The BC Energy Step Code and What It Means for REALTORS®

In the coming years, new homes in BC are about to get measurably healthier, quieter, more durable, and more energy efficient than those on the resale market, thanks to a regulation called the BC Energy Step Code. BCREA is collaborating with BC Hydro to ensure REALTORS® understand the BC Energy Step Code, so they can better advise their clients and meet the growing demand for “high-performance homes.”

What is the BC Energy Step Code?

In short, the BC Energy Step Code sets performance requirements for new construction and groups them into “steps.” Authorities with jurisdiction over the BC Building Code – including local governments – can choose to require or incentivize builders to meet the performance requirements of one or more steps.

The province has set a goal that by 2032, the BC Building Code will set Step 5 as the base requirement for all new houses. This means new homes will be up to 80 per cent more energy efficient than those built today. The province has also set interim targets and aims to set a base requirement of Step 3 by 2022.

What does this mean for Realtors?

As new homes become healthier, quieter, more durable, and more energy efficient over the coming years, Realtors can help homebuyers make informed decisions by educating them on these benefits. New homebuyers are also showing unprecedented interest in energy-efficient homes and will expect Realtors to be knowledgeable on the subject. In a recent Canadian Home Builders Association national survey, nine out of 10 respondents said they either “really want” or “must have” an energy-efficient home.

As leaders in their communities, Realtors can also act as agents of change by further educating consumers on the benefits of energy-efficient homes. In doing so, Realtors can ensure demand continues to grow for homes that are better for their clients, their communities, and the environment.

How is BCREA here to help?

BCREA is collaborating with BC Hydro to ensure Realtors have the knowledge and resources they need to understand the BC Energy Step Code and to market high-performance homes. Over the coming months, we will produce a podcast episode on the topic, additional blog posts, and host an all-Realtor webinar. In 2021, BCREA will also launch an accredited Professional Development Program course on energy-efficient homes.

Stay tuned for the next episode of Open House by BCREA, featuring Zachary May, Chair of the BC Energy Step Code Council, who will speak to the BC Energy Step Code and how it’s implementation will affect real estate practice.

“The Unusual World of Pandemic Economics” – Why BC’s Housing Market Remains Strong Despite COVID-19

Vancouver, BC – September 9, 2020. The British Columbia Real Estate Association’s (BCREA) latest Market Intelligence report, The Unusual World of Pandemic Economics, points to uneven job losses across sectors, an increase in many households’ rate of savings, swift government aid, a tighter-than-ever housing supply and low interest rates as the drivers behind BC’s recent housing market highs.

“The COVID-19 recession has battered many sectors of the BC economy. However, looking at recent data in the housing market, it would be difficult to tell there was a recession at all,” says BCREA Chief Economist Brendon Ogmundson. “In a typical recession, we would see falling demand and rising supply, but this recession is anything but typical.”

Previous BCREA forecasts anticipated housing prices would return to the pre-COVID-19 baseline in early 2021. However, a surge of pent-up demand into an undersupplied market has prices at pre-COVID-19 levels well ahead of schedule.

“Pandemic economics are proving to be very unusual. Many of the trends we are seeing are without precedent and significant uncertainty remains, but we are cautiously optimistic that this housing recovery will continue,” notes Ogmundson.

New COVID-19 Presumption in the Workers Compensation Act

As of August 20, 2020, REALTORS® have yet another reason to maintain high standards of hygiene and safety. Schedule 1 of the BC Workers Compensation Act includes a new presumption for infections caused by communicable viral pathogens, such as COVID-19, that are the subject of a Public Health Act notice or a declared state of emergency.

The new COVID-19 presumption in Schedule 1 of the Act applies to “workers” covered by the Act who meet all of the specified requirements in Schedule 1. Basically, this means that if a worker is diagnosed with a disease listed in Schedule 1, it’s presumed that they got it in the workplace. For real estate, workers include:

  • employees of the brokerage (including any Realtors who don’t meet the conditions used by WorkSafeBC to be considered an “independent operator” Realtor for the purposes of the Act – see WorkSafeBC’s Assessment Practice Directive 1-1-3(A) for more information),
  • “independent operator” Realtors who have incorporated (as the Realtor would be considered an employee of the incorporated entity),
  • “independent operator” Realtors who have purchased Personal Optional Protection (POP) coverage from WorkSafeBC (because the Realtor would be considered to be a “worker” for the purposes of the Act throughout the period that the Realtor’s POP coverage remains in good standing), and
  • any employees the “independent operator” Realtor employs.

