The freshly adopted rent-control measures in Vancouver have been celebrated by advocates and politicians alike. The Vancouver Tenants Union even went as far as calling the new restrictions an “incredible win for literally half the population.” But the adopted measures are not what they seem. The additional measures scheduled for the spring are even worse.
Sure, having your rent capped at current levels plus inflation is great while you stay in your unit, at least while the building holds up. But how long will this last now that much of our rental housing stock is half a century old and we just removed any incentive for a property owner to renovate? That’s right, property owners are no longer allowed to recoup any of the renovation costs through higher rent, even though their tenants would be enjoying nicer, safer, healthier and perhaps more efficient accommodations.
In the spirit of micro-management, Vancouver is further imposing additional costs and restrictions on tenant buyouts. This is a prime example of a nanny state gone rogue, as our politicians clearly believe they know better what’s best for the tenants than the tenants themselves. “It’s for your own good,” no doubt.
But the real hassle begins when you get a new job, or a new kid, or anything new in your life that requires a move. With vacancy rates of about one per cent, finding a place in Vancouver is already a tall order. Builders of rental properties already face headwinds from multi-year approval delays at City Hall, shortage of land, rising interest rates and rising labour costs. Remove the ability to receive market rents even for new tenants or to renovate the building as needed and it is hard to imagine how anyone can make this work. And if nobody can make rental housing development work, then moving will transform from a tall order to an absolute impossibility.
But don’t take my word for it. Rent control has been tried all over the world, and has generated pretty much the same outcome every time.
A recent study out of Stanford University finds that San Francisco rent control resulted in a 15-per-cent decline in rental housing supply and, ironically, a 5.1-per-cent city-wide rent increase. A notable New York Times op-ed from 1997 says: “We’re building less today than during the Depression.” You guessed it — because of pervasive rent control. To give an example closer to home, a study using data from Ontario finds that the major effects of the provincial rent controls have been “to reduce new construction, to accelerate deterioration and conversion of the existing rental stock, to generate a severe rental housing shortage.”
The examples are many, but the Nobel prize-winning economist Paul Krugman summarizes the effects of rent control very clearly: “The analysis of rent control is among the best-understood issues in all of economics, and — among economists, anyway — one of the least controversial. In 1992, a poll of the American Economic Association found that 93 per cent of its members agreed that a ceiling on rents reduces the quality and quantity of housing.”
But surely none of this is news to Mayor Kennedy Stewart, as he no doubt has come across the above studies, and many more, during his doctoral studies at the London School of Economics. Maybe he does not agree with 93 per cent of our colleagues and believes that rent control has no effect on the future of our rental housing stock. But otherwise, I kindly urge him to consider the future of our city beyond a year or two.
We have an opportunity to remove the current obstacles to rental housing supply increases. This would not only limit rent increases through the natural mechanism of substantial new supply, but also stimulate the local economy and generate tax revenue to help achieve his numerous and ambitious campaign promises.
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