Winnipeg Free Press
Tue, Mar 13, 2001

Rent control removal not answer

Low social assistance rent allowance helps fuel housing problem

By Tom Simms

THE removal of rent controls will not by itself improve the quality of housing in the inner city because there are many factors that have contributed to the decline of housing in Winnipeg's core area.

The 1990s was a decade of neglect of inner-city housing renewal. In 1992, the federal government withdrew from its role in housing. Canada is the only industrialized nation without a national housing policy. The government maintained that the private and voluntary sectors could provide affordable housing for low-income Canadians.

This approach has proven to be a complete failure. During the 1990s there were no resources to combat the growing housing crisis faced by low-income people and low-income communities. Nationally, the number of homeless people increased to levels that have not been witnessed since the Great Depression. Locally, the market value of housing in the inner city of Winnipeg crashed. In the north end, the average sale price of a house plummeted from $40,000 in 1988 to $19,000 in 1999. In the west end, the average sale price declined from $44,000 in 1988 to $24,000 in 1999. The number of boarded up houses grew and became targets for an epidemic of arsons.

There was unprecedented growth in ex-urban housing development in communities outside the Perimeter Highway during this same period. Winnipeg has essentially had zero population growth over the past decade. As a result, any expansion of housing in suburban and ex-urban areas has further contributed to the development of a 'doughnut effect' in our city -- new housing on the outer rim of the city and a vacuous hole of decay in the centre of the city.

The general re-assessment of property that will take place in the city this year will see a significant shift in the burden of property taxes from inner-city neighbourhoods to suburban neighbourhoods due to the decline in the market value of housing in the core area. Suburban taxpayers are now forced to pick up the tab for inner-city housing neglect.

Significant public investment will be required in order that these neighbourhoods could once again be economically sustainable. You can't renovate or build $70,000 houses on streets where the average sale price of a house is $20,000.

The removal of rent controls will not remove the causes of inner-city housing decline. Inner-city landlords know that the social assistance rental allowance is the de facto rent control in the inner-city rental housing market. The social assistance rental allowance has not been increased in Manitoba since 1993. The basic monthly rent allowance provided for a family of three is $310. The average monthly market rent for a two-bedroom apartment in Winnipeg for 2000 was $588.

Inner-city landlords know that the removal of rent control is not the driving issue to address the challenges they face. The law of demand and supply dictates that you can't supply housing for more than what families on social assistance are allowed each month for their housing accommodation.

The influence of the social assistance rental allowance in the inner-city housing rental market is significant. In the fiscal year 1998/99 the provincial government spent $55 million in the private housing market on social assistance rental allowances. The provincial government is contributing about $2 million a year to inner-city housing renewal programs. It is critical that this annual $55 million government subsidy to private sector landlords for social assistance rent be provided in a way that ensures the money is being used to maintain and operate decent housing, not slum housing.

The case for increasing the rental allowance is clear. Since the last rent allowance adjustment in 1993, the annual rate of inflation has increased by 18.5 per cent. Allowable rent regulation increases have been nine per cent.

A comparative analysis of the social assistance monthly rental allowance between Winnipeg and Saskatoon is instructive. In 2000, the average monthly market rent for a two-bedroom apartment in Saskatoon was $541, while in Winnipeg it was $582. There is a great disparity between the two cities regarding the monthly social assistance rental allowances as indicated in the accompanying table.

There are good landlords and bad landlords, just as there are good tenants and bad tenants. It would be important to ensure that landlords don't simply use an increased rental allowance to exact a greater return from their properties. The government needs to make sure that any policy approach to increase the social assistance rental allowance will serve to stimulate reinvestment in the upgrading of the housing stock. It is estimated that it will cost the provincial government $1 million for every one per cent increase in the monthly social assistance rental allowance. This has become a very expensive proposition because of past neglect of this issue.

It is a fallacy, therefore, to believe that the removal of rent controls will serve to improve the rental housing accommodations in the inner city. A singular focus on private market considerations will not adequately address this complex issue. The state of inner-city housing did not happen overnight. The situation will not be changed by a simple quick fix or silver bullet solution. The problem requires a long-term commitment based on a private, public and voluntary sector partnership to address this issue through a multi-faceted development strategy.

Tom Simms is executive director of the Community Education Development Association.

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