Daniel Fontaine: BC’s condo market has quietly been hit with eye-watering increases for insurance premiums.
There are hundreds of thousands of British Columbians who bought a condo and make mortgage payments – and live on a fixed or limited income. Before they made the purchase, they no doubt crunched the numbers to ensure sure they could afford not only the unit itself, but the monthly strata fees.
Now just imagine how you’d feel if you were suddenly told that due to skyrocketing property insurance rates your strata fees could be increasing by $600 per month. At the same time, you’d be assessed a one-time special assessment of $3,000.
According to the Insurance Brokers Association of BC (IBABC) “Metro Vancouver has approximately 2.7 million residents, with about half residing in strata-titled properties. Within B.C.’s strata property classification, there are now more than 30,000 strata corporations. These numbers reflect the significance of the current strata deductible increases and the challenges posed to millions of strata unit owners.”
Imagine how you’d feel if your strata fees were increasing by $600 per month.
While many of us have been focused on the financial woes of the Insurance Corporation of B.C. (ICBC), a sleeper issue has quickly creeped upon us, poised to be much more devastating to the pocketbooks of average British Columbians.
As a landlord myself, I first became aware of this issue when I was advised by our strata late last year that due to massive hikes in insurance premiums and deductibles, every owner in the building would be paying a lot more in 2020.
I’d soon find out this was not an isolated case, and we were not alone. In the weeks that followed, media stories started popping up highlighting the plight of both owners and potential condo purchasers.
A CTV Vancouver story was posted online with an ominous headline which stated “insurance issues could cause B.C. condo market collapse, homeowners association warns.” According to this report “a representative of a condo owners’ association says recent changes to insurance rates mean that not only are buildings having to pay more for coverage – some are being denied altogether.”
No insurance equals no mortgage issued by traditional lenders. That’s why this issue has become so critical, so fast for both sellers and buyers in the condo market.
“Insurance issues could cause B.C. condo market collapse, homeowners association warns.”
In the coming months, countless people living in buildings without insurance will face the likely prospect of not being able to sell their units and watching the value drastically decline. Equity built in those properties over the years could evaporate literally overnight. This would leave many facing the prospect of owing more to the bank than is valued in their home.
In an online story posted by MortgageBrokerNews.ca, “a 26-storey condominium in Abbotsford, BC has been rocked by astronomical increases to its insurance premiums—a 780% increase from its rates last year. BFL…raised the property’s rates from $66,000 in 2019 to $588,000 in 2020.”
Given the gravity of this issue, it has now made it on to the provincial radar. We are now less than about 18 months away from the next provincial election. The last thing any government wants is thousands of voters upset as they watch their retirement savings go up in smoke. There are already calls for government to step in and try to rectify this problem through new legislation.
If you rent a condo in BC and think you’re immune, think again. Condo owners renting out their units – as tens of thousands do – will be forced to increase rents the maximum allowable each year. Furthermore, when a rented condo unit becomes vacant, landlords will be forced to drastically hike rent to help cover the cost of rising insurance premiums. This will put rental units even further out of reach for average British Columbians.
Are you renting a place and hoping to buy into the market with your first starter home? Consider that only a limited number of strata units will have affordable insurance – and they will be hot items on the open real estate market. You don’t have to be an economist to realize there will be huge bidding wars to purchase those properties as well as single family homes, which – at least for now – aren’t being impacted by rising insurance rates.
Condo owners renting out their units will be forced to increase rents the maximum allowable each year.
BC Finance Minister Carole James responded to the media, saying stated “we think there are good opportunities to be able to talk with the industry, to talk with condo owners, to talk with insurance companies, and look at how we can address this issue.”
More dialogue is precisely what the IBABC is asking for. In a media release issued February 7th, they state “in order to provide relief to consumers living in strata corporations, IBABC recommends two key reforms to the Strata Property Act: a $50,000 cap on loss assessments (this cap may not apply in cases involving negligence), and the addition of a standard definition of a strata unit. IBABC recognizes these changes won’t directly address the rising strata-building premiums and deductibles, but they are foundational pieces to that issue and the long-term stability of the B.C. strata insurance market.”
They go on to state “these two recommendations could protect millions of strata unit owners from further risk of losing their homes and likely help mitigate future insurance market cycles.”
There are many critical issues facing British Columbians these days, but something that could so profoundly disrupt the real estate market is bound to get everyone’s attention – including provincial politicians.
Whether government or the insurance industry can come up with a solution fast enough to address the concerns of frightened and impacted homeowners, purchasers, and renters remains to be seen.
Daniel Fontaine is the Chief Executive Officer for a non-profit seniors care organization based in Burnaby. Currently, he’s the cohost of #BCPoliTalk, a podcast/webcast focusing on politics in BC. Before that, Fontaine was a former weekly civic affairs columnist for 24 Hours Newspaper, Fontaine has been a political commentator on Global TV and CKNW radio. In 2008 he co-founded one of Canada’s most popular civic affairs blogs. In 2012, Fontaine was awarded the Queen’s Diamond Jubilee Medal for public service.
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