As any regular reader of this blog knows, here at LCTaylor Licensed Insolvency Trustee we are big advocates for the importance of budgeting to financial strength. Though the importance of a budget has not changed, the events of the last few years have made it difficult to create one that will accurately estimate your income and expenses for the period.
The income side of your budget may have been impacted by layoffs or reduced working hours during the Covid-19 pandemic, and the expense side of your budget has probably been feeling pressure from inflation and increased interest rates.
Manitoba’s Rent Increase Freeze
If you rent your residence, your rent budget is something that has likely grown in the last few years, perhaps at a pace that exceeded your expectations. Officially, the Manitoba government froze the allowed rent increases at 0% in 2022 and 2023 and has only allowed an increase of 3% beginning in 2024, which is far below the Manitoba Consumer Price Index.
Despite these guidelines however, many tenants will have seen their home rental prices grow at a far higher rate over those years. But how can that be? What is the maximum rent increase in Manitoba?
Government-Mandated Rent Controls
The government-mandated rent increase maximums are a form of rent control. However, this rent control does not apply in all instances. For example, a unit that is rented for more than $1,615 per month (as at December 31, 2023) is not subject to this guideline, nor are units in buildings that were built and occupied after March 7, 2005. This means that theoretically the landlord of those units could proceed with an unregulated rent increase that is as much as they believe the market will bear.
Another way that your landlord could increase the rent beyond the allowable maximum is by applying to the Residential Tenancies Branch (who administer the Residential Tenancies Act) for a monthly rent increase that exceeds the guideline. This is done by submitting an application that proves that the costs incurred by the landlord have risen at a rate that is higher than the rent increase guideline. The Residential Tenancies Act is the main legislation governing residential tenant law in Manitoba. The Landlord and Tenant Act primarily deals with commercial tenancies.
Rental Property Owners Perspective
The owners of rental properties have certainly not been immune to the same inflation pressures facing tenants and the rest of Canadian society. The costs of building and maintenance supplies, and interest on the money borrowed to purchase or build a rental unit have all increased in recent years. As you know from your own personal budget, income must equal or exceed expenses. If a landlord’s expense rises to the point where it exceeds income, a landlord would reasonably seek to increase that income by raising the rent.
As a result, the Residential Tenancies Branch has been approving most of the applications for above-guideline rent increases that it receives. According to a recent article in the Winnipeg Free Press, 96% of applications were approved in 2020, 80% in 2021, and 92% in 2022. This shifts at least some of the burden of the increased costs to the tenant, which is unfortunate for the tenant. But if the landlord’s request was denied the alternative may be cutbacks that are detrimental to the tenants in other ways, such as reduced maintenance and/or caretaking.
A Balancing Act
As you can see, there is a delicate balancing act between ensuring that owning and maintaining a rental unit is profitable enough to make it worthwhile to do so, while at the same time drafting renters’ laws and enforcing renters’ rights to make sure that tenants are treated fairly.
If the regulations were too heavily slanted in favour of tenants, fewer people would want to build a rental unit. The resulting decrease in supply could drive rents higher. On the other hand, if they were too heavily slanted in favour of landlords, the large portion of society that rents could be treated unfairly. As such, the Manitoba government attempts to maintain a compromise where rents are regulated, but with certain exceptions.
Rental Increases and Your Budget
The resulting regime results in tenants not fully knowing how their rent expense will change year-over-year, which can make it hard to budget on an annual basis. The good news is that your landlord must give you at least three months notice before the rent can be increased, and the rent can generally only be increased once per year. Therefore, once your rent is established for the year, you should be able to count on that amount remaining consistent for 12 months.
Once you know what your rent will be for the year, your next task is finding room in your budget to make sure that the payment can be made. Late payments can be harmful to your relationship with your current landlord and can also hurt your ability to find another place to rent if potential future landlords check on your payment history. Because of this, you’ll want to make sure that you can manage your rent payments, which may be difficult with how much the general cost of living has increased in recent years.
Making Ends Meet
If you are facing a rent increase, and after looking at your budget you aren’t sure how you will be able to afford it, it might be time to consider restructuring your personal debt. If you are carrying debt, it is likely another area of your budget that has become more expensive. This is because rising interest rates have increased the costs of things like lines of credit, and they have begun to impact credit card interest rates as well.
One solution to this problem may be filing a Consumer Proposal. If you have a steady source of income, a Consumer Proposal can allow you to settle your debts for an affordable monthly payment, which can free up additional cash flow each month to use on other things, giving you more flexibility in your budget. If your income is more modest and/or less reliable, a Bankruptcy might be a more appropriate option as it may allow you to start fresh with your finances and build a stronger future.
Reach Out – We Are Here to Help
Without the burden of debts from the past taking money from your present income, you may be better positioned to absorb the rising cost of living, including rent. For a free, no-obligation consultation to find out more about these options and others, please contact LCTaylor by email or give us a call at 204-925-6400.