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Ten on the 10th: Rental housing and COVID-19 Q&A with David Hutniak of LandlordBC

David Hutniak of LandlordBC discusses the rental market in British Columbia during COVID-19. Citified.ca

Ten on the 10th: Rental housing and COVID-19 Q&A with David Hutniak of LandlordBC
Ten on the 10th
Citified's Ten on the 10th is a monthly question-and-answer segment connecting our readers with the insight and knowledge of Victoria's top real-estate and business professionals.
 
April's Ten on the 10th features Dave Hutniak, CEO of LandlordBC, British Columbia's top resource for owners and managers of rental housing with a membership of over 3,300 individuals and organizations.
 
Asking the questions is Ross Marshall, Senior Vice President of the Victoria offices of commercial real-estate brokerage CBRE. As a leader in facilitating large-scale commercial real-estate transactions throughout the Capital Region – which include apartment complexes, industrial retail and office properties, and land/development opportunities – Ross and his team are at the forefront of market-leading real-estate transactions on Vancouver Island.
 
Would you like to be featured as part of a future Ten on the 10th Q&A? We'd love to hear from you.
 
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There must be numerous ways that landlords are approaching rent deferral arrangements with their tenants. Can you speak to measures that LandlordBC initiated or encouraged?
LandlordBC proacted to this crisis well before the state of emergency was announced to help our members and the broader rental housing sector navigate what we envisioned coming. It turned out worse. We immediately provided tools including sample letters for landlords to use to communicate with their tenants, to open a dialogue, and encouraged landlords to demonstrate appropriate sensitivity and compassion.
 
We provide a deferred rent payment agreement (updated since to reflect the Ministerial Order of March 30th), and information sheets outlining the Federal and Provincial financial support programs that they could share with their tenants so they would be in a position to quickly apply for those monies. This combination of tools and information and support from our organization has had considerable uptake by our members and landlords across BC. It has been and continues to be a huge undertaking for us. I’m grateful for my team. We have a COVID-19 portal at www.landlordbc.ca that is updated literally every day.
 
What is a reasonable schedule for a Payment Agreement?
Setting up a payment agreement with a tenant can be a difficult thing; it is a stressful time for all parties involved and it is important that both landlords and tenants come to the table, preferably electronically, in good faith. Landlords should consider what they feel is reasonable to be paid by the tenant and not request a schedule that is unsustainable. On the other side, tenants should consider a reasonable timeframe, given their financial situation, to have back rent paid off. It really comes down to making sure landlords and tenants are working together to find solutions in this uncertain and unprecedented time. 
 
Multiple advocacy groups in Canada have advised tenants not to pay their rent during periods of social isolation regardless of their ability to do so, citing the temporary curtailing of eviction proceedings and therefore no repercussions to skipping payments. Why is this not a good idea, and what are some potential ramifications for tenants that heed this advice?
This has been an ill-conceived and disappointing reaction to the crisis and will ultimately harm renters, and it will be the more vulnerable cohort of the renter population that will be most impacted. They will very likely be homeless when the eviction moratorium ends, and their credit rating will be negatively impacted making it difficult to find housing in the future.  This is more about a political agenda than truly helping renters.  Renters must still pay rent if they can and work with their landlords to find solutions in the interim whiling ensuring to take full advantage of the robust government programming. We’re all in this together.
 
Landlords and property managers reading this would likely welcome some practical advice. For instance, how often should they be cleaning and disinfecting common areas?
Landlords should regularly clean and disinfect frequently touched surfaces. Regular household cleaning products are effective against most viruses, and you can also use 1/50 solution of bleach and water (e.g. approximately 20 ml of bleach per litre of water or 2.5 ounces per gallon) as an effective disinfectant.The BC Centre for Disease Control (BC CDC) link will provide additional information: COVID-19 Precautions for Multi-unit Residential Buildings 
 
Many landlords are making monthly mortgage payments on their buildings. Can you speak to any programs in place to assist landlords who have trouble making their mortgage commitments as a result of deferred rental income?
The challenge is the absence of any targeted programming to explicitly assist our sector and that’s an issue LandlordBC continues to pursue with government both independently and in collaboration with other stakeholders. We are very concerned about what things look like 4-5 months from now.  We have a health crisis and the response from senior levels of government was done through that lens.
 
Certainly, mortgage deferral has been discussed and Canadians are taking advantage accordingly. Our sector has some unique challenges.  Secondary market landlords, folks with a basement suite, have regular jobs and they too are impacted by crisis (ill or out of work).  So, they may have lost their wages and now their tenants can’t pay the rent.  We’ve already seen that the big 6 banks aren’t going to go out of their way to execute deferral agreements with these folks.  Furthermore, lenders in our sector are not only the big 6 banks, they are pension funds and international lenders who are not subject to the “peer pressure” that domestic banks face to provide consideration.  These are the real challenges our sector is facing.  The Feds and Province are going to have to come to the table.
 
Are there any unforeseen circumstances impacting the purpose-built rental market that you see emerging as a result of austerity measures by the public and a looming recession?
The impact of the crisis will be felt very strongly in the rental market. Over 30% of BC households are renters. The rental market had been very tight in Victoria and the Lower Mainland but we were starting to see some recent softening in rents and vacancies (in the West End of Vancouver in particular) due to new purpose-built coming on stream, home-sharing platform regulations, empty homes taxes, etc.  I see demand for rental decreasing and vacancy rates increasing which means prices will be tempered.
 
