Don’t count Hollyburn Properties executives among the 70% of business leaders who support the harmonized sales tax (HST).
Business in Vancouver and Ipsos Reid conducted a survey of business leaders that found that, in early July, 70% support the HST. (See next week’s Business in Vancouver.)
Hollyburn, which owns rental apartment buildings, has to pay the HST on business expenses like hydro bills, repairing roofs and fixing elevators.
It can’t charge tenants the HST on their rents because that basic necessity is HST-free. So, Hollyburn executives claim they are out-of-pocket about $300 per year per suite.
That amount equates to Hollyburn spending more than $4,200 per year per suite in new HST-able expenses.
“Right now at one of our buildings, we’re putting in a new boiler,” Hollyburn director of communications Peter Louwe told BIV July 18. “We’re re-roofing. You have to look at the big picture and amortize it over a number of years.”
Insurance agents and providers of private post-secondary education are in a similar situation. Entrepreneurs in both those business sectors similarly have to pay the HST on business expenses yet cannot deduct those tax payments from the amount of HST they charge customers because both auto insurance and education are HST-free.
Hollyburn can charge higher rents when tenants move out. But that is difficult to do, Louwe said, because the highest churn rate for residential renters comes from short-term tenants in newer housing.
Those tenants are paying near-market rates already, and they move because their rents are near the cost of paying a mortgage on a condo. Hiking their rental rates could be more than the market will bear, he said.
“The embedded, long-term tenants generally aren’t moving,” Louwe said. “Those 20-year-old suites are way under market value.”
Landlords can raise rents only about 2.7% per year unless they can convince the Residential Tenancy Branch (RTB) that an extraordinary rent increase is justified – a difficult task, according to Louwe.
Hollyburn owns 48 apartment buildings in Vancouver, three in Calgary and eight in Toronto.
Combined, the company manages approximately 3,500 rental housing units in Vancouver and a total of approximately 4,000 units Canada-wide.
Glen Korstrom
Twitter: GlenKorstrom