The rent increase season has just begun, and the bill promises to be steep for tenants. In this inflationary context, landlords and tenants expect the Administrative Housing Tribunal (TAL) to collapse under the weight of requests for rent fixing.
Forget the monthly increases of $10 and $15 a month renters have grown accustomed to over the years, monthly increases of $40 or even $60 and more are to be expected in 2023.
The TAL published on January 17 the applicable percentages for the calculation of rent increases in 2023. These are higher than in the past due to inflation and the rise in interest rates which are used in particular to calculate the part of the major work in a rental building that can be recovered by a rent increase.
You’re going to have to have a plan to talk to the tenants. Otherwise everyone will go to the housing court. One would necessarily expect an increase in the causes of TAL fixation.
Martin Messier, President of the Quebec Landlords Association (APQ)
His association is organizing a workshop on setting rent on 28 January. “We are complete. You have to add time slots,” he says to illustrate the great interest among landlords in obtaining the maximum that the regulation on the fixing of rents authorizes them to collect.
“I repeat to the owners: it’s now or never. Rent increases cannot be carried forward for multiple years. If you miss this year, the year after, it’s too late. You will have lost the opportunity to adjust your rent a little more than in the past. This year, more than ever, homeowners need to do their math. »
On the tenants’ side, there are fears that landlords are exaggerating.
“It’s certain that if we see more significant increases; inevitably, there is a risk of having more protests, ”concludes Cédric Dussault, spokesperson for the Regroupement des Comités Logements et Associations de Tenants du Québec. He points out that a tenant always has the right to refuse a rent increase that he considers excessive while remaining in his dwelling.
In recent years, the number of rent fixing cases filed with the Tribunal has remained low, around 7,000 per year.
A landlord must send his notice of rent increase to his tenants no later than three months before the expiry of the lease, March 31 for leases expiring on June 30. The tenant can then accept the increase, refuse it and leave the accommodation or refuse it and stay in the accommodation. In the event of this last scenario, the landlord has 30 days to submit, at his own expense, a request to fix the rent to the TAL. The parties can always agree before the hearing.
Why such high rent increases this year?
On the basis of these percentages published on January 17, the TAL presented, for information purposes, a fictitious calculation scenario which estimates the basic adjustment at 2.3% for dwellings for which the heating is the responsibility of the tenant. With an assumption of a 5% increase in municipal taxes, the average rent increase estimated by the TAL increases to 2.9%.
For the year 2023, many cities have increased the tax burden on property taxpayers to cope with inflation. For example, the average increase is 4.1% in Montreal for the residential sector. In Longueuil, the increase is 5.6%.
According to the rent setting grid, the increase in property taxes is absorbed in full by the tenants in proportion to the rent paid.
It’s the same thing for insurance premiums, which also go up year after year. If the TAL is called upon to set the rent, it will take into account the variation in home insurance premiums between the years 2022 and 2021. The amount of the premiums depends on the replacement value of the building. The value of plexes (buildings with 2 to 5 units) in the Montreal region grew by 9% in one year in 2021 and by another 8% on average in 2022, according to data from the Association professionnelle des courtiers immobiliers du Quebec. Jumps that translate into higher insurance premiums for many homeowners.
In the case of oil-heated apartments included in the rental price, the adjustment factor increases to 7.3% in 2023.
On the net, Martin Messier, of the APQ, expects an average increase ranging between 4 and 6% this year. “It’s been decades since we’ve seen that,” he admits.
The average rent in the Montreal area for a 2-bedroom apartment is approaching $1,000 per month. (It was $930 for occupied units in October 2021, according to Canada Mortgage and Housing Corporation economist Francis Cortellino.) Average increases will easily run between $40 and $60 per month this year.
“One of my members who did $200,000 in major work for a 5-plex arrived at an adjustment rate of 17% using the TAL calculation grid. He is afraid that his tenants will denounce him in the media,” says Martin Messier.
This owner had a lucky hand by carrying out the work in 2022, and not in 2021.
The adjustment factor for major work is 3.8% this year. This means that this owner will be able to recover his investment in 26 years. In 2021, due to lower interest rates, the adjustment rate was 2%, and the payback period was extended to 50 years.
Remember that dwellings built less than five years ago are not subject to the rent fixing grid. In other words, the owners can ask for the increase they want, and the tenant of a recent housing has the choice to accept the proposed increase or to leave the premises.