It’s also important to know that “employment,” “work” and “workplace” are very broadly interpreted when it comes to workers’ compensation. For example, a REALTOR® who is considered a worker for WorkSafeBC purposes is considered to be at work when in the brokerage office, showing a property and even while driving from the office to a client’s property.

Lots of resources are available to help Realtors operate safely, including:

More details
These are the new “Description of Disease” and corresponding “Description of Process or Industry” that have been added to Schedule 1 of the Act:

The following conditions must be met for the above Schedule 1 presumption to apply:

  • The worker must be diagnosed with an infection caused by communicable viral pathogens (such as COVID-19).
  • The infection must be the subject of a Public Health Act notice or a declared state of emergency.
  • The risk of exposure by the worker to a source of the infection is significantly greater than the public at large and occurs during, and within the geographical area of, the applicable notice or state of emergency.

BC Housing Markets Heat Up as Summer Ends

Vancouver, BC – September 14, 2020. The British Columbia Real Estate Association (BCREA) reports that a total of 10,172 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in August 2020, an increase of 42.8 per cent from August 2019. The average MLS® residential price in BC was $771,309, a 12.7 per cent increase from $684,093 recorded the previous year. Total sales dollar volume in August was $7.8 billion, a 61.1 per cent increase over 2019.

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“Very strong provincial home sales continued in August,” said BCREA Chief Economist Brendon Ogmundson. “While pent-up demand from the spring is driving much of the increase, we anticipate a sustained strong level of sales through the fall.”

Total provincial active listings are still down more than 10 per cent year-over-year, with some markets even more under-supplied as the pandemic continues to keep listings low. As a result, prices are sharply rising around the province.

Year-to-date, BC residential sales dollar volume was up 15.8 per cent to $40.4 billion, compared with the same period in 2019. Residential unit sales were up 4.9 per cent to 53,336 units, while the average MLS® residential price was up 10.4 per cent to $757,504.

Monitoring COVID: BCREA Develops New Economic Resources

The Economics Impacts Dashboard helps to monitor the progression of COVID-19 and the impacts of the pandemic on the housing, employment and financial sectors in BC. There is also a “Chart of the Week” showcasing a new indicator and/or trend related to the pandemic. The current dashboard shows that the housing sector recovery is well underway, aided by record low mortgage rates, while the labour market is still finding its way back to pre-COVID-19 levels of employment.

The Commercial Leading Indicator (CLI), which BCREA has produced for several years, forecasts changes in broad commercial real estate activity. BCREA’s research shows that the variables composing the CLI reliably forecast BC commercial real estate activity at a lag of two to four quarters. The CLI was down again in the second quarter of 2020 as a result of the pandemic-induced shutdown of the economy. Going forward, it is expected that the environment for  commercial real estate activity will continue to be weak. The next release will be at the end of November.

The BCREA Nowcast, another pre-existing publication, estimates monthly real GDP growth for BC, an important measure of the province’s overall economic performance. The most recent update shows the BC economy is recovering, albeit slowly. The economy is estimated to have contracted about 6 per cent in June, which is an improvement from the worst of the pandemic when the economy contracted an estimated -10.6 per cent in April. Including advance estimates for July, BC continues to see significant year-over-year negative growth, but month-over-month improvements, reflecting the ongoing reopening of the BC economy.

In addition to these resources, BCREA’s Economics department also continues with regular publications, including monthly statistics releases, occasional Market Intelligence Reports, quarterly Mortgage Rate Forecasts and more.

Strata Insurance Update

For several months, BCREA and other stakeholders have drawn the government’s attention to significant increases in the cost of strata property insurance in BC. This is a complex issue and, while it can’t be solved quickly, actions are underway.

