Rent Controls, who benefits?
During covid we heard a tremendous number of people supporting tenants that there should be more controls on landlords ability to increase rent. In particular they were advocating for rent stabalization between tenants, meaning a landlord should not be able to increase the rent when one tenant vacates to the current market rent. It should be required to rent the unit at the old price. Oddly tenants never advocate for this during the times when rents are decreasing, which is what is happening at this time.
Landlords on the other side were advocating for the right to raise rents to current market rates due to increased costs of operating their property. This could be the cost of the mortgage, heating or other costs associated with the property. At this time landlords are also not advocating for the ability to increase the rent to an amount of their choosing. For the opposite reason as the tenants, they don’t want their property vacant, requiring them to search for another tenant.
When covid started the housing market first dipped including rents from March 2020 through to November of that year rents declined. Then the sales market took off on an upward trajectory. In BC and Canada, many cities use individually owned condos as a large portion of the rental stock for their market. When these products are sold in the free market they are removed from the rental stock. A decrease in supply increases demand and therefore the price of rentals. All levels of governments made amendments to laws trying to combat increased cost of housing.
These changes take time to effect the markets and as they do the markets change.
We now see a large inventory of rental products giving tenant options to choose.
The larger factor is tenants are not being forced out of their properties due to a property being sold, which provides them time to look for the best option. These factors are creating a higher vacancy rate and units are staying vacant for multiple months at a time.
What landlords are not hearing at this time and advocates are not demanding is that the rental rates be left at the previous rental price. The reason for this is, if you rented your property after Nov 2020 you are not likely to achieve the same rent at this time for that property.
We are also hearing less of the landlords advocating for the right to raise the rent to any level they choose. Why? Due to the supply and demand they have no choice other than to offer their product at what the market will pay. A landlord may have rented their property at a higher price two years ago and wants that price now, except the market refuses to pay their requested rate requiring the landlord to accept what tenants will pay today for the rental in property.
Are rent controls good for the tenant or landlords?
A restriction of the amount of rent a landlord can increase the rent does benefit the tenant. How does it benefit the landlord?. If you were restricted to increase the rent to the government approved rate in the past two years your tenants current rent may be comparable to the market and they may not choose to seek a new place to live, giving the landlord stability with their rental property. If a landlord raises the rent higher than the market amounts, tenants have tremendous options at this time to find a better price, location and product to meet their needs.
Rent controls can be beneficial to both parties.
We believe that BC has rent “restrictions” not rent controls. Landlords have the right to charge any amount of rent for their property. During economic good times the landlord is restricted to increase the rent to a level deemed suitable for a tenant to manage in their budget. During slow times the landlords have the right to adjust those agreements aswell to keep tenants and or attract new ones. Often landlords will refuse a tenants request to reduce the rent allowing a tenant to continue residing at the property which causes tenants to vacate the property. Turnover costs can be expensive for landlords and tenants. Increasing rents may provide landlords with increased income today. It may also cause high turnover causing landlords to experience multiple months of vacancy affecting their total income in the long run if the unit is not continuously rented.
The laws are always going to change, and being able to adjust is part of being a landlord.
We recommend as a landlord even in good times be prepared for your property to be vacant or not receiving rent for a minimum of three months each year. If you are not able to carry at least that amount of the expenses you may be in some financial difficulties with your investment property.
Rental restrictions protect both parties of a tenancy agreement.
Need help managing your investment properties. Cartref Properties can assist you, call today to discuss your needs. You can find more information about us at: www.cartrefproperties.com
