The Government of BC announced the end of all strata rental-restriction bylaws and limited age-related restrictions to only allow 55+-year-old communities. This can affect hundreds of thousands of properties throughout the province that previously had rental restrictions that homeowners can now choose to rent out.
James and Monica share their thoughts on how the removal of these restrictions will impact renters and homeowners, as well as what role these changes will have on the real estate market.
This episode will cover the stigma around renters, the different options homeowners now have in regards to renting or selling, the possible issues small stratas may encounter, which type of homes will be most affected by these changes, and the impact this will have on rental rates.
Read the Transcript Here
Hi everyone, I’m James Garbutt. And I’m Denny Dumas. And this is the Garbutt Dumas Real Estate Podcast.
James: Rental restrictions, Monica, it’s in the news today.
Monica: It’s been a hot topic.
James: What is going on? What is happening?
Monica: So, no more rental restrictions, guys. If you have a condo, you can rent it out. There are absolutely no restrictions. The only restriction still in effect are the 55 plus age restrictions and that’s pretty major.
James: Absolutely. Huge deal. Huge deal. There’s a lot of properties that are impacted by this. We just read a daily hive article that said there’s about 300,000 properties and my assumption is in the province of BC, that have rental restrictions that now no longer will take effect. That’s a lot of homes.
Monica: That’s a lot. And there was 2300 homes that this year that were said to have been vacant due to these rental restrictions. So now, the government is saying: “Look what we did. We provided 2300 homes that people can rent out.”
James: I think let’s take a moment to kind of look at the pros and cons of this and how this might actually have an impact because I mean, it’s pretty clear in some stratas are going to be more affected than others. I mean, for I mean openly, our office is in New Westminster, New Westminster has a lot of condos, in New Westminster on the New West Quay and Fraserview area there’s a lot of rental restricted buildings. And these buildings put these rental restrictions in because they don’t want tenants. They’re primarily occupied by owners that care about the building. And once you introduce tenants, it’s kind of a slippery slope that concerns the homeowners because if a building has a lot of tenants in it, it’s more likely to be less, it’s harder to maintain it, you know?
The strata council owners or strata counselors are comprised of owners that care. And landlords that are investors aren’t typically the ones that care. And I hate to generalize here, but that is the fear, that is the biggest negative of this is what pressure does it put on strata councils?
Monica: Yeah, it’s definitely a stigma around having tenants and a building and I do want to remind everyone that there can be some really crappy owners sometimes too.
Monica: It’s not just the tenants. So, it’s a really interesting vibe that, that we’ve seen, once this has been released. There’s been, I’ve had clients call me and be like: “How can we stop this? What can my strata do? Is there something we can do?” And the answer is no.
James: No. You know, I think the biggest impact that comes to mind is the really small stratas, like they see the six unit, eight unit ones, they’re self managed, where they need the owners to be involved to make it work. A tenant doesn’t have the incentive to be involved. Will the landlord be involved? I mean, the, the fear is no they won’t because they’re an investor landlord, and they’re, you know, you put this label on the investor that’s just passive and not involved. So I feel for those, but when you’re talking about the 200-300 building that is or, or see the New West Quay that is lined with buildings that a lot of them have rental restrictions.
At the end of the day, it opens up options and the positives to me outweigh the negatives. I mean, how many people have we met over the years in markets like this, that didn’t want to sell but have to sell because they can’t rent their place?
Monica: Right. So how does this affect the real estate market resale? You know, exactly. So instead of having to sell your property to buy a new one, you now have the opportunity to hold on to your property, rent out, leverage that property to purchase a new property so the opportunity it opens is pretty substantial.
And when it comes to selling a property that is an older building, it’s actually helping that older building market a little bit, get kind of fresh blood through the door, people who have a little bit of money in their pockets, people that can maybe help the life of the building. And it was pretty damaging before. We sold a lot of old condos like you said, and I’d say the number one issue that would come up was, well, you don’t really allow rentals so it doesn’t give these young people that are trying to move in a lot of opportunity for the future. And young people buying property in Vancouver, they look for the smart business choice. They’re not just looking for the fancy new home. They’re looking to: how can I build my real estate portfolio for the future because that’s how a lot of people make money in Vancouver.
