2019 Rent Adjustments: CORPIQ Recommends Landlords Disregard the Drop in School Taxes

Property owners who have received a drop in school taxes should keep it, especially if their rents are below average, says CORPIQ.

The Quebec government's decision in 2018 to lower regional school tax rates remains a small financial compensation for the hundreds of millions of dollars lost in recent years by property owners due to absurd rent fixing criteria.

CORPIQ denounces the last two decades of successive Quebec governments that have set increasingly low rent fixing criteria. Some criteria were even based on erroneous economic indicators that led to equally erroneous judgments.

This situation will continue in 2019 with the publication by the Régie du logement of cap rates lower than inflation. The court is obliged to use these rates on rent fixing, in accordance with the regulation adopted by the government. It also forces the Régie to publish fictitious scenarios that influence hundreds of thousands of rent negotiations between tenants and landlords.

"The low rates of rent fixing criteria can partly be explained: the maintenance deficit of Quebec’s housing stock , the massive conversion to condominiums, as well as a 37% deficit, representing $ 450, with rents observed on average in the other nine Canadian provinces’’ said CORPIQ Public Affairs Director, Hans Brouillette.

While the vacancy rate is at its lowest in ten years, a favorable situation for property owners, those who have had a drop in their school tax bill in 2018 now have a rare opportunity to offset the revenue from which they were deprived of in the passing years.

Another way to benefit from the school tax cut would be for landlords to moderate the 2019 rent adjustment of tenants who currently pay a fair price, but not to grant that benefit to those whose rent is abnormally low for the value of the dwelling. This would lead to a more equitable distribution of common building expenses between tenants.

Three Absurd Fixation Criteria

CORPIQ considers ridiculous the rent adjustment that will be granted in 2019 to an owner who has carried out major repairs or improvements to a dwelling. In fact, each $ 1,000 of completed work will only be entitled to an added $ 2.25 to the rent. The owner will have to wait 37 years to recover the expense. When the Régie du logement was created in 1980 by the government’s Parti Québécois, owners could recover this amount in 8 years.

For owners who can afford it, CORPIQ suggests them to renovate their building and leave it vacant for a year. This will protect it from rent control.

Furtherly absurd is the Quebec government’s intention to give owners an indexation of only 0.4% on the portion of the rent that corresponds to their net income, after operating expenses. Considering that inflation in general was 1.7% in 2018, the return on the building will depreciate.

Finally, owners will be limited to an indexation of only 0.8% for their management expenses, while the inflation in Quebec was 1.7%. This is a mockery property owners can no longer endure.

CORPIQ asks the Minister to Modify the Role of the Régie

The rent fixing method is at the heart of the rental-market supply and demand dynamics, in addition to impacting the upkeep of buildings. However, CORPIQ believes that the Régie du logement is unable to exercise the essential economic role of market regulator.

For many years now, the Régie has seemed to no longer have the resources to fulfill a part of its mission of "studying and compiling statistics on the rental housing situation". Instead, it has refocused on its judicial role of settling disputes on a case-by-case basis, without advising the government with a global vision on housing.

"We ask the Minister of Municipal Affairs and Housing, Andrée Laforest, to limit the role of the Régie to fixing the rents in dispute according to the rates provided. The permanent re-evaluation of the method of calculation and the annual publication of the rent fixing criteria should, logically, be entrusted to a government authority with an economic vocation" explained Hans Brouillette.