What Happened

New Westminster council is set to enact the first Canadian maximum heat bylaw on June 8, requiring rental units to maintain a safe indoor temperature averaging 26 C between 8 p.m. and 8 a.m. This legislative move follows the 2021 heat dome, which caused 619 deaths in British Columbia, including 33 in New Westminster. The bylaw mandates that at least one living space per rental unit meet this temperature standard but does not force landlords to install air conditioning or heat pumps. Instead, the responsibility falls on building owners to find viable solutions to comply with the new standard. The city previously prohibited landlords from banning AC units, a measure Ontario is also adopting on July 1. Similar debates are currently underway in Toronto, Hamilton, Newfoundland and Labrador, and Halifax. Meanwhile, a B.C. pilot project led by Urban Climate Leadership aims to retrofit 5,000 low-rise buildings for cooling and energy efficiency. The project, which has 1,000 owners signed on, could create 1,900 jobs annually if funded through government-backed loan loss reserves. Experts warn that retrofit costs could lead to rent increases of up to 3.1% annually for three years, adding to the provincial rental increase cap.

Why It Matters

The enactment of a maximum heat bylaw represents a significant shift in municipal responsibility, moving beyond traditional heating mandates to address cooling as a basic habitability requirement. With extreme heat events becoming more frequent and deadly, particularly in older, low-rise walk-up apartments built between the 1960s and 1980s, the bylaw aims to prevent heat-related hospitalizations and deaths. The 3,753 heat-related hospitalizations recorded in Canada between 2005 and 2023 highlight the growing public health crisis. By setting a clear temperature standard, New Westminster is forcing landlords to consider energy efficiency and cooling upgrades, which may increase electrical loads and operational costs. This creates a tension between tenant safety and housing affordability, as tenants' advocacy groups fear that retrofitting older buildings will lead to higher rents. The bylaw's success depends on whether landlords can implement solutions without passing excessive costs to renters, especially given the limited ability to recoup capital costs through rent increases under current provincial rules.

Local Vancouver / Burnaby Context

In the Greater Vancouver region, the impact of extreme heat is already evident, with the Downtown Eastside neighbourhood in Vancouver being particularly vulnerable due to its high concentration of older, low-rise housing stock. While New Westminster is leading with a maximum heat bylaw, other municipalities in the region are watching closely. The B.C. building code was updated in 2024 to require new residential builds to have at least one room under 26 C, addressing the issue for future construction but leaving existing stock to rely on municipal bylaws. The provincial rental increase cap, tied to inflation, limits how much landlords can raise rents to recoup retrofit costs, creating a financial disincentive for landlords in older buildings. This regulatory environment makes it difficult to finance retrofits, as older housing units are often considered depreciating assets. The tension between tenant safety and landlord affordability is a key issue in Burnaby and Vancouver, where many rental units are in similar age brackets. Local context suggests that without significant federal or provincial funding, similar bylaws in other cities may face resistance from landlords and property management groups. The B.C. pilot project for 5,000 buildings offers a potential model, but its success hinges on securing private financing through loan loss reserves, a mechanism that has been used historically, such as the $2 billion in federal funding for housing retrofits from 1974 to 2001.

Market Impact

For rental owners, the bylaw introduces a new compliance cost that may affect property valuations and cash flow. Landlords of older, low-rise buildings may face significant capital expenditures to install cooling systems or improve insulation. The inability to fully recoup these costs through rent increases due to the provincial cap may reduce the return on investment for retrofitting. For renters, the bylaw offers improved health and safety during heat waves but may face indirect cost increases if landlords pass on a portion of the expenses. The condo market may see a shift in value for units with existing cooling or energy-efficient features, as these become more desirable. The broader market may see increased interest in energy-efficient retrofits, driven by the B.C. pilot project and potential job creation. However, the financial feasibility of these upgrades for individual landlords remains a key barrier. The bylaw's implementation may also lead to increased scrutiny of building conditions during tenancy disputes, particularly under the Residential Tenancies Act.

Investor / Buyer Takeaway

- Buyers of older rental properties should assess the cost of potential cooling upgrades before purchasing, as compliance with the new bylaw may require significant capital investment.

- Investors should monitor the B.C. pilot project and any subsequent funding opportunities, as government-backed loan loss reserves could improve financing options for retrofits.

- Tenants should be aware that while the bylaw aims to improve living conditions, rent increases may occur as landlords attempt to recoup costs, though these are limited by the provincial cap.

- Properties with existing energy-efficient features or cooling systems may see increased demand and value in the rental market.

- Investors should watch for similar bylaws in other municipalities, as the trend toward maximum heat regulations may spread across Canada.

Builder / Developer Perspective

Builders and developers of new residential projects are already adapting to the 2024 B.C. building code update, which requires at least one room under 26 C. This sets a precedent for future construction but does not address the existing stock. For developers involved in the B.C. pilot project, the opportunity lies in scaling heat pump retrofits and energy upgrades, which could create significant business opportunities and job growth. However, the financing of these retrofits remains a challenge, as older buildings are often seen as high-risk assets. Developers may need to collaborate with government agencies to secure loan loss reserves and other financial incentives. The bylaw also highlights the need for workforce training in heat pump installation and energy efficiency, which could benefit construction firms that invest in these skills. The tension between retrofit costs and rental income caps may limit the feasibility of upgrades for smaller landlords, potentially consolidating the rental market among larger, more capitalized entities.

Risk Factors

- Financial risk for landlords who may face high retrofit costs without the ability to fully recoup them through rent increases.

- Policy risk if other municipalities adopt similar bylaws without providing adequate funding or financing mechanisms.

- Financing risk for older buildings, which may be considered depreciating assets and difficult to secure loans for retrofits.

- Tenant displacement risk if landlords choose to convert rental units to other uses to avoid compliance costs.

- Enforcement risk if the bylaw lacks clear mechanisms for monitoring compliance and addressing violations.

BurnabyHouse Insight

New Westminster's move to enact a maximum heat bylaw is a pioneering step in Canadian municipal policy, addressing a critical gap in housing habitability. However, the success of this bylaw depends on the broader ecosystem of funding, financing, and enforcement. Without significant government support, such as the loan loss reserves proposed in the B.C. pilot project, landlords may struggle to comply, leading to potential rent increases or reduced maintenance. The bylaw also highlights the need for a comprehensive approach to housing resilience, combining new building codes with retrofit incentives for existing stock. For Burnaby and Vancouver, this sets a precedent that may influence future policy debates, particularly as extreme heat events become more frequent. The key takeaway is that while the bylaw is a necessary step, its impact will be determined by the availability of affordable financing and the willingness of landlords to invest in their properties.