James: It’s easy to sell your place and relocate and move when times are good and you have equity in your home but there’s a lot of times where people bought high and life changes. Their job changes, they have to move. And they’re in a position where their place is worth less than what they paid. And when you have rental restrictions, yes, you can sometimes previously, you could ask for, you know, a one year exception and a lot of stratas would grant it for hardship, but you’re asking for permission and that permission doesn’t always have to be granted. So if, that, we’ve just over the years, we’ve run into sellers that were in distressed situations that would have rented their place out to keep it but we’re forced to sell because of rent restrictions. So when I look at the argument for the strata councils that might be a little bit more, you know, inconvenienced by investors and tenants coming in, that’s to me outweighed by the positive of you know, helping the liquidity and helping options for people that own these places that, that don’t want to you know, lose their shirt when times are bad.
Monica: Oh for sure. And again, like I said it is, it’s a major stigma. It’s an outdated stigma that tenants are problematic. Anyone can be problematic. Like Adam from our team rented, up until recently, Denny from our team has rented often and owned other properties that he didn’t live in. So there’s a lot of young professionals in Vancouver that rent property. And I think that the stigma there kind of, will start to get squashed now that it’s opened up.
James: There are always horror stories but like you said, the horror stories can come from owners as well, you know? And there are ways to find landlords that aren’t, that have tenants that are disruptive or have noise complaints. But keep in mind when we’re talking about the negative of tenants, it’s the worst case scenarios, you know? Not the typical tenant.
Monica: Right. So getting back to that little item that you mentioned about the small stratas, I think that’s actually a pretty big item. There are a lot of really small structures throughout Greater Vancouver that are self managed and I think that if one thing is going to really affect those buildings now that there’s no rental restrictions, it’s going to be new clever bylaws that help guide the new homeowner towards being the right homeowner for the property.
James: And we’ll see what kind of creative stuff comes up because of this. Because that rental restriction eliminated a lot of concerns for some of these stratas.
Monica: Yeah, I think it’ll be interesting to see how they angle people towards helping out with the self-managed stratas, it’s going to be interesting.
James: I guess to kind of be a little more clear on what buildings are where rental restrictions are most common. New developments typically don’t have them, typically allow rentals and it usually takes a building to settle out after, call it a decade and I’m just throwing up an arbitrary number but let’s call it a decade, where the residences of the building end up being predominantly owners. And when a building is primarily owner occupied and maybe some buildings have larger floor plans that aren’t catered to investors anyway but if a newer building kind of, with larger floor plans kind of settles out to be, call it 90% plus owner occupied that’s when they’re likely to add a rental restriction.
When newer buildings are primarily smaller one bedroom and the smaller units, they usually don’t add the rental restriction. And we most often find rental restrictions in 90’s built buildings or older. Areas like Kitsilano have a lot of them. I mentioned New Westminster. Think if, if your city has an area that is on the waterfront or in a very desirable part of the city that has older buildings with larger floor plans and the crowd there is generally more mature and older. Odds are it may have rental restrictions. It’s the in, for those buildings, those areas, those communities, those are the ones that are most impacted by this.
With rental rates where they are today, I don’t think, you know, you’re gonna have to have someone with a good job to be able to afford them. And my thought here is yes, there’s going to be some clickbaity horror stories come in the future but I think the positives of adding more housing and giving more flexibility for people that rent their places outweigh those negatives.
Monica: Right. So the way that this is impacting, impacting the real estate market we don’t know quite yet because we haven’t had enough market behind us to tell. But the overall feeling is that there’s a lot more opportunity for people who already own property or for somebody who wants to get their foot in the door and possibly rent a property to get, to build a real estate portfolio or to set themselves up for the future to buy a bigger home for their, for themselves.
The rental market: how do we think it’s gonna affect the rental market and prices?
James: Oh jeez, I mean, my, I guess, your thoughts on rental prices? Like, do you think rental, this will increase the supply to the point where we might see rentals prices go down?
