‘I’m Almost Better Off Carrying A Vacant Unit’: Landlords Worried About Rising Costs
NOVA SCOTIA–Property owners in Nova Scotia are warning that high inflation, combined with the province’s two percent rent cap, is driving small landlords out of the market.
On May 18, Statistics Canada released new Consumer Price Index data that showed more bad news for consumers; inflation in Nova Scotia hit 7.1 percent, which is 0.3 percentage points higher than the national average and well above the generally accepted target of 2 percent.
Kevin Russell, the executive director of the Investment Property Owners Association of Nova Scotia, says things are even worse for landlords. Even though the CPI is 7.1 percent, most property owners are facing double-digit, year-over-year cost increases.
“You can’t compare the CPI of a residential home to an apartment operation,” says Russell.
Russell says he is receiving more phone calls lately from smaller landlords who own a handful of units and are planning to sell.
Amanda Knight is a Pictou County landlord who already has one of her seven buildings on the market. She is considering selling another. In total, her seven buildings have 17 rental units.
Knight became a landlord in Pictou County in 2020. She had bought properties that needed upgrades, investment, and improvements. She was discussing a rent increase with one of her tenants (which would come with unit upgrades) when the first rent cap cancelled those plans.
“It negated our entire conversation, which I think frustrated both me and my tenant. It prevented me from putting utilities in his name as well as increasing the rent…and I had to put a stop on any investment I was putting into the property as well,” recalled Knight.
Knight also says she bought units where tenants were paying rent below market value. With the increase in the cost of maintaining properties, it’s becoming less viable to operate them.
“Two of the units were very low rent,” says Knight. “Someone had been there for years and they were never given a rent increase from their previous landlord.”
The biggest problem for Knight is the rising costs of providing heat and power. In several of her units, those utilities are included in the rent.
Knight says power bills are up 25 percent from 2021 and heating oil is up 55 percent. In 2021, she was paying 85 cents per litre on heating oil, now that has skyrocketed to $1.97.
“On one property alone, that’s a $4,400 increase,” says Knight. “On top of that, I pay the power, I pay the water.”
Higher operating costs are being driven by factors that most people don’t consider. Knight says the new work-from-home trend has upped people’s water, power, and heat usage.
“Now people are choosing to work from home but that means my water costs go up, my power costs go up exponentially,” Knight claims. “You can tell the units where people are working from home versus the ones where they go out Monday to Friday, 9 to 5. It’s shocking and it’s crippling.”
Knight does own units where utilities aren’t included in the rent. Those are the units she plans to hang onto, for now.
“I’m not concerned with selling those ones because I have a little bit of money in the kitty to fix windows and to do the regular maintenance,” says Knight. “The units where it is heat and power inclusive, those are the ones that are absolutely killing me.”
If there is one saving grace for Knight, it’s that her insurance has only gone up eight percent this year. That may sound like a significant increase, but other landlords across Nova Scotia have reported insurance increases as high as 50 percent this year.
As for how long Knight can afford to keep the other units, it’s something she doesn’t like to think about too much.
“I’m afraid to see how it’s going to keep going,” said Knight. “I don’t honestly know at this stage. I’m nervous to think about it, to be quite honest.”
“I’m almost better off carrying a vacant unit right now than with someone living in it and the little amount of rent I’m collecting. And that’s terrible.”
Kevin Russell says there will be more landlords selling if costs keep rising, while not being able to recoup investments.
IPOANS did a member survey in December, which indicated landlords, representing 9,000 units, were considering selling, or already had properties up for sale.
“These would be made up of single-family home rentals and duplex rentals, where they can be converted back to homes instead of rentals,” says Russell.
“It’s not going to be a tsunami all of a sudden, but they’re selling them over a period of time.”
Derek Montague is a Huddle reporter in Halifax. Send him your feedback and story ideas: [email protected].