How rent controls in Saskatchewan can do more harm than good
There’s a bit of a debate occurring on another post about whether or not Saskatchewan needs to implement rent control legislation.
Few would disagree that this market is extremely tough for renters and it would be difficult to make a case that Saskatoon renters don’t need some help right now. Is rent control the right way to do that or does such legislation ultimately lead to greater harm in the rental market?
Here are some points gleaned from a policy paper written by William Tucker, author of “The Excluded Americans: Homelessness and Housing Policies. Please refer to the complete document to examine the evidence in support of his position.
- Rent controls cause frustrated property owners to sell and redirect investment dollars to a multitude of other investment opportunities that exist in the free market, ultimately reducing the supply of rental housing.
- Rent controls produce excess demand, which further reduces the stock of rental housing for those who need it most.
- Rent controlled housing tends to come off of the market and stay off of the market forever. Renters just don’t move.
- Rent controls create closed communities, which excludes newcomers from entering the market.
- Rent controlled housing tends to fall into the hands of middle-class professionals, not the poor.
- Rent controls provide an incentive for landlords to neglect property and tenants.
- Historically, vacancy rates are significantly lower in rent controlled areas than they are in free and open rental markets.
- Median rents tend to be higher in areas with rent control than in areas that aren’t controlled.
- Rent controls reduce the quality and quantity of housing available to renters.
Standard supply-and-demand theory predicts that any price controls, including rent controls, will produce an excess of demand over supply–an economic “shortage.” There is virtually no disagreement on this premise. In a survey of 75 of the world’s outstanding economists, J. R. Kearl and his colleagues found nearly unanimous agreement on the proposition: “A ceiling on rents will reduce the quality and quantity of housing.”
I’m always happy to answer your Saskatoon real estate questions. All of my contact info is here. Please feel free to call or email.
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Norm Fisher
Royal LePage Saskatoon Real Estate
47 comments so far. We'd love to hear your thoughts.
May 14th, 2009 at 3:53 PM
Hey Norm,
glad you’ve made this a separate topic.
I’m disappointed that you seem to have made such a judgment right off the bat with your title and also listing a bunch of claims (not your own) that are not backed up with facts. No one can predict whether rent control in Saskatchewan, our unique province, people and economy will “Do More Harm Than Good.”
It is wise to consider the opinions of someone who’s studied the effects of rent control and Tucker obviously has. Let’s not get into another tiff
but William Tucker is not the absolute authority here, his is only one opinion. From what I can see (I will need to read further-there’s a lot to read in that link) he makes all sorts of claims without backing them up.
Can you tell us please who this guy is, other than “an author” and why his opinions should be respected?
“In a survey of 75 of the world’s outstanding economists, J. R. Kearl and his colleagues found nearly unanimous agreement on the proposition:: “A ceiling on rents will reduce the quality and quantity of housing.”
Interesting… but not good enough. As I have said before, 5 provinces in Canada have rent control. Why would it still be in place if it was not beneficial? Obviously the question is, who does rent control benefit?
I’ll be back, going to go gather some amo hehe.
Cheers
May 14th, 2009 at 3:53 PM
Norm,
Thank you very much for taking the time to go into this a little deeper. I definitely appreciate the other perspective. It’s always good to see another side of things.
I would have to agree then that the obvious ideal solution would be to increase the amount of rental housing in the city. Do you think adding a number of rentals would cause the current rates to drop? Or probably just stabilize?
Shannon,
I believe the title says “HOW rent controls in Saskatchewan CAN do more harm then good” That doesn’t really seem too judgemental….
May 14th, 2009 at 3:54 PM
Thanks for pointing that out Leslie, you are right, CAN means might. Sorry I overlooked that. I thought I learned my lesson yesterday but obviously not! Sorry once again Norm!
Here is some background on rent control in Canada:
British Columbia, Manitoba, Ontario, P.E.I. and New Brunswick all have provincial rent control policies.
What is common in these policies is that rental rates can only be raised by a certain percentage and only once per year. The percentage ranges from 1% in P.E.I. to 4% in B.C. I don’t think that controls for the max amount of rent that can be charged are in place in any province. Once a unit is vacant the landlord can set whatever price the market will bear and then subsequent increases are subject to the policy.
Provincial rent control in Saskatchewan ceased in 1992. I don’t know why it ended but certainly the economy and housing climate was very different 16 years ago.
May 14th, 2009 at 3:54 PM
Hi Shannon,
Did you get a chance to read the paper or just the post? I realize that it’s a very long document but it is an interesting read. That’s where you would find the “evidence” which he puts forward to support the claims.
I find that Mr. Tucker’s arguments are convincing and his research is well documented. He points to a number of sources used in formulating his points.
With due respect, pointing to the policies of other provinces isn’t a very compelling argument that rent controls are justified, or in the best interest of tenants.
May 14th, 2009 at 3:54 PM
I’m in favour of the BC rent control model – Sask should just implement that (tailored to their needs) and be done with it.
May 14th, 2009 at 3:55 PM
Now I wonder..i haven’t read the article yet (but i will) but I wonder how could implementing rent control in this already zero market could make it worse…it’s like subtracting something from 0…
*goes to read*
May 14th, 2009 at 3:55 PM
Unfortunately, I suppose it COULD get worse than zero… right? If what little rental properties we have start going off the market because the landlords are pissed off…
I hate to think what that might be like
And I suppose then any incentive to start building more rental properties would dissappear….
