Winnipeg Free Press
Consumer and Corporate Affairs Minister Ron Lemieux says he will consider scrapping Manitoba's pernicious rent control regime, but first he wants to determine whether there is a "Positive alternative." He need not look especially hard or long. The positive alternative is obvious - a free market.
Manitoba has not experienced a free market in the rental sector for more than 25 years, not since a past NDP administration moved to protect renters from market forces by regulating rent increases. It was bad economic policy, but popular political policy. So popular, in fact, that, with brief exception, succeeding governments have maintained controls rather face the wrath renters who enjoy artificially low rents but great cost to homeowners, the city, and even to themselves.
Homeowners pay for rent controls indirectly through their property taxes. In the past decade, the inability of rental properties to produce a return on investment has led to a decline in their value with the result that assessments for apartments have sunk relative to owner-occupied houses. In fact, during the period between 1987 and 1995 alone, one-third of the tax load that had been carried by apartment buildings was shifted from renters to homeowners. There is no ready estimate how much of the decline in assessments of inner-city properties, most of which are rent-controlled, has shifted to owner-occupied properties, but it is substantial.
The city overall will pay in ways less obvious. The cost of reversing, the death spiral in the inner city through tax holidays and renovation grants and the costs of addressing the problems in the "fire zone" could long ago have been largely addressed through rising rents. But rent controls, which in recent years have been held at one per cent - that's $5 on a property that rents for $500 - stripped property owners of revenues needed for repairs that today have become so urgent that the public purse will have to fix what controlled rents failed to do.
Even renters live in something of a fool's paradise. The inability to raise rents to meet even the cost of inflation over the past 25 years has led to a decline in renovations - a so-called "renovation deficit" - that five years ago had already reached the hundreds of millions. Manitoba renters enjoy the only remaining rent control regime in Canada. They get what they pay for.
That rent controls are hindering Winnipeg's growth is obvious - it is reported there has not been a new rental apartment building constructed in a decade and, despite vacancy rates that have fallen to zero in many parts of the city, none are planned. There is a market for new construction, but rent controls in place, there is no incentive to build.
There is some concern that lifting controls when demand is starting to eclipse supply, will lead to rapid increases in rents. The Professional Property Managers Association has proposed a common-sense solution - lift rent controls on rental units only as they become vacant. It is another "positive alternative" for Mr. Lemieux to embrace.