B.C.’s Residential Tenancy Act allows landlords to increase rents substantially above that rate if faced with unexpected refinancing costs.Tijana Martin/The Globe and Mail
Vancouver housing advocates are raising the alarm that a provision in B.C.’s Residential Tenancy Act puts tenants at risk of potentially disastrous rent increases.
Landlords in the province are mandated to cap rent increases at a certain level, this year at 3.5 per cent. But the Act allows landlords to increase rents substantially above that rate if faced with unexpected refinancing costs. That provision was recently used successfully by a landlord to increase their tenant’s rent by an additional 23.5 per cent.
As more mortgages come up for renewal in a high-interest rate environment, the problem may spread, say housing advocates. And, with the province heading into an October election, the issue could play a key role in several ridings.
The arbitration case involved landlord Kriss Canada, who’d purchased a fourplex property in 2021 when the interest rate was 1.9 per cent. The arbitrator had agreed that the variable mortgage rate had shot up to a point that made management of the property unsustainable. Lawyer Robert Patterson, advocate for the Tenant Resource and Advisory Centre, fears that the Kriss precedent will encourage other landlords to follow suit, as many five-year-term mortgages acquired during the ultra-low-interest rate years of 2020 and 2021 will soon come up for renewal.
There’s another feature that makes the provision worrisome, says Mr. Patterson. The provision that allows additional rent due to refinancing costs has no cap – the amount is up to the arbitrator to decide, he says.
“With this increase, there is no restriction. It can be anything,” he says. “How many landlords will try this? Are real estate investment trusts going to engage in this on a large-scale basis? And mom-and-pop landlords could do it on eight- or 10-units per building.”
Mr. Patterson asks why a tenant should have to take on the burden of a landlord’s risky financial decision making. His organization has made a formal application to have the policy repealed.
“The danger now is because this story has gotten traction because it has raised itself in the public consciousness again, and because the [Residential Tenancy Branch] in its decision has shown a willingness to enforce it, to allow arbitrators to award these rent increases, and that could be the blood in the water that brings the sharks out.
“Are there going to be institutional landlords, real estate investment trusts, that engage in this on a large-scale basis? That’s entirely possible, even if it’s sort of moderate-sized landlords, the ‘mom and pop’ landlord who only owns a couple of buildings that can still be six or eight tenants, if they’ve had to refinance and now, they’re paying a higher mortgage cost.”
The provision may not have been used until recently, but long-time tenants’ legal advocate Stephanie Smith says we can expect to see more of these applications for these sorts of increases.
And in her experience representing tenants, while some of the applications for increases will get refused, many others will likely be approved, and tenants will have little recourse. She says there will be the large institutional investors whose accounting and legal teams could make the case for increases at scale, and those individuals who, because of the system, rely on basement suites for revenue and are facing mortgage payments that have doubled or tripled.
“We have a housing market where it has become impossible in some places for a person, for a family, to own a home unless they become landlords and have basement suites,” says Ms. Smith. “That’s a symptom of a broken housing market. The expectations of rent from the tenant have become baked into housing prices. I would not want someone to lose their home if they can’t afford their mortgage payments on refinancing. But I would also say that the housing security of the family living upstairs, the owner, and the housing security of the tenant, are both important. I don’t think a healthy housing system allows for some people’s housing security to come at the expense of other people’s – and that is how the system is currently set up.”
Mr. Patterson says it would be an easy fix. He notes how “incredibly quickly” the government amended Bill 14, which came into effect on July 18. Instead of giving a tenant two months’ notice for eviction for personal use, the legislation raised the requirement for landlords to four months’ notice and 30 days for the dispute period. That caused problems for the real estate industry because lenders typically give buyers a 90 -to 120-day rate hold period for mortgage approvals. After pushback from the industry, the government quickly changed the legislation to three months and the dispute period to 21 days.
Andy Yan, director of Simon Fraser University’s City Program, says renters in B.C. could impact the upcoming provincial election. In 33 out of 93 ridings, one-third of households are renters. Eleven ridings have more than 50 per cent renters, including Vancouver’s West End and Strathcona, South Granville, Yaletown, Langara, Little Mountain, Point Grey, Hastings, Surrey City Centre, New Westminster-Coquitlam and Victoria-Beacon Hill, says Prof. Yan. In the city of Victoria, more than 60 per cent are renters; in Vancouver, it’s 55 per cent; in Kelowna it’s 35 per cent.
The renter demographic feels the full impact of the affordability crisis. One-quarter of renters in B.C. pay more than 50 per cent of their incomes on rent, says Prof. Yan, and renters have a median household income of $63,200.
“With an increasingly contentious provincial election and many renters in the province facing increasing housing precarity, robust policies on security of tenure could determine who occupies B.C.’s legislature,” he says.
Minister of Housing Ravi Kahlon was asked if he’d consider repealing the provision, and if he had concerns that it might be abused by bad actors. He responded by e-mail: “Since 2018, we have kept rental increases at or below inflation, below the rate set by the previous government.
“The policy that allows these kinds of exceptional rental increases because of financing is an old policy from the old government and this is the first time an application like this has been granted since we started collecting data in 2021. I know people have a lot of questions and I’ve directed staff to review this policy and how it impacts renters in the current context.”