I guess… it’s kind of a lose-lose here!
May 14th, 2009 at 3:55 PM
Although rent controls would help me, I have understood the benefits of letting the market decide, but we do need some help with the current situation we are faced with.
Two pieces of legislation I’d like to see:
- No more condo conversions until vacancy rates are reasonable. They are making the problem worse with each approval.
- A yearly rental increase cap of 20% or so. This would still allow landlords to move rents to market conditions, and allowing the tenants to adjust to the new rent. Many landlords have been taking advantage of the very low availability by giving renters 50% increases; we can’t take out 40 year loans to make them affordable.
I know investors will invest where there is the least regulations, but this is not a stock market, these are peoples homes and lives!
May 14th, 2009 at 3:56 PM
I’ll throw out my two cents because I just bought a house that I now occupy and I have a two-bedroom basement suite that I rent.
The basement suite was rented out for $550 when I moved in — the problem is that the previous owners bought the place for about $100,000 less than I did. Just the interest on that extra capital cost is about $400 a month for me.
I don’t think its unreasonable of me to increase rent to offset some of the extra capital cost (as long as its reasonable). If you want legislation on rent controls then what about legislation to keep the price of houses down so owners can afford them?
If inflation is the real problem, rent controls would help keep the price of houses down by discourage people like me from buying and to continue renting. That reduces the demand to own and would slow down the inflation for houses.
Still, trying to discourage people from owning seems backwards to me – shouldn’t we be encouraging people to become property owners? If slowing inflation is the agenda, I think getting more units built and increasing the supply of rental units on the market makes more sense to me.
May 14th, 2009 at 3:56 PM
Shannon’s point is sound: Ontario has the same policy.
Most of these studies are working from an old model of rent control, one which set an absolute ceiling for rents (“a one bedroom is worth X amount”). Since this was never increased, rents became absurdly low very quickly, and no-one wanted to move out, and unsheltered rents rose rapidly.
The system Shannon describes — and that I’ve lived under too — is different, since all rents on all units reset at what the market will bear whenever a tenant moves.
If my landlord wants to try to rent my one bedroom apartment for 1,500 bucks a month when I move out, he’s welcome to do so. If he gets someone willing to pay that much, then he can only raise the rent 5% a year, once a year, at an agreed upon time: the rent goes up 75 bucks a year, every year. If the new tenant stays for three years, say, then their rent will be 1,725 a month.
When that tenant moves, the landlord can up the rent to whatever they like — 2500 a month, 3000 a month — if they can get it.
The rents are only ‘controlled’ for the life of the tenancy. The increases are held under a reasonable level, usually tied to inflation, which are examined and reset every year. Because they are set and come at a set time, so you know when and how much your increases will be. The policy applies to all units, not just ‘low-income’ units; I am not low income, but I still freaking object to my rent going up by 50% a year.
This system results in more stable tenancies — you don’t get evicted by rent increase, and unless your salary falls, you can always afford the place — but that’s a good thing for both landlords and tenants.
Given that this works very well for both parties in the nation’s largest and most active rental markets, Toronto, Montreal and Vancouver, I can’t see why it wouldn’t work equally well here.
But this won’t be implemented here: the Wall government is opposed to such things on principle, and policies like this are set at the provincial level.
I expect that rental housing will continue to be converted to condos and rents will rise until they have severe effects on enrollment at the University and SIAST and on the labor market. It now costs more to buy here than in Edmonton, according to the Royal LePage report; soon, it will be more expensive to rent here too. It takes a while for students to give up and start looking into transferring credits, but both U of A and Calgary are better schools than U of S, so it might start happening sooner rather than later.
May 14th, 2009 at 3:56 PM
Norm,
It only takes a glance to see that these points have no basis in reality. The truth avails itself a lot more quickly than what this guy is trying to foist.
First point:
So, how does this hold up to the fact that many rental units are at present being converted to fake condos even without rental legislation in place?
This turns us back to the undeniable truth that if a greedy person can gouge, they will. Greedy people don’t need help being greedy, they will never excel at having a conscience!
Second point:
Excess demand how? It seems we have two problems converging into one and when they are addressed, it is only ever in the context of one.
We have rental unit supply and then we have rental unit prices.
It is fair to say that both interact with each other, but that both must be handled at the same time is simply an imposed limitation in considering solutions.
Keeping it simple, we see that really what this says is “people aren’t displaced as often, so they stay”. Which translates to stable families who can rent, which translates to stable and friendly neighborhoods (undeniably in rapid decline), which translates to good families, good homes and the freedom to live your life without the toil of wondering where you are going to live a month down the road.
Sorry, this is just another belligerent defense of oppressive greed.
Third point:
See second point. If people aren’t oppressed into moving, of course they won’t. They might concentrate on other important things like raising a family, furthering their career and dare I even say save up for a house.
Not you know – obsessively surfing the trends of a tempestuous rental market.
Fourth Point:
Not true at all. When I *joined* my last rental community in Winnipeg, I was instantly made to feel welcome. Even the prior occupant of my suite stayed in touch with us for a little bit afterwards.
It wasn’t a parade or anything, but my fellow tenants not only in my own building but in other buildings in the square all conveyed a sense of shared respect.
The fact that the people weren’t made to feel like everything could end in a flash allowed them to relax and be human beings.
Again, heavily related to points 2 & 3.
Fifth point:
There were students amongst my units, one of my college professors was in the building across from me, I had old people in my building, we had a young couple recently arrive.
