Winnipeg Free Press
Tue, Feb 13, 2001
Rent control seems like a kindness to tenants. In today's Manitoba, it is not. The rent control we have in Manitoba ensures that residential rents stay low but it also discourages landlords from investing in their buildings. No one builds rental apartments and existing rental properties are allowed to deteriorate. That is no kindness to tenants.
Mayor Glen Murray is keenly aware of the damage rent control has inflicted on Winnipeg's housing stock. "Rent controls as we know them today need to be replaced," Mayor Murray told the Free Press recently, adding his voice to the chorus of demands for upgrading of rental housing in the city.
Rent controls are a dirty trick that government plays on tenants. The promise of rent increases limited to one per cent or 1.5 per cent per year sounds great until the other part of the deal becomes apparent, namely that you only get what you pay for.
A similar dirty trick was played on electricity customers in Califomia. The state regulators kept the power rates cheap, but now the power companies are imposing rolling blackouts on whole sections of cities because they cannot buy power as cheaply as they are required to sell it. The power is cheap, but there's no power. Bread supply worked the same way in the old Soviet Union. Bread was cheap, but there was no bread.
Rental housing is cheap in Manitoba, but the housing supply is stumbling toward the equivalent of rolling power blackouts. When rental residential properties decay and become unusable, as four Marion Street apartment blocks did last month, astute investors would be unwise to rebuild them as rental properties.
While rent controls last, there is no prospect that landlords will be able to recover their investment and show a profit. They are likely to do better in hog barns. Rent controls do not apply to hog barns and plenty have been built -- brand spanking new facilities with all the latest mechanical comforts. The housing needs of hogs are better served than those of Manitoba's residential tenants. Tenants are not the beneficiaries of rent control. They are its victims.
Rent control is not only sucking the value out of rental properties, it is also eroding the tax base that finances municipal services for all Winnipeggers. One 39-unit building near the University of Manitoba, for example, which was assessed $38,731 in realty taxes a dozen years ago, was assessed only $25,025 last year. The city-wide decline in taxable value of apartment buildings increased the tax burden on all other kinds of property.
Other factors are also in play. On the page opposite, north end residents show how the property assessment system penalizes residents of declining neighbourhoods. Because they will pay taxes this year on 1995 values, before the wave of arson drove values down, north end and inner-city properties are
overtaxed relative to others where values have risen since 1995. These circumstances discourage homebuyers from buying overtaxed Fire Zone properties.
Public housing and non-profit effort will never fill the gap opened by rent control and punitive tax policy. As long as private owners are discouraged from buying residential properties and improving them, Winnipeg will be saddled with a large and growing supply of cheap, poor-quality housing.
Premier Gary Doer and his government should take Mr. Murray's advice and remove the existing rent control system. Programs such as welfare and subsidies to the non-profit sector will still be needed to help the poorest city dwellers pay the rent. A rational system to make landlords and tenants treat each other fairly will have to be maintained. For the most part, free bargaining between landlords and tenants will offer the best rental housing for the best price and the widest range of options for apartment dwellers.