Landlords Worry Rent Cap, Heating Costs Will Drive Mass Rental Unit Sell-Off
HALIFAX — The subject of home heating costs has ignited across Canada as winter creeps around the corner, and the federal carbon tax is soon to take effect in various provinces. It’s also a top-of-mind issue for Halifax landlords.
Nova Scotia still has a lot of old buildings that rely on oil furnaces for heat. Landlords are reporting unmanageable increases in the cost of heating their units.
Mike Burgess has been a Dartmouth landlord for 40 years. He has more than 70 units concentrated in the city’s north end. One of his one-bedroom apartments usually rents for between $700 and $900 per month. Many of his tenants have been in the same units for several years.
According to Burgess, the cost of heating an apartment building has more than doubled in two years. He owns a 12-unit building that has a 1,136-litre oil tank. In 2020, it cost him $988 to fill; in October, it cost him nearly $2,400.
In the entire year of 2020, Burgess spent $12,180 to heat that building. After the first 10 months of 2022, that bill has already ballooned to $24,616.
The increased cost of home heating comes at a time when other major expenses for landlords have also gone up. Burgess says his insurance has gone up 60 percent over two years.
With a two-percent rent cap in place, it has become impossible to recoup the increase. Burgess says that for the first time as a landlord he is thinking of selling some buildings.
“The biggest, ultimate killer has been the cost of heating. There is no money left to pay for all this stuff. So, we’re forced to say, ‘do we not fix that roof that needs to be fixed?’” says Burgess. “What maintenance can be deferred? It really is a catch-22.”
“I’ve been in it for a long time and had no intentions of getting out of the business and now if there’s not some drastic changes or help from the government, I may be forced to sell off some of the buildings.”
Burgess says that with oil furnace buildings it’s impossible to have tenants pay for heat separately from rent. Especially in older buildings, it’s nearly impossible to measure how much oil each unit is using individually. So it’s a cost that must be factored into the rent itself.
Burgess says he understands why many support having a rent cap but he believes it could force landlords out of the industry, leading to a loss of rental stock.
“There’s a lot of pressure from a good portion of the population that feels that they’re being protected from this rent cap,” said Burgess. “But I think it’s a huge false sense of security. It’s a double-edged sword that is creating a lot more problems. It’s taken a lot of our housing stock out of the market.”
IPOANS, an association representing landlords in Nova Scotia, has been taking surveys on how many of their members are thinking of selling off their buildings. Their latest numbers from October suggest 12,000 units are either on the market or at risk of being listed.
Kevin Russell, Director of IPOANS, says its members represent 45,000 units across the province; 20,000 of which are owned by “small” landlords, and not huge real estate companies.
IPOANS considers any landlord running operations themselves, or just with family, as being small. Essentially, they don’t use management or staff to run things for them. It’s those smaller landlords, who often own duplexes and other single-unit dwellings, who are at risk of selling.
It’s not just energy costs that has IPOANS concerned. A recent HRM staff report has recommended that the average tax bill should go up eight percent in 2023-24. That would mean an average increase of $173 for homeowners and nearly $4,000 per year for commercial properties.
Russell says an eight percent increase could be too much for smaller landlords to take on top of all the other stresses.
“It would be devastating because, the fact of the matter is, for the past two years operating costs have continued to experience double-digit increases while under a two-percent cap. With HRM coming along with a proposed increase, it could be the straw that breaks the camel’s back for many small rental housing providers.”
IPOANS has been lobbying the provincial government for help. Russell says the government should soften the cap if they don’t plan to scrap it altogether. Barring that, IPOANS is looking for relief on property tax and for apartment buildings to be protected by the Capped Assessment Program. Right now, that cap only applies to residential homeowners.
Derek Montague is a Huddle reporter in Halifax. Send him your feedback and story ideas: [email protected].