I’m sorry, can you say “wonderful mix”!?
Sixth point:
Any more than they do now? A lack of rent controls and an adequate residential tenancies act blows the doors off the hinges.
People stand a better chance with help from the government in asserting some sensible standards.
I don’t think everybody has the luxury to threaten their departure when it first costs so much and second doesn’t make a difference. Especially in a rental shortage. This is just such an amateur and pro-money point.
Seventh Point:
See points two, three and four. We never had a hard time finding somewhere. Actually in Winnipeg there’s a great multiplex rental market in the Wolesely, Osborne Village and River Heights areas. Amazing places – granted prices are increasing for new tenancies, but that’s the rules. You only get into it if you can afford it and you’re never priced out.
Sounds pretty damn fair to me.
Eighth Point:
This is such a load of garbage, at this point we can conclude the writeup is just pro everything free market. Let’s do a complete whiteout of the facts until people are gassed unconscious with persuasive nonsense with no practical footing.
Ninth Point:
In Winnipeg I was able to heat my home room by room to any temperature I wanted.
In Saskatoon, I had one control for the entire apartment and on the coldest days I couldn’t get my baseboard heaters warm enough to notice.
In Winnipeg I was able to use my fireplace simply by tossing a log on and lighting it after opening it up.
In Saskatoon the smoke backed up into my suite and set off my smoke alarm, choking us out for the night. When I complained I was told I had to hold a lit piece of paper in the fireplace before lighting the log. A complex procedure I had never heard of, even after phoning around to various fireplace companies – and of course having had a fireplace in my last home.
In Winnipeg my entire suite was cleaned thoroughly. If there had ever been a smoker in the unit, I would never have known because it was immaculate.
In Saskatoon, brown sludge (photos available upon request) seeped from my bathroom walls after a shower. Rubbing a pure white cloth on any wooden surface resulted in the cloth being stained brown & yellow from the smoke.
My cups smelled disgusting and had to be rinsed because the cupboards in the kitchen had absorbed so much smoke, it diffused into them quickly.
This may lead to the talk about rental quality standards, but don’t even try to assume that higher prices results in better care for the units. In Saskatchewan which has no standards and no rent control, everything is the least humanly possible.
The proof is right there in front of you, I don’t know why we even enter into this excersize of theoretical justification.
Years into the future people will look at discussions like this and wonder why the free market boosters had such a hard time understanding that greed has no moral ambition.
This guy doesn’t sound like he has any idea what he’s talking about.
To make matters worse he does this pedantic analysis which is some process to isolate you further and further from reality. Anything that takes you so far from the most basic observations can’t possibly be any more than persuasive.
Laissez faire and all the rules from the playbook of libertarians don’t work. It is the exact opposite of communism – as in, duh?!
Look around, look at the USA, look at Canada as we continue to mow down all our beloved virtues.
That’s the free market at work, tearing our social society down.
That’s the past 20 years and especially the past 8 talking loud & clear.
It’s all showing that when you leave it to the corporations and investors, they will never volunteer an ounce of consideration for the rest of society.
We need to put people and skills first, not money. Because that’s what free market and libertarian values idolize: Wealth.
http://www.zompist.com/libertos.html
May 14th, 2009 at 3:57 PM
Doug –
If your house was in Ontario, BC or Quebec, you’d be able to rent the apartment at whatever price you wanted. Once you had that price, though, your increases would be limited to a set percentage each year, until that tenant left.
Capice?
I think you’re also allowed to give notice to the tenants of a unit you’re taking over, too; there are restrictions and guidlines, and typically the tenant has several months to move, but I had a couple of properties change hands while I lived in them when I was in grad school in TO, and I was usually offered an increase or a moving date.
Question, though: do you really think you’ll get 950 a month for a basement suite? Are you in Nutana?
May 14th, 2009 at 3:57 PM
Leslie,
I’m devoting the afternoon to researching both sides. In every article I’ve read previously and today on the subject four predicted and often proven effects are common, similar to what Norm has shown above:
1. The quality of both new and existing units decreases to maximize profits (make up for the loss)
2. The size of units decreases and in some cases current units are split (eg. upper/lower)
3. The property is neglected
4. Rent control deters investment and new construction because the developer feels that the municipality has too much control
In another post on Norm’s blog I said I would share what the city is doing to make more rental units available. Last night I went through my information and blogged it:
http://www.groovity.ca/shannon
Typing it up allowed me to appreciate what the city has done even more than I originally expressed. Hats off to those administrators who are working so hard to provide more housing.
What I have not seen (so far) in any research is how initiatives like what our City has accomplished has an effect on the common 4 results above. What I mean is… since our City provides MANY incentives to landlords and developers is there a chance that rent control might not result in adverse effects the economy as research has shown.
I’ve read of two other economist polls today that concur with the one of J. R. Kearl above. One in the US resulted in 98% and one in Canada 95%. The polls were not very recent though, I hope I can find more recent ones.
callum, some municipalities apply the rent control to buildings only of a certain age. Units build after a certain date are not subject to the policies.
I have forgotten to add information about student housing. I think it deserves some research. Here’s what is known though… Currently the University is capable of supplying housing to only 5% of those who apply. In other Canadian cities with Universities the average housing supplied is 40%. I’m assuming the 5% is a result of the fact that the University of Saskatchewan has not created new housing in decades. Is it safe to say that if the University stepped up with some solutions many students would then provide available units to non-students?
