2023 maximum allowable rent increase announced
The B.C. government has announced 2.0% as the maximum allowable rent increase for 2023.
The allowable increase is typically calculated based on a set formula tied to the 12-month average percent change in the All-Items Consumer Price Index for B.C. ending in July of the previous year. In reviewing the 12-month average from August 2021 to July 2022, the rate should have been 5.4%.
Back in June, the provincial government signaled that it was considering policy options to ease the burden for tenants saddled with rising inflation. The reduced rate results from a desire to give British Columbians a break on rental increases while they’re also paying for increases in other items like food and gas.
For landlords, this cap on rental increases is challenging given expenses such as property taxes, maintenance, utilities and insurance have risen exponentially relative to past years. This trend has also occurred against a backdrop of two years of temporary rent freezes. By our count, this is the fourth year that this government has meddled with rental rates since coming into power five years ago. Previous impositions have occurred in 2019, 2020 and 2021. Meanwhile, rapid inflation has reared its head as an additional hardship for all British Columbians, hitting 8.0% year over year in B.C. as of July 2022 (B.C. All-Items CPI, August 16th, 2022). Moreover, the Bank of Canada has increased the overnight interest rate at a speed not seen since 1994, leading to headlines trumpeting the biggest mortgage rate increases since the 1980s. This along with construction cost increases, supply chain issues for materials, a labour shortage and competition for resources.
Given the impact on existing rental housing and future construction, we are hopeful for future announcements to assist with the rising costs landlords are seeing along with incentives to build new purpose-built rental housing. For real-world examples demonstrating expense increases over time, see these articles:
Inflation pushes housing providers to the brink
With new federal government, we await housing plan
For more information on the announcement and the rules for delivering notice to tenants, please click here.