The 30% Solution — Eviction Crisis Averted
Apr 22 · 8 min read
The 30% Solution — Renter Crisis Averted
DRAFT AS OF May 1, 12:30pm, 2020
The 30% Solution: Renter Crisis Averted
Renters are facing the loss of their homes in the Vancouver rental market — and in rental markets across Canada.
Many renters, having lost all or most of their incomes in recent weeks, are going to be unable to pay their rent in full, in spite of the recent policy measures that have provided them with some temporary financial assistance. Many who do pay their full rent will be starved of funds for other necessities.
Unfortunately, Canada Emergency Response Benefits (CERB) payments designed to help struggling individuals effectively flow straight through to landlords who are entitled to their full rent while tenants go deeper into debt.
We are racing towards an explosion of evictions when the B.C. State of Emergency is over and evictions are allowed again. Thousands of renters, unable to pay their deferred rent and facing unemployment, lost businesses and exhausted savings, will lose their homes. Many landlords, having to meet their own financial needs, will feel compelled to evict tenants in arrears.
Young adults are especially vulnerable, as they comprise the majority of renters.
This looming crisis demands a solution that balances the needs and resources of both tenants and landlords, and recognizes that losses not covered by government grants should be somehow shared.
There needs to be a middle way between righteous calls for a “rent strike” and landlords demanding that tenants chose between full rent payment or evictions.
It starts with these principles and assumptions:
-> The notion of renters and rental housing providers collaborating to advance a mutually beneficial solution would open a lot of eyes to the possibilities.
-> We’re all in this together: both tenants and landlords have to be prepared to share losses driven by forces outside their control.
-> “All or nothing” is not feasible. Rent strikes are both unlikely and could significantly damage both renters and landlords. Forcing mass evictions on those who can’t make up rent shortfalls will equally hurt both renters and landlords.
-> The current evictions ban, which lasts until the B.C. State of Emergency is lifted, does nothing to avoid the crushing debt load of deferred rents facing struggling tenants when it is lifted.
-> Any renters evicted for not being able to pay their rent will crowd the market for cheaper rentals, squeezing out those with lower incomes who are already struggling to keep their homes. Increased homelessness would seem inevitable.
-> To be “affordable”, housing costs should not exceed 30% of a household’s gross income.
-> Government guidance and regulation is necessary: requiring individual negotiations between every tenant and their landlord is fraught with difficulties, costs, complications, excruciating uncertainties and unfairness — there are 131,00 rental households in Vancouver
-> Governments cannot be expected to pay all tenants enough to cover all their rent in full.
->Landlords are typically better resourced than tenants.
->Some landlords will need assistance to survive on significantly reduced rental incomes. Some of these will be recent arrivals in the housing market, typically younger adults and their families with little or no equity in recently-purchased homes dependent on rental suite income.
The current situation (April 23, 2020):
The majority of B.C. renters are eligible for a B.C. Rent Subsidy of $300-$500/month. This excludes households with 2019 incomes over $74,150, and households with dependants who earned over $113,040 — many young adults and young families.
A third of all tenants are currently unable to pay rent in full. That’s approximately 48,000 in the City of Vancouver alone. This data is based on a LandlordBC survey of Apr 2020. It shows that 64% of rents were collected in full on Apr 1. A City of Vancouver survey shows 37% of renter households will be unable to pay their full rent in May, which is 48,470 households.
The number of renters falling behind in rent can be expected to increase as savings disappear and lines of credit reach their limits.
The most vulnerable renters are those who qualify for CERB, but do not qualify for the BC Rent Subsidy, and whose rents are over $600/month for individuals, or over $1,200/month for couples and families. (The average rent for a single bedroom suite in the City of Vancouver is $2,006/month.)
Across B.C., there could be upwards of 142,000 rental units facing a rent deficit on May 1, nearly 50,000 in the City of Vancouver alone. (a rent deficit is the difference between rent owed and rent paid, or the shortfall in rent) This is a huge number of individuals and families vulnerable to unprecedented housing insecurity. And it’s going to grow.
The 30% Solution:
Renters pay 30% of current income in rent. Landlords cover the shortfall — with help.
Renters pay 30% of current income in rent, plus rental subsidy, landlords cover the shortfall. Tenants will pay more than 30% of their income if they can access the BC Rent Subsidy. This subsidy would be added to the total rent paid. (Unfortunately this subsidy is currently tied to pre-COVID earnings and many renters will not qualify.)
Payment is means tested, and verified by the BC government and CRA, as per qualifications for CERB and the BC Rent Subsidy. Landlords will not be given direct access to tenants finances. If it is determined that a tenant has paid less than 30% of income, the difference shall be owing.
This means that individual renters with no other income will have $900 of their monthly rent paid by government grants and subsidies. This goes up to $1,700/month for family households with children under 18. In roommate situations, all adult income shall be totaled to determine household income.
A possible option for Metro Vancouver, where rents are often already more than 50% of income, is for renters to pay 50% of their income. In this case, most individual renters will have $1,300 of their rent paid by government grants and subsidies. This would go up to $2,500 for family households with children under 18.
At the 30% rate, an individual renter who was making $50,000 in 2019, with no dependants, would pay their landlord $900 per month in rent. At 50% that would be $1,300. The renter would then have between $1,000 and $1,400 in monthly disposable income.
Tenants argue that anything more that 25% of income it too much, given how much incomes are decreasing.
A higher percentage could be justified by renters spending less on daycare, transportation, food, clothing, personal care, entertainment and vacations while the pandemic is in effect.
Rent Relief Bank to support marginal landlords who are unable to secure financing by any other means. Any funding from this “bank” would be coordinated with grants and programs for tax relief and mortgage deferrals available to homeowners. The administration of this Rent Deficit Bank could be by The B.C. Ministry of Municipal Affairs and Housing or a landlord group such as LandlordBC — to establish funding and distribute funds.
The estimated funding required for the Rent Relief Bank, to cover the rent deficits of all non-corporate landlords in the City of Vancouver, is $5.8 million/month. This is based on 30% of income as rent payment. It is not expected that corporate landlords will require access to a Rent Relief Bank to secure financing.
1- Landlord and tenant organizations need to agree that this is a fair way through the current impasse.
2- These conditions need to be legislated as amendments to the B.C. Residential Tenancy Act.
3. The B.C. Ministry of Municipal Affairs and Housing needs to set up a Rent Relief Bank
4- CRA data needs to be made accessible to ensure tenants are transparent about CERB and other relief payments they are receiving.
5- The B.C Ministry of Municipal Affairs has to determine how long the 30% solution will be in effect.
These are unprecedented times. Next to food, housing security is vital for peoples’ sense safety and security — and our eventual return to a sustainable economy.
The 30% solution provides a template for stabilizing the rental market during this financial crisis in B.C. — and anywhere else that currently has an evictions ban.
These measures will ease the transition from today’s trauma to tomorrow’s healing, fairly allocating the unavoidable losses that now face us all.
A vigorous debate about this policy option is urgently needed.
Contact: Brendan Ladner, 778–788–2278, email@example.com
Coming soon: www.30percentsolution.com