(Update Nov. 27, 2025: I was flattered to learn that former Councillor Geoff Young referenced this two-year old post in an op-ed yesterday. His reference was limited to borrowing my hypothetical scenario of a rental suite where property taxes were 15% of rent. That hypothetical scenario was just to provide round numbers for some illustrative calculations, below. (By the way, I am not advocating in support of his suggestion that property tax increases be passed along to tenants.)
It’s City budgetting time, and there are claims that a larger property tax increase, rather than a smaller one, is “really gonna hurt renters.”
Really?
Let’s take a quick look at two things: rent control and economics.
Rent control. During existing tenancies, landlords who comply with the law generally increase rents by the legal maximum per year, regardless of increases to property tax, insurance, mortgage interest rates, etc. In BC, that’s 2% for 2023 and 3.5% for 2024.
So for renters in existing tenancies, property tax increases don’t affect rents.
Economics. Between tenancies, landlords can increase the rent to whatever the market will bear. Will a prospective renter be willing to pay an offered rent? They don’t have much choice; with a 1% vacancy rate it’s a landlord’s market, and rents are high. It’s the basic economics of supply and demand. (This is why some landlords oppose policy changes that allow more housing.)
And incidentally, how much will a property tax increase affect landlord costs? To get a rough idea, let’s assume that:
- market rent is $2,000 per month; and,
- property taxes on the suite are $3,600 per year, or $300 per month.
A 10% tax increase would be $30 per month, or 1.5% of rent, i.e. below the rent control cap.
A more realistic policy decision is the difference between, say, a 6% property tax increase and a 10% tax increase, which would be $12 per month.
Actual market rent increases are much larger. The most recent CMHC Rental Market Survey shows monthly rent for an average 2BR Victoria suite went up by $259 /month (from $1,897 / month to $2,156) in the year up to October 2022.
For visual learners like me, here’s a chart showing the relative scale of:
- the average market rent increase;
- a 10% property tax increase; and,
- the difference between between a 10% and a 6% property tax increase.
As you can see, a 10% property tax increase is quite small compared to market rent increases. And the difference between a 10% property tax increase and a 6% property tax increase is even smaller.
So, is that extra cost of property tax “really gonna hurt renters”?
- For an existing tenancy, no. Their rent increase is subject to rent control regardless of property tax increases
- For a suite between tenancies, also no. Market rents are set by supply and demand, not by costs. (And of course the costs of tax increases have been very small compared to market rent increases over recent years.)
The bottom line? Anyone who is genuinely concerned about rents being too high should focus on increasing the vacancy rate.