Monica: Right. I’ve seen those clickbaity articles it’s like “Oh my gosh, rentals are going to be so cheap now.” What are your thoughts on that?
James: I think it’s gonna be pretty insignificant. I think rental rates will remain and if I were to guess throughout 2023 I just think it’s more likely that rental rates will be higher at the end of next year than lower. Just purely based on this not adding enough supply.
Monica: That’s the thing. I think there’s a large misconception around this. This is obviously like everything in Vancouver, especially when it comes to real estate. This is very political. It’s very, you know, get people on my side if I do something good and there was a lot of negativity about that this topic wasn’t heavily debated enough before getting passed into policy. But the misconception is that there’s just going to be 2300 units available to rent immediately. That’s the misconception.
James: If they’re right,and that hits Marketplace tomorrow, it could over saturate the market for a brief period of time, but I, it’s my thought is, it’s going to trickle in.
It’s gonna get, I guess, what do you call it? Consumed as they come available. Like I mean, there’s incredible demand for rent. And a lot of these older places, you’re generally getting more space for the amount that you’re paying. So it’s either your, your if it’s a smaller, older building, you’re gonna have lower rent or if it’s, if the rent is in line with new, say it’s a two bedroom that’s older you’re gonna have 1100 square feet versus 800 square feet for the same amount. So ultimately, I don’t, I see the, I don’t see it getting oversaturated. I don’t see rental rates being that affected.
One thing that I was looking at is, in what scenarios might it positively or have a significant impact on real estate values? Are there any buildings or examples that might have an impact on real estate values?
Monica: Oh, for sure. There’s a lot of buildings. One, one place I see some big opportunity, is there are buildings where there’s work coming up. And the, it’s difficult for owners to sell when there’s work coming up when, when the strata is talking about doing major renovations to the building. So they usually kind of get stuck and they have to stay in this property until they’re able to sell it which could sometimes take two years if there’s work coming up in the minutes.
So I think that this will give those people the opportunity to hold on to the property, rent it out and move on with their lives while they wait for the strata to get the work done.
James: Absolutely. I think that’s a great example. So that is, this is a little bit of a dated one example but I ran into a seller that lived in the New West Quay, that paid a $86,000 assessment for their one bedroom about a decade ago. So it’s about 10 years ago, or maybe it was even 15 years ago. When, when those massive assessments come and the owners are basically forced to pay it, there’s a period of time where you have the option to sell a leaky condo or pay the assessment and then have a rain screen condo when you get through the project.
And I’m going to throw up some rough numbers here but that was $86,000 let’s call that today as a round number $100,000. If, if what I tend to find, is if you do a select few situations where someone has a significant assessment. If it’s a $100,000 assessment in a market like this, you might be selling, call it that one bedroom for $350,000 or $300,000. That has a $100,000 assessment due. So you’re going to be into it for $400,000. But when you have a rainscreen finished product on the other end, it might be worth $450 or $500,000.
But there’s a period of time where it’s significantly undervalued because of this massive assessment coming. From an investor standpoint, if you can afford that $100,000 assessment and know there’s a $50 or $100,000 lift at the other end, it makes sense. But if you’re an owner and you’re not thinking as an investor all the time and every owner is in a different situation. So I think an assessment is a good example.
I looked at like okay, what, what might be like the, you know, in New West for example, there’s one building that came to mind like okay, let me look into this building because it is in a rental restricted, age restricted building, and there’s not many units in it and it’s all but I’ll give you the address. It’s 55 Blackberry and a one bedroom at 55 BlackBerry might sell for $350,000 today, built in 1984. That’s a 610 square foot one bedroom.
The reason why I’m using this as an example is because when you have age restricted buildings and rental restricted buildings, you really are narrowing the buyer pool down quite a bit. And arguably, the moment you allow rentals you’re freeing that buyer pool up quite a bit, significantly. So, but when I look, I factor in the price and the maintenance that you expect in the 90’s building, there, I guess the discount on price you might get in this extreme example of a building that is age restricted, rental restricted that you buy a $350,000 one bedroom condo that arguably could rent out for maybe $2,000 a month. Those numbers work pretty well historically.
