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MIKAELA MACKENZIE \/ FREE PRESS<\/p>\n
Neil Kraemer, a member of the West Broadway Tenant Committee, is a renter who\u2019s seen above-guideline rent increases over the past three years.<\/p>\n
The Manitoba government plans to change how rental property managers can apply for above-guideline increases this spring. If implemented, landlords won\u2019t recoup renovation costs through rent as quickly.<\/p>\n
It could take twice as long to cover costs, industry experts say.<\/p>\n
That\u2019s put a chill on work for contractors, Phaneuf said, noting his Sunnyside firm has had two balcony jobs at residential towers put on hold, as well as two parkade contracts.<\/p>\n
\u201cPeople who the government\u2019s trying to protect with these (changes) will be the ones affected the most, because they\u2019re going to be out of work,\u201d Phaneuf said, adding most of his staff live in apartments. \u201cAnd the downstream effects will eventually hurt the end user.\u201d<\/p>\n
Ron Penner, chief operating officer of Globe Property Management, said the changes are devastating.<\/p>\n
The firm, which oversees roughly 5,500 rental units in Manitoba, has put $10 million of capital spending on hold. Most of its sites are more than 20 years old and subject to rent control, which is set at a 1.8 per cent increase this year.<\/p>\n
That doesn\u2019t cover the cost of maintenance and repairs, Penner said.<\/p>\n
The government\u2019s proposal to cap the portion of capital expenditures landlords can claim \u2014 by 50 per cent \u2014 will result in \u201cnegative returns,\u201d Penner said, as property managers spend money on renovations before applying for above-guideline rent increases.<\/p>\n
\u201cIf you\u2019re not getting a return on your investment, you can\u2019t spend the money,\u201d Penner said. \u201cIt\u2019s going to have to make us (as an industry) look at pushing things beyond the reasonable limits, and there\u2019ll be more deferred maintenance.\u201d<\/p>\n
Under the current formula, companies see an average of five per cent profit from renovations, said Avrom Charach, spokesman for the Professional Property Managers Association.<\/p>\n
The association expects landlords to lose 1.5 to two per cent under the new model. Charach said it will be hard for businesses to pitch their projects for bank loans.<\/p>\n
\u201cIt\u2019s going to degrade the\u2026 housing stock in this province significantly because you can\u2019t make a living doing these kinds of repairs,\u201d he said.<\/p>\n
\u201cThe misnomer that government has out there is \u2018landlords just keep increasing profits\u2019\u2026 What we\u2019re trying to do is keep pace.\u201d<\/p>\n
Charach cited higher taxes and an average seven per cent operating cost increase within the industry. By the time a project, like fridge replacements, is paid off, an identical project or replacement will need to start, he said.<\/p>\n
\u201cIn every single case, the tenant will pay 100 per cent of that cost,\u201d said Yutaka Dirks, spokesperson for the Right to Housing Coalition.<\/p>\n
\u201cWe are happy that the government is moving the capital expenses\u2026 it will make a real difference in tenants\u2019 rent increases.\u201d<\/p>\n
Still, the coalition believes renovation costs should be broken down by a repair\u2019s expected lifetime and added to tenants\u2019 rents during that span. It\u2019d be a smaller and temporary expense, Dirks said.<\/p>\n
\u201cThe way (the system is) currently designed produces these much higher rent increases than other provinces,\u201d Dirks said, highlighting Ontario, which ends rent increases with project lifespans.<\/p>\n
\t\t\t\t\t\t\t\t\t MIKE DEAL \/ FREE PRESS<\/p>\n Ron Penner, chief operating officer of Globe Property Management, outside one of the apartment towers at Courts of St. James.<\/p>\n A helpful model would include passing the cost of a suite\u2019s renovation to the future renter instead of splitting the money between the entire block, Charach said.<\/p>\n The Manitoba government introduced legislation this year to increase the number of rent-controlled units. Currently, exemptions begin for units charging $1,670 or more. If passed, the floor will be $2,000.<\/p>\n Buildings less than 20 years old are exempt.<\/p>\n \u201cThe changes are good,\u201d said Neil Kraemer, a renter and member of the West Broadway Tenants Committee. \u201c(But) they don\u2019t quite go far enough.\u201d<\/p>\n He lives at 645 Westminster Ave., a building that went without heat for weeks<\/a> this winter. Kraemer\u2019s rent has increased from $941 per month in 2019 to $1,341 through a series of above-guideline rent increases. He said many of the renovations weren\u2019t necessary.<\/p>\n \u201cThere\u2019s no requirement for the landlord to prove that any of these renovations were necessary,\u201d Kraemer said. \u201cEverything\u2019s gotten more expensive.\u201d<\/p>\n He\u2019d like to see rent discounts eliminated as the advertised price of a unit sometimes doesn\u2019t last, leaving the renter with much heftier bills than they\u2019d signed up for, he said.<\/p>\n \u201cThe landlord is choosing not to make as much profit because the market won\u2019t bear it,\u201d Charach said of discounts, adding the government approved a higher rent.<\/p>\n Landlords remove discounts to pay their bills, Charach continued, saying \u201cwe\u2019re facing exactly what our tenants are facing (with affordability).\u201d<\/p>\n He said nationally, the average profit in the industry doesn\u2019t exceed five per cent. Statistics Canada reported an industry profit margin of 36.9 per cent in 2023, up from 36.2 per cent in 2022, which doesn\u2019t factor many expenses, such as income tax and salaries.<\/p>\n \n\t\tWinnipeg Free Press | Newsletter\n\t<\/p>\n \t\t\t\t\t Public Service Delivery Minister Mintu Sandhu said he was reasonable and would continue listening to both renters and property managers.<\/p>\n \u201cRight now is the largest expansion to the rent control in decades,\u201d Sandhu said.<\/p>\n The rules will be reviewed every five years, he added.<\/p>\n The median Manitoba two-bedroom apartment rent was $1,518 last October, according to the Canada Mortgage and Housing Corporation.<\/p>\n gabrielle.piche@winnipegfreepress.com<\/p>\n \t\t\t\t Gabrielle Pich\u00e9 Gabrielle Pich\u00e9 reports on business for the Free Press. She interned at the Free Press and worked for its sister outlet, Canstar Community News, before entering the business beat in 2021. Read more about Gabrielle<\/a>.<\/p>\n Every piece of reporting Gabrielle produces is reviewed by an editing team before it is posted online or published in print \u2014 part of the Free Press\u2018s tradition, since 1872, of producing reliable independent journalism. Read more about Free Press\u2019s history and mandate<\/a>, and learn how our newsroom operates<\/a>.<\/p>\n
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