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OF COURSE WE HAVE A RENTAL CRISIS. WHO WOULD WANT TO BE A LANDLORD?

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OF COURSE WE HAVE A RENTAL CRISIS. WHO WOULD WANT TO BE A LANDLORD?
You must pay the rent! I can’t pay the rent! You must pay the rent! I can’t pay the rent!The internet tells me this classic confrontation between a greedy landlord and a penniless young damsel dates back at least to an 1867 play called “Under the Gaslight.” (Gaslight, indeed!) We boomers had it embedded in our consciousness by the cartoon series “Rocky and Bullwinkle,” which several subsequent generations have probably seen in re-runs.

In this culture, “greedy landlord” is redundant. It’s a given that landlords are avaricious and exploitative. We’ve all seen news stories and public affairs show segments on how they habitually jack up the rent in cockroach-infested hellholes where their victims invariably are single moms. When not doing that, they’re engineering “reno-victions” — evicting tenants on the pretext that they’re doing repairs but really just wanting to replace them with people willing to pay higher rents.If anyone has ever seen a news report, especially on CBC, in which the landlord’s side of the story is told fairly, and the difficulty of dealing with deadbeat or destructive tenants is given appropriate weight, please let me know. I watch a lot of news and I’ve never seen it — no doubt because reporters are more likely to be tenants than landlords.

This same news media is now all aflutter about the housing crisis, especially in rental housing, especially among students — a problem the federal government is thinking about solving by capping the number of international students our universities and colleges can admit — presumably because foreign students can’t vote. It will be fun to see how such a policy is administered. Will there be a cap-and-trade system in which schools are allotted a quota on the basis of their historic enrolment of foreign students, minus some percentage, and can then buy and sell quota, as dairy farmers do?

Writing in the Post Thursday, former Ontario chief economist Brian Lewis puts his finger on the nub of the rental housing problem. Rental housing is a lousy investment and has been since provinces started imposing rent controls in the 1970s. As one economist famously put it, rent control is the most effective way to destroy a city, save carpet bombing. Yet in the economic-policy amnesia that has seized western democracies in recent years, many governments are returning to it. And a media ignorant of even the rudiments of supply and demand cheers them on.

Of course we have a rental housing crisis. Who in their right mind would want to be a landlord these days? Social justice warriors are all over you for making your living by ripping off poor people — which is actually a terrible way to make a living since poor people have so little to rip off. And governments are all over you enforcing zoning and construction codes and, in five provinces, imposing outright ceilings on the price of the product you’re trying to sell. Usually there are escape clauses that allow you to raise rents when you’ve undertaken various kinds of improvements. But you’ve got to argue these before a tribunal that has your economic fate in its hands and is unlikely to be staffed by people sympathetic to the entrepreneurial class.

Given the road blocks, hurdles and harassment imposed on suppliers of rental services, it’s no surprise, as Lewis reports, that Ontario is only getting 15,000 new builds a year when it needs 50,000. And now, because of purported links between developers and politicians — imagine such a thing! — the province won’t be able to touch its more than generous Greenbelt. Urban sophisticates won’t let developers build up: in places like Toronto’s Annex, NIMBYists insist on single-family homes only, not highrises. And the CBC and other green activists won’t let them build out, into the Greenbelt. Where can they build? Underground? Most days it would be easier to make money in oil and gas than in rental housing, even with Environment Minister Steven Guilbeault hounding you.In a world in which governments have turned rental housing into a lousy investment, you have two choices. One is to do as Brian Lewis suggests and use other means — primarily tax breaks — to at least partly offset the harm done by regulation and cultural stigma and make supplying rental housing a not-quite-so-lousy investment. That has the disadvantage, though, of screwing up the tax system with yet more special deals for activities governments are trying to promote. In effect, you use your right hand to offset the damage your left hand (or left-wing caucus) is doing. The technical name economists have for such policies is “second best,” and they’re a perfectly respectable way of addressing the problem.

I prefer “first best,” however. That’s economists’ grammatically galumphing way of saying “best.” Best is to try to remove the impediments, in this case by changing society’s view of landlords and getting governments to back off on regulation. It’s a long-term project but that’s what editorialists and other idealists are for.The one thing we don’t need is the federal government to start building houses or apartments, as seems to be the at least implicit object of much TV commentary. I seldom agree with Prime Minister Justin Trudeau but he never said a truer thing than “housing isn’t a federal responsibility.” We have a housing market. It lets buyers and sellers make their own choices. Let’s let them do that.

 

Story by: Financial Post

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