There have been several media accounts recently concerning money matters — rent hikes and bank sales tactics being two examples — where the underlying thrust of the stories is that we are supposed to feel sympathy toward one party in the disputes as preyed-upon victims while accepting that the other party is some form of Earth-bound devil. Thieving bank officials, greedy landlords, corrupt government officials enriching their pals, that kind of thing.
While it’s true that such characters exist, it’s truer that these situations are almost always more complex and nuanced than is presented, and that many people — including some who know better — will admit. Yeah, I’m talking to you, opportunistic opposition politicians.
If I had to blame the recent series of financial “woe-is-me” stories on one thing, it wouldn’t be, as many would have us believe, on bad actors; I would blame it on the appalling level of financial illiteracy in our country. The subprime lending disaster in the U.S. showed the havoc financial illiteracy can create.
Let’s consider a few examples, starting with recent complaints of excessive rent hikes, including a 43-per-cent increase in Vancouver’s West End. It’s easy to feel sympathy for someone facing that kind of increase, especially if it is going to force them to move.
In B.C., almost all rent hikes are limited by the Residential Tenancy Act, using a formula of the cost-of-living plus two per cent. This year, typical rents can only increase by 3.7 per cent. (That annual allowable percentage increase has fluctuated over the past 14 years between 2.2 per cent in 2014 and 4.6 per cent in 2004.)
Under the act, landlords can generally increase rents above the maximum annual amount in three ways: the tenant can agree or, if they don’t, the landlord can apply for a greater rent hike through the Residential Tenancy Branch by arguing that the rent in question has fallen below the average rent for similar properties in the neighbourhood or that a higher rent is needed because the suite has been improved.
The other way tenants are finding themselves facing higher rent hikes is when they agree to a one-year lease and landlords seek a higher rent when the lease is up.
Critics of the higher rents call the legal ways landlords can raise rents “loopholes,” but they are nothing of the kind. They’re just part of the legislation, no different than the rules that protect tenants by limiting annual rent hikes. You don’t hear landlords calling those “loopholes.”
The problem here is too many people agree to contracts and other financial arrangements without doing enough research. Why should anyone expect that a rent won’t change at the end of a lease? If you don’t want a one-year lease, don’t sign one. The flip side of such a lease is that a tenant isn’t locked into a high rent for several years in a longer deal.
How is it unfair to allow landlords to occasionally adjust rents to the market? It’s easy to feel sorry for tenants, some of whom are of moderate means. But the costs to landlords of providing housing — maintenance and taxes — are always rising. They deserve a reasonable return on investment, something that is a struggle in Vancouver with its high property values.
The same goes for the recent stories on banks aggressively trying to sell financial products to customers. While I understand that banks, a highly regulated industry, shouldn’t be fleecing people, it’s not like anyone is holding a gun to anyone’s head, selling them overpriced life insurance, mutual funds or lines of credit. Banks, like car dealers and, well, anyone who sells things for a living, want to get as much as the market will bear.
Again, what’s needed here is for people to do a little research before buying a product or investing. There’s a reason lawyers came up with the Latin term “caveat emptor” for contract law — let the buyer beware.
When you get involved with a financial deal, learn what you need to know and consider the implications. If you don’t, and you later find yourself unhappy, you have no one to blame but yourself.
Article thanks to “The Province” newspaper and Gordon Clark, columnist firstname.lastname@example.org
Gordon Clark is a columnist and editorial pages editor for The Province. Letters to the editor can be sent to email@example.com.