Photo: Jeff Hitchcock/Flickr

The formula the BC government uses each year to determine how much landlords can hike rents is once again the subject of debate after 2019’s limit has turned out to be the highest in 14 years.

Earlier this month, the BC government set the limit at 4.5 per cent, just shy of the 4.6-per-cent cap for 2004, the first year the formula — which is based on inflation plus 2 per cent — was first implemented as part of the province’s Residential Tenancies Regulation.

Renters may not have been thrilled at the prospect of potentially having to fork over an additional $1,080 per year to rent a median-priced unit, and the BC Ministry of Municipal Affairs and Housing has confirmed there has been talk of changing the formula should the Rental Task Force recommend doing so.

“The Premier, the Minister, and the Chair of the Rental Housing Task Force have spoken about the possibility of expediting any recommendations they may have about the allowable rent increase formula,” reads a statement from the ministry.

But at least one group supports the current method of determining how much rents can increase year-over-year.

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“We feel strongly that the formula should remain intact,” David Hutniak, the CEO of LandlordBC, a lobby group, tells Livabl.

Hutniak says the allowable maximum increase “has been woefully inadequate” versus the cost of owning and operating a rental property, especially amid rising labour costs and an aging purpose-built rental stock in need of repairs. “That’s an endless cheque-writing exercise,” he says.

This week, LandlordBC published research that arrives at this conclusion. According to a 10-year expense analysis of a rental building in Metro Vancouver, operating expenses rose 7.6 per cent annually between 2009 and 2018, while over the same period the maximum allowable rent increase has worked out to 3.2 per cent per annum. “We looked at actual invoices,” he says. “This is pretty in depth dig into this,” he adds.

It would be more effective to look at supports for renters, such as affordable housing benefits, Hutniak suggests. “The monies that the government shovels to homeowners could be shared on some more equitable basis to renters,” he says, noting how BC homeowners receive grants and how they don’t pay tax on capital gains from the sale of a primary residence.

However, Andy Yan, a prominent analyst who heads up Simon Fraser University’s City Program, sees potential room for improvement in BC’s formula for the maximum allowable rent increase.

“One possible… variable to include is income,” Yan tells Livabl. He suggests the government consider median incomes when setting rent guidelines. “It’s not only about rent increases or rents, it’s also about relatively flat incomes.”

LandlordBC points out that average wage growth from August 2017 to July 2018 tracked at 4.6 per cent. But Yan notes there’s a “sizable” difference between the earnings of renters and homeowners.

“Of course the income profile of renters is actually sizably different from the profile of owners,” he notes.

Yan also suggests the formula should be more localized and reflect differences from region to region. “What’s happening, say, in Kelowna is probably going to be a lot different than what’s happening in Vancouver,” he explains. “We have very different regional housing markets.” That means when looking at incomes, localized numbers should be used, rather than the province-wide median, he adds.

Yan did acknowledge whatever is done needs to be “fair for landlords” and mentioned tax credits as a way to mitigate any impacts from low allowable rent increases.

For now, renters will have to sit tight, but the BC Ministry of Municipal Affairs and Housing expects the provincially created Rental Housing Task Force’s recommendations this week. “We are committed to taking swift action once we receive them to make life more affordable for all British Columbians,” the ministry says in the statement.

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