Initial research findings
The BC Financial Services Authority (BCFSA), BC’s financial services regulator, published a brief interim report in June on the causes of significant increases in strata insurance. These are some of the key findings:

  • Looking at both large and small stratas, premiums have risen on average by approximately 40 per cent across the province over the past year while deductibles have increased up to triple-digits over the same period.
  • Price pressures will continue and there is not enough capacity in the strata insurance market to support future expected demand.
  • Insurers are incurring losses mostly from minor claims due to poor building maintenance practices, initial construction quality issues, building material changes and rising replacement costs.

The BCFSA is consulting with stakeholders – including BCREA – and plans to publish its final report in the fall.

Legislative changes
During the summer session, BC MLAs passed the following legislative amendments as the first step to address strata insurance concerns:

  • Add insurance information to the Form B Information Certificate (recommended by BCREA).
  • Strengthen notification requirements by insurers to strata corporations of changes to insurance coverage and costs, or an intent not to renew (recommended by BCREA).
  • Require strata corporations to inform owners about insurance coverage and provide notice of any policy changes, including increasing deductibles (recommended by BCREA).
  • End the practice of referral fees between insurers or insurance brokers and property managers or other third parties, and require brokers to disclose the amount of their commission.
  • Set out clear guidelines for what strata corporations are required to insure to help strata councils make informed decisions.
  • Allow stratas to use their contingency reserve fund when necessary to pay for unexpected premium increases.
  • Protect strata unit owners against large lawsuits from strata corporations if the owner was legally responsible for a loss or damage, but through no fault of their own.
  • Identify when stratas are not required to get full insurance coverage.
  • Strengthen depreciation reporting requirements.
  • Change the minimum required contributions made by strata unit owners and developers to a strata corporation’s contingency reserve fund.

Most of the changes will take effect by regulation, and BCREA looks forward to opportunities to provide input. In the meantime, resources are available from the Condominium Home Owners Association of British Columbia and the BC Government.

Action Plan for Economic Recovery to Achieve CleanBC Goals

In August, BCREA interviewed the Pembina Institute’s director for buildings and urban solutions, Tom-Pierre Frappé-Sénéclauze, to understand their perspective on making homes and buildings in BC low carbon, healthy and resilient.

Tom-Pierre was a coauthor of a July submission sent to the BC Government, “Accelerating BC’s economic recovery through building retrofits.” Closely aligned with BCREA’s recommendations, the Pembina Institute called for:

  • boosting CleanBC incentives for deep retrofits in homes and buildings,
  • accelerating retrofits and construction of social housing, and
  • deepening renovations of public sector buildings.

The Pembina Institute’s recommendations aim to assist the BC Government achieve the province’s climate targets of reducing greenhouse gas emissions by at least 40 per cent below 2007 levels by 2030. The BC Government has an opportunity to work toward these climate goals while also stimulating the economy. According to Pembina, incentives for retrofits are effective tools for economic recovery because they create a high number of jobs per dollar, employ a range of skilled labour and use many local made-in-BC materials.

To achieve its climate targets, Pembina says BC will need more workers in the construction sector. “There are opportunities for laid-off workers to take upgrade courses and move into the sector,” notes Tom-Pierre. For example, more resources are needed for contractors to install heat pumps and insulation.

In July, BCREA and other real estate stakeholders provided the government with similar COVID-19 economic recovery recommendations to help the government achieve their climate goals, including:

  • provide incentives for building retrofits,
  • encourage energy-efficient materials by expanding the list of eligible energy conservation materials and equipment exempt from PST, and
  • support skilled trades training.

Commercial Activity Impacted by Pandemic in 2020 Q2

The BCREA Commercial Leading Indicator (CLI) continued to fall in the second quarter of 2020 from 127.6 to 121.9, representing the fourth consecutive quarterly decline. It was the second largest drop in the indicator in over two decades, reflecting the hardest hit months of the pandemic in April and May. Compared to the same time last year, the index was down by 9.8 per cent.

