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The subject of building amenities is a window on the negative effects of government policies on the rental housing industry in Canada.

In the United States many landlords compete for tenants with different amenities packages: some are addressed at students and young people, others at families, others at seniors and still others at special niche markets. The amenities extend to physical building features and to services that are available at the building or complex. New buildings in particular are built with amenities installed or in mind.

The same takes place in Canada, but to a much lesser degree. Why is that the case?

Across Canada, the amount of purpose-built rental construction is low.  In hot markets, current tax laws mean that rentals cannot compete with condominium development due to the high land values those developments bring.  In slow markets, costs are lower but there is not enough demand for rental product to raise rents above replacement costs. The ultimate cause is the excessive taxes on rental housing, in contrast with the very favourable income tax treatment of owner-occupied dwellings, like condominiums and single family homes.

A lack of new construction is reflected in a lack of rental product with amenities. Although it is sometimes done in the hot markets like Toronto and Vancouver, building in amenities at the time of a major renovation is more expensive than designing the amenities into new buildings.

In many provinces, rent control strangles building improvements and innovations.  In Ontario a landlord can set a new rent on turnover, but a landlord cannot readily build the value of new amenities into the rents of tenants who do not vacate.  (A landlord and a tenant can agree to a rent increase for certain new services, but the process is cumbersome and consequently little used.)  In Manitoba the rules are even more restrictive.

Besides the other financial impediments rent control brings, rent control creates disincentives to spending money on a building; rather, the way to maximize profit and value is to minimize expenses. Rent control leads owners to avoid the strategy of driving revenue by providing new and improved services and amenities that prospective and current tenants want and need.

Despite these handicaps in both Ontario and BC, leading landlords are tending toward more experiments with new and improved services and amenities.  At the CFAA 2011 Rental Housing Conference, just held in Toronto, BC’s Al Kemp addressed amenities as ancillary revenue sources.  Mr. Kemp discussed scooter charge areas, communal deep freezers, storage areas, games rooms, fitness rooms, vending machines, covered outdoor parking stalls and smart-card laundry systems.

In his talk Mr. Kemp addressed the cost of various amenities, what revenue they bring in and the potential rate of return, as well as the competitive advantage they can create. For ideas on how you can move your properties forward, see the CFAA website at www.cfaa-fcapi.org for Al Kemp’s presentation.

Note that even those ideas fall short of the integrated packages of amenities targeted at the needs and preferences of specific groups as is often done in the United States.  For that quality of resident services, we need Canadian governments to stop controlling rents and to balance the income tax treatment afforded to rental property with the treatment given to home ownership.  If those reforms were implemented, renters could surely expect substantial improvements in their amenities and services