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Construction cranes tower above condos under construction near southeast False Creek in Vancouver on Feb. 9, 2020.DARRYL DYCK/The Canadian Press

The B.C. government is considering a suppression of residential rent increases in 2023 as tenants face the prospect of outsized rent hikes that aggravate inflation troubles.

David Eby, Attorney-General and Minister Responsible for Housing, said British Columbia is weighing various options, ranging from a rent freeze to using the standard formula for annual increases, which is tied to inflation. Like many provinces, B.C. froze rents early in the COVID-19 pandemic, a move that expired at the end of 2021.

Mr. Eby said a decision for 2023 would be made before the end of July.

“I know that a lot of landlords are facing increased costs around maintaining their buildings and staffing and this kind of thing. But we also know that tenants are incredibly vulnerable,” Mr. Eby said, noting that “a significant rent hike could undo a lot of the work we’re trying to do around homelessness. So we’re trying to balance those interests.”

Under the existing formula, rent increases in B.C. are based on the province’s average annual inflation from August through July, prior to the year in which the hikes take effect. In 2022, the maximum allowable rent increase for most tenants was 1.5 per cent, a reflection of the tepid inflation that was seen from August, 2020, to July, 2021.

More recently, inflation has surged to multidecade highs. Statistics Canada reported last week that the annual inflation rate hit 7.7 per cent in May, the highest since 1983. In B.C., the inflation rate was 8.1 per cent. If that holds for two more months, B.C.’s maximum allowable rent increase in 2023 would be 5.4 per cent, adding to cost-of-living pressures. It would also be the largest provincial rent hike since at least 2004.

B.C. had nearly 600,000 tenant households in 2016, based on census results. (The 2021 census results for housing will be published in September.) About 43 per cent of those households were spending 30 per cent or more of their income on shelter costs – above what the Canada Mortgage and Housing Corporation (CMHC) considers affordable.

Across the country, there is a patchwork of policies on residential rent increases. In Nova Scotia, which normally doesn’t have rent control, there is a temporary annual limit of 2 per cent on hikes until the end of 2023, brought in to help tenants during the pandemic. In Ontario, rent increases are tied to inflation for most units, though there’s an annual cap of 2.5 per cent. Some provinces, such as Alberta, do not have rent control.

Even with limits in many jurisdictions, rental costs are accelerating. Rents have risen 4.4 per cent nationwide over the past year, among the largest increases seen since 1990, according to Statscan’s consumer price index, the main gauge of inflation. Following decades of scant construction, apartment vacancies are meagre in parts of Canada and when units are vacated and become available, landlords in most provinces can set rates where they wish.

The Vancouver area is among the most expensive rental markets in the country. The average monthly rent for a two-bedroom condo in the region was about $2,500 in 2021, according to CMHC. If rents were to increase by 5.4 per cent next year, those units would cost $135 more a month, or $1,620 over a full year.

Rents “are the largest single item that governments have direct control over,” said Ricardo Tranjan, a political economist with the Canadian Centre for Policy Alternatives, a think tank. “If the political will is there, it is low-hanging fruit in terms of mitigating the impact” of high inflation, he said.

Under New Democratic Party control, the B.C. government has previously moved to curb rental costs. Annual rent increases used to be based on inflation, plus an additional two percentage points. The B.C. NDP changed the formula so that it was based solely on inflation, starting in 2019.

Any further reduction in rent increases is likely to draw the ire of landlords, who are seeing their costs increase rapidly, too. Many homeowners are starting to renew their mortgages at significantly higher interest rates, while costs for home insurance, repairs and utilities have also surged.

“In the long term, rents need to keep up with the costs of providing rental housing,” said John Dickie, president of the Canadian Federation of Apartment Associations.

Mr. Dickie said rising interest rates and lower limits on rent increases could hinder the construction of purpose-built apartments. “We are certainly seeing that people are taking a very hard look at projects now,” he said.

Recent history has proven favourable. In the first quarter of 2022, there were more than 115,000 rental units under construction in Canada, the most since at least 1990, according to CMHC. Rock-bottom interest rates, strong population growth and priced-out homebuyers have drawn developers into rental housing.

Mr. Eby said he was sensitive to the cost pressures facing landlords. He noted that landlords can apply for larger rent increases when they make necessary home repairs, such as replacing a roof.

However, Mr. Eby said that “tenants are in a pretty precarious spot right now and they haven’t seen the benefit of the lift in the property market that landlords have.”

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