Vancouver Rental Market Discussion

[misher]

This letter from the Urban Development Institute to the City's Rental Task Force provides quite a bit of insight. I do like the point they make about the recent tax and regulatory framework causing uncertainty which may scare away rental developers.

http://udi.bc.ca/wp-content/uploads/2018/07/UDI-Ltr-July-6-2018-Rental-Housing-Task-Force.pdf

The quote below is interesting:

While the Government is introducing programs to further incent rental housing,
Budget 2018 includes several added costs for new rental projects. Currently, the
Speculation, School and Luxury Property Transfer Taxes apply to the development
lands of residential projects – including rental ones. Based on a recent analysis by 2
one of our members, added up, these taxes could add over $850 per year to a
tenant’s rent in a new project.

UDI is deeply concerned that further regulatory changes could add more
disincentives to building rental housing. The RTA as it is currently enacted, strikes an
effective and fair balance between protecting tenants and allowing landlords to
recover expenses, and in ideal circumstances generate a modest return on
investment. A key concern UDI has with potentially more changes to the RTA, is the
continued uncertainty it would bring. The Government has already made several
changes to the Act, including improving tenant rights during
renovations/redevelopment, putting limits on fixed-term leases and eliminating
geographic rent increases. In addition, the Government is increasing resources for
the RTB and enforcement of the RTA, which UDI strongly supports.
Further changes to the Act could undermine private sector investment in new rental
housing. The developers of these projects are impacted by risk far more and longer
than strata developers. Strata projects are risky, but only for a few years. Once the
developer closes on the sale of the units in a building, they receive their revenues, so
there is little to no further risk for them. A rental developer has to wait decades to
earn the revenues to pay back their land, construction, soft and financing costs. They
have to trust that over that time, the regulatory and tax framework will not radically
change; otherwise, they may choose to build other types of product, or worse, invest
outside of British Columbia.

As such, UDI strongly recommends against any further material changes to the RTA,
and specifically, UDI recommends protecting the 2%+CPI annual increase formula,
and the ability to adjust rates to market when a tenant concludes tenancy. Certainly,
if the Government considers more tinkering, or whole sale changes to the RTA that
impact these two policies, the shift away from rental will be immediate, and likely
result in thousands of rental units currently in the development pipeline to be forced
to switch over to strata condo development, as we have seen recently in Toronto.