Rent hike application raises concern about rental rules in Manitoba

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This article was published 13/02/2023 (941 days ago), so information in it may no longer be current.

Alex Deneka can’t understand how the property managers of her downtown apartment have applied to increase rent by 118 per cent in the middle of a two-year rent freeze.

“At first, I felt scared. Then I kind of just felt angry,” she said.

The resident of a 400-square-foot unit in Smith Street Lofts has paid $1,440 a month since May 2022 when she moved in. Edison Properties, which owns the 21-storey building at 185 Smith St., sent a letter to tenants last month explaining that it has applied to the Residential Tenancies Branch to increase rent in the building’s 251 units by 118 per cent.

The letter said, if approved, her rent would increase to $3,142 a month when her lease renewed on May 1, 2023, but that Edison would grant her a $1,702 monthly discount.

“It seems like an obvious attempt to work around the idea of rent protection. The rules say ‘X,’ and you’re trying to do ‘Y,’ by doing all this sneaky (stuff),” she said.

Edison assured tenants in the letter that the actual rent charged would not increase immediately; those who sign a yearly lease renewal in 2023 will receive a rent discount so the cost stays the same.

After that, per provincial guidelines, the discount could be removed as the landlord deems fit, and rent could increase marginally — or suddenly skyrocket.

Edison Properties — which bought the building in 2018 from the Manitoba government for $16.2 million — justifies the increases by saying the building has since undergone a massive renovation to convert it into lofts.

Manitoba Housing had originally owned the building, which had 373 units for low-income tenants, but it sat vacant for years after flooding due to a broken pipe in 2015. The sale was criticized as an example of the shrinking pool of affordable housing at the hands of an austerity-minded Tory government.

Under provincial regulations, an apartment block that is built from the ground up is exempt from rent control for 20 years so developers can recoup their costs. In the case of Smith Street Lofts, it is a pre-existing building and is required to follow rent control guidelines, which were set at zero per cent for 2022 and 2023.

That is why Edison needs the Residential Tenancies Branch to sign off on its proposed increases.

Company president Frank Koch-Schulte said Edison has one chance to apply for an increase that could cover building costs over time.

“In order to make sure that we’re kind of, when I say ‘playing the game,’ but essentially, that’s what it is with rent controls, that if we don’t do this process, we can never go back and ask for it,” he said.

He had lobbied the residential tenancies branch to have the building designated as new because of the huge cost of repairs, which he said is close to $100 million, but the agency rejected the argument.

“We took a building that was, by all other purposes, probably meant to be taken down and imploded, and we cleaned it up, repurposed it and put it back on the market. Now we’re just trying to get the justification for the rents that we feel it’s entitled to,” Koch-Schulte said.

Monthly rents vary at Smith Street Lofts — available studio units “up to” 385 square feet are listed at $1,185, while a 970-square-foot two-bedroom starts at $2,060.

A statement from the province emphasized that the rent increase application has yet to be approved and refused to comment further on the application.

In an effort to quell concerns and answer tenants’ questions, Edison held a town hall meeting Feb. 8.

Koch-Schulte said he understands tenants’ concerns.

“While there’s no reason for people to believe us when we say we’re not going to be unreasonably increasing rents, we have examples of doing exactly that for years at our… other 25 high-rises around the city,” he said.

“It’s an unfortunate situation. Admittedly… we should have maybe been more proactive on this to get in front of our residents and communicate with them, like, ‘Look, this is happening, this is what we got to do,’” he said.

Deneka said she’s not moved by the explanation.

“Honestly, one of the reasons I’m upset is because I like living here, it’s a good building… it’s genuinely been a really nice experience,” she said. “But this is so shady.”

Shauna MacKinnon, chair of the department of urban and inner-city studies at the University of Winnipeg, said the situation shows the unregulated private supply is out of control. Even people who earn a middle- to upper-middle income struggle to afford small apartments.

“How much of the supply is actually really rent-regulated anymore? Because there are so many ways around it,” she said.

She posited that because rent control no longer applies if the rent hits a certain amount — as of 2023, it is $1,570 monthly — a large discount that can be removed in increments is a way to get more units exempt from the tenancies branch oversight.

“That way, they don’t have to worry about rent rates. So they do that as a way to get around them and still entice people to move in,” Mackinnon said.

Koch-Schulte said their unit costs are “basically a combination of whatever the market rent is, and what we feel our product is offering comparative to the market.”

“The cost of everything is going up, so I’d say that a $1,400, $1,200, $1,000 rent is, unfortunately, reasonable in Canada right now,” he said.

“If you are spending that, I challenge anyone in the city to find a better value than what we’re offering there.”

The tenancies branch approved above-guideline rent increases by an average nine per cent, with hikes ranging between five and 126 per cent, in the first half of 2022.

It ruled on 912 above-guideline rent applications that affected nearly 60,000 units, from 2019 to 2021. On average, rents increased 10.8 per cent in 2019, 11.65 per cent in 2020, and 10.3 per cent in 2021.

malak.abas@freepress.mb.ca