I still feel that the view that the “economy will suffer” places too much emphasis on how much the wealthy, developers, business owners and landlords will suffer and as a community we should focus on how our less-fortunate citizens will suffer.
I’ve reloaded this page and see a lot has been posted since I started typing! Need to read…
BTW there is a petition circulating to the City regarding the condo conversions.
May 14th, 2009 at 3:57 PM
Shannon:
student housing. I think it deserves some research. Here’s what is known though… Currently the University is capable of supplying housing to only 5% of those who apply. In other Canadian cities with Universities the average housing supplied is 40%. I’m assuming the 5% is a result of the fact that the University of Saskatchewan has not created new housing in decades. Is it safe to say that if the University stepped up with some solutions many students would then provide available units to non-students?
Yes, BUT.
1) Institutions typically house 40% of their first year students. Very few institutions provide housing for students beyond 1st year or foreign students — who pay higher fees and don’t have work permits, so are usually provided with housing.
2) funding for student housing would have to come from somewhere: I don’t think the government would provide the money, and raising tuitions to pay to construct highrises would reduce enrollment drastically. U of S already has substantial retention issues. (I teach here).
3) It’s going to take quite a while — 4 years? — to build anything.
4) Agriculture — a faculty with a fair amount of clout — uses the fields that are being proposed for development for soil research, seed development, etc.
5) Sure as eggs is eggs, Boardwalk and other major rental companies as well as the condo development firms will object to any kind of ‘subsidized housing’ bringing down market rents and work to block the construction.
It’s a good idea, but it’s going to be too little too late to have much of an impact.
May 14th, 2009 at 3:58 PM
Alex,
“It only takes a glance to see that these points have no basis in reality.”
I’m going to guess that you gave it no more than a glance.
jrochest,
According to Tucker, the landlords ability to raise rents upon vacancy contributes to the problem. He refers to “shadow markets” and argues that two distinct rental markets are created; one which is only affordable for the wealthy; and another which more typically has no vacancies. Almost all of the available supply is non-controlled units and almost all of the demand is focused there because nothing else is available. The others are basically off the market. The studies of median prices of advertised apartments in rent controlled areas seems to suggest that affordable units are rarely available.
May 14th, 2009 at 3:59 PM
Shannon,
I’ve also decided to spend a little time doing some research as well. Of course, I don’t have a lot of free time at present so I’m building it up a bit at a time. The first point I chose to research was:
Historically, vacancy rates are significantly lower in rent controlled areas than they are in free and open rental markets.
Right now the “major centres” where the vacancy rates are:
below 1% – Saskatoon, Kelowna, Vancouver, Victoria, and Sudbury (obviously all rent-controlled except for Saskatoon)
between 1-2% – Edmonton, Calgary, Regina, Winnipeg, Guelph, Quebec City and Trois Riviere (3-4 split w/majority being rent-controlled)
and 2%+ – 22 major centres (the lowest being 2.1% for Abbotsford B.C., and the highest being 10.4% for Windsor, Ontario). Of these 22 major centres 17 ARE rent-controlled (keeping in mind that 13 are in Ontario, so we must give some consideration to the size of the province).
In my research I discovered that while only 5 provinces are officially “rent-controlled”, Newfounland, North-West Territories, Nova Scotia and Nunavut all have a 12 month rule (only one increase per year), and Quebec and Yukon both have rules regarding the first year of tenancy.
Interesting to note
May 14th, 2009 at 3:59 PM
I had a friend who has moved out to Vancouver a while back. Her landlord owned one side of a duplex in sutherland. Fairly newly built house. Her rent for the 2 bedroom was $650 a month. As she left, she was a nice tennant and got someone else all lined up to rent from him. When she told him this, he was frustrated becuase he told her he was going to up the rent to $850 because his buddy down the street did it and he wants the extra money because he’s building a new house for himself. He did it mostly beucase ‘his buddy said he could get way more’…it wasn’t a ‘needed raise’ in rent, etc…
Not every landlord is the moral guide that some people tend to say, although in the same respect neither are all renters.
May 14th, 2009 at 3:59 PM
Jesse,
And see I would have to disagree there. In all honesty, that sounds pretty fair. That’s an example of where I see it as ok. If he choses to rent it for $850 obviously someone who can “afford that” will move in. What bugs me is when you’ve been renting it to someone for $650 for a year (or whatever) who can afford that and then suddenly they go up $200 in one jump…. now that’s rude.
May 14th, 2009 at 4:00 PM
Yes, Norm — but as I said, he’s operating on a different set of assumptions.
There’s no ‘noncontrolled’ units in Ontario: if you rent anything from anyone, be it an apartment, a house, a condo or a mobile home, you’re covered under the provisions of the residential tenancy act. The only exception is a hotel room or a furnished weekly rental — and even then, if it’s a month-to-month boarding house setup, you’re covered.
So there’s no ‘dual market’ of free market vz rent controlled units, such as exists in many US cities.
My point is that it’s a very Ontario solution: middle of the road, dull as ditchwater, complained about by everyone but curiously effective.
Two: I think that your second point might be a chicken-and-egg problem. Most places that implement rent-control policies are places that have vacancy issues before guidelines start.
Saskatoon didn’t need rent controls or ‘guidelines’ as Toronto calls them, when it had a high vacancy rate. It’s when it drops that seniors on fixed incomes, families with children, students, kids who’ve never rented before and others (including pet owners, like me) have a really hard time finding housing, and wind up paying “non-refundable damage deposits” or key money, repairing the landlord’s property (you only here “how much will you pay me to fix the toilet”? so many times before you do it yourself) or, in some cases, providing favors under threat of eviction.
