How the B.C. rent increase cap could make housing more expensive in the long run
While the news that the B.C. rent increase cap is being lowered in 2027 is good news for renters in the short term, it could have some negative long-term consequences.
Last week, the B.C. government announced that the rent increase cap in 2027 would be 2.2 per cent, down from 2.3 per cent.
This is the seventh consecutive year that the maximum allowable increase has been capped at or below inflation, according to the Province. Before 2019, renters saw an additional two per cent increase in addition to inflation. B.C. said if they hadn’t changed their rent increase policy, allowable rent increases would have reached up to 5.6 per cent in 2024.
Giacomo Ladas, the associate director of communications for Rentals.ca, said that in the near future, this is a good thing for renters, as it gives them some sense of predictability — especially when other commodities like gas and groceries are getting more expensive.
“They can budget accordingly for the foreseeable future if there are these limits on rental increases,” Ladas told Daily Hive in an interview. “They at least know that their housing costs are going to remain relatively stable.”
But in the long term, rent control can have the opposite effect.
“What truly happens with rent control is, yeah, it keeps rental costs down [in the short-term]. But as soon as a tenant moves out of that building, in order to keep up with inflation and all the money that effectively rental housing providers may have lost, [the landlord will] increase the asking rents, which are called rental turnover, the most,” Ladas said.
“If you’re looking at only three or four units that you’re managing, but your taxes have gone up considerably, your water bills, your hydro bills, you have to make up that money somehow, and the way to do that is asking rents,” Ladas said.
He said this is part of the reason why jurisdictions with strict rent control, like B.C. or Ontario, tend to have the most expensive.
“There is that trade-off.”
B.C. does not have vacancy control, which means that once a tenant vacates a unit, the landlord can increase the price to whatever they want.
Further, this limit can be tough for small landlords.
B.C.’s 2.2 per cent rent increase cap is actually below inflation levels, which could impact rental providers who have a small number of units that they rely on for their income, Ladas explained.
“You’re telling them that ‘Hey, your source of income is not only going down, but it’s actually going to be below inflation.’ Well, then they’re just losing money.”
Rent over the years
As any Vancouver renter can attest, rent prices got out of hand in the early 2020s. According to Rentals.ca, it peaked in September 2023, when the average asking rent in the city was $3,335.
Renter demand outpaced supply due to the fact that Canada has a decades-long undersupply of purpose-built rentals and, at the same time, was experiencing unprecedented population growth.
“We just saw demand outpace supply, and like any commodity, when that happens, prices go up because there is such a limited amount of it available,” Ladas said.
Since then, the federal government has reversed the demand, limiting population growth, while also increasing incentives to bring in new purpose-built rentals to boost supply and resulting in downward pressure on rent prices.
In July of this year, the average asking rent in Vancouver was $2,686.
But Ladas said this downward pressure has nothing to do with rent control.
“That’s asking rents on new units,” he said. “These rent control laws are not necessarily tied one to one with asking rents coming down because rent control affects in-place renters already.”
He said that a weakening economy is partially responsible for falling asking rents.
“It is people having less money. It is a lot of young Canadians sitting on the sidelines, still living at home a lot longer, waiting to get into that first apartment, which means they’re bringing down demand, so prices come down.”
Rentals.ca
In a healthy rental market, Ladas said we would see prices go up a couple per cent a year, in line with inflation and wages.
“That is very difficult for investors. It’s very difficult for small landlords. It’s difficult for large enterprise companies to forecast properly. And it’s very difficult for developers to know what to build next.”
With files from Amir Ali