Renters in British Columbia could see the highest annual rent hike in decades come January 1, 2023, unless the province enacts a rent increase ceiling untethering the annual lift from inflation.
Come January, rents in BC could increase by 5% or more based on provincial inflation data, which the government uses to determine the annual rent change maximum. At 5%, rental rates would adjust higher by $50 for every $1,000 in rent, should a landlord choose to pursue the alloted limit.
In 2018 the provincial government removed a 2% top-up landlords could use in addition to the BC Consumer Price Index inflation figure, or CPI, which lowered the 2019 maximum increase to 2.5% from an otherwise 4.5% maximum. Without the top-up, the 2020 increase was set at 2.6% instead of 4.6%.
Due to the pandemic, a rent freeze for existing tenants was instituted for 2021. And associated solely to the CPI, 2022’s allowable change was limited to 1.5%.
Through April of this year, however, the CPI has already pushed to 4.0%, and is tracking higher. Data from May is expected this week.
Annual rent adjustments are calculated by using the 12-month average percent change to the all-items provincial CPI through July. What this means, is whatever the 12-month average CPI figure is in July, that number will be used as the inflation component of a rent increase maximum for the following year, starting January 1. Since BC only has the inflation component for its rent increase calculation, whatever the CPI is come July, that is the additional percentage renters can expect to pay next year above the current year's rent.
Ahead of 2023, due to inflationary pressures not seen for decades, analysts believe a July CPI of 5% or higher is possible, meaning rent movements tethered solely to the CPI will correspond with an equal rent increase ceiling reaching even higher than a recent peak of 4.3% set in 2012.
In light of the CPI approaching 5%, housing minister David Eby has expressed support for yet another change to the rent increase calculation, which may cap the rate at a yet undetermined maximum, while additional provincial efforts could be rolled out to assist renters already at their maximum affordability limit.
An announcement relating to rent assistance programs and the 2023 maximum rent adjustment is expected this summer.
Although rent controls are laudable from the perspective of renters facing ever-growing housing costs and historic changes to the cost of living, landlord advocates have expressed concern that ceilings out of sync with inflation and the potential for added measures such as rent caps in between tenancy changes are pushing many suppliers, particularly small-time operators, out of the industry.
Speaking to Vancouver’s CityNews earlier this month
, David Hutniak of landlord advocacy group LandlordBC said landlords “are leaving the business frankly, in droves,” in part due to feeling “frustrated that [being a landlord] is more challenging,” and that “the returns aren’t there.”
At a time when rental availability in BC’s largest cities is hovering at near-zero vacancy rates, further negative pressure on maintaining the already existing supply of rentals could have significant medium and long-term impacts on housing costs and availability as flex units like secondary or basement suites are turned over to owner-occupiers.
In addition to rising interest rates, inflation is chipping away at the viability of rental housing proposals large and small. And the inability for the industry to adequately recoup annual operating and inflationary pressures post-construction as a result of changing recovery costs could yield even more supply challenges in the years to come.
“If [Minister Eby] tempers this [maximum rent] increase, at this particular time, what kind of message does that send to potential rental developers?” Hutniak told CityNews. “Basically, it means that they can’t trust the government. That they’re making 50, 60 year decisions, huge amounts of money involved, now with interest rates rising, purpose built rental in particular is hugely challenged. So, they need to have confidence that the [Residential Tenancy Act] formula is the RTA formula.” C
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