‘Squeeze is on:’ Rentals face rising costs
Landlords say they are struggling as government fails to act on large insurance-premium hikes
B.C. landlords large and small are struggling with big hikes in their insurance premiums, which they say will, in turn, put pressure on renters.
There are no reports yet of apartment buildings being hit with insurance-rate hikes as extreme as the biggest hitting the strata sector where some B.C. condo buildings have reported 400-per-cent hikes in premiums. But landlords are reporting an average increase around 30 per cent this year. Combined with the B.C. NDP government’s move in 2018 to reduce maximum allowable rent increases, landlords say it creates a challenging environment to operate rental housing.
At a time when Vancouver’s rental vacancy rate is near zero and politicians are calling for boosting the construction of new apartment buildings and the retention of older, more affordable rental stock, landlords say increasing insurance costs are just another factor contributing to a hostile climate for private-sector landlords. That poses a challenge considering the vast majority of Vancouver’s rental housing stock is privately owned.
“It’s brutal,” said Tom Johnson, vice-president of asset management for Cressey Development Group, a major owner of apartment buildings in Vancouver. This year, Cressey has had insurance premiums increase by an average of 18 per cent for concrete apartment buildings and an average of 36 per cent for the wood-frame ones that make up most of their rental portfolio in Vancouver.
“You’re squeezed by a lesser allowable rent increase, and at the time that the insurance increase is coming through you’re also getting hammered by property taxes and you’re also getting hammered by all these other non-controllable expenses,” Johnston said.
So far this year, rental properties across B.C. have experienced insurance premiums increasing by 30 per cent, said David Hutniak, CEO of LandlordBC, an organization representing the rental housing industry.
Rob de Pruis, the Insurance Bureau of Canada’s director of consumer and industry relations for Western Canada, said insurance costs for rental housing are being driven by some of the same factors pushing condo insurance, including aging infrastructure and increasing claims in buildings, as well as broader market conditions.
Some smaller-scale, family-run rental providers have seen higher increases, causing them to question the viability of continuing to provide badly needed rental homes.
Andy Lynch owns an old house in Vancouver’s Mount Pleasant neighbourhood that has been converted into five rental suites of varying sizes, which he rents out for rates far lower than some nearby units are listed. He recently learned the premium for his insurance policy will increase more than 80 per cent this year.
Even if Lynch increases every tenants’ rent by 2.6 per cent, the maximum allowed by law, he would not be able to cover the cost of the premium hike. And that doesn’t even begin to consider property taxes, which are increasing by seven per cent this year in Vancouver, and other rising costs.
Lynch, an 81-year-old retired scientist who now runs two rental properties, said he believes the provincial government should either allow for larger rent increases to cover operating costs or do more to regulate home insurance, as ICBC does with car insurance.
“The squeeze is on,” Lynch said. “I guess the lesson for me is that the government is not really interested in maintaining existing rental stock. Better to sell to a developer and get out of the business.”