This week, the provincial government bowed to pressure from tenant organizations. Without any economic or impact study, the government announced formally its intention to roll back the previously mandated rent increases of CPI plus 2% (equating to 4.5% for 2019) to CPI only. This politically expedient, rushed announcement comes in ahead of the BC Rental Task Force Recommendations Report scheduled for November, whose contents we await with some trepidation.
We’re all aware that over the past 30 years, most Canadian municipal governments, including those in Metro Vancouver, have been unwilling or unable to facilitate desperately needed new rental construction. Instead, the market has focused on condos. This has led to well-documented shortages of rental supply, creating undue hardship for renters.
Now, in imposing further restrictive rent increases, the provincial government is unfairly targeting providers of rental housing. These meddlesome tactics, which will seriously impede the creation of new purpose-built rentals, are somewhat predictable on the part of the NDP, with its history of legislating against rental market forces. We’re not aware of any other real-estate asset class where all levels of government appear to conspire against existing or newly built construction by deploying regressive tax measures or by regulating both income and supply.
Interestingly, Metro Seattle, our neighbour to the south, show completion levels of approximately 12,000 rental units in 2018 alone. Tenants have lots of choice, despite an absence of rent control, a population growing faster than Vancouver’s and with rent levels falling under our own averages. How does Seattle pull this off? Solely by allowing market forces to determine supply and demand, developers produce what the Metro area truly requires, without government intervention. How refreshing!
As readers of the Goodman Report, you may remember that we sent out an email blast on July 4 expressing concern that the task force wasn’t truly interested in hearing from landlords. We predicted sweeping changes to the Residential Tenancy Act that could deter owners from upgrading buildings and could stop the construction of purpose-built rentals. We warned that these changes had the potential to ensure the ongoing deterioration of rental stock, with a negative impact on your real-estate investment. 3 months later, based on this week’s actions, these words ring true.
We fear that this movement toward a rental cap could signal more measures to come. Are we seeing just the tip of the iceberg?
We encourage you ASAP to email and/or call Selina Robinson, Minister of Municipal Affairs and Housing, about the challenges that this change to rental increases will cause you as owners. You might suggest how further unbalanced recommendations coming from the provincial government could affect both tenants and owners.
“It is a socialist idea that making profits is a vice; I consider the real vice is making losses.” ― Winston Churchill
Please feel free to call David Goodman to discuss at 604.714.4778