Rule change could make it more difficult for first-time buyers to enter the housing market
Recent changes to British Columbia's Residential Tenancy Act (RTA) have sparked concerns from housing industry associations, particularly regarding the impact on high-ratio buyers, including first-time homebuyers.
In open letters, the BC Real Estate Association (BCREA) and the Canadian Mortgage Brokers Association – British Columbia (CMBA-BC) have called on the BC Government to amend the new rules, citing unintended consequences that could negatively affect homebuyers, rental-property owners, and tenants.
The changes, which took effect last week as part of Bill 14, require landlords to provide four months' notice for evictions due to personal or caretaker use, up from the previous two-month requirement. This extended notice period is proving particularly problematic for high-ratio buyers who typically require mortgage default insurance.
The combination of a four-month eviction notice and a 30-day dispute period effectively creates a five-month delay before a buyer can take possession of a property. Critics allege this delay is impractical for buyers transitioning from one home to another and complicates securing default mortgage insurance.
“These changes are inadvertently making it more difficult for all buyers, but especially first-time buyers, many of whom are currently tenants, to enter the housing market,” Trevor Hargreaves, senior vice president of government relations, marketing and communications at BCREA, said in a statement.
The BCREA highlighted several key issues, including:
- The four-month notice period, combined with a 30-day dispute notice, creates an effective five-month waiting period for buyers to take possession.
- First-time buyers often lack the financial capacity for the 20% down payment required for non-insured mortgages on rental properties.
- Default-insured mortgage holders must receive vacant possession to qualify, and cannot close on a purchase where the former tenant has not vacated.
- Homeowner and mortgage insurance typically require owner occupancy.
CMBA-BC raised additional concerns, particularly regarding mortgage approvals. The four-month notice period misaligns with the typical 90- to 120-day rate hold period for mortgage approvals, potentially leading to funding denials or increased costs for buyers.
This change impacts first-time homebuyers the most, as they are the typical buyers of rental properties.
"The amendments to the Residential Tenancy Act will exacerbate housing unaffordability and availability of rental units in our province by hindering purchase transactions for buyers with less than 20% down payments, narrowing the eligibility of purchasers for properties that are currently tenanted," said CMBA-BC president Rebecca Casey.
Both organizations have proposed several recommendations to address these issues, including:
- Adjusting notice rules for conventional mortgage buyers to allow vacant possession within a three-month period.
- Maintaining a two-month notice period for high-ratio insured buyers who will occupy the property.
- Protecting the privacy of new buyers by using existing public systems for information reporting.
- Develop a standard Statutory Declaration form for necessary disclosures.
- Eliminating the reporting requirement for buyers intending to occupy their own unit.
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The BCREA has also renewed its call for the BC Government to create a permanent housing roundtable comprising housing policy experts and representatives from across the sector to provide early advice on new or updated housing policies.
“While we await accommodations or changes to the Act, we are concerned that these amendments will worsen these issues rather than alleviate them, potentially compromising the stability and affordability for current and prospective tenants and home purchasers,” Casey added.
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