My Western Standard colleague, and my pal, Dave ‘Maje’ Makichuk, and I get along quite well on most things, as long as it doesn’t involve politics, certain types of music, the basics of a free-market economy and the merits of Scotch Whisky over Rye Whiskey..Add rent controls to the list..Maje recently opined rent controls should be put in place ‘now!’.I say ‘never!” and so do common sense and the free market system..If they’re not there yet, rental rates are approaching all-time highs all across Canada, which Maje suggests is the work of ‘power brokers’, the ‘movers and shakers’ and ‘the sycophants and stooges who support them..Perhaps in some parts of the world, but in our part, the No. 1 issue driving rents skyward is a demand higher than the supply, which 100% of the time, regardless of what you’re selling, increases prices..Instituting across-the-board rent controls has the potential to slow, perhaps stop, the development of rental-only buildings and be an incentive to convert rentals to condos for sale. The last thing we need is less supply..Worse, rent controls would involve more government bureaucracy, which would spend more on salaries and expenses than on the problem, because that’s what bureaucracies do..Speaking of that, the Trudeau/Singh coalition government and all levels of government below it have created the housing affordability and shortage problems, and the more they are involved, the worse it gets..Start with the ridiculous targets for immigration, adding 500,000 new people a year to the country, who cannot physically be sheltered..Builders and developers cannot produce enough new homes that fast because there are too many gatekeepers collecting too many tolls that prevent them from being able to reach that level of production..There is an average of 2.6 people per household in Canada, which would require making roughly 192,000 new homes available, just for the newcomers, every year..Currently builders start about 215,000 new homes of all types every year in Canada – the key word there being ‘start.’.A high-rise apartment tower takes upwards of four years, or more, to complete and be ready for occupancy and that’s just construction time..Add four or five years just to get government approvals to start construction..Smaller multi-family units take a slightly shorter time and both are costly to build..The other issues are serious shortages of labour, building supplies and available land..Paul Betts, president of GAP Marketing, a real estate consultant firm shines a brighter light on rent controls..“I believe only four provinces have rent controls in place and in those provinces, there is no evidence that rent controls have curtailed the construction of purpose-built rental projects,” says Betts. “This is because rent controls only kick in for existing tenants, new tenants can be charged whatever the landlord wants and can get.”.“If a tenant moves out that is being charged $1,800, the landlord can charge $2,600 if he/she can get it.”.Betts prefers rent stabilization..“This ties rental rates to income/values via a means test,” he says. “What happens under true rent controls is that it benefits higher income earners because they are afforded the same rent control advantages as low-income earners in the same building.”.Lastly, says Betts, “why is it that rent controls place the entire onus on the landlord? If there is to be rent controls, the government needs to participate through incentives for the landlord.”.“As a main example, I would legislate that landlords would be eligible to deduct differences between true market rates and what they are allowed to charge,” he says. “For example, if the market rent is $2,800 for the property and rent controls allow them to only charge $2,300, they would be eligible for a $6,000 per year deduction.”.“This keeps current tenants in place and reduces the probability of the landlord wanting/looking for a new tenant they can charge $2,800.”.As noted above, I am not in favour of governments meddling in the free market system, however, they are a big part of the affordability and shortage problems, offering programs and incentives that are only for show and not effective..They must remove the harnesses from the builders and let them get their jobs done with no interference.
