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.

 

June'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.

 

 

Despite persistently low vacancy rates, we seem to have entered an era of supply denial.  Whereas the only solution to the rental housing crisis is to support and encourage the building of more rental housing, specifically secure purpose-built rental housing, we are faced with an increasingly restrictive legislative and regulatory environment that I would argue is discouraging the building of rental housing.  Furthermore, operationally, the exponential costs we face as rental housing providers, especially those costs over which we have no control such as property taxes, utility costs, insurance costs, water and sewer, etc., when weighed against the costs and risks associated with the provision of rental housing, makes this a difficult environment today and potentially for the foreseeable future. 

 

National, provincial and municipal governments seem to have varied views on the challenges facing the rental housing market – of these three levels of government, who should ultimately be the primary regulator of the rental housing market? 

Well rental housing regulation currently rests with the Province and that’s where it should remain.  However, in some municipalities, we are witnessing jurisdictional challenges to the provincial authority specifically as it pertains to the Residential Tenancy Act, which is concerning.  The Province is working on providing municipalities with additional clarity and some resources to address this situation, but continued monitoring is needed.  Ultimately, all levels of government have a responsibility to use the powers and tools at their disposal to work collaboratively to address the rental housing crisis that we are experiencing in many jurisdictions across Canada, with BC hit especially hard.  We are seeing some good evidence of collaboration but more needs to be done. For example, the Feds could deliver on their election promise to exempt new purpose-built rental from GST, specifically the self-supply anomaly.  The stakes are very high.

 

LandlordBC was formed July 1, 2013, and I assumed the CEO role July 1, 2014, so it will be 5 years that I have been leading the organization. I have the good fortune of working with a group of intelligent and dedicated individuals who care about the organization and our members.  Together we’ve achieved a great deal in a very short time in terms of supporting our members, building and delivering educational tools like our Landlord Registry™, engaging landlords and other stakeholders to improve the landlord/tenant relationships, and so much more.  In terms of the proudest achievement for me, it would be the fact that we’ve taken LandlordBC from an unknown entity, to one that is highly respected by all levels of government and a broad range of stakeholders for our expertise, professionalism, integrity and, progressiveness.  Our voice is sought after and heard at virtually every table, and as an industry association, that’s where you want to be.  I’m very proud of that.

 

This may come as a surprise, but the engagement of the smaller secondary market landlords is a continuing challenge.  They disproportionately represent our industry however, many of them do not necessarily appreciate that they are running a business, let alone understand that they are part of an industry.  They are spread out throughout the province and finding them let along touching them is no easy task.   The homes they provide BC families are critical and we want them to thrive, but we also know that many of them are lacking the necessary legislative knowledge to properly manage their rental units.  This exposes them to considerable risk and is often the reason for less than successful landlord/tenant relationships.  That’s why we are very honoured to have been awarded an education grant by the Minister of Municipal Affairs & Housing to deliver regional education across the province in two phases (initially 13 different locations), which we know will go a long way to increasing that knowledge base.

 

The Province’s decision to limit maximum annual allowable rent increases to CPI only (from 2% + CPI) was hugely disappointing and a decision that we vigorously argued against with the Minister, but sadly to no avail.  I still feel that it was not the correct decision and it has put huge pressure on the operation of existing rental and has had a direct and negative impact on the building of new rental housing, with some projects having been cancelled immediately as a result.  The Province did promise to implement an Above Guideline Increase (AGI) process.  LandlordBC is intimately involved with the Province in the development of the AGI process, and that work continues.  LandlordBC has put forward comprehensive recommendations that would result in a simple, transparent, easy to administer process, and are hopeful that’s where the Province ultimately lands.  

 

While we are very sympathetic to the difficult environment renters are facing today in BC, the issue remains one of supply, and the current environment with increasingly regressive price controls, inclusionary zoning, etc. are problematic, and will only make matters worse for both current and future renters.  We have proposed that the Province consider measures taken in other jurisdictions, like Ontario, where at least newly constructed purpose-built rental would be exempt from rent controls as an interim measure to build new supply.  Then, at such time as we achieve something resembling a balanced market in terms of vacancy rates, broader price control exemptions should be phased in. This advocacy continues.

