Winnipeg Free Press
November 17, 2005
By Murray McNeill
Rent allowed to rise on upgraded units
A growing number of Winnipeg landlords are taking
advantage of the city's unusually low apartment vacancy rates to upgrade their
properties, government figures show.
The executive director of the province's Residential Tenancies Branch said yesterday there's been a dramatic increase in the past four years in the number of suites that have been exempted from provincial rent controls because the landlords have completed major renovations (at least $6,000 worth per unit).
Roger Barsy said that prior to 2001, when apartment vacancy rates in the city began to plunge, an average of only 50 suites per year were being exempted because major improvements had been made to the units. However, by 2004, that by number had skyrocketed to 1,086 units.
"I think it's related to the vacancy rate," Barsy said, noting landlords whose suites are exempted from rent controls can charge whatever the market will bear for the units.
And if vacancy rates are low -- Canada Mortgage and Housing Corporation pegged the average vacancy rate in the city at 1.1 per cent as of last October -- they have a much better chance of getting what they want, he added, so they're going ahead with the renovations.
There's also no indication that trend is about to change any time soon, Barsy said, because there have already been 1,137 units exempted in the first nine months of this year.
"So we're not seeing a slowdown in renovations, that's for sure, and we think that will continue."
While that means some tenants are paying higher rents, Barsy said there's also an upside to this trend.
"It's a good thing because it improves the quality of the rental stock," he added.
Barsy didn't have any figures to show how large the rent increases have been for some of these exempted units. However, the average increase in 2004 was about three per cent, he added, which was double what would have been allowed had they not been exempted from the rent control guideline, which was been set at 1.5 per cent for the last three years.
In addition to renovation-related exemptions, Manitoba landlords also can apply for rent increases above the provincial guideline if they can show that the regulated increase isn't enough to cover their increased operating and maintenance costs.
Barsy said there's also been a dramatic jump since 2001 in the number of applications for those kinds of exemptions, as well.
He noted that in 2001, there were only about 100 such applications. The following year that number jumped to 258, and in the first eight and a half months of this year there have been 245 such applications filed.
The president of the Professional Property Owners Association of Manitoba said those number are on the rise because of escalating costs for things like natural gas, water and sewer services, and building materials.
"Energy costs have been hitting us hard," Ron Penner said in an interview, "and this winter the suggestions from Centra Gas are that we're facing more increases."
The provincial government announced in September that next year's rent control guideline will be 2.5 per cent, which is the biggest annual increase in more than a decade. It said at the time that the higher rate was based on a review of increases in utility costs, property taxes, insurance, and repair and maintenance costs.
Penner, who is vice-president of operations for Globe General Agencies, said it's too early to say if 2.5 per cent will be enough to cover the increased costs landlords are likely to face in 2006.
"But if I had to make a guess... I'd say it's not going to cover the costs," he added.
He noted the average increase for exempted suites was three per cent last year, and operating and capital improvement costs have increased substantially since then. So it seems unlikely that 2.5 per cent will be adequate in many cases.
"We'll see how the year goes...," he added.
Barsy noted that even though the number of rent-control exemptions has been growing in recent years, two-thirds of the approximately 54,000 apartment units in the city still saw increases of only 1.5 per cent or less in 2004.