Rent controls already force Vancouver landlords to follow strict rules, but this is not enough for some tenant advocacy groups pushing a controversial policy they call “vacancy controls.”
They argue the right of landlords to charge market rates when a suite becomes vacant is unfair to tenants, and that rents should be maintained at the previous rates upon new occupancy.
This comes with the benefit of maintaining low rental rates on all units, but as this article will detail, it creates a slew of problems for long-term viability.
Why is now the worst time, possibly ever, for a government to enact vacancy controls?
Our rental stock is old. Due to lack of government incentives and stern rent controls, the private sector has built few rental buildings since the 1970s, leaving the majority of units which are available to renters between 60 and 70 years old.
According to Integral Consultants, “Usually at age 55, the (multi-family) building needs to stripped of its finishes, features, etc. down to the bare bones and redesigned and refurbished to suit current needs.”
Across the board our current rental stock has reached the end of the structures’ life expectancies. Landlords have large bills ahead in order to provide safe, habitable living for Vancouverites.
This means a choice is going to be required of all landlords. Do they spend hundreds of thousands of dollars required to keep operations running smoothly, or let the building slide and decay?
Our current rental stock is at the end of its life expectancy
Let’s consider what could happen if our provincial government ignores landlord advocates and economic theory to introduce strict vacancy controls.
Every landlord understands a large portion of rents must be held aside for future capital expenditures. LandlordBC did an analysis from statistical data derived by Stats BC.
The analysis discovered during the time studied average expenses increased 7.6 per cent, but during the same period the allowable rental increases averaged 4.5 per cent. The province has been no friend to property owners with large increases in property tax, water, sewer, gas and hydro bills.
If there is no relief for landlords, the surplus between average income and cost can become negative. Throw in a mortgage and landlords could be faced with covering a negative cash flow to finance the property. Now the average landlord cannot afford to reinvest back into the building even if they plan to.
Not to mention there is no incentive to go through all the work of doing so.
Expect no new rental stock
Economics drive new rental properties, not libertarian ideals. Vacancy controls will have detrimental impacts on the pro forma of new developments.
With rents for the first time in almost 40 years driving apartments as a feasible asset class to build, we are seeing a record number of projects breaking ground. This relief is much needed as the ratio of renters to owners continues to widen.
If the rules and regulations regarding rent controls are negatively modified, all these current and future projects could be shelved, leaving Vancouver in a never-ending shortage of rentals.
What is fair?
Tenant advocacy groups rally behind the concept of fairness, but what is fair?
Land has to be purchased and maintained by individual owners and investors. Landlords have invested life savings into these properties knowing that British Colombia will maintain tight rental controls.
Should a landlord be penalized for the longstanding hard work, commitment and dedication involved in saving up for a rental property with new restrictions?
Many owners work nights and weekends to care for tenant needs, showing suites, cleaning, organizing repairs, and so much more. This goes from rectifying small situations such as a leaky sink or broken toilet to burst pipes which are potentially damaging to residents’ personal possessions.
As a tenant you expect your landlord to do all the work maintaining your home, and be responsible for liability. There is a price for that convenience.
A range of housing supply is vital to the success and future of every city, especially a landlocked one such as Vancouver. When strategizing policy and action that will modify the current landscape of available rental housing, Landlords and Tenants need to work together in a balanced approach. Rushing to appease one side or the other will lead to long-term consequences that are even more challenging to rectify.
Vacancy controls are short-sighted and one-sided. We want to maintain quality living accommodations that provide landlords the means to do so while keeping current and future tenants happy with their living situation. This is the wrong approach.
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Economics degree with the University of Victoria and
Apartment Building Specialist in the Greater Vancouver area