Canada's 'housing bubble' deemed close to bursting

[Xelebes]

Originally Posted by milomilo

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?

What I'm saying is that price is not a signal enough to build more rental units. So rent control as is currently implemented in Vancouver is meant to protect individuals who would be harmed by the price inelasticity of construction of new units. The rent controls as implemented do not have a significant role in creating that price inelasticity.

[milomilo]

Originally Posted by Xelebes

What I'm saying is that price is not a signal enough to build more rental units. So rent control as is currently implemented in Vancouver is meant to protect individuals who would be harmed by the price inelasticity of construction of new units. The rent controls as implemented do not have a significant role in creating that price inelasticity.

Probably not, the rent controls are not the source of the problem. But they do make the problem worse, so why have them?

[Xelebes]

Originally Posted by milomilo

Probably not, the rent controls are not the source of the problem. But they do make the problem worse, so why have them?

What is the mechanism that makes it worse?

[dreambrother808]

Originally Posted by milomilo

Probably not, the rent controls are not the source of the problem. But they do make the problem worse, so why have them?

What is worse than looking for a place to rent that allows dogs in a city of 700k people, when only 3 listing show up under 2000 dollars and they are all just under that dollar amount? If there was no rent control in this city, the already horrific situation would be worse. Thousands would be priced out overnight.

[milomilo]

Originally Posted by Xelebes

What is the mechanism that makes it worse?

Rent controls make building new supply less attractive, and make the market less efficient.

[milomilo]

Originally Posted by dreambrother808

What is worse than looking for a place to rent that allows dogs in a city of 700k people, when only 3 listing show up under 2000 dollars and they are all just under that dollar amount? If there was no rent control in this city, the already horrific situation would be worse. Thousands would be priced out overnight.

The amount of benefit to removing rent controls outweighs the cost.

[Xelebes]

Originally Posted by milomilo

Rent controls make building new supply less attractive, and make the market less efficient.

Efficiency supremacism is a dangerous road to follow though. There are several levers to make construction more appealing and if you only look at price efficiency when it comes to construction, you are not in the right business.

[milomilo]

Well then accept higher prices for everyone as the cost for benefiting existing renters at this moment in time. It's a terrible tradeoff, IMO, for places that suffer greatly from housing affordability.

[whatnext]

Originally Posted by milomilo

Probably not, the rent controls are not the source of the problem. But they do make the problem worse, so why have them?

As someone pointed out upthread, Montreal has them and it doesn't seem to have hurt. We have them because otherwise greedy landlords in BC would be turfing people out left and right to get more money on a lot of aging rental stock. Or selling out for condos.

Landlords here should be thankful we haven't followed Berlin's just implemented rules:

As a rental tenant in Berlin, Oleg Mirzac is what you could call the last man standing. He is the final holdout in an apartment building in the north of Berlin where new owners want to renovate and raise rents by 140%.

He has lived there since 2003, when Berlin's rents were less than half of what they are now, and when hardly anyone spent more than a quarter of their income on rent. He's seen almost all his neighbors leave in the last few years as new owners have pressured them out to make way for expensive renovations.

But Mirzac received good news on Tuesday: The Berlin state government agreed a new rent control law that will freeze rents for 1.5 million homes in Berlin for five years and capped them at €9.80 ($10.90) per square meter....(bold mine)

https://www.dw.com/en/berlins-new-rent-freeze-how-it-compares-globally/a-50937652

[SpongeG]

Rent control is not a rent cap though. Developers can build rentals and charge what the market will warrant. Its just been a nobrainer to develop condos here.