NYC has largely lost all of its rent controlled apartments: you pay about 2000 a month for a room in a shared flat in Manhattan. Don’t think that free market rents have made the place more affordable.
May 14th, 2009 at 4:00 PM
Re: U of S housing:
Housing project awaits gov’t grant
http://www.usask.ca/communications/ocn/08-mar-28/1.php
Basically they are ready to build but are waiting on a $19 million grant from the Saskatchewan Housing Authority.
(I read OCN all the time as I used to work for the President’s office waaaaaay back in the day.)
May 14th, 2009 at 4:00 PM
I agree with Leslie too, Jesse: raising the rent is fair, because you know what you’re getting into. Rents will start going up, too, because taxes are going to be much higher, thanks to higher property values, and many landlords will pass those on to their tenants.
May 14th, 2009 at 4:01 PM
Jesse,
I don’t have a single investment which delivers a return, or a loss, based on my needs.
Leslie,
…and then $200 again three months later.
The once a year thing might even be palatable. I understand it’s three months now and I don’t think I can understand why “market rent” needs to be adjusted that frequently. I don’t think I’d oppose some minimum term during which a tenant could be certain that they’ve bought some level of security.
Shannon,
I definitely want to hear what you learn through your research.
Read your post about city initiatives. Very informative. Thanks for the heads up.
May 14th, 2009 at 4:01 PM
Thanks Callum — that’s interesting. So much for my unbridled pessimism.
I’m going to shut up and go away now…:) Seriously, I’m avoiding a stack ‘o papers.
May 14th, 2009 at 4:02 PM
I lived in Ottawa for 5 years, under rent control, and rented from Minto, the largest landlord in that area (the Ont version of Boardwalk, although I’m sure they’d hate that comparison).
My rent for a 2 bedroom apartment started at $860 in 1997, and 5 years later when I moved west, was $1150 (2002 values). I was curious and looked up my old residence to see how much they charge now, 6 years later. My old unit is listed at $975 per month now (keeping in mind Ottawa is a flat market).
Every month that you rented from Minto, who were also in the business of building new houses, they would credit you with $100 towards the purchase of a new home (for as long as your tenancy). After renting from them for 5 years, they would have given me $6000 towards my downpayment. At the risk of sounding like a shill for Minto, they seemed to be trying to encourage renters out of the rental units and into inexpensive (relatively speaking) housing.
Minto applied to the rental board on a few occasions to raise the rent more than the yearly allowed amount. They won most of those cases, because they could justify it. At least we knew why they were raising our rent, and had a totally public hearing, with a non-biased arbitrator who ruled on their request. Nobody begrudges a landlord from making a profit, it’s a business after all.
Having said all that though, I don’t think it kept the price down. I have been trying to read up on rent control since this debate started on the blog, and it appears that no economist seems to support rent controls. I’ll have to give the article a good read, adn do more research on it.
May 14th, 2009 at 4:02 PM
Thomas,
Appreciate hearing that feedback and anything else that you might dig up on the rent control issue.
May 14th, 2009 at 4:02 PM
Norm,
How can you when I continue to explain how he distances from the reality of the matter by going into the usual desensitized statistics?
I think it’s right there in what I wrote. The point is, these facts all continue in the trend of stark ignoring the inequalities they cause.
You’d have to be in complete denial to ignore the proof in front of you. Look at the United States, look at Canada.
That’s free market, that’s libertarian as it gears up.
You want more of that?!
May 14th, 2009 at 4:03 PM
Alex,
“How can you when I continue to explain how he distances from the reality of the matter by going into the usual desensitized statistics?”
I’m not sure how you could know this if you didn’t read it.
I mean, you don’t even want to have a reasonable discussion. You go straight to knocking off the points without even looking at the arguments that are made. On the simplest and most obvious point he makes you say, “Excess demand how?” I wouldn’t have thought that you could find much to contest in that point, but I should have known better.
I hope you won’t be offended that I breeze over your long-winded arguments which are in response to my long-winded arguments which you haven’t bothered to explore.
May 14th, 2009 at 4:03 PM
Go Milroys!
They’ve decided to appeal! I’ve blogged it (http://www.groovity.ca) and we’re going to help raise funds for their legal costs. They are accepting contributions (tax deductible) if anyone would like to help out.
I still need to do some reading here – glad to see so many posts on the issue, way to go
May 14th, 2009 at 4:03 PM
Been a while,
Since I heard the word “greed”. Can someone please mention it?
May 14th, 2009 at 4:04 PM
Northstar,
Happy to oblige. It’s been a while since I’ve seen someone put a new spin on justifying it. Think you can help?
Maybe this is another rule of discussion from the ‘progressive’ right wing?
I just can’t keep them all straight these days!
Help me out and make a list, will ya?
Norm,
I have been in a lot of discussions with free market idealists.
I try to follow the ideas as new angles crop up. Although I haven’t seen much new from the camp for a while. It appears to be losing steam overall – and for that I’m thankful. Even the Americans have caught on.
Just because I don’t agree with what I read in the article doesn’t mean I didn’t read it. There’s no information put forward there that under any circumstance could reshape reality: It is persuasive greed driven propaganda.
I’ll pull out some portions rather than whole paragraphs. Don’t misunderstand me though, they serve only as anchors and I am not trying to take anything out of context.
