RENT CONTROL NOT THE ANSWER TO RISING COST OF HOUSING
Posted in Rent Control, Rental Rates
There’s no doubt that housing costs have been a significant contributor to the financial pressure Canadians have faced over the past couple of years. And it’s not just homeowners and homebuyers coping with rising mortgage rates and housing prices; the cost of renting has gone up, too.
It’s therefore understandable that elected leaders would take note of these concerns and explore or propose possible solutions. However, a proposed solution is not automatically a wise or advisable solution. For example, rent control. Whatever concerns exist about rising rents in Calgary, rent control measures are the wrong answer.
The Alberta government is facing increased pressure to consider some form of rent control after a new report showed a 25-per-cent year-over-year increase in the average monthly rent of a one-bedroom apartment in Calgary. A rally was held last week in Calgary demanding a cap on rent increases, a call echoed by Ward 11 Coun. Kourtney Penner.
The calls for rent control seem driven by an underlying assumption that these increases are driven by greedy and profiteering landlords, as opposed to being a byproduct of supply and demand factors. To better understand the situation in Calgary, there’s some valuable additional context to consider.
First, the average monthly rent in Calgary remains below the national average ($1,560 for a one-bedroom, compared with the national average of $1,752). Among major Canadian cities, only Edmonton, Winnipeg, Regina and Saskatoon have lower average rents. In fact, Calgary is among the 10 most affordable markets studied in this report, along with four other Alberta cities.
Furthermore, while this year’s average rent increase seems substantial, last year’s increase was less than three per cent and was preceded by a decline in the average monthly rent the previous two years. So did Calgary’s generous landlords suddenly get replaced by hordes of greedy property owners, or is something else going on?
If the problem is insufficient regulatory measures from the Alberta government, that fails to explain why this province is so affordable compared with the rest of the country. And If Calgary landlords are supposedly gouging renters due to Alberta’s laissez-faire approach, then why aren’t we seeing that in Edmonton?
The average monthly rent for a one-bedroom apartment in Edmonton is $1,099, a year-over-year increase of just 5.5 per cent (by comparison, the top five rental markets in Canada are all above $2,200). Two cities operating under the same provincial regime — is it possible that local factors are at play?
Yes, matters related to rent control — or anything else under the purview of the Rental Tenancies Act — are provincial jurisdiction. But it’s absurd to think that municipal governments are powerless when it comes to housing issues.
For example, a recent study from the University of Calgary’s School of Public Policy showed that Edmonton has done a far better job than Calgary when it comes to the availability of low-cost rental units. The report’s author pointed to differences in land-use regulations and costs as a possible explanation.
It seems clear that Calgary’s increase in rental costs is a result of demand outpacing supply. Would-be renters, therefore, find themselves essentially in bidding wars for available units. There is much that governments — especially municipal governments — can do to increase supply, which is where the focus needs to be. Rent control measures simply create disincentives to add to that supply.
Fortunately, Alberta’s Seniors, Community and Social Services Minister Jeremy Nixon rejected the idea of new rent control measures. He says the focus will continue to be on building more affordable units and providing direct support to those who need it.
There’s long been a consensus among economists about the harms of rent control, which was confirmed again in a report released last week from the U.S. National Apartment Association. It’s not what Alberta needs.
Story by: Calgary Herald