We are seeing a lot of rentals in Coquitlam right now cause the city has rules that if you demolish rentals and replace with condos they have to contain a rental component. They tore down two 3 storey rentals down my street and there may have been 70 rentals between the two buildings, they are replacing it with two towers one condo and one rental tower which will have 200 units. There are two other developments on the same street aldo adding a few hundred rentals, not to mention all the developments going up in Burquitlam, one 98 unit building is being replaced with just over 200 rentals. So rentals are coming on the market finally.
The first rental building built in Coquitlam in 40 years is almost complete now. There hadn't been any rentals built since the 70s which seems to be the same for most of the Lower Mainland.
I remember when Calgary was booming a few years ago seeing a story on the news where a guy was renting a basement suite for $800 and they jacked it up to $1200 and he had to move out and couldn't find anything else he was living in his car. Thats what happens without tenant rights.

[SpongeG]

Originally Posted by whatnext

As someone pointed out upthread, Montreal has them and it doesn't seem to have hurt. We have them because otherwise greedy landlords in BC would be turfing people out left and right to get more money on a lot of aging rental stock. Or selling out for condos.

Landlords here should be thankful we haven't followed Berlin's just implemented rules:

As a rental tenant in Berlin, Oleg Mirzac is what you could call the last man standing. He is the final holdout in an apartment building in the north of Berlin where new owners want to renovate and raise rents by 140%.

He has lived there since 2003, when Berlin's rents were less than half of what they are now, and when hardly anyone spent more than a quarter of their income on rent. He's seen almost all his neighbors leave in the last few years as new owners have pressured them out to make way for expensive renovations.

But Mirzac received good news on Tuesday: The Berlin state government agreed a new rent control law that will freeze rents for 1.5 million homes in Berlin for five years and capped them at €9.80 ($10.90) per square meter....(bold mine)

https://www.dw.com/en/berlins-new-rent-freeze-how-it-compares-globally/a-50937652

They bring up whats going on in Berlin in this story, kind of interesting

• Video Link

[misher]

Whatnext I love how rental owners and homeowners are greedy to you, so is that plumber who charges you to fix your toilet and the restaurant that served you food, right?

To you everyone that makes money these days is “greedy” it’s just wrong to make a profit right?

Can I ask you what would make landlords not greedy to you?

[Xelebes]

Originally Posted by milomilo

Well then accept higher prices for everyone as the cost for benefiting existing renters at this moment in time. It's a terrible tradeoff, IMO, for places that suffer greatly from housing affordability.

To me, the debate is a much richer than the black and white offerings you have brought forth and seem utterly naïve as to why many liberal proponents of ridding any and all rent controls would propose them and how they might benefit from it. Perhaps they are the landlords who want a precocious relationship with their customers, landtraders looking to have less controls on how they move land titles around, the NIMBYs who want the low-income folks out from their neighbouring apartment to be replaced by the more well-off; the gentrifiers of communities and not the renovators of communities.

In Vancouver's situation, a landlord can price the control in and still find lots of potential eager renters. Perhaps it's not the price that is the barrier but that building condos has been more lucrative (same situation in Alberta with less rental controls. Supply has not been so forthcoming here either even during the boom years.)

[misher]

Originally Posted by Xelebes

To me, the debate is a much richer than the black and white offerings you have brought forth and seem utterly naïve as to why many liberal proponents of ridding any and all rent controls would propose them and how they might benefit from it. Perhaps they are the landlords who want a precocious relationship with their customers, landtraders looking to have less controls on how they move land titles around, the NIMBYs who want the low-income folks out from their neighbouring apartment to be replaced by the more well-off; the gentrifiers of communities and not the renovators of communities.

In Vancouver's situation, a landlord can price the control in and still find lots of potential eager renters. Perhaps it's not the price that is the barrier but that building condos has been more lucrative (same situation in Alberta with less rental controls. Supply has not been so forthcoming here either even during the boom years.)

Rental owners require a 20-30 year payback. When costs are rising much faster than inflation yet rent is rising at inflation its clear that eventually they will stop making money from their investment and start losing money. Thus most don't develop rental unless they can make their investment back and a decent profit margin before they reach this point where they start losing money.

