Rent control reform across Canada

by Tonya Moreton

Manitoba and Quebec residential rental property owners and managers remain hopeful that their governments will follow the lead of provinces like B.C. and Alberta while investigating possible changes to their Residential Tenancies Act, particularly to the section responsible for rent controls.

Those provinces were able, through full and open discussions with industry stakeholders, such as resident, owner and manager groups and other parties, to strike balanced and fair legislation. For example, B.C.’s rent increase limit being set at 3.8 per cent (Consumer Price Index plus two per cent, which show respect for inflation and capitol refurbishment costs).

Over the past five years, Ontario has seen their traditionally stagnant development market explode with renovations, complete building rehabilitations and new construction. As a direct result, their one- to two-per-cent vacancy rates rose to between seven to 12 per cent, and as high as 15 per cent in some markets, according to Canada Mortgage and Housing Corporation and other research bodies. 

This shifted the balance of power to the residents who were being offered a wide variety of move-in incentives as buildings competed for residents.

However, Ontario’s government, under the direction of Dalton McGuinty’s Liberal Party, has taken a decidedly huge step backwards in reinstating draconian rent control legislation which are similar to Manitoba, (both provinces have set their 2005 rent increase limit at 1.5 per cent, a full one per cent below the last two years CPI levels). The controls will certainly impact the recent growth in the development of private rental housing units in Ontario that followed the removal of the same restrictive controls in the late 1990s. A rent control increase that low will also hamper efforts of property owners and managers who were looking at doing renovations and investing major capitol into their buildings.

According to Brad Butt, executive director of the Greater Toronto Apartment Association (GTAA Building Blocks, June 2004): “A draconian rent control regime is only a cop-out for governments devoid of good public policy to help low income people afford their homes. Because you provide little to no help through rent supplements or income support to tenants of low income, you blame the private sector and implement price controls.”

In the August 18 Toronto Star, Dean Pandurov, general manager of Valiant Property Management, said that “he cancelled some planned improvements because the company wouldn’t be able to recover its costs under the new maximum increase.” 

The postponement or cancellation of general, scheduled and required maintenance or refurbishments — due to the inability to recapture the expended funds under tight rent guidelines, marginal annual increases and onerous application processes —  are far too well known here in Manitoba. Locally, when the dollars are compounded, the annual rent guideline increase has lagged behind the CPI by 17.4 points or 27.3 per cent over the past 22 years of the current rent control system.

Another non-secret is the fact that some housing industry costs, such as utility rates and school taxes, are rising faster than inflation, yet they remain unchecked and/or unregulated by government.

To achieve a truly balanced market, governments need to get out of the business of trying to control financial returns in private enterprises, such as rental housing. 

Look at Saskatchewan. They are a model case in point of how the complete removal of rent controls can work to the benefit of all parties affected.

The complete removal of their rent controls did not lead to widespread evictions and hardships. In fact, according to statistics from CMHC, Saskatchewan’s median rents in each category ( one bedroom, two bedroom and three bedroom) are all lower than rates here in Manitoba. They have achieved a balanced market between consumers and providers of housing at all levels of the spectrum.

“Rent controls mean to assist poorer residents, but they harm far more than they help, they benefit the better-off (who stay in price controlled units longer than they need to, making low priced units unavailable for those who really need them), and limit the freedom of all citizens,” said  William Tucker in his policy analysis, How Rent Control Drives Out Affordable Housing, May 1997.

“Rent Control is best abolished quickly and cleanly, with ample effort to protect the most vulnerable tenants. (In 1994, Massachusetts immediately lifted controls in three cities with a two-year extension for tenants qualifying for the federal definition of ‘low income,’ which amounted to less than 60 per cent of the median for the region or 80 per cent for the elderly and handicapped. In the end, only four per cent of the tenants in Boston and 10 per cent in Cambridge and Brookeline qualified for the extension).

“Boston landlords helped their cause enormously by setting up the reserve bank of 200 apartments for emergency relocations. Such an effort would go a long way toward allaying fears and deregulation.”

There are positive models throughout North America for deregulation, both south of the border and right next door to us in the West. Manitoba, Ontario and Quebec need only look at the vast amount of data supporting such change and they too will:

• See the cranes return to the horizon.

• Realize widespread rehabilitation of a quickly and ever aging rental housing stock.

• Experience an increase in property tax values.

• Enjoy an overall improvement in quality of life for all of their citizens.

If the Manitoba government is interested in taking a serious look at improving the housing situation and relieving the emerging housing crisis in our cities, then they must consult a wide audience — industry professionals, such as the PPMA, the Winnipeg Real Estate Board and the Winnipeg Chamber of Commerce, as well as the various industry stakeholders like the Manitoba Home Builders’ Association and neighbourhood and community groups. They must also consult individual homeowners and taxpayers, who, without realizing it, are subsidizing our ailing rental housing industry.

The rent control system in Manitoba, similar to that of Ontario, has resulted in increasing demand for dwindling supply, which all agree is poor public policy.

With a full and open understanding of the alternatives that work well and those that don’t, our government with then be able to take the necessary steps to ensure the market provides truly affordable housing at competitive market prices and enable them to direct federal funding to programs, such as Shelter Allowances, that have not seen increases in rates for over 15 years.

A free and competitive market will also allow property owners and managers the financial freedom required to maintain their properties in a healthy fashion, which ultimately benefits the residents. With the improvement in or refurbishment of buildings, comes job creation, revenue generation and increased property taxes that benefit the taxpayers and all levels of government, creating a win-win situation for everyone.

It is a huge challenge to place at the feet of our public officials, but if handled delicately and in full consultation with all industry stakeholders, its benefits will be far reaching and create a lasting legacy of prosperity and safe and affordable housing, as seen in so many other jurisdictions who exhibited the fortitude to see this monumental task through to completion.

(Tonya Moreton is the executive director of the Winnipeg-based Professional Property Managers Association.)