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Give landlords incentives to rent properties
Letter to the Editor
Clearly, the Province of B.C. recognizes that many renters live in fear of large rent increases.
But the question has to be asked, what is the government doing to encourage property owners to rent , or to increase the supply of rental properties on the market ? Action by the government to entice property owners and investors to add to long – term rentals would be a welcome relief to tight rental markets.
The government needs to balance this new move to restrict revenues with way s for landlords to reduce or recoup their costs. The current Residential Tenancy Act (RTA) restricts a landlord ’s ability to recover expenses incurred for repairing property damage caused by the tenant. New and existing restrictions in the RTA leave landlords without the ability to increase their revenues to cover increasing expenses. The RTA also makes it very difficult to recover costs incurred through missed rent payments and damages to property. The changes also raise a question on the availability of seasonal rates for communities with differing summer and winter market rates.
The challenge of damage deposits is that when needed, they are rarely large enough to cover the damage don e and are difficult to collect. Damage deposits are restricted to a half – month’s rent and can only be kept for repairs when a tenant agrees in writing. The power lies with the tenant not to sign, which forces the landlord to pursue arbitration. In almost all cases, arbitration and/or time in court is not worth the small damage deposit. The restrictions in damage deposit amounts, plus the difficulty in using damage deposits to pay for repairs, give no incentive for property owners to rent.
The options for generating revenue from properties is expanding and new options pose a smaller risk to the property owner. In October at a City of Fernie council meeting regarding short – term rental units, over 15 property owners stood up and said they will not rent their secondary suites, second homes, or garage suites to long – term renters. Perhaps it is best summed up in the example: Why rent to someone who leaves you with a house in need of $10,000 in repairs when you can rent it to someone who leaves you a bottle of wine on check-out?
Two concerns arise from this comment. One – is the current RTA a factor in the proliferation of short – term rentals? Two – are the rules in the RTA resulting in landlords pulling their rentals off the market and leaving them empty?
B.C.’s hot housing market means property values are increasing quickly. Higher assessed property values mean higher property taxes. In addition, municipal utilities and insurance costs fluctuate without restriction; they are not subject to the same rules limiting rent increases. Here in Fernie – unlike some other municipalities – properties with two units are hit twice with municipal utilities. The expenses associated with owning and maintaining a rental property ownership have quickly outpaced a landlord’s ability to recoup those expenses through rent increases.
It appears the government regulations have pushed being a property owner and landlord to that of philanthropic activity. The return on investment for purchasing property has vanished due to land transfer taxes, growing regulations, increasing expenses, and limited revenue opportunities. These costs and risks make investing in GICs with three per cent annual returns an attractive alternative to investing in rental properties. Further, the affluence of landlords is also coming into play. Investors are choosing to leave their property empty, earn a return on the house value, rather than rent it long – term and take on the risk of insurance, damage, and the headache of tenants.
The RTA and the current changes also restrict a landlord’s ability to adapt to market demand in various seasons. In Fernie, as can be expected in many resort communities, there are many looking for six-month rental options coming for summer or winter. The winter rental demand sets the market rate. The summer rental season experiences a discount to the winter market price. This can be a great benefit to the renter who came for a winter and chooses to stay for a summer. There are question s ho w these loophole changes will impact this option.
This is a call on the Province of B.C. and the Minister of Municipal Affairs and Housing Selina Robinson, to address the other half of the attainable housing problem and give landlords incentives to rent their properties. Address the challenges created from damage deposit restrictions, address the high insurance rates through ICBC, and encourage municipalities to come to utilities solutions. Let us work on both sides of the rental market to ensure all have a place to call home.
Patty Vadnais,
Executive Director,
Fernie Chamber of Commerce