I think one great example is this Surrey developer that rejected building bigger, people will not build if there isn't an anticipated profit and in this case building taller is more expensive for every floor you go while rents/leases don't rise significantly with every floor so they feel they are at the perfect height to maximize profitability. Although this is an office example, it shows you that we can't just allow people to build rental, we need to make it profitable or they won't build as much as we want.
https://dailyhive.com/vancouver/central-...ing-george-boulevard-height-october-2019



Rent control protects the poor and the rich. Thats just wrong. Rent control should only apply to the minority of renters who make below the median vancouver wage. Why should a rich renter live in a rent controlled condo while a poor owner who has a large mortgage be forced to cover rising costs? Ownership does not equate to wealth and a good rent control policy would distinguish progressively.

[CityTech]

The real question is: why would a landlord's costs increase beyond the rate of inflation?

Mortgage payments are fixed. They don't increase with inflation every year. Same with amortized capital payments on construction loans. So that cost doesn't go up each year. Relative to inflation it actually drops.

Land value increases don't actually directly increase property tax rates, at least with the way it works in Ontario, because cities increase total revenue by X% a year (where X is set by the council's budget), so if land values increase by like 5%, property taxes rates actually decline.

Regular costs like maintenance, janitor salaries, etc. shouldn't be rising faster than inflation.

And utilities costs are usually passed on to the tenants anyway.

So why would capping rent increases at the rate of inflation actually hurt a landlord's ability to make a profit? As long as the lease is set at an appropriate amount when the tenants moves in, the costs shouldn't be rising faster than the capped rent.

In Ontario we also have full vacancy decontrol; when a tenant moves out the rent is reset and the landlord can change whatever they want. Unlike Quebec, Ontario prohibits lease transferring, so there's no way to retain rent control when the tenant changes.

[misher]

Originally Posted by CityTech

The real question is: why would a landlord's costs increase beyond the rate of inflation?

Mortgage payments are fixed. They don't increase with inflation every year. Same with amortized capital payments on construction loans. So that cost doesn't go up each year. Relative to inflation it actually drops.

Land value increases don't actually directly increase property tax rates, at least with the way it works in Ontario, because cities increase total revenue by X% a year (where X is set by the council's budget), so if land values increase by like 5%, property taxes rates actually decline.

Regular costs like maintenance, janitor salaries, etc. shouldn't be rising faster than inflation.

And utilities costs are usually passed on to the tenants anyway.

So why would capping rent increases at the rate of inflation actually hurt a landlord's ability to make a profit? As long as the lease is set at an appropriate amount when the tenants moves in, the costs shouldn't be rising faster than the capped rent.

In Ontario we also have full vacancy decontrol; when a tenant moves out the rent is reset and the landlord can change whatever they want. Unlike Quebec, Ontario prohibits lease transferring, so there's no way to retain rent control when the tenant changes.

Ah I guess someone not in Vancouver wouldn't understand how much costs increase here when they aren't passed on to the tenant. In Vancouver we are seeing 5-15% property tax increases annually, 5-15% service/utility increases annually, 15-40% increases this year in insurance costs, and large increases in the costs of contractors. I would love a system where utility and other costs are passed on to the tenant. Would help block the city from constantly raising them.

[milomilo]

Originally Posted by Xelebes

To me, the debate is a much richer than the black and white offerings you have brought forth and seem utterly naïve as to why many liberal proponents of ridding any and all rent controls would propose them and how they might benefit from it. Perhaps they are the landlords who want a precocious relationship with their customers, landtraders looking to have less controls on how they move land titles around, the NIMBYs who want the low-income folks out from their neighbouring apartment to be replaced by the more well-off; the gentrifiers of communities and not the renovators of communities.

In Vancouver's situation, a landlord can price the control in and still find lots of potential eager renters. Perhaps it's not the price that is the barrier but that building condos has been more lucrative (same situation in Alberta with less rental controls. Supply has not been so forthcoming here either even during the boom years.)

