Gambling on future interest rates.

An RTB decision reported on a second time in an August 16, 2024, CBC News article, "Tenant advocate decries RTB's 27% rent increase decision," defies all comprehension of the risks involved in speculating on future interest rates. The speculators in this case argued that BOC raising its policy interest rate to 4.5% on Feb. 1, 2023, "was not foreseeable 'under reasonable circumstances.'"

They guessed wrong, in other words

Banks hedge against future losses due to interest rate increases by issuing variable rate mortgages. Unsophisticated gamblers who only see the upside to their bets do not hedge against these losses. Worse, they accept the liability (a variable rate mortgage) to cover their bank's hedge and wind up holding the bag.

Amateurs trying to pass on a hot potato that their bank hands them to tenants they thought were going to make them big bucks have no leg to stand on in the real world. Legal agreements between speculators and the tenants who, according to them, are supposed to pay off their mortgages say nothing about variable rate loans or interest rates increasing.

In a scenario where BOC is easing interest rates because it is satisfied that inflation has reached its target, you can bet that if their bank refinanced these speculators' loans at a lower interest rate, they would never in a million years pass this reduction on to the tenants renting from them.

"Supply and demand," you see.

An entire economy built on grossly inflated house prices and ruthlessly predatory rents has got to be unwound now that money is no longer free.

The RTB, Ministry of Housing, and Courts are legally obligated – because leases on rental units say nothing about interest rate increases – to freeze the rents in buildings banks foreclose on because interest rate speculators posturing as "landlords" cannot make their payments. And they should make "variable rate rents" illegal before sharpies start inserting them into lease agreements.

Banks that foreclose on the properties these speculators cannot pay their mortgages on will take a haircut, too, as house and apartment markets price those financialized buildings in line with current economic conditions.

None of this is the responsibility of the tenants renting in these buildings.

"Investments" are not magic money machines. People who do not know what they are doing, and banks who lend to them, lose money when they make bad bets. That is life.