Landlords in British Columbia will be allowed to raise rents up to 3.5 per cent in 2024, an increase which the province says balances affordability for tenants and the ability for landlords to maintain rental units.

While the increase, announced Monday, is below the current rate of inflation, it is also more than the allowable increase for 2023, which was two per cent.

"Across the country, costs have been increasing especially for housing at a rate that's unsustainable for many people," said Minister of Housing Ravi Kahlon in a statement.

"We know that's the case for both landlords and renters, and that's why we've found a balance to protect renters while helping to keep rental units on the market."

The province said the 12-month average inflation rate is 5.6 per cent currently.

If landlords choose to increase rent, they must provide a full three months' notice to tenants using a provincial form.

Landlords can only increase rent only once every 12 months.

Premier David Eby, speaking at a news conference in Kamloops, acknowledged the affordability challenge facing tenants, but said the allowable rent increase for 2024 had to help ensure landlords and those behind building rental units stay in that business.

"It's an incredibly challenging area, and one of my biggest concerns is that the cost of borrowing is leading home-builders to abandon building rental housing projects in the province," said Eby. "That is what is going to help us deal with rent levels, is to get those rental housing units built."

In 2018 the NDP government changed rules over allowable rent increases. Previously landlords could raise rents by the rate of inflation plus a further two per cent.

Based on advice from a rental housing task force, that was changed to allow increases at inflation. A rent increase freeze was put in place in 2020 and 2021 to support renters during the COVID-19 pandemic.

David Hutniak with Landlord B.C. said years of either no allowable rent increases, or ones well below inflation has harmed landlords both small and large.

"The issue is on a cumulative basis when we look at what it costs to operate rental housing," he said. "We're not immune to inflation, property taxes, utility costs, insurance costs, maintenance costs everything is going up.

"You're looking at negative cash flow, year over year, and that's just not a sustainable business model."

The province said on Monday that when inflation returns to normal levels it intends to return to an annual rent increase that is tied to B.C.'s Consumer Price Index (CPI). The CPI represents changes in goods and services, such as food, shelter and transportation by comparing them over time. It's one of the most widely used measures of inflation.

The allowable rent increase does not apply to commercial tenancies, non-profit housing tenancies where rent is geared to income, co-operative housing and some assisted-living facilities.