Just because the market is complex does not mean the fundamentals of supply and demand don't exist. It's like denying the laws of thermodynamics. The market will always win, if you restrict supply, you will increase the price. Perhaps not for the individual renter in the short term, but eventually that renter has to move, and now the new place he gets is priced higher than it otherwise would have been, and the new buyer of the previous place also pays more.

[milomilo]

Originally Posted by whatnext

As someone pointed out upthread, Montreal has them and it doesn't seem to have hurt. We have them because otherwise greedy landlords in BC would be turfing people out left and right to get more money on a lot of aging rental stock. Or selling out for condos.

Landlords here should be thankful we haven't followed Berlin's just implemented rules:

As a rental tenant in Berlin, Oleg Mirzac is what you could call the last man standing. He is the final holdout in an apartment building in the north of Berlin where new owners want to renovate and raise rents by 140%.

He has lived there since 2003, when Berlin's rents were less than half of what they are now, and when hardly anyone spent more than a quarter of their income on rent. He's seen almost all his neighbors leave in the last few years as new owners have pressured them out to make way for expensive renovations.

But Mirzac received good news on Tuesday: The Berlin state government agreed a new rent control law that will freeze rents for 1.5 million homes in Berlin for five years and capped them at €9.80 ($10.90) per square meter....(bold mine)

https://www.dw.com/en/berlins-new-rent-freeze-how-it-compares-globally/a-50937652

Just because Berlin does something doesn't mean it is a good idea. It's clear from what you quoted that the problem there has nothing to do with lack of rent control, it's something else, probably lack of supply. All adding rent control now does is strangle supply further, either increasing prices or, since it's Germany, probably increase wait times for rent controlled housing.

As for Montreal, they appear to be doing a good job of keeping prices low regardless, so the rent control doesn't have much effect, landlords wouldn't be increasing prices anyway. Ironically, the cities which appear to 'need' rent control the most, high cost cities like Vancouver, are precisely the cities that have the most to lose by implementing them.

[milomilo]

Originally Posted by CityTech

The real question is: why would a landlord's costs increase beyond the rate of inflation?

Mortgage payments are fixed. They don't increase with inflation every year. Same with amortized capital payments on construction loans. So that cost doesn't go up each year. Relative to inflation it actually drops.

Land value increases don't actually directly increase property tax rates, at least with the way it works in Ontario, because cities increase total revenue by X% a year (where X is set by the council's budget), so if land values increase by like 5%, property taxes rates actually decline.

Regular costs like maintenance, janitor salaries, etc. shouldn't be rising faster than inflation.

And utilities costs are usually passed on to the tenants anyway.

So why would capping rent increases at the rate of inflation actually hurt a landlord's ability to make a profit? As long as the lease is set at an appropriate amount when the tenants moves in, the costs shouldn't be rising faster than the capped rent.

In Ontario we also have full vacancy decontrol; when a tenant moves out the rent is reset and the landlord can change whatever they want. Unlike Quebec, Ontario prohibits lease transferring, so there's no way to retain rent control when the tenant changes.

If costs aren't increasing, and demand relative to supply isn't increasing, then prices won't go up on average. Any landlord that raises prices too high will find his unit vacant. So in that case, rent control is unnecessary. If prices are rising, there is an underlying reason for it that rent control will not fix, only hide.

[whatnext]

Originally Posted by milomilo

Just because the market is complex does not mean the fundamentals of supply and demand don't exist. It's like denying the laws of thermodynamics. The market will always win, if you restrict supply, you will increase the price. Perhaps not for the individual renter in the short term, but eventually that renter has to move, and now the new place he gets is priced higher than it otherwise would have been, and the new buyer of the previous place also pays more.

And it should be noted that nothing currently restricts landlords in BC from hiking the rents on a unit by an outrageous amount when one tenant moves out and a new one moves in. The costs Misher is moaning about can be recouped that way.