Vancouver’s city council took the first steps this month toward banning renovictions in the city, a move that attracted almost no media attention despite its huge importance to residents.
If adopted, the framework would require owners to arrange alternative accommodation for tenants during major repairs or renovations, and to allow them to return to the unit at their old rent. Fines would be levied for violations.
Renovictions, as most of us now know and many have experienced firsthand with crushing personal consequence, is the process that landlords often use to justify evicting tenants. Provincial tenancy laws prohibit evictions without cause. They also limit annual rent increases to roughly the rate of inflation.
Rents for vacant apartments — where landlords aren’t limited by rent controls — are increasing at 10 per cent a year. So many owners understandably see a chance to get much higher rents by pushing out current tenants who have been protected by the limit on annual increases. That’s because rent controls apply to a specific tenant, not the unit.
What is a landlord to do?
Well, one loophole is that it’s OK to evict tenants if you are renovating the apartment. And you don’t have to rent the unit back to them when you are done.
So, the new renter comes in at market rates that can be double the old rates (depending on how long the unit was occupied at rent-controlled rates).
The tenancy laws say eviction is allowed for “extensive renovations.” But there is no clear definition of what that means, or minimum amount that must be spent on renos before a tenant can be evicted.
This makes the incentive to evict very high, and the threshold to legally evict very low. Result — renoviction.
It’s far too easy to paint landlords as the evildoers in this process, but they are not. Under present circumstances, the value of rental real estate is calculated based not on cash flow from existing rents, but on its potential if every unit was occupied by tenants paying current market rents. So too are property tax assessments, which rise based on the general increase in the value of similar rental properties, not on landlord’s profits.
Thus, increasingly, many rental property owners are caught in a two-way pull. On the one hand their municipal taxes are going up faster than rental income, while on the other hand they are tempted to capitalize on their paper gains by selling their buildings.
And who do they sell to? These days the hungriest purchasers of rental properties are corporate real estate investment trusts and other professional investors — not your traditional local landlords to be sure. For example, CBRE, an international real estate corporation, is now marketing its Vancouver Legacy Apartment Portfolio to buyers — 10 apartment buildings (mostly West End), with over 400 rental units, packaged as a group.
Investors typically bid on an available rental building based on its “income potential,” not its current rental revenue. The real estate investment trusts rely on investors looking for gains in value of five- to 10-per-cent a year. And that means everyone in the building must go.
At the same time, the higher sale prices of newly acquired investor-owned buildings is, in time, reflected in higher property tax assessments for all nearby properties, including those owned by local landlords. These higher “paper values” and associated property tax increases generate an ever-greater pressure on local owners to sell out or turn to renoviction themselves.
We can now more clearly see how a restriction on renovictions is the secret sauce (or one of them at least) for managing our housing crisis.
Obviously banning renovictions is immensely important for current tenants who would otherwise be on the streets. But perhaps of even greater importance, it would reduce the inflationary pressures on all city land zoned for apartments.
With a prohibition on renovictions, real estate investment trusts would be forced to reduce their projections of future earnings. Over the long term, this would reduce purchase prices for rental buildings, lowering property tax rates, and lessen the pressure on local owners to sell out to investment groups.
For the same reason, we need to prohibit renoviction’s evil twin, demovictions, where residents can be kicked out without compensation if their building is replaced with a new one. Demovictions similarly harm renters and inflate land values. The City of Burnaby recently passed an ordinance banning demovictions on any property subject to a rezoning request.
The only fly in the ointment is that, as worded, the mayor’s motion sets up a number of potential barriers to implementation. It asks staff a series of questions: Will the province amend the tenancy act to allow this? What does the city charter allow? Can staff do the work necessary to implement the policy? Negative answers to any one of them could kill the initiative.
And staff are not even to report back to council until some time in 2021.
When New Westminster passed a final bylaw almost two years ago, why isn’t there confidence that this can be done, and an urgency to make it happen much sooner? People are being evicted now. They shouldn’t have to wait for help.