New Westminster wants the province to provide cities with the ability to address skyrocketing commercial lease rates.
On Monday, council considered a motion from Coun. Tasha Henderson regarding commercial rent controls.
The motion, which is to be forwarded to the Lower Mainland Local Government Association, asks the province to provide local governments with the legislative authority to enable special economic zones where commercial rent control and demo/renovation policies could be applied.
The concept is being proposed to ensure predictability in commercial lease costs, so local small businesses and community-serving commercial tenants can continue to serve their communities.
“What I'm hearing from the community is that the current structure of commercial leases doesn't work as it is,” Henderson said. “It's really unpredictable from lease to lease; it's not sustainable, given rising land values and speculation.”
As land values increase so does the equity that commercial landowners have access to – and the expense proportionately increases for those landowners, Henderson said.
“Currently, those costs are being downloaded to small businesses to cover, even though those businesses or community-serving organizations don't have access to the gain in equity that property owners enjoy,” she said.
At Monday’s council meeting, Henderson provided examples of three local businesses that have faced hefty lease increases.
According to Henderson, the Thirsty Duck Pub on 12th Street is seeing its lease rate nearly triple from $12 to $30 per square foot. She said a 300 per cent increase to its lease is well above the city’s 7.7 per cent property tax increase in 2024.
“The Vancouver Circus School in the River Market is facing a similar issue,” she told council.
According to Henderson, the Vancouver Circus School’s rent is set to increase by more than 200 per cent – at a time when it’s in the middle of its program year and is unable to adjust costs for people who use its programs.
Modern Warrior Academy of Self Defence, located on Sixth Street, has been subjected to three rent increases since it started its lease in 2022 – including one that came just eight months after signing its initial lease, said Henderson.
“I think that that's a really good example because the land value of that building went up 34 per cent last year,” she said. “The property owner saw a $1.5 million-increase to their land value, to their equity. And again, it's a small business who's absorbing any related costs increase without any notice.”
Henderson’s motion stated the province regulates annual allowable residential rent increases to protect lower income renters from housing insecurity, but there is currently no similar provincial policy to protect small businesses or community-serving commercial tenants from “unsustainable, unpredictable, and increasingly significant” rent increases.
“I'm sure there will be questions about what this would look like. I don't have those answers tonight. What I'm asking here is for us to ask the province for the ability to explore what tools we have, what neighbourhood-level solutions that we can find to support some more security and sustainability for commercial tenants and their leases,” she said. “Certainly these ad-hoc, unpredictable increases are not providing safeguards for the commercial rents.”
Henderson said the motion is coming forward at a time when the British Columbia Restaurant and Foodservices Association and Restaurants Canada have launched a new campaign, Save BC Restaurants.
She said two of the recommendations from those organizations say unrestricted rent increases from landlords risks pricing restaurants out of long-established locations because commercial properties pass taxes on to tenants, who have to eat the cost of those increases.
Motion passes 4-2
In a 4-2 vote, council supported Henderson’s motion. It will be forwarded to the Lower Mainland Local Government Association for consideration at its 2024 conference and annual general meeting.
Henderson’s fellow Community First New Westminster council colleagues, Mayor Patrick Johnstone and Coun. Ruby Campbell, supported the motion, as did former Community First member Coun. Nadine Nakagawa.
New Westminster Progressive councillors Daniel Fontaine and Paul Minhas voted against the motion.
Fontaine said he appreciates the spirit of Henderson's motion, but couldn’t support it.
“I just don't have enough information. I don't know what the unintended consequences are. And as a result of that, I won't be supporting that,” he said. “But I will be focused very much on keeping our costs down in the city to make sure that our property tax hikes next year are kept in check and hopefully within the rate of inflation.”
Before supporting the motion, Fontaine said he would need to see more information about the creation of economic zones where rent controls could be implemented. He said that when residents leave rental units, landlords jack up the rents so the next tenant inherits a huge increase in rent – a situation that could impact the ability to attract new businesses if it happens in commercial spaces.
Fontaine emphasized the need for the city to support local businesses with the tool that council directly controls – property taxes.
But Nakagawa countered that “there's a huge gap” between the city’s 7.7 per cent tax increase and the 300 per cent lease increases being seen by some small businesses.
“And so, it's pretty clear that there's other factors at play here,” she said.
Nakagawa, who is a renter, said she couldn’t imagine what it would be like if her landlord could increase her rent by whatever price they wanted.
“It would be unfeasible,” she said. “The only thing that protects renters is that rental increase cap. And I will say, as somebody who's moved fairly recently, it is deeply troubling moving into a new market.”
Nakagawa pointed out businesses often invest money into making tenant improvements to their leased commercial spaces.
“That is a very difficult thing, if you're investing tens, sometimes hundreds of thousands of dollars, in tenant improvements of a space only to be costed out of that space the next year, and your rent could go up 300 per cent,” she said. “I think it's hugely prohibitive to people who want to maybe try out a business, or maybe want to invest in small businesses in our communities.”
Coun. Ruby Campbell said she recently participated in a home-based business event put on by the New Westminster Chamber of Commerce and said it was “eye-opening” to see the number of small businesses that are going from commercial spaces to home-based businesses – even though they may need a place to showcase their work or provide services.
“I’m just feeling like there is an opportunity here for us to have the backs of small businesses in a way that is not necessarily about reducing property taxes,” she said. “Because we need property taxes in order to expedite business licenses. We need them in order to do some of the public activation work that happens. We need them to support businesses in other ways. This is in addition to that, so I will support this because I think it's something that our small businesses deserve.”
Minhas, who owns a business on Columbia Street, said property taxes are one of the biggest expenses pushed onto businesses from building owners. In terms of supporting businesses, he said business owners have told him the city needs to do more to promote and draw people to the downtown.
According to the province, residential rents can only be increased once every 12 months and must be within the yearly rent increase limit, as set by the Residential Tenancy Branch.
📣 SOUND OFF: Do you think commercial rent controls should be considered in B.C. to support local businesses facing rising rents? Send us a letter.