Why don’t we get the show rolling?
“…and limits the freedom of all citizens…”
What’s the aim of open ended statements like this? I had one person who I forwarded this to describe the document as fear mongering.
“…In many cities, policymakers understand that controls drive out residents and businesses…”
All good boys and girls…
“When this interest group is a tenant population that forms a near-majority of a municipality”
So you mean the will of the masses should be subdued by private interest?
“…alternative markets and black markets will arise…”
Black market apartments? I’m not sure what one of those looks like, but we’ve effectively removed apartments from the discussion by referring to them as commodities.
“The “energy crisis” vanished almost overnight.”
But why stop there?! Fast fast forward to 2008 and every time gas prices go up, CBC feels compelled to do a survey at some random station. Hint, hint maybe?
Somebody only has to let out a balkanized belch and we get three cents added to the price instantly. But if anything goes well? Well, it’s just supply and demand, baby!
How can we correlate gasoline – something we burn as fuel – to houses? I can’t make an igloo out of gas.
“…that soon makes it difficult or impossible to get rid of even the most destructive or delinquent tenants…”
Relevance? Residential tenancy acts will help here, as well as criminal law.
“…Price controls are built around the concept that one particular group, the providers of some essential good or service, is a nefarious clique that must be wrestled into submission by the government…”
In Saskatoon where you are without rent control, they are.
Here in Winnipeg? Apartments only go up in price when they return to the market and our apartments are cheaper than yours now. There is also an appeals process which is a nice way to keep the – yes greedy – landlords honest.
I just looked it up: Apartments in my last Winnipeg complex are still the same price I paid two years ago – thanks rent control! Supply is obviously still good too as these guys won’t list anything they don’t have. They are also one of the larger rental companies in Winnipeg, with a great reputation. What’s this business about me never liking anything? Does anyone ever actually pay attention?
It’s all the wacky unpredictable inconveniences of a free market, with the added tree huggin’ of rent controls!
“[insert graphs here]”
It’s good to see some details, but those are some pretty steep prices for 1990.
The good news is, the rent controlled market seems to have an abundance of affordable and middle-tiered options (at least in the scale of the graph).
Looking at the free market, the excess of lower priced options, crossed with a proper sense of reality shows that it was simply more profitable to offer low quality cheap rentals. There’s no righteous angle on this, everyone I showed this graph to – including Canadians who moved to the states recently – came to that conclusion.
These so called abundant affordable units likely were/are overpriced dives.
Sounds about right and that passes the smell test as far as business goals are concerned. Who are the easiest people to exploit after all?
The high end also appears to be conspicuously under represented here. Again, contributing to the notion that everyone was just stuffed into one low-grade category when they could have fit in between. There is strong evidence of a affordability gap. This goes hand in hand with my assertion that free markets will effectively drown out the middle class.
Looking more at the controlled market all that overall quality and the median price is off by fifty dollars?! From what I can see the rent controlled graph when examined *properly* indicates a pretty good situation!
I know what your next question will be!
To preempt, answer this: What do you say, then to newcomers in the housing market?
We need a finer detail to this data, and newer data would be preferred. I also would like to see less focus on such strangely behaving cores as New York. After some searching, prices in New York could be well worse than they are at any point without rent controls. Let us remember how affluent a place it is.
To be fair, I’m offering a rematch on this data because I want to see newer and more diverse graphs.
This article is chockablock with absolutes, infinitives, surreptitious assumptions and a subliminal agenda.
It is a healthy sample of free market disinformation.
It doesn’t help that none of his trends can be observed in Saskatoon. There’s no correlation because Saskatoon is by all rights an unregulated market.
So now, I wonder why then you’ve chosen not to read what I say. It’s odd, because I do know and understand what you’re saying here. The problem is, while it sounds like a great idea to you, it lost its appeal almost instantly to me.
Eventually libertarians or partial ones snap out if it.
There’s a kind of born-again quality to the onset of whole or partial libertarian ideology.
But following that, it behaves more like chicken pox, fading away gradually.
I keep company with many different people from many different callings. We disagree on a lot, but one thing we always agree on is all this free market voodoo. It’s about as hoaky as astrology.
None of us even waste a full brain cycle to do the crunching necessary to debunk free market idealism.
What then makes it so difficult for people who stand to gain from it to see the damage it does?
“It is difficult to get a man to understand something when his salary depends upon his not understanding it.”
May 14th, 2009 at 4:04 PM
Alex,
You’re right, things are looking good in Winnipeg, without question. But that doesn’t mean that rent control has necessarily been a positive in every case. As I mentioned earlier, B.C. has the most amount of major metro areas with vacancy rates below 1%. They are also rent controlled.
I’m not disagreeing with you entirely, just saying that there IS some basis of truth to the article Norm posted. I do believe that it requires some more research.
Everyone,
If you come across a good site or article that has some information about the impact rent controls have had in Canada, I would be very interested to hear more.
Also, in case anyone cares, the info that I posted earlier about vacancy rates, came from good ‘ole CMHC!
May 14th, 2009 at 4:05 PM
Alex,
My apologies if you had actually read the article. Your comment “it only takes a glance” left me with the impression that you probably hadn’t.
Please be assured that I read most of what you write here. I do find it challenging to remain engaged through these long essays filled with metaphors and suppositions. I mean, seriously, how does one form a response to something like this? “Somebody only has to let out a balkanized belch and we get three cents added to the price instantly. But if anything goes well? Well, it’s just supply and demand, baby!” “Chicken pox?” “Voodoo?” “Astrology?” Sorry, you’re losing me here.
