Victoria council wants senior governments to help set up a non-profit housing-acquisition fund to allow municipalities to buy and protect low-cost housing, as the number of rental properties purchased by real estate investment trusts and institutional investors soars, driving up rents.
Last year, Greater Victoria experienced record-breaking sales of multi-family properties, with about $862 million worth of housing changing hands.
That’s up 70 per cent from 2019, when the previous record of $505 million was set.
Real estate agents specializing in multi-family properties, however, say it is government policies that are forcing many owners of older apartment buildings to sell.
After a near year-long rent and eviction freeze and a capping of B.C. rent increases at 1.5 per cent for 2022, despite an official inflation rate at a 30-year high, many smaller landlords are cashing out, they say.
Victoria, for example, increased 2022 property taxes by 3.89 per cent and most lending rates have doubled or tripled since January.
“B.C. government-imposed policies and rent freezes, escalating operating costs and potential increases in capital gains tax nudged more owners to make the decision to sell and take advantage of the market demand and record pricing,” said Lance Coulson, executive vice-president of CBRE national apartment group, in releasing the 2021 Annual Apartment Report for Metro Vancouver & Greater Victoria.
Six out of 10 buyers of rental apartment buildings in Greater Victoria and Metro Vancouver in 2021 were large institutional investors and real estate investment trusts, because they have the financial depth to weather B.C.’s rental policies, Coulson suggested,
Big players in Victoria include Starlight Investments, which has $20 billion in assets with more than 70,000 rental units across North America, and Canadian Apartment Properties Real Estate Investment Trust (CAPREIT), Canada’s largest landlord.
In the past year, Starlight has bought 10 older Victoria apartment buildings with a total of 592 rental units; CAPREIT has purchased six existing buildings totalling 335 residential suites in Victoria.
In a recent report on the city’s housing strategy presented at council’s committee of the whole, city staff said that massive increase in investment is putting upward pressure on rental rates.
While the involvement of REITs and institutions in the marketplace is not new, the report noted the high purchase prices – the current average is north of $275,000 per unit - often result in new owners raising rents.
“This trend has the potential to significantly affect affordability in Victoria’s rental housing market in the coming years, particularly where older, more affordable rental buildings are acquired,” the report said.
Coun. Jeremy Loveday said it might be time for city staff to look at whether the city can implement regulation or licensing measures to control REITs.
“If there’s anything the city can do within our own powers, I think we need to be looking at that and advocating to upper levels of government for strong regulations as well.”
Council agreed to push the federal and provincial government for both stronger regulation and for the funding of acquisition programs to allow municipalities to get into the marketplace to protect existing rental stock.
While some may mourn the passing of local landlords, well-financed institutional owners can offer advantages to tenants, according to Coulson, who noted that the deeper pockets allow regular maintenance and upgrades in Victoria, where 96 per cent of the 500 rental properties in the city were built prior to 1980.
Larger landlords with multiple properties would also be better equipped to ride out rental income and renovation restrictions under B.C.'s Residential Tenancy Act – and shifting municipal regulations.
For instance, when landlords propose replacing an older rental building with a new, larger project, the City of Victoria, and some other B.C. municipalities, pressure them to provide relief for displaced tenants. That can take the form of a right of first refusal on the newly built units, paying moving expenses or helping tenants with relocation.