LANDLORDS REMOVING UNITS FROM RENT SUBSIDY PROGRAM, CITING INCREASED OPERATING COSTS
A senior civil servant in the New Brunswick Housing Corporation says his office is looking into an increased trend in landlords taking units off the corporation’s rent subsidy program.
Gregory Forestell, the corporation’s vice-president of housing programs, says landlords are opting out of the rent subsidy program as early as five years after entering into agreements with the provincial body.
“They’re seeing the opportunity to see a better return on their investment. They’re paying off their loan to us and then taking those units out of the program.
“So, not every landlord, but some landlords are doing that, and so it’s significant enough that we’ve noticed it.”
Forestell made those comments in an interview Wednesday following a panel discussion at the Canadian Housing and Renewal Association’s National Congress on Housing and Homelessness, happening this week in Fredericton.
The panel included Perry Kendall, CEO of Habitat for Humanity New Brunswick, who pointed out the trend as one that’s concerning to him.
“There are more and more landlords opting out of the provincially subsidized program knowing the demand is there, and they’re able to get higher rents,” Kendall said.
“So that’s a concern. We’re losing more affordable units than we’re building.”
Recent data from the Department of Social Development shows the wait list for an N.B. Housing unit in the province doubled in the past five years, going from about 5,000 households at the end of 2019 to 10,733, as of Feb. 1.
Forestell said he didn’t have statistics on the number of units that have been removed from the rent subsidy program in recent years.
He also couldn’t say for sure whether the increase in N.B. Housing’s wait list is related to the loss of subsidized rental units.
Forestell said the N.B. Housing program helps developers fund the construction of apartment buildings by offering loans of $70,000 to $80,000 for each unit that’s to be subsidized.
Landlords will then typically agree to pay off the loan over a 16- to 20-year period, over which time the tenant of the unit will only have to pay the landlord 30 per cent of their income, while N.B. Housing pays the difference.
Forestell’s office is looking at the program’s criteria to find “a sweet spot” to encourage landlords to keep their units in the program.
It used to be that landlords turned to N.B. Housing to fill vacant units using the program, but with supply of rental units low and demand high, he said that tide has turned.
“As supply increases, the demand will go down, and we’ll be able to come back and entice more landlords into into our program.
“But it really comes down to a financial return on their investment,” Forestell said.
“And as their expenses rise, they need to raise their rents, and sometimes we can’t get those rents up to that to that level and save those units.”
Province not recognizing rise in costs to landlords, says rep
Willy Scholten, president of the New Brunswick Apartment Owners Association, said he’s aware some landlords have taken their units off the rent subsidy program.
He said many of those units were pulled out of the program in 2021 and 2022, when inflation in Canada started rising to historic levels, as high as 6.8 per cent.
He said those higher inflation levels resulted in higher operating costs, which N.B. Housing in some cases wasn’t willing to make up for.
“So I think some rental housing providers got very frustrated with that and decided that if they [N.B. Housing] couldn’t keep up with their costs with the contracts, they would no longer be able to do [the program],” Scholten said.
Proof private sector can’t be relied on, says researcher
Government, non-profit and the co-operative sectors do a better job at running subsidized housing than the private sector because they’re not focused on generating a profit, said Julia Woodhall-Melnik, co-director of the housing, mobilization and engagement research lab at the University of New Brunswick.
“The for-profit sector will always try to increase profit,” she said.
“And if there’s requirements … that impinge on their convenience, their profit, their time, etcetera, they’re just not going to do it.”
Woodhall-Melnik said the trend mentioned by Forestell isn’t surprising and shows more government incentives should be directed to the non-profit housing sector.
“Our research shows that the for-profit sector has never been designed to provide affordability. Their impetus is capital accumulation and growth of wealth.”
Story by: CBC News