You are also buying something that has more maintenance. Is more dated. Needs more upgrades. Then the return on investment isn’t significant. When you actually do the math and do the numbers, the return on investment in this example isn’t significantly better than buying a newer, like place in Victoria Hill right next door, that for $100,000 more. So, in, Richmond Street, which I mean this might not mean much for people that don’t know these streets but Fraserview in New West is loaded with age restricted, rental restricted buildings. And what I tend to find is these buildings have larger floor plans, higher maintenance fees, and so I don’t think there are going to be some exceptions where this, where they’re going to be one off buildings here and there where the values may go up 10% because they allow rentals. I think 10% might be the extreme case because in a lot of these buildings the floor plans are so large, the maintenance fees are higher, the maintenance coming up the building is more that when you, when you equate an 1100 square foot place that’s built in the 90’s versus an 800 square foot place that’s built two years ago. You know that yes, you are paying more for the 800 square foot place but you have a lower maintenance, you have less maintenance coming up and the rental rates are still in some cases better.
So, there’s, my thought is, there could be a select few buildings that benefit from this from a value perspective. But I don’t think it’s going to change a lot of values. I don’t think investors are going to rush to buy these older buildings.
Monica: No, agreed. And I think the really important thing to note here is that this policy has not added any new property. It’s only re-purposed property that already exists. And we already have a strain on the property that already exists. This is just re-purposing it, making it eligible for more people. But it’s not adding a new product to the market. It’s just the same that’s been re-purposed and something we haven’t touched on yet that you kind of brought up was the age restrictions like Richmond is a really good example. There’s a lot of areas of New West, there’s massive townhomes on Jamieson. There’s lots of townhomes on Richmond that are 19+ or 45+. Those ones no longer have age restrictions or if they do they have to change them to 55.
I know that Jamieson is trying to get them changed to 55 because they were 45+ before, but Richmond has some amazing townhomes that were 19 plus. Those restrictions are gone and for those townhomes, I do believe the values of those will go way up. I struggled to sell..
James: They were a bargain!
Monica: I struggled to sell a townhome at 72 Jamison in New West, it’s a 3,000 square foot townhouse in the middle of the city, with one man living in it because he couldn’t sell it. And it was a family home in a 45 plus community and it’s, it was a major, major issue. You have some people on strata that didn’t want to change that policy but lots of other people within the strata that wanted that bylaw changed and now they have no choice.
James: Let’s add one more like, kind of thing in this world that’s been wrong. That’s not the best way to introduce this. But I’d say one criminal thing, that I would say is totally unfair that, that is justifies this lift of strata rental bylaws and that is that on January 1 people that owned rental restricted condos that were say, they moved for their job, but they didn’t sell it or whatever reason that people that own rent restricted condos, were not, were no longer exempt from the empty homes tax.
So, if your life changed and you had to relocate or move out for a period of time, you, if you kept your condo and it stayed empty, strata wouldn’t allow you rent it and the government would charge you an empty homes tax. So I think the fact that they lifted that earlier this year on January 1, 2022. I think that pressured them to do this because of how unfair it is for
Monica: It’s unjust. Like you’re forcing a sale and you don’t even know the circumstances and oftentimes, like we’ve discussed in this podcast, oftentimes it’s hard to sell because of levies coming up or interest rate hikes and things like that right so your there’s a very unfair way to do business.
James: Totally. I think if you’ve made it this far into this episode, you must be an investor or thinking about investing into a property, a condo. Monica, what do we do in that realm?
Monica: We can definitely help. If you are interested in buying an investment property or if you own a property already and you’re thinking about upsizing and want to keep that property, hit us up, we can help steer you in the right direction.
James: We are Realtors, we work with investors all the time, we would love to help and at least bring some clarity, some options in your market that or markets you are considering, that whether they’re old or new, that might be great rental properties.
One last little tidbit. Thanks for listening. Give us a five star review if you have a moment. We love those. We want more listeners. Thank you.