Politics cited as prices of Metro rental buildings fall

Landlords fear arrival of new policy that could make it harder to raise rents

HQ Commercial multi-family specialist Cynthia Jagger: “no one knows what the new [rental] rules will be" | Chung Chow

HQ Commercial has eight rental apartment buildings for sale in Metro Vancouver, and the prices for three of them have been slashed by more than $750,000 in the past four weeks.

The price drops reflect a cooling in what has been a white-hot multi-family market as investors fear tougher rent control regulations from the province and higher lending rates from the Bank of Canada, according to Cynthia Jagger, a multi-family specialist at HQ Commercial, one of the largest apartment building brokers in the province.

“A rental housing task force has made recommendations, but no one knows what the new rules will be,” Jagger said.

Landlords are understandably nervous. The province has already reversed a decision and reduced the maximum allowable rent increase for 2019 from 4.5% to 2.5%. The sudden policy change was the first of an estimated 30 recommendations from the government’s Rental Housing Task Force.

“We recognize supply is key to bringing down rental costs in the long term, but renters have told us they are hurting and need help today,” said Municipal Affairs and Housing Minister Selina Robinson.

A new B.C. rental policy, based on the task force recommendations, could be unveiled within weeks and instituted early next year.

The Urban Development Institute (UDI) has warned that up to 12,000 planned new rental apartments could be delayed or cancelled if the B.C. government imposes further restrictive rental policies.

In a survey of 30 B.C. rental builders, the UDI found that 12,631 rental homes, which are planned for communities across B.C., would be “at significant risk if restrictive policies are imposed.” This represents nearly two-thirds of the 19,972 rental homes now in development, according to the UDI. While some builders said they would still deliver rental homes because they were under construction, they were unequivocal in their opposition to potential vacancy control policies, the UDI found.

A key issue is a task force recommendation that would tie rent controls to a unit, rather than the tenant. Currently, if a tenant leaves, the apartment’s rent can be raised to the current market value, which can represent an increase far above the allowable annual rental increase.

“This would be the single most significant impediment to the construction of rental apartments,” said UDI president and CEO Anne McMullin. “With record-low vacancy rates, British Columbians need new rental homes, but this proposal puts those in jeopardy.”

She said that if rent is tied to the unit, the incentive for owners of older apartment buildings – which make up the bulk of the Metro Vancouver rental inventory – to improve their buildings would be severely compromised.