Another plot twist was added to the Vancouver housing market. Yesterday the BC Government announced it has decided to reverse the decision to allow landlords the ability to increase rents by 4.5% (inflation + 2%) in 2019 back down to 2.5% (inflation). The controversial moves comes amidst strong political pressures to appease households struggling to maintain the cost of living amidst a housing crisis which has spread across the province.
Since 2004, provincial regulations have allowed landlords to increase rents annually by inflation plus an additional 2%. Ironically, the move to end that policy comes at a time when rent prices appear to be flatlining and housing starts are beginning to roll over, both signs of a real estate cycle on its last legs.
While the decision to cap rents at inflation has created a divide amongst developers, landlords, and renters, studies on rent controls show “rent control increased renters’ probabilities of staying at their addresses by nearly 20%. Landlords treated by rent control reduced rental housing supply by 15%, causing a 5.1% city-wide rent increase.”
Unsurprisingly this has prompted developers of purpose built rental projects to threaten to pull the plug on new rental projects as stricter rent controls jeopardize the viability of future projects.
Despite the potential repercussions, BC Premier John Horgan noted, “It’s simply not sustainable for renters, many of whom are on fixed incomes, to see their rent increase by more than inflation each and every year. We have to eliminate the risk of such huge increases for renters. Our new approach strikes a balance between giving relief to renters while encouraging people to maintain their rental properties.”
“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,” Added Selina Robinson, Minister of Municipal Affairs and Housing.