Canada's 'housing bubble' deemed close to bursting

[milomilo]

I don't normally agree with misher, but rent controls are absolutely awful policy. They go against the most fundamental of economics and make things worse for the very people they intend to help. If you care about affordable housing, then you must oppose rent controls, or you are part of the problem.

[SpongeG]

But they can build rentals all they want and charge what they want, what they can't do is jack your rent up from $800 to $1200 a month as long as you are living there which I think is fair.

[milomilo]

Originally Posted by SpongeG

But they can build rentals all they want and charge what they want, what they can't do is jack your rent up from $800 to $1200 a month as long as you are living there which I think is fair.

Which results in less supply, and more expensive housing in the long run. It only benefits those already in rent controlled housing.

[milomilo]

Why Rent Control Doesn’t Work

Worth a listen, if you're interested in the issue.

[SpongeG]

how does it end up in less supply? There is no stipulation on how much rent a landlord can charge, they can rent it what the market will pay.

I don't live in rent controlled housing, the whole of BC has rent control, you can only increase the rent 2.5% per year.

[misher]

Originally Posted by SpongeG

how does it end up in less supply? There is no stipulation on how much rent a landlord can charge, they can rent it what the market will pay.

I don't live in rent controlled housing, the whole of BC has rent control, you can only increase the rent 2.5% per year.

Note that rental vacancies in Vancouver are the lowest in North America (below 1%) including New York which is considered extremely low at around 3%. It’s almost as if no one wants to invest in rental.

[Nite]

Originally Posted by misher

Note that rental vacancies in Vancouver are the lowest in North America (below 1%) including New York which is considered extremely low at around 3%. It’s almost as if no one wants to invest in rental.

The city of Vancouver should be building as much as Toronto right now, but it seems the city has put in rules/regulations to stop this boom from happening.
and hence high prices. The city of Vancouver has only 6, 100m+ buildings going up right now compared to 101 in the city of Toronto and the city of Toronto is not 17 times larger than the city of Vancouver

[p_xavier]

Originally Posted by SpongeG

how does it end up in less supply? There is no stipulation on how much rent a landlord can charge, they can rent it what the market will pay.

I don't live in rent controlled housing, the whole of BC has rent control, you can only increase the rent 2.5% per year.

Montréal always had tight rent control and it has one of the highest rates of rental unit construction in the country.

[giallo]

Originally Posted by Nite

The city of Vancouver should be building as much as Toronto right now, but it seems the city has put in rules/regulations to stop this boom from happening.
and hence high prices. The city of Vancouver has only 6, 100m+ buildings going up right now compared to 101 in the city of Toronto and the city of Toronto is not 17 times larger than the city of Vancouver

Metro Vancouver has something like 200 construction cranes up atm. It's definitely not not building. It's just not building as many rentals as it should be.

*edit* Yeah, the City of Vancouver should be building way more. I agree with that.

[milomilo]

Originally Posted by SpongeG

how does it end up in less supply? There is no stipulation on how much rent a landlord can charge, they can rent it what the market will pay.

I don't live in rent controlled housing, the whole of BC has rent control, you can only increase the rent 2.5% per year.

Even moderate controls mess up the market. There is less potential profit (and more potential loss) in building rentals, hence less incentive to build and less supply. You also end up with less fluidity in the market and less units for sale, as the people in cheap old rent controlled units are forced to stay put, while new entrants are forced to pay much higher prices. This is bad for prices, bad for quality of life and bad for the economy.

Since rent controls mean the government is artificially restricting supply, they might be justifiable if the government also artificially boosted supply to a greater degree with subsidies and other encouragements to building. But Vancouver and other expensive cities clearly are not doing enough there, so restricting supply through rent controls is unjustifiable, and frankly immoral in my opinion.

[misher]

Originally Posted by milomilo

Even moderate controls mess up the market. There is less potential profit (and more potential loss) in building rentals, hence less incentive to build and less supply. You also end up with less fluidity in the market and less units for sale, as the people in cheap old rent controlled units are forced to stay put, while new entrants are forced to pay much higher prices. This is bad for prices, bad for quality of life and bad for the economy.

