Why Rent Controls Don’t Work -Prairie landlords cheer rent market stability – March 17, 2019,
I’m glad I no longer support Stephen Harper’s Conservatives, I often had to balance my personal free market dreams for Canada vs. the Corporatist reality, at one point I agreed that Alberta should consider rent controls based on the direction of the country, however now that I’m seeing actual change in the country, I’m hopeful that maybe, just maybe Canadians can see that price controls cause more harm than good. Quebec has some of the lowest rent prices in Canada but the rest of Canada which includes Calgary pays for it. When an outsider looks at Quebec’s economy which revolves around price controls without observing the specifics it appears that their system works.
It’s when you learn about equalization payments and how Quebec consumes the lions share of equalization payments that you understand how on the surface Quebec appears to have a stable rental market, when in truth if they didn’t have money to take from Provinces like Alberta, their rental market, as well as their economy, would be in shambles.
With that said it should be noted how the market forces exist in Alberta that differs from a place like Ontario where I reside. Now as a renter in Toronto, I have the security of rent controls, which by the way is something I absolutely hate. In Toronto to assure that some idiots will build us rental housing an apartment building is allowed to have their starting price at whatever they want, however, once someone moves in for a set period their rent can’t exceed a certain amount annually, because of CMHC what this has done is it’s created massive incentive to build condos, because, in a condo, the builder or developers don’t have to worry about rental controls on maintenance fees, which the government, as far as I know, have no control over.
So instead what you get because of CMHC is a lot of unsophisticated real estate speculators who buy very small condos not to live but which they hope to rent out or flip them. So although Toronto has more than enough housing for everyone, because market fundamentals via CMHC aren’t allowed to flush out bad investment, those horrible investors are able to hoard real estate all over the city, which of course raises rental prices, and also gives the illusion that Toronto needs more housing, when in fact what’s actually happened is the supply in the Toronto Market isn’t meeting actual demand.
Toronto and Chicago are cities similar in size population wise, however, because Chicago’s housing market is based more on demand, there are a lot more houses in Chicago, when you visit Chicago you won’t see as many Condos as you’ll see in Toronto, because if the people of Chicago want a house that’s will get built. If you’ve ever listened to the central planners in Ontario, they view things more from a corporatist perspective and for the most part, especially in this CMHC mortgage insurance fueled market, once word comes out that a condo is being built a lot of people who buy the Toronto condo, just because they’re certain that the value of the condo will go up. So the investors in actuality aren’t reflecting the demands of the residential housing market. This hurts the poor more than it hurts anyone else because now the poor not only have to have good credit but also have to worry about condo taking away what used to be adequate affordable housing for them.
In Alberta, because there are no rent controls, there’s still a little bit of a free market there, so landlords aren’t guaranteed to make any profits, which is actually a good thing, because it forces them to be competitive, the real estate investor in Alberta is also more complicated because many are more mobile and don’t want to be tied down and therefore in Alberta their market is more susceptible to market forces, which in the real world equates to your house is only an asset if it’s helping you to make money.
So many Albertans will buy a house near where they’re working or if they can’t they’ll rent, when the oil market is booming in Alberta, Albertans find a way to make things work which is why even Rachel Notley has been slow to create rent controls. in a free market, human behavior is different. Now, in no way am I calling Alberta a free market, but it’s definitely more of a free market than the rest of Canada and the article below is worth the read.
Prairie landlords cheer rent market stability – The Canadian Press
Interesting times ahead.