B.C. has lurched from one rental-housing crisis to another for the past 42 years, each, sadly, worse than the previous.
Rent controls became a fact of life in June 1974 under the Dave Barrett NDP government. The allowable rent increase is set each year in September and allows rents for the following year to be raised by the amount of the previous year inflation rate plus two per cent.
This sounds reasonable, if not generous. It was intended by the drafters of the legislation that, if a landlord gave the maximum allowable increase each year, rents would always remain at market, a brilliant solution to a knotty political problem.
But market rents have not increased much, if at all, since 2007 — until recently. The 20 to 30 per cent increases referred to in the article look more reasonable when compared to the compounded sum of the inflation rates for these years.
If a mechanism had been built into the rent-control rules to allow rents to be rationalized to market levels over an extended period of time, landlords would have no reason to use loopholes to raise rents beyond guideline amounts. Rents could, as was intended, approximate market levels over the long term, and tenants would not receive jarring increases. The people who invest their life savings to provide housing to those who so desperately need it could receive an acceptable rate of return.
Current rates of return might make sense in a market where the cost of borrowing is close to zero, but will cause mayhem to the rental housing when interest rates return to historic norms.
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