1.5% Rent Guideline Announced for 2004

By Tonya Moreton, PPMA Executive Director

On September 2, 2003 the Honourable Greg Selinger, Minister of Finance, announced that the rent increase guideline for 2004 was set at 1.5% and the exemption from rent control rate was raised from $970 per month to $985.

The announcement produced the usual 10-minute buzz on CJOB and articles in the Winnipeg Free Press and Sun, with the attention to this issue fading faster than your summer tan. It was a small step forward by Minister Selinger (in light of the fact that the CPI for last year was 1.6% and is projected to be double that for this year) after the step back by his predecessor Minister Tim Sale, a year ago, but it is still business as usual for rental property owners and managers in Manitoba.

As everyone is aware, while property managers are regulated to increase their property's rents by only 1.5%, they do have the option to apply for an increase above the guideline if they have incurred certain costs throughout the year, which are deemed as “passthroughs” to their residents, or they may apply to have their units removed from rent controls altogether if they undertake a complete building rehabilitation scheme.

A brief look at the history of total rental units voluntarily reported to the Residential Tenancies Branch (RTB), as shown below*,

Compared to the number of units affected by increases above the guideline, as shown in the second table* and units removed from rent control due to building rehabilitation schemes, as shown in the third table*, illustrates that while both the former and the current provincial governments continue to extol the virtues of rent controls as “protecting the rights of residents to affordable rents and reasonable increases”, the number of units that have seen their rents rise above the guideline, has increased dramatically over the past four years.

*Source: Residential Tenancies Branch, February 2003

While the total number of rental units appears to be increasing, this may not in fact be the case. The number of units reported to the RTB is done on a voluntary basis and does not include all rental units. As more units are reported, the RTB numbers increase. This increase is not indicative of an increase in rental units in the market, just the number of units that the RTB is made aware of. Conversely information acquired from CMHC, indicates that the number of rental units has been steadily decreasing due to building demolitions or conversions to other uses such as condominiums.

*Source: CMHC, February 2003, Apartments, row houses and 3+ unit buildings only

On the CJOB radio spot on September 2, 2003 four guests of Richard Clouthier shared their views on rent controls and their function in our society.

Greg Mason of Prairie Research commented that in general, almost every study shows them as bad for the economy and housing stock and that there have been many cases of improvements upon removal. However Mr. Mason could not say that their removal will be a panacea in Manitoba since there is little way to prove something like that other than to make the change. He did mentioned that many traditional renters (young people) now borrow the down payment from parents and buy small condos instead of paying rent due to affordable housing and availability issues and this may skew the possibility of prohibitive change.

Avrom Charach of Kay Four Properties and the PPMA Secretary spoke on behalf of the PPMA to say that while the 1.5% is better than the ten year average of just above 1%, it does not meet traditional or projected inflation rates and thus landlords are falling further behind economically. (See CPI vs. Rent Increase Table)

He went on to say that the development of new units has been adversely affected by rent controls and as such, there have been no new rental housing units built in more than 10-15 years because economic rent would be around $1200 for a newly constructed suite that is comparable in size and quality of construction to existing suites renting for $500-700. Older buildings are pre-cast concrete versus the newer wood frame construction, which makes older buildings more soundproof and fire resistive than their newer counterparts. Older units also tend to be slightly larger than newer ones. Mr. Charach opined that it does not make sound financial sense to build new units when residents can rent an existing suite for half the price.

Having said that, further to the rent holiday on new construction being extended from 5 to 15 years, there are two rental housing projects currently under construction in Winnipeg. However, one of them is almost exclusively catering to the $1000 per month clientele and will not be affected by rent controls after the fifteen year abatement (if rent controls in their current form are still in effect at that time).

Harold Dyck of the poverty council spoke next about the lack of affordable housing blaming landlords for continuing to raise rents (as if they were not entitled to a fair return on their investments as with any other business), and for the lack of support for the 60,000 poor people in our province.

Mr. Charach was in agreement with Mr. Dyck that there are many housing problems for our citizens, but reminded him that it is provincial government who allows property owners/managers an increase to meet inflation, but fails to increase the shelter allowance (it has not done so in more than a decade) and other benefits, which provide assistance to the financially poor residents to meet the increased rents. It was Mr. Charach's position and that of this association that it is the responsibility of our federal and provincial governments and the social service system to provide for our marginalized citizens.

David Northcott of Winnipeg commented last and brought the two issues together-his great concern is that rising rents make people choose between paying rent and buying food. He pointed out that in other cities, especially in Toronto, people are coming to food banks in record numbers because they cannot afford both. This includes people who are above the poverty line but cannot make ends meet.

The Doer government appears to have rethought its previous position on rent control from the Premier's comment, “Not on my watch.” (referring to the elimination of rent controls), to “We will look at all reasonable changes.” Adding however, “We will not throw the baby out with the bath water.”

How long is our provincial government going to keep perpetuating the myth that rent controls protect our province's poor and that they are good for our economy when so many reports, special interest groups and empirical evidence show exactly the opposite to be true?

It is time for this government to get to work on making positive changes to the oppressive rent control system here in Manitoba.
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The PPMA's Political Action Committee will be working hard on furthering our rent control position over the fall and early winter. Look for an update in the January edition of the PPMA News.

To find out how you can help, contact Bob Shaer, Committee Chair or the PPMA office at 444-4832 or ppma@mts.net.

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