Pros and Cons To Rent Controls: Toronto-Yorkville tenants say proposed rent hikes could make some of them homeless – November 21, 2019,
So, here’s a basic scenario, let’s say McDonald’s decides to hike the price of its burgers if Burge King or Wendy’s does not exist, will there be any market forces, that will make McDonald’s burgers cheaper? No, fewer options create what are called monopolies and when monopolies exist consumers have to settle for what’s available. What’s very interesting in the rental markets is the proliferation of something called Airbnb.
Now, truth be told Airbnb existed long before the APP was created, the Airbnb APP only made the process more safer. Now, because of technology, what a lot of people all across the world fail to realize is that that the government should actually be getting smaller, because as is the case with this Yorkville story in which the landlord is raising rents, had rent controls and many of the other government-enforced regulations not been in place, not only would rent prices be cheaper, rental apartment buildings would be more plentiful.
There are a lot of unoccupied condos all over Toronto and these condos quite frankly should have been rental apartments, however all over Canada, there’s a huge demand for the services of CMHC, which is a Government mortgage Insurance company. The demand for this entity is fueling condo development because condos that usually wouldn’t be financed are now being financed by real estate investors who now qualify for mortgage loans they otherwise wouldn’t qualify for. This has also been fuel for subprime lending in Toronto, because like the rest of the world interest rates in Canada are very low, so basically the housing sector of the Canadian economy that is getting the most love right now is Real estate and this, of course, has led to fewer rental homes being built.
The story you read about below, will never be written about the condo market, even though it’s primarily the government intervening in the housing markets that have created this scenario. Fewer options equate to more stories like this. Now, did stories like this happen in the past? Of course, it did, this was the reason rent controls were created in the first place. However, it’s important to tell the entire history of why rental controls which is a 1 size fits all approach to renters has created a disaster.
Now, it’s important to remember that some tenants are just horrible people, sure there are slumlords, yes there are landlords who are horrible people, but there are also tenants who are horrible people also. If a tenant destroys a property, under rent control laws, the landlord can’t recoup their profits for the damages, this is why landlords hike rates initially in the first place, also if the landlord offers lower rates but rates might fluctuate based on a number of factors, renters don’t like this, and I don’t blame them, but this problem was actually being solved by the market prior to the government intervening.
Better companies began entering Canada’s rental market year after year, however, government regulations in most provinces and municipalities got worse year after year, this, of course, is why building rental units came to a halt in many parts of Canada. No private business owner wants the government in their business, no employee wants the government in their business, even people on welfare don’t want the government in their business, no human wants to have the government micro-managing their finances and making their lives more difficult, this is of course why building rental units came to a halt in favor of building condos. Now, the problem with building a condo is that there’s a huge barrier to entry.
So it’s in actuality the government picking winners and losers and because Canada has a rental control problem, it’s smarter for investors to build condos over rental housing and this, of course, creates housing shortages, which cause not only housing inflation in real estate but rental inflation in rental apartment buildings. There really is a rental shortage in Toronto and with every Condo built that housing shortage will get worse and worse.
So, the old building in the Yorkville story below needs repairs, this often the best time to sell for a rental management company, because it allows the new company to recoupe the losses by raising rents, now, truth be told this probably wouldn’t have occurred if rent controls didn’t exist, but they do exist and this what ends up happening. Now I’m familiar with the are in question and quite frankly there should have been more adequate rental housing competition with the apartment in question, but bad government policies equated to a bad scenario for tenants whereby tenants basically have to only handful options to choose from and because there are only a handful of options prices inflate.
The government doesn’t want to build buildings, do you know why? Maintenance costs are too expensive, furthermore, most Government employees even the contracted one are often unionized which drive maintenance costs up. As I’ve stated when I began this post, Airbnb is nothing new, it’s an APP, that wouldn’t really be a disruptor if the government didn’t get involved in the price-fixing business. I’m not really sure at this point how to remedy this situation, because it’s such an ugly situation now and most people don’t understand the root causes.
Yorkville tenants say proposed rent hikes could make some of them homeless | CBC
Interesting times ahead!