Company that shocked Moncton tenants with a 62% rent increase buys second building
Higgs government reluctant to adopt new rules to protect tenants in red-hot real estate market
A Quebec company that gave tenants notice of rent increases of up to 62 per cent after buying a building in Moncton in August has purchased a second, larger apartment complex in the city.
That could pose problems for the government of Premier Blaine Higgs if tenants there face similar treatment.
Property records show Bon Accord Real Estate Inc., of Kirkland, Que., paid $1.8 million for a 24-unit building on Mountain Road last month. The price was $800,000 above the property's assessed value.
Renters in the fully occupied building pay rents between $695 and $850 per month, including utilities, for one-bedroom and two-bedroom apartments.
Attempts by CBC News to reach Bon Accord Real Estate about its plans for the property have been unsuccessful. The man who sold the building, Moncton landlord Pat Rodgers, said he knows little about the buyer or its plans.
"I hardly even know their name " said Rodgers.
A tenant entering the building last week who spoke briefly with CBC News said she was aware of the sale and is concerned about the possibility of a rent increase, but has received no notice of any changes.
The Mountain Road property is two kilometres from a 12-unit building on Steadman Street that the same company bought in late August.
Five weeks after that sale closed, tenants in the building were delivered notice that rent would be increasing from $740 per month to $1,200. Free utilities would be discontinued, all by Jan.1.
The acquisitions by Bon Accord Real Estate are part of a wave of apartment building sales in multiple communities in New Brunswick this year, many by out-of-province investors. They have been showering property owners with record prices and promising significant new tax revenues for governments.
It has also resulted in stunning rent increases for some tenants.
The Higgs government has called those unfortunate, but too infrequent to justify rules to regulate them in a way that might interfere with the red-hot real estate market.
"We are not seeing the statistics that say that there is a problem," Higgs said in the legislature last week. "Yes, there may be one-offs that we should look at and determine how we can help those situations.
"Let's not put measures in place to put artificial controls on the free market, and let's let it grow. But let's find a way to deal with specific concerns and issues effectively so that all will benefit because of it."
Rodgers said the appetite among investors from across the country for New Brunswick apartment buildings appeared to ignite all of a sudden this summer.
He listed the Mountain Road property for sale in the spring and initially received minimal interest. Within weeks, however, multiple buyers competed to own it.
"Prices went up so much this summer after we listed it," said Rodgers. "It seemed toward the end it got four or five offers on the same day.
"It changed a lot this summer."
The province collected an $18,000 property transfer tax on the sale. It stands to split an extra $23,000 a year in property tax revenue from the building with Moncton if Service New Brunswick adopts the sale price as the property's "market value" and incorporates it into its next assessment.
Service New Brunswick defines market value as "the most probable price that a property would sell for on the open real estate market."
That's a positive development for the economy, but also poses potential problems for existing renters according to research by Martine August, an urban planning expert who teaches at the University of Waterloo.
August has written about the interest among investors across Canada in acquiring older apartment complexes that charge tenants modest rents.
In tight markets those can be transformed into higher rent addresses, beyond the means of many existing tenants, often with minimal upgrades
"In Canada the scarcity of this stock amidst high demand is central to its appeal," August wrote in the Journal of Urban affairs earlier this year.
In an interview, she said it is not unusual for older buildings to sell well above their assessed values with significant rent increases following close behind.
"These companies can increase their profits by reducing their expenses. But the bigger focus is on driving higher revenues, and the revenues really come from only one place, and that's the people living in the building," said August.
Higgs said he has heard of only isolated instances of tenants being negatively affected by the sale of buildings and it is not something he believes is widespread enough, at least yet, for a government response.
"I am not suggesting that there are not cases that have seen this," Higgs said in response to questions from Green Party Leader David Coon about tenants being pushed out by sales.
"Let's not take a particular example and say, 'There, throw the book at that because there is the problem.' Let's understand how big the problem is and deal with the specific situations."