N.S. Landlord Sells Buildings Because Of Rent Cap
HALIFAX–Five years ago, Kim Newsome and her husband sold a house and decided to reinvest the money into apartment buildings in their hometown of Digby, NS. They bought seven buildings, totaling 22 units. Their goal was to break even and, when the mortgages were fully paid off, sell the buildings for profit.
“Our goal wasn’t to take a huge income from this,” says Newsome. “We wanted to keep rents fairly low but we wanted the buildings to pay for themselves and have a little bit of padding in there. So, we haven’t raised rents from the time we bought them in the last five years.”
“At the end of 25 years, at the end of our mortgage, that would be our retirement fund.”
But that was five years ago. The rental landscape has changed entirely since then, leaving Newsome wanting out of the market. The last and most vital straw was when Tim Houston announced the two-percent rent cap would remain for at least another two years.
“It’s solely a decision [caused by] the rent control measure,” says Newsome.
“There’s no longer breaking even and there’s no end in sight. I don’t believe this is temporary so we have to make a decision: do we leave, or do we stick it out?”
RELATED: Premier Tim Houston Extends Rent Control In N.S.
Newsome and her husband have already sold three of the seven buildings (all duplexes). Depending on what the new owners plan to do with the buildings, this could mean fewer rental units in Digby. Just a month ago, Newsome had 47 tenants, but with the sale, along with some vacancies, she is now down to 19.
“We’re not in it for a business, we’re not in it for an income; we were in it to provide something to the community. And in return, at a later date, we would have a little nest egg for our retirement,” says Newsome.
“We’re really trying to be good people and here we are, five years later, and we’re basically being screwed by the government.”
For five years, Newsome rented one bedroom apartments for as low as $400 per month(without utilities), and two bedroom apartments for $550.
These prices worked on a break-even basis until the pandemic hit and the consumer market was rocked by the near-unprecedented inflation we are still feeling today.
“Everything was fine until last year. When Covid hit, the prices of everything went up; then the two per cent rent cap came on,” recalls Newsome.
“We were hopeful we were going to be able to raise some rents, starting in February.”
The insurance costs alone on her seven buildings increased 45 per cent since 2020. Newsome calculated that if she raised rents on all units by the two per cent maximum, it would give her an extra $212 per month. But the insurance increases over two years have added an extra $450 a month to her expenses.
Then there are other expenses that have skyrocketed for landlords in recent months: tax assessments, oil, electricity, and building materials, to name a few.
Newsome was hoping to raise the rent in some of her units by $100 in February of 2022, but the extended rent control prevented that from happening. Even though she has already sold three of her seven buildings, Newsome is still considering selling off the remaining four.
The landlord already works the equivalent of two full time jobs, so it is difficult for her to be renting out units if she doesn’t know if she can break even in the long-term. Newsome currently has two vacancies she won’t fill. Instead she and her husband has decided to turn them into Airbnbs.
Derek Montague is a Huddle reporter in Halifax. Send him your feedback and story ideas: [email protected].