I have little doubt that some of these arguments could fail under various circumstances or market conditions. Most of them can be studied and considered more on common sense than empirical evidence, which isn’t totally absent here either.
For instance, “excess demand. How?”
Point #1 – It doesn’t take a genius to understand that investment dollars will find their way to investments which provide the greatest return. I understand how offensive that idea is to you, but again, it’s just the way it is. Your comment about them “converting to fake condos” underscores the point. These property owners already don’t want to hold them as rentals because there’s far greater profit to be made by selling them. A plan to make renting even less attractive seems a smidge out of place right now.
Point #2 – It doesn’t take a rocket scientist to figure out that demand for almost anything of value increases as the price gets lower. Controlled rents will keep more people in the rental market for longer periods of time. Economics 101.
and so on, and so on, and so on.
I won’t further argue the points which have already been convincingly made, however I’ll agree that not every one of them will be equally relevant all of the time, or in every market. Overall, I think I’ll lean in the direction of “95-98% of economists agree.”
I remain open-minded to anything that is workable within the economic model that we’re operating under. For instance, longer periods of time which are free of rent increases seems reasonable to me. Enforceable standards which ensure safe, clean and warm homes for tenants is a no-brainer.
As for the Upton Sinclair quote, I’m not sure how that relates to me given the fact that I only own one property, which I happen to live in and that I rarely work with what’s considered to be investment real estate.
“Let not him who is houseless pull down the house of another, but let him work diligently and build one for himself, thus by example assuring that his own shall be safe from violence when built.”
May 14th, 2009 at 4:05 PM
I like your last quote, but that view is incompatible with return on investment centric thinking.
Like many free market idealists, your goals are sensible, worthwhile and compelling. But depending on the goodwill of private interests is a pretty huge roll of the dice. One – which as again evidenced by our surroundings – is clearly not paying out so hot.
When referencing:
“Somebody only has to let out a balkanized belch and we get three cents added to the price instantly. But if anything goes well? Well, it’s just supply and demand, baby!” “Chicken pox?” “Voodoo?” “Astrology?”
Most other people I ran that by seemed to get it pretty easily. These are things we can go out and observe today, as in right now.
Why you chose to skim that rather than contest it is very telltale.
There is beauty in simplicity.
May 14th, 2009 at 4:05 PM
“…that soon makes it difficult or impossible to get rid of even the most destructive or delinquent tenants…”
Relevance? Residential tenancy acts will help here, as well as criminal law.
Hey Alex,
I own a condo in Germany, I Don’t rent it out because of the rent controls. You can’t easily raise the rent, and you can’t remove a tenant, unless you find them a new place to rent, and even then they don’t have to take it if they don’t want to. Even if they move, if they have a relative that want to move it they have the right to assume the rent and you can’t get rid if them either. Before you can evict them they have to be severely delinquent with the rent. Needless to say I don’t rent it out even though the demand is high, it sits vacant and I use it once or twice a year. Not surprising I’m not alone, about 10% of the condos in the country sit empty. The average room rate for a hotel is 140-150 euros ->$200/nite, and you can’t find a place to rent. So image that situation in Saskatoon.
Oh Alex,
I know that is a different country but so is the US, and there seen to be a lot references to them on this blog, with just as little relevance.
Norm,
No offence to the Blog, its great, I wish all cities had something like this. I just have to take some of the left wingers with a large tablet of salt.
May 14th, 2009 at 4:06 PM
Wow jack, that is crazy, thanks for the info.
Ok, so we have 2 extremes – BC rent controls which balance nicely between tenant and owner, allowing nominal yearly increases pegged to inflation and move-out time when the landlord can ask for market rent …. and … Germany which is absolutely freaking insane with their rent controls!
I think the decision makers in Saskatchewan can safely choose the better of these two options…
May 14th, 2009 at 4:06 PM
Jack F,
I don’t have a problem with people being able to live somewhere. If you can just go bumping people at your own discretion it leaves little stability or gauarantee for the renters.
It may be your condo, but when someone moves in, it becomes their home. That’s kind of where you lose direction.
I think the bit about a relative coming in on the same rent is a little bit bizarre. Seems to me that it reaches beyond being classified as “rent control” and more just outright oppression of the landlord.
You won’t get any contest from me on that one. It’s a bit over reaching.
Don’t try to polarize the discussion by saying it’s left vs. right. Ideas of those who classify themselves “right wing” have brought us the issues we face today.
May 14th, 2009 at 4:06 PM
Alex,
“I like your last quote, but that view is incompatible with return on investment centric thinking.”
Not so much. I understand it to mean, “if you can tear apart what someone else has built you run the risk of suffering the same fate against that which you have built.”
“There is beauty in simplicity.”
Uh-huh.
“Seems to me that it reaches beyond being classified as “rent control” and more just outright oppression of the landlord.”
I suppose this is the danger of that slippery slope of eroding freedoms. I think there was at least one such example, far closer to home in Tucker’s report. Here’s another that goes even further over the top.
“In 1989, Cambridge adopted a law actually making it illegal for owners of converted condominiums to live in their own apartments. Instead, owners were to be forced to rent out their apartments as rent-controlled units, in order not to “diminish the supply of rental housing.” Active enforcement of this law that would evict individuals from their own property was begun in earnest in 1992.”
