MARCH/APRIL 2016 ;e Costco Connection 15
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MOST OF us can empathize with low-income
Canadians living in large
metropolitan areas who
face ever-increasing costs
of housing, and we can
understand and often
support their demand for
government policies to help them.
One such government policy involves the
adoption of rent controls that prevent or slow the
increase in the cost of renting apartments. While
this policy enjoys much popularity with the poor
and others wanting to help the needy, its use
results in a number of unintended outcomes that
reduce its effectiveness and bring large, mostly
hidden costs to society.
The most important unintended effect is a
decrease in the supply of rental housing. Fewer
new units are produced since the lowered rental
income makes their ownership unprofitable for
investors. Landlords are encouraged to turn
rental units into condominiums that are not covered by controls.
Second, rent control provisions that prohibit
the eviction of renters may encourage people to
stay in their units when otherwise they would
have bought homes or moved into other rental
units. We haven’t seen this on a wide scale yet in
Canada, but it’s a threat that exists for all rent-
A final important unintended consequence
occurs when general inflation decreases the real
income from rent-controlled housing so much
that landlords abandon their properties, as hap-
pened in the U.S. in the 1960s, creating urban
wastelands. The problem has not occurred in
Canada because controlled rents were never so
low that landlords had operating costs exceed
The unintended reduction in the supply of
housing caused by rent controls has the unfortu-
nate effect of reducing the housing available for
low-income earners and, as a result, some
become homeless. These problems lead to gov-
ernment policies designed to increase the supply
of low-cost housing and other costly efforts to
take care of the homeless.
Economists deplore the costs imposed on
taxpayers and others by rent controls in the form
of subsidies, which help some people, but do not
solve the problem of unaffordable housing for
the majority and the homeless. The market
should determine the demand, supply and cost
of housing. One viable option is to give vouchers
to the needy that are as good as cash for landlords
and that can be spent on rents, thereby making
housing affordable. C
Herbert Grubel is professor of economics (emeritus) at Simon Fraser
University ( hgrubel.blogspot.com).
Trish Garner is the community organizer of the BC Poverty Reduction
Coalition ( bcpovertyreduction.ca).
I BELIEVE that strong
rent control is a critical
measure to help alleviate
According to a recent
report by the BC NonProfit Housing Association, 40 per cent of renters
in Canada are living with housing insecurity,
spending more than 30 per cent of their income
on rent; and one in five renters spends more
than half their income on rent, leaving them
with little left over to support themselves and
their families. Clearly, the cost of housing is
already too high for far too many people, and
with no rent control, there’s nothing to stop
Currently, British Columbia, Manitoba,
Ontario and Prince Edward Island have some
form of rent control in relation to rent increases.
In these provinces, the provincial government
determines the maximum allowed increase of
the rent, which goes some way to alleviating
huge rent increases. However, another critical
aspect of rent control is tying rent increases to
the tenant, not the property. Only in Prince
Edward Island, Nunavut and the Northwest
Territories does this happen.
When rent control is based on the renter,
not the unit, when tenants move out, landlords
can increase the rent as much as they like. This
gives landlords an incentive to force tenants to
move by using harassment, neglect or any other
means when they see an opportunity to charge
higher rent. This places all the power in the
landlord’s hands at the expense of renters’ long-
term security in their home. Rent control
attached to the unit instead of the tenant has
the potential to rebalance the power and pro-
tect renters from unscrupulous landlords.
There are concerns that rent control
decreases housing supply, as rent caps might
dissuade some from fixing up their basement
suite for rent or building rental property.
Landlords may also have little incentive to
repair or renovate when needed, as competi-
tion to attract higher-paying tenants is limited.
But that is easily fixed by the provincial govern-
ment reinvesting in building more affordable
social housing to maintain a healthy supply.
Rent control has the potential to maintain
the diversity of our neighbourhoods rather than
making a growing number of properties available
only to those who can afford them, squeezing
everyone else out and leaving our communities
lacking. In a housing economy where increasing
numbers of people are renters, now is the time
for stronger protection for tenants. C