Derrick O'Keefe: Landlord B.C. is wrong—Vancouver tenants can't afford these rent hikes
Everywhere I’ve canvassed around Vancouver for the past two weeks, I’m meeting and talking to lots of people who are angry about the recently announced rent hikes. Renters in this city have had enough, and many homeowners also express their opposition to the hikes. But there’s at least one group supporting the latest hikes.
Landlord B.C. issued a paper this week in support of next year's maximum 4.5 percent increase. Their report cherry-picks data, ignores the past 15 years of stagnant wages, and pretends that landlords aren't profiting from our province's real-estate bonanza.
It'll likely come as no surprise that the landlord lobby thinks B.C.'s NDP government is doing the right thing in setting next year's "maximum allowable rent increase" at 4.5 percent. This number, well above inflation, comes from a formula created by the previous B.C. Liberal government in 2004, which sets maximum increases at inflation (measured for the 12 months between August and July) plus 2 percent. This year’s increase is only the second highest under the formula; the highest was 4.6 percent in the formula’s first year in 2004.
The landlords argue that 4.5 percent is justified because average wages in B.C. have been growing at about same pace over the past 12 months. They even argue that 4.5 percent is too little as their costs are growing even more quickly. Let's take a closer look at some of their data.
First, wages. Here's a chart showing maximum rent increases alongside growth in median and average wages since 2003, the year before the inflation plus 2 percent rent formula came into effect.
Yes, average wages in B.C. have finally shown some real growth over the past few months, but this is so far an anomaly that comes after more than a decade of wage stagnation. (In June, for example, minimum wage was increased by $1.30/hr to $12.65, still far below anything resembling a living wage or a wage at which a full-time worker could afford to live in Vancouver.) Seen in its proper context, this very recent wage growth is a blip, one that is barely allowing workers to keep their heads above water, especially as housing costs have exploded over those same 15 years.
Since 2003, the cumulative maximum rent increases have been 67.8 percent. Adjusted for inflation, this is 33.8 percent. Over the same period, the average weekly wage has increased less than half as much, 14.7 percent when adjusted for inflation. And the median weekly wage (a better measure of wages the typical worker receives as the very few very high wages pull up the average) has gone up even less: 7.9 percent in inflation-adjusted terms over the 15 years between 2003 and 2018, four times slower than allowable rent increases.
Remember that these increases only apply for ongoing tenancies; once a tenant leaves a unit, it's open season and rents can increase by any amount. In fact, Vancouver has an epidemic of renovictions and demovictions to get around rent controls.
Second, Landlord B.C. is overstating the extent that rising costs are having on landlord bottom lines. Notice that while the report includes many charts and numbers about increases in particular costs, we don't get any information about how big these costs are or how they are related to revenues. If landlords only use some of their rental income to pay these expenses then they only need a much smaller (not proportional) increase in rents to cover them.
Luckily, a recent report from Altus Group, one of the world's biggest real estate consultancies, outlines the costs involved at typical Vancouver rental buildings. Among them is a four-storey wood-frame building dating from the 1970s with modest (only by today’s inflated standards!) rents, nearly exactly the type of building Landlord B.C. uses as its example.
According to this report, the expenses Landlord B.C. lists—property taxes, insurance, water and sewer, utilities, repairs and maintenance—make up just 22 percent of this typical building’s rental income. This means that even if these expenses are increasing by 7.6 percent on average per year as Landlord B.C. claims, that’s only 1.7 percent of total rental income—and even this assumes they cannot cover it by eating into profits slightly. Don’t forget especially older buildings whose construction loans are paid off can be quite profitable with current rents in large part a pure return to land ownership.
Both Ontario and Manitoba allow maximum rent increases in line with inflation, yet somehow landlords in those two provinces are not going bankrupt en masse. B.C.’s rent increase formula allows landlords in our province to pad their bottom lines. In the context of our housing emergency, there is simply no valid or moral reason to allow this latest 4.5 percent rent hike. What we need is a temporary Rent Freeze, a zero percent rent increase, to give tenants some relief as part of a comprehensive emergency action plan on housing and affordability in Vancouver.
As a renter myself, with a family with two young children, I know how tenants are already pushed to the brink. I know how anxious renters are and how these annual rent hikes hit our already squeezed-to-the-max budgets.
Landlords have a well-organized lobby. Renters in Vancouver need political representatives who aren’t afraid to take on these powerful interests. On city council I’ll fight hard, together with my COPE colleagues Jean Swanson and Anne Roberts, to use all tools at our disposal to provide some long overdue relief to renters in Vancouver.
Since the new increases were announced nearly two weeks ago, we’ve talked to thousands of renters who are angry and want the 2019 rent hikes rescinded. The good news is that MLA Spencer Chandra Herbert, chair of the B.C. Rental Housing Task Force that is due to table its report this fall, has said the government is open to revisiting the Liberals’ rental increase formula.
The message is getting through: Instead of this outrageous 4.5 percent increase, it’s time for a temporary Rent Freeze and real rent control in B.C.More