Winnipeg Free Press
Sept. 27, 2002
Recently, the minister of consumer and corporate affairs,
concurrently with the announcement of the one-per-cent rent increase guideline
for 2003, reminded real estate developers that apartment construction is
exempted from rent controls for 15 years, adding that "there is no excuse
for not having any construction."
Firstly, no developer nor any mortgage lender is looking for
"excuses" not to build or finance new construction: they simply assess
the economics of the marketplace and invest where there is a reasonable
expectation of reasonable returns. The government can give all the exemptions it
wants, but it will not induce new construction of apartments that would then
compete in a price-controlled environment.
Secondly, successive provincial governments have been reminded throughout the
years of the following basic economic principle: Artificially controlling the
price of a commodity will negatively affect its supply. In the residential
rental market, this effect may not be immediately felt, but some of the economic
consequences of rent control are now with us: no new apartment construction in
the past 20 years and a zero vacancy rate.
The remarks of the minister reveal a total ignorance of this basic economic
principle. It may be that Economics 101 should be a prerequisite for all members
of cabinet.
DENNIS SOUCHAY
General Manager
Royal Realty Services Ltd.
Winnipeg