BC Landlords view on rent caps

[Thomas Beyer]

The landlords’ view on unfairness of a 2% rent cap in BC:

BC Hydro rates have increased 35% in the last 4 years.

Every other utility and agency is increasing fees as well. Not to mention, that for larger employers they are imposing an Employer’s Health Tax of 1.95%.

The list continues:

Tipping fees for waste disposal in the Lower Mainland are going up 3%.

The City of Vancouver is proposing to increase property taxes by 4.9% for 2019 (3.9% last year).

Starting January 1st, Fortis BC will increase natural gas prices by 9%, pending BCUC’s approval of their application.

During the drier months in Vancouver, metered water utility rates will rise 25% in 2019.

Interest rates have risen steadily over the past 15 months

https://landlordbc.ca/taxes-and-price-increases-from-heaven/


Thomas Beyer, Asset Manager, Investor, Community Improver, Author, Father, Mentor www.prestprop.com

 

[Matt Crowley]

It is a bit of a late-to-the-party response. In a way, I'm less opposed to rent controls than I am to inclusionary zoning. In my view, Canadians have overweighted home ownership as a society and as an investment allocation so creating some security around renting is not a bad thing. In global cities, there is a higher % of renters and Vancouver is still way below this.

On the expense side of things, we need a technology to just package those expenses as a tenant pass through and grow up a little as a society from thinking renters can only pay gross rents. This isn't the 1970s when renters had FICOs of 500, paid rent in cash, and moved every 6 months to run from creditors. Renters can be just as well off and liquid as owners, no reason they can't pay a landlord a net rent and then get pass-through responsibility for expenses.

 

[Thomas Beyer]

It is a bit of a late-to-the-party response. In a way, I'm less opposed to rent controls than I am to inclusionary zoning. In my view, Canadians have overweighted home ownership as a society and as an investment allocation so creating some security around renting is not a bad thing. In global cities, there is a higher % of renters and Vancouver is still way below this.

On the expense side of things, we need a technology to just package those expenses as a tenant pass through and grow up a little as a society from thinking renters can only pay gross rents. This isn't the 1970s when renters had FICOs of 500, paid rent in cash, and moved every 6 months to run from creditors. Renters can be just as well off and liquid as owners, no reason they can't pay a landlord a net rent and then get pass-through responsibility for expenses.

Indeed. In Europe the concept of cold rent and warm rent is quite common ie sub-metered utility expenses esp hot water and heat, but also elevator repairs, cleaning and maintenance costs are often paid by tenants. That legislation is missing in Canada.


Sent from my iPad using myREINspace

 

[Willyboy]

IMO the problem is not in rent cap or rent control where it applies. It is mainly in the highly inflated bubbly sale prices which makes it very hard for new investors to enter the market with the expectation of reasonable return on investment. Those very high prices would be exciting for speculators who make a quick buck but for long term investors specially those who didn't buy before the bubble they would be very discouraging.

The evidence to what I'm saying is the the depressed cap rates across all major cities. At one point and even if there's no rent control but if rents keep going up people won't be able to rent anymore unless rents go back down and that's what happened in Alberta where there's no rent control but because of the oil crisis rents came down.

Another example to back up my point is Quebec where there is rent control but where prices specially in the multifamily sector and in particular in Montreal have skyrocketed relative to rents in the last 10-15 years. Cap rates on apartment buildings over there are as low as in Vancouver and Toronto relative to rents and I find it unattractive to buy multifamily properties as the ROI is very low.

If on the other hand prices haven't skyrocketed in the last 10-15 years in those cities including in Alberta in 2006-2007 (bubble time) and even if rents haven't gone up much you would still get a very attractive ROI with attractive cash flow and higher cap rates and more often than not smart investors would be very happy with their returns.

 

[Matt Crowley]

@Willyboy

Well said on bubbly prices! On a 5-year Burnaby MF hold, I had to use 7% CAGR rental growth assumptions to hit a 5% IRR on a C-grade 4-story project.

The new GAARP: Growth At "ANY" Reasonable Price haha