“Private sector rental property investors must be assured of safe, secure and stable long-term returns on their investment, and a balanced and fair legislative regime.” LandlordBC
British Columbia’s private rental housing sector is critical to the BC housing market and to the entire BC economy as well. In a November 2014 study published by KPMG Canada entitled Economic Impact Assessment Study – British Columbia’s Rental Housing Sector, it was estimated that the rental housing industry provides homes for over 30% of BC households in approximately 550,000 units of rental housing. This same report confirmed that our industry’s GDP contribution in BC was in the order of $10.6 Billion, which is greater than forestry and mining combined. Furthermore, Statistic Canada/Census Canada reported that in the City of Vancouver alone, renter households as a share of all new households rose from 40% in the 2000 – 2011 census period to 76% for the 2011 – 2016 census period, a startling 36% increase. Needless to say our industry’s long-term viability and success has huge social and economic consequences for British Columbians.
In the past, renting was primarily considered a housing option to meet rising demand and to promote flexibility and better alignment to a more mobile labour market. Renting made it easier for individuals and families to pursue job opportunities or adapt their accommodation to changing family circumstances. Rental housing’s role has evolved to become a critical housing option for an increasing percentage of our population.
In the ground-breaking study entitled Code Red, Generation Squeeze concluded that it now takes 12 years for the typical 25 to 34 year-old Canadian to save a 20 per cent down payment on an average home (up from five years in 1976). In Vancouver that same Canadian would need 23 years to save a 20 per cent down payment! Home ownership rates are steadily dropping, and the implication is that many more younger Canadians then ever before will be renters for life when compared with preceding generations. The reality is that home ownership will likely become less common for generations of younger Canadians and this is especially true in British Columbia. A perfect example of this phenomenon can be seen in the Victoria CMA where Statistic Canada/Census Canada reported that during the 2011 – 2016 census period household growth in the Victoria CMA recorded fewer young homeowners and more renters with an increase of 1,975 owners and 7,385 renters or almost a 4-fold difference between young renters and owners.
Given this new reality, it is critical that the government create an environment in which the private rental sector can offer a viable, sustainable and attractive alternative to home ownership. For this to happen, private sector rental property investors must be assured of safe, secure and stable long-term returns on their investment, and a balanced and fair legislative regime.
This government ought to be recognized for taking recent action for addressing the acknowledged anomalies within the rental market and Residential Tenancy Act that were negatively impacting both responsible renters and landlords. It will take time to know the full impact of these measures on the private rental sector as they “work through the system”. Other government measures which are having an impact on the private rental sector include tax changes introduced in the February 2018 Budget which will increase the cost of building new rental housing and, recommendations by the Office of the Information and Privacy Commissioner of BC, which will increase operating costs for landlords. It is critical during this review process that the Task Force consider the significant impact on the private rental sector of actions and measures government has already taken.
It is LandlordBC’s view that the Act as it is currently enacted, largely strikes an effective and fair balance between protecting tenants and allowing landlords to recover expenses and generate modest revenue surplus. However, in the context of the current high tax and expense environment, it does not provide any mechanism for either generating adequate contingency funding for or financing of the major investments required to make sure that the aging purpose-built rental stock keeps up with current environmental and safety standards. As a consequence, owners have not been able to establish reserves for upgrading the aging stock and the condition of much of it has languished, resulting in poor quality, less energy efficient housing. Compounding the challenges in British Columbia is the fact that the private rental sector is disproportionately represented by the secondary market to provide rental homes for British Columbians. It is this secondary market; small, generally less knowledgeable or sophisticated landlords, with mortgage helper basement suites and the like, who are particularly vulnerable to legislative change.
The government, both in its words and recent actions, has acknowledged that the chronic shortage of rental supply, most notably purpose-built rental housing, is the primary contributor to today’s rental housing crisis in BC. In this context it is important for the government to implement tax incentives and legislative change supporting current owners of long-term, purpose-built rental housing and prospective investors to make development of rental housing as competitive as market condominiums. Notwithstanding some recent growth in purpose-built rental housing development, primarily driven by record low interest rates, the rental housing market in BC is highly volatile and we are on the cusp of our worst nightmare, the steady inching up of interest rates. Higher interest rates will turn the challenging economics associated with building new purpose-built rental housing into untenable economics and cause developers to retreat to condo development.
The continuing concern expressed by all parties about timely access to accurate and timely justice at the Residential Tenancy Branch (the Act), is an administrative and financial matter, not a legislative one. Those delays appear to be exacerbated by irresponsible tenants who repeatedly prey on small landlords.
Furthermore, while LandlordBC has long held the view that rent controls do not truly help renters and can ultimately contribute to inferior and poorly maintained rental housing, we accept that in the current environment, until perhaps such time as we can achieve market balance for a consistent period of time (ie: vacancy rates of 3-5%), that it would be untenable for the government to phase them out. We get that.
It is a universal and strongly held view on both our organization and our industry that the government must retain two critical elements of the current Residential Tenancy Act; 1) the Annual Allowable Increase of 2% + CPI (we note some stakeholders suggesting the Annual Allowable Increase should be changed to just CPI) and, 2) rent controls tied to the tenant not the unit ie: the ability for a landlord to negotiate a new tenancy at tenant turnover on the basis of the market and the actual cost to deliver safe, secure rental housing. Any reconfiguring of either of these existing provisions under the Act, in whole or in part, will cause irreparable long-term harm to both renters and landlords. The economics to provide rental housing will unravel, as will the incentive and ability to invest in one’s property. Further, it will be impossible to build any or any business case for the construction of new purpose-built rental housing. This in our view is the only way in which the private sector can address the critical shortcoming in supply. It is for these reasons that we urge the government not to make any changes to these two critical provisions of the Act.
LandlordBC appreciates and supports the high priority government has placed on housing. We also appreciate government’s significant additional funding commitment to the Residential Tenancy Branch and its decision to create a new Compliance Unit. LandlordBC is committed to continue to be an active and progressive partner with government.
On May 28, 2018, the Rental Housing Task Force announced the launch of a provincewide engagement. British Columbia’s Rental Housing Task Force will tour the province in June 2018, stopping in 10 communities to engage British Columbians.
We encourage all landlords to share their ideas. For more information on community meeting locations taking place in June visit: https://engage.gov.bc.ca/rentalhousingtaskforce/communitymeetings/. To contribute to the online discussion, visit the online engagement site before July 6th at 4 pm: engage.gov.bc.ca/rentalhousingtaskforce