City of Victoria staff complain affordable rentals are being sold to big investors, but experts say government policies are forcing veteran smallholders to sell
Victoria Council wants senior governments to help create a non-profit housing acquisition fund to enable municipalities to buy and protect low-cost housing, as the number of rental properties purchased by trusts Real estate investment companies and institutional investors are skyrocketing, driving up rents.
Last year, Greater Victoria saw record sales of multi-family properties, with an estimated $862 million worth of homes changing hands.
That’s a 70% increase from 2019, when the previous record of $505 million was set.
Estate agents who specialize in multi-family properties, however, say it is government policies that are forcing many owners of older buildings to sell.
After a nearly year-long rent and eviction freeze and a cap on rent increases in British Columbia at 1.5% for 2022, despite the official inflation rate at a 30-year high, many small owners cash in, they say.
Victoria, for example, has raised 2022 property taxes by 3.89% and most loan rates have doubled or tripled since January.
“B.C. government-imposed policies and rent freezes, escalating operating costs and potential capital gains tax increases have caused more landlords to make the decision to sell and to take advantage of market demand and record prices,” said Lance Coulson, Executive Vice President of CBRE National Apartment Group, in releasing the 2021 Greater Vancouver and Greater Victoria Apartments Annual Report.
Six in 10 buyers of rental apartment buildings in Greater Victoria and Metro Vancouver in 2021 were large institutional investors and real estate investment trusts, as they have the financial depth to deal with the rental policies of British Columbia, suggested Coulson,
Major players in Victoria include Starlight Investments, which has $20 billion in assets with more than 70,000 rental units in North America, and Canadian Apartment Properties Real Estate Investment Trust (CAPREIT), Canada’s largest landlord.
Over the past year, Starlight has purchased 10 older apartment buildings in Victoria with a total of 592 rental units; CAPREIT has purchased six existing properties totaling 335 residential suites in Victoria.
In a recent report on the city’s housing strategy presented to council’s full committee, city staff said a massive increase in investment is putting upward pressure on rental rates.
Although the involvement of REITs and institutions in the market is not new, the report notes that high purchase prices – the current average is north of $275,000 per unit – often drive up rents by new owners.
“This trend has the potential to significantly affect the affordability of Victoria’s rental housing market in the years to come, particularly as older, more affordable rental properties are acquired,” the report said.
Com. Jeremy Loveday said it might be time for city staff to consider whether the city can implement regulatory or licensing measures to control REITs.
“If there’s anything the city can do within our own powers, I think we need to look at that and also advocate with higher levels of government for strict regulation.”
Council agreed to push the federal and provincial governments to both strengthen regulations and fund acquisition programs to allow municipalities to enter the market to protect existing rental stock.
While some may mourn the deaths of local landlords, well-financed institutional landlords can provide benefits to tenants, according to Coulson, who noted that deeper pockets allow for regular maintenance and improvements in Victoria, where 96% of 500 properties rental units in the city were built before 1980.
Large landlords with multiple properties would also be better equipped to circumvent restrictions on rental income and renovations under British Columbia’s Residential Tenancy Act – and changing municipal regulations.
For example, when landlords propose to replace an old rental building with a larger new project, the City of Victoria and some other municipalities in British Columbia pressure them to provide relief to displaced tenants. This can take the form of a right of first refusal on newly built units, payment of moving costs or assistance to tenants when relocating.