The BC government came out this week and capped rental increases by 2% – Renters say that’s too much! And Landlords are incredibly frustrated as inflationary costs have inflated their cost of ownership by much more than 2%.
Historically, the government has increased rates in unison with inflation, but this time around they have suggested a lift of that magnitude would only hurt the Renters. However, the housing providers, folks who have a rental suites that helps offset the cost of their rising mortgages and property taxes are left holding the bag.. often times renting their suites out at a loss.
The long term affects of rental caps have historically proven to be more negative than positive. There’s a consequential butterfly effect to these decisions and ultimately kicks the problems further down the road, creating a divisive point of contention between tenants and landlords. This is a result of not having enough housing stock, compounded by the time it takes to create homes in Vancouver – yet Landlords are having to pay the price.
Vancouver has a massive housing supply issue and the largest provider of rental housing are investors and local property owners. While the government needs new rental stock they are handcuffing themselves and the providers they need so desperately for their stock. And with inflation being a bigger issue than rent control, expect housing providers to turn to services like Air BnB to make up the shortfall. Landlords will entertain more short term fixed tenancies so they can deal with inflationary pressures.
Ultimately, Developers building market rentals for the city will back off from these building types and move to more capital friendly markets where rents are not controlled further restricting the supply of market rental housing. Alberta by comparison has 85% of the population that BC has and they have zero rent control – they also don’t have a rental crisis. The move makes very little financial sense and puts unnecessary pressures on providers to come up with their own solutions.
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