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."

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Norm Fisher
Royal LePage Vidorra