Since rent controls mean the government is artificially restricting supply, they might be justifiable if the government also artificially boosted supply to a greater degree with subsidies and other encouragements to building. But Vancouver and other expensive cities clearly are not doing enough there, so restricting supply through rent controls is unjustifiable, and frankly immoral in my opinion.

Not to mention we’re making Vancouver more “affordable” by jacking up property taxes and utilities at more than twice the pace of inflation.

[CityTech]

Repealing rent controls would only work as one element of a broader liberalization strategy which would have to include a significant weakening of development restrictions and lowering of fees/taxes on the sector.

[niwell]

Originally Posted by milomilo

Even moderate controls mess up the market. There is less potential profit (and more potential loss) in building rentals, hence less incentive to build and less supply.

There's been zero rent stabilization on new rental units in Ontario since 1991 (save for a brief period) and we've seen next to no correlation with new construction. And applications for new rental buildings actually ramped up in the brief period when stabilization was reintroduced for new units, which indicates that other factors are far more important.

[milomilo]

Originally Posted by niwell

There's been zero rent stabilization on new rental units in Ontario since 1991 (save for a brief period) and we've seen next to no correlation with new construction. And applications for new rental buildings actually ramped up in the brief period when stabilization was reintroduced for new units, which indicates that other factors are far more important.

The other factors may be more important, but that is no reason whatsoever to implement objectively bad policy. Once rent controls are implemented, they will be very hard to take away as you create a vested interest group. So on top of NIMBYs and all the other drags on supply, now you have individuals in rent controlled units that are restricting supply too.

[Xelebes]

Originally Posted by milomilo

The other factors may be more important, but that is no reason whatsoever to implement objectively bad policy. Once rent controls are implemented, they will be very hard to take away as you create a vested interest group. So on top of NIMBYs and all the other drags on supply, now you have individuals in rent controlled units that are restricting supply too.

I think the problem here is you are applying economism (faulty oversimplifications of economic theory) to justify bad policy (the exclusion of housing floors.)

[milomilo]

Originally Posted by Xelebes

I think the problem here is you are applying economism (faulty oversimplifications of economic theory) to justify bad policy (the exclusion of housing floors.)

Where's the faulty oversimplification? You can't get around economics, it will always apply, just not always in the way that people without understanding will expect. Rent controls just act to paper over problems that will still exist with the controls in place, only now the problem is increased somewhat.

[WarrenC12]

Originally Posted by SpongeG

how does it end up in less supply? There is no stipulation on how much rent a landlord can charge, they can rent it what the market will pay.

I don't live in rent controlled housing, the whole of BC has rent control, you can only increase the rent 2.5% per year.

Rent control has been studied to death and we have all kind of examples around North America how it's a bad idea.

The previous "soft" rent control of inflation + 2% as the max increase was a good compromise between real politics and actual economics.

[WarrenC12]

Originally Posted by misher

Note that rental vacancies in Vancouver are the lowest in North America (below 1%) including New York which is considered extremely low at around 3%. It’s almost as if no one wants to invest in rental.

Aren't those stats based on purpose built rental, which as you allude to, isn't being built anymore?

Is there any reliable data for strata owned rental condos, for example?

[Xelebes]

Originally Posted by milomilo

Where's the faulty oversimplification? You can't get around economics, it will always apply, just not always in the way that people without understanding will expect. Rent controls just act to paper over problems that will still exist with the controls in place, only now the problem is increased somewhat.

The faulty oversimplification is that if you mess with price, you will mess with the balance. That's often not true when it comes to experimental economics. Price is not always an effective communicator when it comes to signaling for the allocation of resources.

[milomilo]

Originally Posted by Xelebes

The faulty oversimplification is that if you mess with price, you will mess with the balance. That's often not true when it comes to experimental economics. Price is not always an effective communicator when it comes to signaling for the allocation of resources.

You are essentially saying that the most basic of economic principles is wrong. I am not oversimplifying, you are overcomplicating. No economist would ever say that rent controls would result in lower prices overall.

Now, rent controls could be justified as they would smooth out some perceived unfairness that individuals disproportionately suffer when their rent is jacked, at the cost of slightly higher prices for everyone else. But that only works if the rest of the market is providing adequate supply - which is not the case in a market like Vancouver. If you're going to implement rent controls, then you must ensure supply is increased some other way. But if you do manage to increase supply enough to temper prices, why bother with rent control?