Landlords will see some mortgage relief through BC's rent supplement

Apr 10 2020, 9:09 am

BC Housing saw over 2,200 applications for the provincial government’s Temporary Rental Supplement within only the first five hours of the program’s launch on Thursday.

More refined details were also released, with the three-month-long program through the end of June now offering $300 per month for eligible applicants with no dependents and the full $500 per month for eligible households with dependents. Roommates will also be able to apply for the supplement individually.

Other than providing evidence of loss of employment or a 25% reduction in monthly income due to COVID-19, there are a few other caveats. To be eligible, households must have a 2019 income of less than $74,150 for singles or couples with no dependents, and $113,040 for households with dependents.

As well, the household must pay over 30% of their current or reduced gross monthly income towards rent, and they cannot receive any other pre-existing rent subsidy from any level of government.

But for those who were thinking the supplement would be deposited to tenants and could directly go towards other household expenses instead of rent to their landlord — given that there is now a temporary ban on most types of evictions, including financial hardship — that is clearly no longer the case.

The provincial government has indicated the supplement will be paid directly to landlords on behalf of tenants, with the supplement directly deposited within seven days once the application has been completed and processed.

The higher thresholds for eligibility may be a disappointment for many struggling renters, who will also be able to receive the federal government’s Canada Emergency Response Benefit, but they provide landlords with some guaranteed relief towards their mortgage at a time when they have little recourse against their tenants for non-payment.

Mark Goodman, a principal with local commercial real estate broker Goodman Commercial, says a large percentage of Canada Mortgage and Housing Corporation-insured apartment debt is with life insurance companies, and these companies are some of the largest investors in rental housing.

However, if renters stop paying, then landlords will not be able to pay their mortgages either. Like what was experienced in 2008, there could be a ripple effect across the economy: these companies will then pass down their very significant debt obligations to regular Canadians. There would also be an impact on retirement plans and investments.

Much of this debt has also been packaged by loan aggregators and then sold off into secondary markets around the world. For this reason, the provincial government’s plea for domestic banks to defer mortgages will likely have little real impact on landlord debt on multi-family rental housing properties, as they are not the primary holders of this type of debt.

In a presentation to the Urban Development Institute last week, Cynthia Jaggar, another principal of Goodman Commercial, provided the results of a short informal survey between April 1 and 2 that gauged landlords on the level of rent payment fulfillment.

Some landlords with a medium-size rental housing portfolio saw a single-digit percentage of partial pay or non-payment, while others with a similarly-sized portfolio saw a staggering rate of up to 45%.

Goodman Commercial

Goodman Commercial

“Some people had very few instances, while others had many. Just for context, if you have 1,000 units and 30 people are unable to pay, that’s 3%. But if you have four units and one person is unable to pay, that’s 25%. Smaller landlords will be hit disproportionately hard,” she explained.

“There seems to be this movement out there on not paying rent even if you can. Just know that all those property expenses are still payable… the property taxes, utilities, repairs, and maintenance, insurance, and salaries and wages. And each one of these costs actually has people and jobs attached to them.”