VANCOUVER—At least one developer says it is halting plans to build new rental buildings in response to a provincial task force’s recommendation to reduce annual allowable rent increases.

Premier John Horgan and Selina Robinson, minister of municipal affairs and housing, are set to make an announcement on the recommendation Wednesday. The task force, made up of two NDP MLAs and one Green MLA, has recommended that B.C. rent increases be allowed to rise by inflation only, instead of the current two per cent plus inflation.

Renters in Metro Vancouver and cities like Victoria and Kelowna have struggled with a tight rental market that has led to higher rents, an increase in evictions and significant challenges in finding a new home.

The rent-control recommendation was made this week following news that rents could rise 4.5 per cent this year, the highest increase since 2004. The proposed change would make B.C.’s rules similar to how rent control is calculated in Ontario.

But while renter advocates celebrated the recommendation, developers warned the move could have dire long-term consequences.

“We have now halted plans for hundreds of new purpose-built rental units just over the next 12-24 months and will now focus on developing condos,” Aly Jiwan, CEO of Redbrick Properties, tweeted on Monday.

“Government and public opposition to purpose-built rental business is stifling much-needed rental housing supply.”

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Jiwan declined to elaborate on the decision and referred all questions to advocacy group Landlord BC, which speaks on behalf of landlords as well as rental developers.

It’s already a challenge for rental developers to get financing and compete with condo builders for land because condo projects deliver a quicker return on the initial investment. David Hutniak, CEO of Landlord BC, said that if the recommendation is approved, it would be even harder for rental developers to get bank financing to start new projects.

Hutniak said that if the new inflation-only rent increase calculation were in place this year, landlords would be able to raise rents by 2.5 per cent instead of 4.5 per cent.

But Spencer Chandra Herbert, the NDP MLA who chaired the task force, said data from Manitoba and Ontario shows stricter rent controls don’t translate to a slowdown in new rental construction.

“We looked at Manitoba, we looked at Ontario, and we’ve seen in Ontario even with stronger rent controls than what we’re recommending, for the most part over the past decade they’ve been building more rental housing than we have,” Chandra Herbert said.

The Canada Mortgage and Housing Corporation’s rental survey shows that in the Greater Toronto Area, the number of rental units has risen slightly every year since 2013, the earliest year available on the organization’s website. Between 2013 and 2017, the total number of new units rose by 1.5 per cent, or 5,118 units.

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To spur new rental construction, some Metro Vancouver municipalities have put forward density bonusing and other incentives. Some may use a new tool: rental-only zoning.

But Hutniak said that if the B.C. government does reduce the amount landlords can raise rents, the province will need to look for ways for further incentivize new rental construction.

“If this lost revenue were offset by tax breaks, that’s a conversation we’d be prepared to have,” he said. “Seattle has been successful in getting purpose-built rental built because they had a 10-year tax break.”

With files from Tessa Vikander

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