Rental Property Investor · Port Coquitlam, BC · Member since 2017 · 520 posts · 527 votes
The conservative majority government of NB just instituted rent control in their budget. 3.8% retroactive to January 1, 2022.... So any landlords that have already served notice of increase (I had respectable increases set to take effect on Apr 1) are hooped. This will likely impact any transactions out there that haven't closed. On the plus side, property taxes are set to decrease by 50% (but over 3 years).
Thanks for the info, Chris. This lines up with everything that I'm receiving, as well.
I spoke with Willy Scholten of the New Brunswick Apartment Owners Association this afternoon. They are encouraging landlords to write/submit letters to Premier Higgs and Minister Steeves expressing any concerns you may have with this budget proposal. I'd be happy to share all contact information if you'd like -- send me direct message.
The budget is not approved (yet). So for me to know, none of this is law (yet). However, I have no intel suggesting that anything will change. They have a budget meeting scheduled for tonight and one of my colleagues plans to voice some concern with this proposal.
Anytime policy is used as enforcement, it's never good and usually backfires. I suspect this will happen with what the government "thinks" they will accomplish with this proposal.
Thanks for this @Account Closed , I just closed on another property there and was planning for rent increases . Looks like I will have to reconsider my strategy .
At least that property tax decrease is pretty nice !!
Thanks for this @Account Closed , I just closed on another property there and was planning for rent increases . Looks like I will have to reconsider my strategy .
At least that property tax decrease is pretty nice !!
Considering how property taxes saw a large increase this year, a 50% reduction in taxes over 3 years is less helpful. If you have below market rents, you'll never be able to catch up at a 3.8% annual increases unless units turn over.
side question to this: Do you think rent control encourages renters to stay renters, thus making more houses on the market for investors?
The longer a tenant stays in a rent controlled unit, the harder it is for them to leave, especially in appreciating markets. With each year that goes by, they are getting a better 'deal' on the cost of housing. I don't think this helps investors at all; for a property to change hands, there has to be something for the landlord to gain.
Here's a real world-example of the net impact of today's decision on one of my properties, a 6-plex in Moncton (all 1BDRM). Market rent (which has escalated considerably in the last 2 years) is now $850 including utilities. I've been applying $20-$50 increases over the past few years, but kept rents flat during COVID to help tenants out. My average rent is $659. I had a $100 rent increase scheduled to go into effect on April 1st; all units would still be way below market, and all tenants were staying on. Now, my average permitted increase will be $25. From an NOI perspective, the delta is $5,400 in year 1 which, at a 6CAP, translates to a decrease in value of $90,000. I have one tenant that has been in the building for 34 years. She will never leave and will never pay market rent. My costs go up and the allowed rent increase doesn't cover inflation. So, as time goes on, I am subsidizing housing costs.
I'm in the same boat, Chris. Currently closing on a couple deals and this rent control will definitely shift the game for us. I agree with you, the tax decrease nice, but it's definitely not enough to offset the loss of rent.
This rent cap changes things in a pretty significant way. What's the chances this only lasts one year?
I just spoke to a representative at SNB and got the following intel:
-If you've done a rent increase since the beginning of the year, you have to give the money back (anything above 3.8%). Technically, that should be deducted from April's rent, but you can work with your tenants to pay back over a period of time
-If you've already issued a notice of increase, the notice period remains the same, but you have to dial back the increase to 3.8%
-If you have other services included in your leases (i.e. utilities), you can revise a lease to remove these (long-term tenants have the right to refuse these).
-SNB received only a very brief email explaining the changes this morning and more detailed guidance is expected to come out in the next week.
-The program is 1 year (unless the government changes its mind) and ends on Dec 31, 2022. If you have rent increases scheduled for later this year, it might make sense to defer these until Jan 1, 2023.
Thanks for the info, Chris. This lines up with everything that I'm receiving, as well.
I spoke with Willy Scholten of the New Brunswick Apartment Owners Association this afternoon. They are encouraging landlords to write/submit letters to Premier Higgs and Minister Steeves expressing any concerns you may have with this budget proposal. I'd be happy to share all contact information if you'd like -- send me direct message.
The budget is not approved (yet). So for me to know, none of this is law (yet). However, I have no intel suggesting that anything will change. They have a budget meeting scheduled for tonight and one of my colleagues plans to voice some concern with this proposal.
Anytime policy is used as enforcement, it's never good and usually backfires. I suspect this will happen with what the government "thinks" they will accomplish with this proposal.
Does anyone know if utilities are excluded from the rent control ?
I recently closed on a property where the tenants were paying all inclusive rent , but there are separate meters so hoping I can kick back the utilities to them to increase cashflow .
@Mike Singh if utilities are spelled out in the lease, it is my understanding that these can't be removed without tenant approval. What is less clear is whether ancillary services can be pushed to the tenants. We spend $5k/year on snow removal for one of our properties, for example.
Here is another article that discusses the need to legislate the rental cap before it takes effect: https://globalnews.ca/news/871...