The provincial government’s new policies that enact restrictive vacancy controls could put nearly 13,000 planned rental homes across BC at significant risk of delay or cancellation, according to the Urban Development Institute (UDI).
The introduction of new vacancy controls would allow the provincial government to strictly regulate rent to a unit instead of the tenant. It would remove the current ability of rental owners to flexibly adjust rents between tenants to account for building and unit upgrades and any increased property taxes and insurance and utilities costs.
However, the UDI says builders are concerned that such strict limits will mean owners will be unable to afford mid-life building improvements, such as upgraded elevators, new appliances or replaced carpets. There is a much higher risk of buildings falling into “disrepair.”
This finding is based on UDI’s survey of 30 rental builders, with about two-thirds of the approximately 20,000 rental homes under development at risk of being financially unfeasible to complete.
Builders also have to deal with other supply-inhibiting factors on new rental housing, such as rapidly rising construction costs, increasing interest rates and taxes, and long municipal approval process that can take as long as seven years.
“This would be the single, most significant impediment to the construction of rental apartments,” said Anne McMullin, President and CEO of UDI. “This is not the time for new restrictions that could result in the cancellation of important rental home projects in communities across British Columbia.”
The rental vacancy rate could fall even lower; within the city of Vancouver, where rental housing accounts for 53% of all housing types, the vacancy rate is below 1%, pushing the rental market into a landlord’s market with unaffordable rates for many low-and middle-income individuals and families.
“Our builders are looking for creative ways to address the housing crisis. If governments commit to proven, specific solutions and incentives, our local builders will be enabled to provide more purpose-built rentals that help deliver more home options,” she continued.
“Ultimately, local builders want to build more rental homes. They recognize the growing need for these in every community, for every budget. We are eager to work with government to help solve this rental crisis.”
The provincial government’s Rental Housing Task Force (RHTF) — led by Vancouver-West End MLA Spencer Chandra Herbert — is expected to release further recommendations later this month outlining a number of tenancy policy changes, including new vacancy control policies.
The RHTF’s earlier recommendations in September reversed the provincial government’s policy on increasing the maximum allowable rent increase, removing an automatic additional 2% annual increase. The 2019 maximum allowable rent increase will be 2.5%, instead of the previously announced 4.5%.
“We need to remove the countless government barriers to increasing supply,” said Andrey Pavlov, finance professor at Simon Fraser University’s Beedie School of Business. “Rent controls feel good for the moment, but hurt everyone, including renters, in the long-term.”