 

We need incentive programs to mitigate the high land and construction costs as well as a legislative and regulatory framework that is more conducive to developers and lenders taking the considerable risk that’s involved. This is especially true if we wish to see more new secure purpose-built rental housing in the larger urban centres. A program that has had some success is Vancouver’s Rental 100 program which offers DCL waivers, parking relaxation and density bonusing. When the program was introduced concurrent processing was included which cuts up to one year off the time to get construction started.  It was unfortunately suspended for administrative reasons.

 

But Rental 100 nevertheless is a good model and unbelievably currently under attack by some stakeholders.  Faster approvals are a must. Seattle is a model for new purpose-built rental with its generous property tax exemption (10 years).  Seattle also does not have rent controls which serves as a major incentive to building new rental housing. CMHC has offered a good program under the National Housing Strategy for construction financing, which helps.  In my view there are opportunities to employ Residential Rental Tenure Rezoning for gentle densification in single family neighbourhoods and light industrial areas provided appropriate upzoning/density bonusing is integrated into the process.

 

Oh man don’t get me started on this one. Dense, affordable, multi-family developments are the only hope for our being able to deliver the housing we need and, equally importantly I might add, for breathing new life into single-family neighbourhoods.  When you look at an urban centre like Victoria, where single-family neighbourhoods account for in the order of 60-70 per cent of the city’s landmass and only 30 per cent or so of the population, we need everybody to get on board with efforts to offer some kind of middle ground for the underhoused families that live with children in our communities today, and homes for the many more families that we need in our communities tomorrow to drive our local and really broader economy.  What’s odd is that whereas a significant proportion of Victoria residents are known for being ecologically conscious, yet they fail to appreciate that increased density is critical if we are to positively impact climate change.  

 

BC Assessment assesses purpose-built rental buildings on the basis of highest and best use.  Furthermore, BCA assumes all units in a rental building, at the time of assessment, are at market rent.  Well highest and best use is a condo.  And it would be highly unusual to find an existing rental building where every unit is at market rent due to low vacancy rates which translate into low tenant turnover rates.  BCA’s assessment process ultimately translates into much higher property taxes as we’ve seen for 2019. The Province is collaborating with municipalities to consider a split-assessment basis for commercial properties   to help small commercial landlords.  We argue that similar consideration should be afforded rental buildings because they are in effect small businesses, and we are getting hammered with sky-high operating costs, and property taxes is a significant cost driver.  This is at a time when everyone wants affordable housing so they’re working at cross-purposes as I see it. I believe that a separate class for purpose-built rental is probably the ultimate solution.  This is an issue that LandlordBC is currently pursuing.  

 

Well the first thing that came to my mind is getting the orange guy with that thing on his head impeached.  But in all seriousness, and staying on the subject of rental housing, I would really like to see all levels of government do their part to encourage the building of market rental housing.  It’s been great to see the significant investment in the community sector housing by the Feds and Province, in collaboration with a growing list of municipalities.  It is badly needed.  The reality is that 90% of renters live in market rental housing provided by the private sector.  However, it seems that at every turn recently, there is new legislation and regulation that creates further barriers to building rental housing in BC.  Pension funds, a huge source of financing for these projects, have a fiduciary responsibility to mitigate their risks and achieve a certain rate of return.  For many of them, BC is not the place to make those investments.  We need to change that.  This rental housing crisis is totally fixable. C

 

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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 LandlordBC's website here | View CBRE Victoria's website here
• October, 2018 Ten on the 10th: Reed Kipp of Devon Properties talks about Victoria's rental housing industry
• November, 2018 Ten on the 10th: Business Development Bank of Canada's Chris Boissevain talks about interest rates
• December, 2018 Ten on the 10th: Aryze Development's Luke Mari and Ryan Goodman talk about real-estate development
• February, 2019 Ten on the 10th: Phung Horwood's My Phung talks about real-estate appraisals
• March, 2019 Ten on the 10th: Luke Mills of Megson Fitzpatrick Insurance talks about the insurance industry
• April, 2019 Ten on the 10th: Greg Damant of Cascadia Architects talks about architecture in Victoria
• May, 2019 Ten on the 10th: Real-estate development with Robert Fung of The Salient Group
• Looking for a new-build home or commercial space in Victoria? Use Citified to research new-build condos, rentals and commercial spaces
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Ten on the 10th: Real-estate development with Robert Fung of The Salient Group