A Vancouver city councillor is worried the Harmonized Sales Tax will cause the shortage of rental housing in Vancouver to get worse.

Building owners are one of many groups complaining about the new tax, which takes effect in July 2010.

They say it will increase their operating expenses by as much as three per cent.

With rental vacancy rates hovering around two per cent in Vancouver, the city is desperate to attract and retain landlords, but Coun. Suzanne Anton says the HST will do exactly the opposite.

"Rental landlords have a tough time, mainly under federal tax law, and now under provincial tax law as well."

Anton said the HST will increase operating costs for services that weren't previously subject to provincial tax, including maintenance and accountants fees.

"So what's happened now is that when landlords buy services they have to pay GST. They haven't had any way of recovering that," she said.

"But now they will have to pay an additional seven per cent of PST on all of these sorts of things that they buy in order to support their own buildings, so they are going to take quite a hit."

Marg Gordon, CEO of the B.C. Apartment Owners and Managers Association, said landlords are in a bind because they can't collect the additional HST costs from their tenants due to rent controls.

She thinks landlords should get a break from the government, either through rebates or tax credits.

"Our revenue is controlled, but our expenses are not controlled, so it's getting to the point where we can't afford to have any more outputs where we have to pay taxes."

Anton has drafted a motion calling on the province to find ways to offset additional HST costs and to lobby the federal government for favourable tax rules for landlords.

It is slated to be debated at city council next week.