Mortgage Broker

CMB MAGAZINE cmba-achc.ca summer 2018 | 13 rentalhousing "MORTgAgE hELPERS" – SECOndARy SuITES Secondary rental suites, which are commonly known as "mortgage helpers," are essential in providing many prospective home buyers and mortgage borrowers with revenue to assist in qualifying for mortgages and making payments under those mortgages. In addition, tenants benefit from secondary rental suites in houses as they provide a significant portion of the rental housing stock in the province of B.C. e City of Vancouver in it its April 2017 "Housing Characteristic Fact Sheet" advises that there were an estimated 30,125 secondary rental units within the city. Some estimate that as many as 40 per cent of all detached homes in Vancouver contain rental suites. Mortgage helpers are therefore vital in ensuring the affordability of homes for both owners and tenants. IMPACT Of fInAnCIng RuLES On B.C. REnTAL STOCK e federal government, in its quest to limit consumer debt, has put mortgage borrowers on a "debt diet." is has changed how residential mortgages for home owners and buyers are underwritten. Federal mortgage underwriting rules for residential properties are set out by the Office of the Superintendent of Financial Institutions in B-20. Chartered banks used to be able to count all secondary- suite income in underwriting mortgages. With recent B-20 changes, suite income is now capped at 80 per cent of rental income added to qualifying income. Additional B-20 changes make it harder for individuals to qualify for mortgages for standalone rental properties as well. ese rules have limited individual purchasers' contribution to our province's rental stock. Our members are telling us most of their clients can only qualify for one or possibly two rental properties since B-20 changes were implemented. e message here is that most rental housing must now be supplied by commercial property owners, developers and government – not by individual home buyers or investors. e federal government through its B-20 changes has created tighter monetary policy which directly limits the supply of rental housing. At the same time the federal government has also opened its doors widely to immigrants, fuelling the demand for rental housing in B.C. e population in many Lower Mainland centres is forecast to grow by over 10% annually, with others over 5% annually, province-wide. Federal B-20 mortgage underwriting policies that limit the supply of investor-owned housing diametrically opposes an immigration policy which creates a constant demand for new rental housing. A rental housing crisis is the perfect storm engineered, in part, by counterposing federal policies. ThE AvAILABILITy Of REnTAL hOuSIng – vACAnCy RATES And REnT COnTROLS ere can be little doubt that a severe shortage of rental housing exists in B.C., and more particularly in the Metro Vancouver area. CMHC in its 2017 Rental Housing Market Report advises that vacancy rates have been dropping to almost crisis levels and currently sit below one per cent. e challenge of tinkering with the Residential Tenancy Act (RTA) and creating further rental restrictions or controls, is that this will have an impact on the supply of rental housing. e Rental Housing Task Force should consider all options to increase the supply of rental housing, including a review of the rent control provisions contained in the RTA. e RTA currently permits annual rent increases which amount to two per cent plus the Consumer Price Index for B.C., which is also two per cent. is four per cent permitted rate of increase for residential rents is woefully inadequate to compensate homeowners with the myriad of costs attached to housing, which have been escalating at a much faster pace. For instance, over the last decade, costs relating to insurance, electricity, property taxes and water and sewer services have increased on average at a rate of seven per cent to 10 per cent per year. Construction costs related to labour, building materials, and appliances have also skyrocketed in excess of 10 per cent per year. Paul Krugman, a Nobel Prize-winning economist who has studied rent control issues on an international scale, explains, "e analysis of rent control is among the best- understood issues in all of economics, and – among economists, anyway – one of the least controversial. In 1992 a poll of the American Economic Association found 93 per cent of its members agreeing that ''a ceiling on rents reduces the quality and quantity of housing.'' Being a landlord is not an easy task, especially for those homeowners who are financially dependent on rent to pay for monthly housing costs, including increasingly higher mortgage payments. Contrary to the perception of some, renting a part of one's home carries risk. Homeowners may be financially devastated when damage to the Housing Task Force

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