The second quarter of 2020 saw the complete shutdown of key economic industries in BC, while employment continued to decline in manufacturing and in key real estate sectors. In contrast, the financial component had the largest positive impact on the CLI on record, as REIT prices rose and risk spreads narrowed from the previous quarter. The underlying trend in the CLI continued its downward trend into the second quarter of 2020. This suggests that going forward, the environment for commercial real estate activity in BC will continue to be weak.

BC’s economy was slowed by the pandemic in the first quarter of 2020, and by the second quarter came to a halt. Manufacturing sales of both durable and nondurable goods fell by magnitudes not seen since the great financial crisis in 2009. The decline in wholesale trade was driven by lower sales in motor vehicles, and to a lesser extent by lower sales in personal and household goods such as clothing and footwear. Meanwhile, April saw the largest monthly drop in retail sales on record, as brick-and-mortar stores were shut down for most of the second quarter. Although online sales reached new highs during this period, they were not enough to offset the decline.

Employment growth in key commercial real estate sectors such as finance, insurance, real estate and leasing was negative for the second consecutive quarter, down by about 1,700 jobs, which is notably fewer than the 13,500 jobs lost in the previous quarter. Manufacturing employment fell for the fourth consecutive quarter by about 5,170 jobs, almost three times the number of jobs lost in the previous quarter.

The CLI’s financial component was positive in the second quarter of 2020 as the market bounced back from the full meltdown in late February that sent equity markets into free fall and government bond yields plummeting.

Province Revises Strata Property Act in Response to Insurance Crisis

The Province of BC has changed the Strata Property Act and the Financial Institutions Act in response to the recent escalation of insurance premiums and deductibles. In a communication to Strata Managers, the Real Estate Council of BC (RECBC) highlighted that now:

  • Strata corporations are required to inform owners as soon as it is feasible of any material change in the strata corporation’s insurance coverage, including increasing deductibles; and
  • Strata corporations can use their operating fund or contingency reserve fund to pay for property and liability insurance required under the Strata Property Act or the strata corporation’s bylaws without a vote of owners if there are reasonable grounds to believe that an immediate expenditure is necessary to obtain the required insurance.

RECBC also noted that more changes are in the works and advised real estate professionals to refer to the updated insurance web page on the government’s strata housing website for further details.

BCREA Continues to Advocate on Insurance Issues

The dramatic rise in insurance premiums and deductibles experienced by many strata properties and owners is an issue of significant concern to BCREA.

The need to find a solution is urgent, but there are no quick fixes on the horizon. The issues are complex, ranging from high claims ratios and our ever-present risk of earthquakes, to insurance companies vacating the BC market and poor maintenance practices. For the approximately 1.5 million BC residents who are strata residents, and any potential purchasers of condominium units, this crisis creates risk and uncertainty.

We have engaged with the BC Financial Services Authority with our recommendations (viewable in this previous blog post), and continue to advocate for further actions by government to ensure better availability of insurers in the market, and improved education and training for strata councils.

This page on the provincial government’s website provides more information on the recent legislative changes and additional background on insurance for strata corporations.

BCREA 2020 Third Quarter Housing Forecast Update: Surprisingly Strong Recovery to Propel Housing Market in 2021

To view the BCREA Housing Forecast Update PDF, click here.

Vancouver, BC – August 25, 2020. The British Columbia Real Estate Association (BCREA) released its 2020 Third Quarter Housing Forecast Update today.

Multiple Listing Service® (MLS®) residential sales in the province are forecast to rise 6.5 per cent to 82,380 units this year, after recording 77,351 residential sales in 2019. MLS® residential sales are forecast to increase 17.6 per cent to 96,860 units in 2021.

“The outlook for the BC housing market is much brighter following a surprisingly strong recovery,” said Brendon Ogmundson, BCREA Chief Economist. “We expect home sales will sustain this momentum into 2021, aided by record-low mortgage rates and a recovering economy.”

With home sales more than fully recovered and now above pre-COVID-19 levels, combined with a decline in the supply of re-sale listings driven by the pandemic, many markets are now seeing sharply rising average prices despite a weak provincial economy. We are forecasting the provincial MLS® average price to finish the year up 7.7 per cent and to increase a further 3.7 per cent in 2021.