Landlords fear financial fallout from new cap on rent hikes
'If we get much more pressure in terms of being able to rent our houses, we'll just sell them to developers'
Landlords in B.C. are concerned about absorbing the costs of property taxes and maintenance after the province decided against a 4.5 per cent rent increase proposed earlier this month.
Increases in rent are allowed annually and the province determines the maximum amount, but this week the government chose to instead cap the increase at 2.5 per cent, the rate of inflation.
During Monday's edition of BC Today, property owners phoned in from around the province to express their frustration and panic as they prepared to face the new year without the option of an additional two per cent to cover costs of maintenance, insurance and utilities.
Fear of increased rent control caused Walter Lo, a resident on the Sunshine Coast with a property in Vancouver, to send one of his tenants a notice after hearing the announcement.
"I have just sent one of our longer tenants a notice of a rent increase for the full 4.5 per cent. We've only raised his rent once in the last seven years. The suite is below market in terms of pricing.
"My fear is this is the first and the next one will be rent control from the government. So I've had to raise his rent to protect me in the future should rent controls be imposed by the government," he told BC Today's Michelle Eliot.
Developers rely on CPI+2% inflation in their feasibility analysis when agreeing to rent caps that grow at this rate between application and occupancy. Removing the 2% pa means initial rents are reduced by 4%-6% which will kill projects <a href="https://twitter.com/SChandraHerbert?ref_src=twsrc%5Etfw">@schandraherbert</a><a href="https://t.co/s2WywG1SCw">https://t.co/s2WywG1SCw</a>—@rwittstock
David Hutniak, the CEO of Landlord B.C., said the current formula can work in B.C. 's housing market and feels landlords are being forced to shoulder increased costs in order to provide affordable housing.
"It's a hugely challenging issue … it just seems a bit unfair that our industry is going to be exclusively responsible for providing support or covering the initial gap in rents here," Hutniak said.
What a disaster. Makes even more sense to develop condos now. Developers who have been trying to make new rental housing work just can't do it now. <a href="https://t.co/7jNkQ3MfpD">https://t.co/7jNkQ3MfpD</a>—@AbdulJiwan
"It feels to me very much like landlords are being expected to help subsidize affordable accommodations for B.C. renters. This is a disincentive to potential landlords to invest their funds in rental accommodations which will ultimately result in less rental housing on the market," Penny Eadie, a resident of the Cariboo region, said in an email.
Hutniak is also concerned about how the new limit will affect the rental housing supply, saying the government should be focused on increased renter support and place more scrutiny on the province's tax policy.
"The risk here is that with these changes, it's in fact going to tighten the market. There's going to be less supply, prices are going to go higher. We can't be ignorant to that."
With files from BC Today