Jack,
Thanks for the comment and the kind feedback.
“No offence to the Blog, its great, I wish all cities had something like this. I just have to take some of the left wingers with a large tablet of salt.”
I know where you’re coming from but there’s nothing more boring than listening to a group of people pat each other on the back.
Differences in opinion lead to far more interesting discussions. Thanks again for joining in. I appreciate the unique perspective and the example you put forward.
May 14th, 2009 at 4:07 PM
I’ve skimmed through these posts, there’s a lot of discussion going on here!
I still think rent controls can be a good thing, when set-up properly and justly. We’ve seen what can happen with the abscence of rent controls, but severe rent controls can be a bad thing too. As usual, a balance like what callum is saying with BC’s rent controls would be idealistic.
May 14th, 2009 at 4:07 PM
So Alex just to clarify are you wanting rent controls and changes to current legislation? Currently a landlord can evict a tenant with 30 days notice at the end of the term of their tenancy. So if you are month to month then 30 days from month end or if you are in a lease then 30 days prior to the end of the lease and simply state they are wanting to renovate the unit. Thus the tenant MUST move out and now the landlord could raise the rent as the unit is vacant. Another question I ask of you is this : Why do people own investment property? Because it is an investment and for a lot of people a retirement fund and more importantly Leverage. We recently have re-financed a few properties to take out large sums of equity to leverage ourselves to new markets. With doing this our mortgage payments have risen and now we would be running in the red. So we are left with 2 Choices.
1. Sell the property and use the equity for our venture.
2. Raise the rent and allow a rental property to remain in the market.
Now I’m sure the tenants in these properties were never happy to see a rent increase in their mailbox last month for approx $150-$200 however when running a business you will never last long running in the red. Now I still beleive in the motto of if you dont like the rent then move out. No Private Investor is the government. We are not responsible for other peoples well being. I’m sure many would agree that if they chose to cash in some mutual funds in tomorrow they wouldnt be getting a call from anyone asking why they are doing this?
I think right now it’s a gamble being a tenant. Your in a very hot market and know that with money comes greed. Lobbying the government for more affordable housing is a very long shot thought when you consider it’s 2+ years to build a home currently so theirs NO short term solution.
If they brought in rent controls effective may 1st for example do you think most landlords wouldnt raise the rents to the max currently to ensure their financial position for the long term. The solution is to let the market level itself out. This province is booming in the commodities and natural resources right now. If you aren’t making enough money their are PLENTY of opportunities out there to make more. Just reading on potash alone today they are putting in 700 more permanent jobs in the province….That’s providing 700 more people with 80k+ year incomes…”No experience necessary, apply within”
May 14th, 2009 at 4:07 PM
“Now I still beleive in the motto of if you dont like the rent then move out.”
Where would you suggest they move to? If you haven’t noticed there is ZERO percent vacancy.
“I think right now it’s a gamble being a tenant.”
A “gamble?” Most people don’t choose to be tenants. They are just at a point in their lives where owning their own home has not yet been an opportunity for them.
“Your in a very hot market and know that with money comes greed.”
You sure know how to prove that.
“If you aren’t making enough money their are PLENTY of opportunities out there to make more.”
Not true. Students need to focus on their studies or their investment in their education is wasted. Would you suggest seniors who live on a fixed income go out and get a job? After a lifetime of contributing to the economy and society?
Thanks for bringing to light such ignorance.
May 14th, 2009 at 4:07 PM
“If you aren’t making enough money their are PLENTY of opportunities out there to make more.”
Are you saying I should have to take on a 2nd job just to put a roof over my head? That’s a little…. insensitive.
May 14th, 2009 at 4:08 PM
Excellent EXCELLENT points Shannon and Leslie! Some people just don’t put themselves in other’s shoes.
May 14th, 2009 at 4:09 PM
Jack,
“Left-wingers” have to put up with people like you EVERYDAY, so don’t feel so hard done by. :’)
May 14th, 2009 at 4:09 PM
Where are the people who can get the laws changed? It’s tough enough for my wife and I to work full time and still not have enough to afford a house when the market is insanely high. Denro management has increased our rent every 5 or six months in the last few years and who is going to stop them? Why can’t renters unite and force the governments to freeze rents? I remember years ago when I was on assistance, and how are such persons supposed to live now? This is getting to be quite enough and its time you all help me do something about it, pronto. This issue is far too important to trash by arguing that rent controls do harm. What a grievous insult to renters.
May 14th, 2009 at 4:10 PM
As public employee working for the University I live with wage controls in the form of a public sector employer who hides behind essential services legislation to restrict my wage increases to less than 4.75% (we still don’t know how much less perhaps 2.75%). My rent in May of 2007 was $675/month paid to local landlords. The property was sold to a Toronto landlord. My rent rose to $1100 per month in 12 months and then I was still evicted without cause so that my Toronto based landlord could make even more money. Replacing that duplex cost me moving expenses plus $1300/month for an older smaller place owned by a Calgary based landlord. I made up the difference by cutting back virtually all of my spending with local businesses. I’m just a simple IT technician not an economist. So will someone please explain to me how how wage stagnation without rent control is good for the Saskatoon economy.
May 14th, 2009 at 4:10 PM
Employed and Evicted,
You make an excellent point. I’m not crazy about the idea of wage controls either.
May 14th, 2009 at 4:10 PM
The day they bring in rent control is the day I sell out all my properties! Nobody has the right to tell me how much or little I should charge. What a rediculous concept!!!