By: Neil Sharma
Investment properties in Vancouver, which feed the supply of rental housing in a city that has a vacancy rate of below 1%, are being afflicted by B-20.
According to Shannon Patterson, a mortgage agent and Regional Director of Vine Group, lenders have started asking for Market Rent Letters, and that’s stymied closings on many investment properties.
“A huge amount of my clients are doing investment properties and they rely on Market Rent Letters, where an appraiser gives an estimate of the potential rental income for a new purchase, but now because of B-20 we’re being told by appraisers that they’ll have to do almost a full appraisal with comparables and a range of rents, and that is affecting the qualification of investment properties,” said Patterson.
The domino effect is being felt in the Lower Mainland’s condo rental market, which is where many would-be first-time buyers were believed to dwell.
“It’s going to have a compounding effect on the rental market because it will be harder for people to buy investment properties, which would open up rentals in the Lower Mainland where there’s almost a 0% vacancy rate,” continued Patterson. “The catch-22 is you also have these renters who might want to enter the housing market as first-time buyers, but now because of B-20 it’s difficult to qualify for those purchases.”
Patterson believes the ramification of this trickle-down effect is many more young professionals living with their parents for much longer than they intended—and certainly for much longer than any previous generation.
“I think with my first-time homebuyers, the thought of buying a detached home to raise a family is farther and farther away from reality, and the other is the supply of housing,” she said. “There’s been a lot of talk, but not a lot of action in the Lower Mainland with reviewing the different municipalities and expediting the approvals process for developers to get more product onto the market.”
Patterson wishes the government had consulted the industry before embarking on the latest updates to B-20 because she thinks a lot of what’s ailing Vancouver could have been averted. In spite of the unintended consequences she expects business to grow as the year progresses, but she isn’t holding out hope for any policy reversals.