Student renters, for example, will have left or will leave as soon as they can. Whether this lasts for just a handful of months or much longer, we’ll have to monitor the crisis for a while longer to know.  I mean we’re in a deep recession already with high unemployment and that’s going to take some time to settle down. An economist noted that the reduced number of immigrants and non-permanent residents coming to Canada due to travel restrictions and the state of the economy will impact rental.   These newcomers are mostly renters.  In the City of Vancouver, for example, prior to this crisis City stats indicated that 76% of all new residents in Vancouver are renters. 
 
As many jurisdictions in our province continue to build new rental housing to meet growing demand and replace aging inventory, can we expect disruptions to that supply if the economy does not rapidly improve by the third or fourth quarters of 2020?
It is hard to imagine that there will be a huge rush to build new purpose-built rental housing in the foreseeable future despite record low interest rates.  Certainly not in 2020 and until there’s a better sense for the supply/vacancies rates.
 
Once we emerge on the other side of this crisis, what changes do you think will be proposed for the Residential Tenancy Act? Or is it too early to say if the industry can expect deviations from its standard operating procedures?
Hard to say what will happen when the state of emergency is lifted and the eviction moratorium via the Ministerial Order is also lifted. 
 
Needless to say there are likely going to be a significant number of tenants with differed rents that need to be recouped. So, what then?  Someone who can't pay rent now is surely not going to have unpaid rent saved up once this is over. I cannot imagine the BC government will want to see large numbers of tenants put out into the street all at once for failure to pay. This is a political reality. LandlordBC is already working to find solutions that will be amenable to Government and our sector. This will likely require the Feds and Province to partner as this is really a national problem.
 
What sort of solutions does LandlordBC envison? 
This involves the Feds and the Province(s) and is just a concept that we see has having potential merit.  Namely, a fully refundable tax credit for tax year 2020 that allows a landlord to be compensated for the foregone rent from a rental unit (up to a monthly dollar limit tied to the local CMHC rental market survey report) that was occupied but for which rent was not collected for each month a Ministerial Order was in place regarding evictions. The refundable tax credit would cover the late unpaid rent but not any increases, interest, or late fees. The requirement for the credit would be the tenant name and address of the rental unit. CRA would then locate the tenant in their records. CRA would then be responsible for confirming that the tenant was indeed negatively impacted by COVID-19 and financially at risk.  If CRA found evidence the tenant was gainfully employed and/or had resources that were not utilized instead of paying rent that was due, then CRA could take appropriate action to recoup tax credit monies from the tenant directly. In this latter scenario, the landlord would not be affected and would nonetheless get the tax credit.
 
The above scheme would ensure the tax burden for our sector housing hundreds of thousands of British Columbians is shifted from the backs of individual landlords to the general tax-payer purse and thus spread equitably across the country.  This equity is critically needed.  We don’t see the food industry, for example, being forced to do what we are. 
 
Any final thoughts?
Simply this, at the end of the day we are all in this together. These are unprecedented times and to believe that anyone is going to escape unscathed is beyond naïve.  Everyone is going to endure some pain and that includes financial pain.  So while we as landlords are all running businesses and the financial impacts are definitely going to be challenging for us, we are also all part of a broader community and we need to do what we can to help.  We can’t lose sight of that.  We will get through this.  Finally, as Dr. Henry says in pretty much every news conference she’s done since this crisis began; “Be kind, be calm, be safe.”
 
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 Article resources

  • Would you like to be featured as part of a future Ten on the 10th Q&A? We'd love to hear from you
  • View CBRE Victoria's website here
  • View Megson FitzPatrick Insurance's website here
  • 2018
    • October, 2018: Reed Kipp of Devon Properties talks about Victoria's rental housing industry
    • November, 2018: Business Development Bank of Canada's Chris Boissevain talks about interest rates
    • December, 2018: Aryze Development's Luke Mari and Ryan Goodman talk about real-estate development
  • 2019
    • February, 2019: Phung Horwood's My Phung talks about real-estate appraisals
    • March, 2019: Luke Mills of Megson Fitzpatrick Insurance talks about the insurance industry
    • April, 2019: Greg Damant of Cascadia Architects talks about architecture in Victoria
    • May, 2019: Real-estate development with Robert Fung of The Salient Group
    • June, 2019: Rental housing industry Q&A with David Hutniak of LandlordBC
    • July 2019: Harris Green redevelopment Q&A with Mark Chemij of Starlight Investments
    • August 2019: Land remediation Q&A with Harm Gross of NEXT Environmental
    • September 2019: Business banking Q&A with Raj Wirk of Coast Capital Savings
    • October, 2019: Real-estate development Q&A with Mike Miller of Abstract Developments
    • November, 2019: Real-estate development Q&A with Byron Chard of Chard Development
    • December, 2019: Interest rate and commercial mortgage brokerage Q&A with Dave Ganong of Canada ICI Capital
  • 2020
    • January, 2020: Real-estate development costs Q&A with Doug Foord of Invictus Commercial Investment Corp.
    • February, 2020: Private lending and the mortgage industry Q&A with Len Shorkey of Shorkey Mortgage Corp.
    • March, 2020: Strata insurance premiums Q&A with Luke Mills of Megson FitzPatrick Insurance
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