Tenants in B.C. are bracing for a bigger hike in the allowable rent increase for 2023 after the Bank of Canada boosted its benchmark interest rate by one percentage point, taking it to 2.5.
Doug King, executive director of the Together Against Poverty Society, said the new cap, expected to be announced in September, will likely be affected by the interest-rate increase, aimed at slowing soaring inflation.
“If you’ve got a landlord with a mortgage, that could significantly increase the amount that they have to pay the mortgage month over month,” he said Wednesday.
King figures the next maximum allowable rental rate increase will be at least four or five per cent, so landlords can recoup some of their costs.
If the province decides to hike it to five per cent, that would probably be a good time to roll out the renters’ rebate it has talked about in the past, he said.
The previous allowed maximum increase was 1.5 per cent, which many people could manage. Five per cent, by contrast, would have a “significant impact” on tenants, King said.
Normally, the province bases the maximum allowable rent increase on the average consumer price index in the 12 months from July to July.
However, Housing Minister David Eby recently indicated that formula may be changed in a way that reflects landlords’ rising costs, but also doesn’t saddle tenants with a sudden large rent increase.
King also wants to see alternatives to the existing system for calculating the increase, and says municipal governments can play a role, too, by offering options such as deferring property taxes for landlords who can prove they need assistance, which could prevent new costs being passed on to tenants.
Hunter Boucher, director of operations at Landlord B.C., said some landlords are holding back on working on buildings until they see what the allowable rent increase is in September.
Financing is a significant part of the rental housing industry, especially when it comes to raising money for repairs and renovations, he said.
With higher costs in areas such as construction, the industry is wondering if the province will cap the rent increase at a level below inflation, he said.
“At the end of the day, [financing is] an important part of the cash-flow aspect, especially for larger owners and operators,” Boucher said. “With [interest-rate] increases like this, certainly owner-operators are going to have to really consider where they put their money, especially when it comes to capital improvements.”
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