There have been no shortage of individuals or “experts” commenting on the government’s decision to end the rent cap, however having sociology or political science degrees don’t necessarily make you a housing expert and or an economist. In the interest of disclosure, I do have a degree in sociology, am a land developer and would be classed as a small- to medium-sized landlord. None of the above makes me an expert, however I can relate my 40 years of personal experience.
As a small landlord who witnessed both rent caps, I am indifferent on the issue. A rent cap benefits existing tenants and as a result they are less likely to move. The result is a growing number of new tenants chasing fewer available rental units; so new tenants will either face paying more or be left out in the cold. A building’s total rental income still needs to cover costs. If some tenants are paying less other tenants have to make up the difference in order to make up the difference. Landlords’ costs are not exempt from current inflation. Maintenance and common area costs have risen faster than the rate of inflation. Larger apartment buildings and the disappearance of small- to medium-sized landlords (who were once the majority) are a reflection that historical profits per unit have been decreasing. Combine that with lack of desire to be on call 24 hours a day / 7 days a week and fewer people are interested in entering the field.
Food costs are way up, but if we legislated that grocery stores could not raise the price of any item on their shelves more than 3.8% per year, what do you think would happen? Or, if we said that the 3.8% cap only applied to some customers but not to newer customers. And yet, somehow landlords are seen as being capable of stopping the steep rise in a tenants’ cost of living. Landlords are an easy target, since they are expected to be available 24/7.
Rent controls will affect demand and lessen competition in the rental market. As a land developer, before the rent cap we had considerable interest in land for multi-unit buildings. Once the rent cap was introduced, inquiries slowed. The experts on either side can argue if the temporary rent cap had an effect on new construction, but the full effect won’t be seen for at least another year. From the time that interest is expressed until the apartment is available for rent takes from one to four years. The numbers will tell the truth about the rent cap, not how people “feel” about rent controls.
The government may have ended the rent cap, but excessive rental increases are still subject to review by the Rental Tribunal. I have every confidence that they are more than capable of being fair. The Tribunal applies the rules and I hear complaints from both landlords and tenants about decisions that don’t match their claim. “Experts” have complained that under the coming system tenants must lodge a complaint over excessive rent increase. Under the 3.8% rent cap it was still the tenant lodging the complaint.
The Residential Tenancy Tribunal is an independent agency. Their dedicated staff are neutral and should be respected as such. Anyone concerned that their decisions take too long should be pushing for better staffing. Given the proper resources they are more than capable of limiting excessive rent Increases.
Rental units are only one part of the current housing shortage. The 16% tax (15%HST + 1% Transfer Tax) on new home sales drives up the cost of all housing. A $50,000 tax on a modest new 2 or 3 bedroom home puts it out of the reach of many young couples. Resale prices of older homes or apartments are directly related to the cost of new ones. Due to affordability, some tenants that could be living in their own home are still renting. New multi-unit buildings are subject to those same taxes which can easily be $30,000 per apartment. The more your house costs, the higher your mortgage payment and the more it costs to build or buy an apartment building, the higher the rent.
Our shortage did not happen overnight. For years the amount of construction in Fredericton did not keep pace with the rate of population growth. An almost decade of under construction has placed us in our present housing condition. During that period many of the skilled building trades left to find work elsewhere. No one should be surprised about the skilled trade shortage. Even with a labour shortage, the local construction industry is capable of increasing the number of homes or apartments currently under construction. As a last resort we could always do what farmers do when they cannot find enough local workers.
A targeted HST and Transfer Tax credit would make new home ownership (and the resale market) more affordable which would free up rental units. A healthy vacancy rate of 5% is easily attainable. During my 40 years as a landlord I have seen vacancy rates in Fredericton as high as 15% and as low as less than 1%. We need to increase the number of new apartments and homes being built. We can also shorten bureaucratic delays. If someone woke up this morning and decided to build an apartment building, it could take two years or more. Half of that time getting would be getting approvals, even if they had built the exact same building next door. A new subdivision takes 3 to 4 years before the lots are ready to build on. Why should it take so long? The actual physical installation of services for new building lots is about 6 months. Every rule, regulation, zoning by-law, etc. takes time and adds cost.
There must be rules and regulations, but at the same time, we can achieve the same result, in a much more timely and efficient fashion. As an example, when I first started working it took less than an hour at the registry office to register a subdivision plan that already had all the approvals. Three years ago, it took about three days to register the same plan. Today it can take 6 to 8 weeks. In the digital age, timelines should be decreasing and again, every regulation, every delay has a cost to it. Developers also pay double the homeowner tax rate for serviced lots that receive no services.
Any short-term strategy should be centred on those most in need, the homeless. Our medical system is currently having difficulty treating common ailments let alone dealing with some of their complex addiction and mental health issues. During the next few months, it may be a life-or-death situation for some of them and it is the weakest members of society who suffer most from a housing shortage.
Arnold Chippin
*A version of this article was first published at the end of 2022 and has been posted here with permission.
