Tenants feel squeeze of special upgrades levy

Tenants’ advocate Aissa Aggoune standing in front of one of the apartments he represents in Vancouver on July 30.Jimmy Jeong/The Globe and Mail

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Trish Everett had been living in her Nelson Street apartment for 12 years when she received a notice from her landlord that she and her roommate, Zachary Coumont, could be facing rent increases to help their landlord cover the cost of building updates.

If permitted, the roommates would see their rent go up an additional 3 per cent each year for three years, on top of the usual maximum increases already legally allowed.

Their West End Vancouver building is 20 years old, and the repairs, they say, include updating the lobby with marble finishings and an energy-efficient light system for the parkade. Although the units that become vacated are routinely renovated in the building, no updates are planned for their unit, or any other occupied units as far as they know. Since the tenants banded together and obtained the help of the Vancouver Tenants Union (VTU) to fight the landlord’s capital expenditures increase, technically called the Additional Rent Increase (ARI), they say the mood between management and tenants has become tense.

“We had perfectly adequately tile, perfectly adequately finishes on the lobby walls, and now we have a fancy luxury lobby that no one in the building asked for,” she says.

VTU volunteer advocate Aissa Aggoune is representing about 300 tenants in three West End apartment blocks who are all facing the same predicament, a highly stressful one that sees them on the losing end – even if they are to win, he says, because of the time and effort required to get through a highly complicated process filled with legal jargon and hundreds of pages of documents. Fighting the increases is akin to going to small claims court, he says.

ARI legislation introduced in British Columbia last year allows landlords to recoup money used for eligible repairs and updates on buildings. Landlords are required to notify the tenants and then attend Residential Tenancy Branch (RTB) hearings to plead their case, with tenants also given the opportunity to present evidence and challenge the increase. Mr. Aggoune says all three landlords in the West End are using lawyers to represent them.

Ms. Everett calls it a David and Goliath battle in which the tenants even have to bring forward expert witnesses if necessary need be, to show that the landlord did not do maintenance to avoid the expenditure being claimed, for example.

The ARI is allowed at a maximum 9 per cent, phased in over three years, on top of the maximum rent increase set by the province. At present, the annual increase is 1.5 per cent, but due to inflation some expect that it will go up next year. Assuming that the annual increase goes up to a conservative 2 per cent, and the landlord’s application to add 3 per cent on top of that for repairs is approved, Ms. Everett and Mr. Coumont are looking at a 5 per cent rent increase of approximately $120 a month for their two-bedroom apartment over one year.

However, it accumulates, Mr. Aggoune says.

“Over the next three years, it will likely be a 15 per cent or more [total] increase, depending on how inflation is,” Mr. Aggoune says. “If a one bedroom goes for $2,200 on average, then that is $330 per month more. We are talking $3,000 or $4,000 a year more, and potentially more than that. So this is not small.”

And there is no indication that the capital expenditure increase is a temporary increase until the cost is paid off, Ms. Everett says.

“It was negotiated to allow landlords to get back some of the money when they have to put in a large amount to redo a roof, or replace windows. I can understand that’s a big investment. I get that, I sympathize,” Ms. Everett says.

“But at some point they will have recuped that cost, and the tenant’s rent never goes back down. There is no end date to this. So at some point, our fancy lobby and the gym and the fancy lights in the parkade will have been paid off, but we will continue to pay for them indefinitely.”

Tenants interviewed say the new legislation is so complex that they have little legal advice, and advocacy groups such as the VTU are already over-stretched. Details from other cases that have been heard at the RTB are not made public, so they lack information about precedent.

Landlords are allowed to apply for rent increases to cover costs of repairs incurred in the previous 18 months, and which won’t likely occur again for at least five years. Reasons for the increase include the installation or repair of a major system or component, such as a roof, for example, in order to maintain the building. Other reasons include improving energy efficiency and security.

The landlord has to go through many hoops to prove that they need to increase the rent for capital expenditures. Both sides are burdened with the cumbersome and lengthy process. A big part of the problem is that the system is not set up to deal with dozens of tenants trying to get a fair hearing, said Mr. Aggoune. The 79 tenants in Joani Bisson’s 109-unit Barclay street building have been served with the increase. There has been a preliminary hearing and a first hearing, which was deferred to a later date to give the landlord time to show more evidence. Like the others, no decision has been reached yet because of deferments, and so they wait.

Ms. Bisson said they weren’t given accurate information and a handful of tenants showed up for the first hearing.

“None of us knew what was going on,” she says. “The value of his property increased in the last five years… and those of us who rent don’t own a building. We don’t have any equity and we are being asked to pay the bill.”

Jennifer Kaleta, who lives on Haro Street and works as a transcriptionist, calls the process “a nightmare,” that takes time away from caring for ill family members and her work. She pays $1,690 for a one bedroom. Units that become available rent at $2,300, she says. Their next hearing is in September, seven months after the first one. Many of the tenants in her building speak English as a second language. There was fear and confusion among a lot of tenants about the ARI so not everyone signed on to oppose it.

“It was extremely overwhelming,” she said. “The jargon was all legal, very confusing, a multiple page document, and it was unclear what was happening. All we could ascertain was that the owners wanted a 9-per-cent increase over three years.”

A ministry of housing spokesperson said in an e-mail response that since the capital expenditures increase was introduced on July 1, 2021, they had received 199 applications from landlords as of July 28 this year. Of those, 30 had gone through the hearing process and their files were closed. Of those 30 applications, 25 landlords had been given approval to give their tenants the additional rent increase.

Landlords can’t claim for work caused by deferred maintenance, or that could be covered by a grant, for example.

The ministry pointed out that the changes are a result of the Rental Housing Taskforce, which also led to the elimination in 2018 of an extra 2 per cent on top of the rate of inflation (LandlordBC continues to question that move). In 2018, the maximum rent increase had been 4 per cent.

If the point is to ensure long-term secure rental, then it benefits renters if the buildings are maintained and the landlords are incentivized to hang onto them. If operating costs get too high, then they will sell, says LandlordBC chief executive officer David Hutniak.

He says landlords are dealing with inflation and interest rate hikes. Prior to those challenges, the province had taken away the 2 per cent increase on top of inflation. And then, they dealt with rent freezes during the pandemic. Whether the 2023 maximum rent increase responds to the inflation rate won’t be known for a few months. Mr. Hutniak said there is “a very real risk” that it may be cut.

“We appreciate that, renters, like all British Columbians, are facing challenges these days, but safe and healthy rental housing comes at a cost.”

He points out that there has not been a huge response to the ARI by landlords. The RTB is so jammed up that the process from start to finish likely takes about a year.

“All in all, while we support the ARI process, it is by no means some panacea for our sector, and the broader rental housing ecosystem.”

It is, he says, a “necessary tool” to help preserve the existing stock of apartments.

“The alternative is to let it age out and get redeveloped, which frankly, would make more economic sense and generate more units.”

Meantime, the VTU will continue to fight, representing however many cases they can handle. Mr. Aggoune said the legislation doesn’t consider that tenants have limited means to properly challenge the increase.

“And this is in the middle of a housing crisis, and in the middle of an inflation crisis,” said Mr. Aggoune.

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