Winnipeg Free Press
February 12, 2001
Plaster falling from walls. Broken windows. Doors that won't close. Finally, boarded up and vacant, a target for arsonists.
That's the story for many of Winnipeg's inner-city apartments and rental properties.
Property managers admit that slum landlords and bad tenants can be blamed for some of the problems, but they argue that the real culprit is rent controls.
According to those who have studied their effects, rent controls devalue real estate, reduce tax income for city coffers, shift the tax burden to the suburbs, inhibit construction of new buildings and provide inadequate shelter to low income Winnipegers.
"Rent controls simply don't work," said Greg Mason, a managing partner with Prairie Research Associates, who has studied housing for 25 years. "It's a serious, serious problem for deterioration."
Under rent controls, the province sets a limit to how much landlords can raise rents. Currently in Manitoba, that limit is 1.5 per cent.
Manitoba is the last bastion of true rent controls in Canada, and one of the few in North America. Other jurisdictions have some form of controls but few continue to apply those controls to all rental accommodations.
Bob Shaer of A.S.H. Management and head of the Professional Property Managers Association of Manitoba said the result is that owners can't bring in the revenue needed to properly maintain properties.
Between 1986 and 1998, Manitoba's inflation rate was a combined 40.6 per cent, Shaer said. Yet government approved rent increases applied by the Residential Tenancies Branch only amounted to a 28 percent increase.
So landlords make choices. They choose whether to replace the hall carpets or pay for heating fuel. Maybe they don't upgrade when they should. And maybe the building falls apart, becomes vacant and is boarded up.
Rent controls have also meant no construction. No new apartments, apart from seniors life-lease condominiums, have been built in Winnipeg in 12 years.
"There's no incentive to invest," city assessor Brian Moore said.
Property manager Max Reich has exact figures. His company, Astroid Management, owns a 39-unit building near the University of Manitoba.. His realty tax bill was $38,731 in 1988. Last year, his taxes were only $25,025. The city lost more than $13,000 because of rent controls, Reich said.
Between 1994 and 1996, the value of Winnipeg's apartment buildings fell by $138 million, said Shaer, resulting in a loss of tax revenue to the city of $5 million. And that has shifted more of the property tax burden to single-family homes.
Harry Lehotsky, inner-city minister and landlord, sees the degraded downtown first-hand. His ministry started up Lazarus Housing, which renovates inner-city houses (at a loss of about $15,000 per unit) to increase downtown property values and prevent more boarded-up housing.
He also manages a 27-unit apartment on Maryland Street, but since it is non-profit, everything they take in is returned to the building.
"If we had to live off that building, we'd all be crying, too," Lehotsky said.
But he isn't convinced that abolishing rent controls outright would provide an instant solution for Winnipeg's derelict core.
"I'm not convinced landlords would put the increase back into the buildings," Lehotsky said. He'd like to see rent controls kept for the inner city but removed or reduced for newer apartments elsewhere in Winnipeg.
Rent-control critics also blame Winnipeg's low vacancy rate - now at two per cent - on rent controls.
But Dwayne Rewniak of Canada Mortgage and Housing Corp. aid a two per cent vacancy rate is not too low. He says that three per cent "reflects a balanced rental market" and an adequate supply. Winnipeg's vacancy rate is 3.3 per cent in the inner city and one per cent in the suburbs.
Linda Williams, co-ordinator of the West Broadway Neighbourhood Housing Resource Centre, said the solution to deteriorating buildings is more cooperation between landlords, tenants and neighbourhoods.
"We should work together with the private sector with the buildings that are here'" Williams said.
"We're trying to convince landlords it's the time to put money into the buildings and manage them well."
Shaer's association has proposed a three-pronged approach: no rent controls on newly constructed apartments, negotiated rents with new tenants (which would then be subject to limited annual increase), and increases on rent-controlled apartments equal to the Consumer Price Index.
But Williams believes changes would force the suburban middle class to more affordable apartments downtown and push out the poor. That's been Toronto's experience since controls were largely dropped in 1997, she said.
Tom Simms, executive director of the Community Education Development Association, identified another problem. He said the government doesn't pay people on social assistance enough for their rent. People on social assistance often receive $100 less per month than actual rents, he said. A government spokesman said those amounts have been unchanged since January 1993 and are not under review.
"Families are having to dip into their food benefits to top off their rent and landlords aren't getting enough money to maintain their buildings," Simms said.
Inner-city councillor Harvey Smith said all these problems demand a rent control review.
We can't strangle the people who have money to invest. On the other hand you can't give them free rein," Smith said.
But until such a review happens, the status quo of deteriorating apartments with no new construction in sight continues.
"Right now we're tearing down more homes than we're building," Lehotsky said.