idea of vacancy control extensively. In the end they made a number of other changes, including limiting rent increases to just inflation (which they no longer honour anyway), but the Task Force specifically decided not to implement vacancy control. They did this because they considered it destabilizing to the creation of new rental stock and re-investment in existing rental buildings.