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Rent controls absolved in city's vacancy squeeze

By: Larry Kusch

Posted: 02/15/2011 1:00 AM | Comments: 0 (including replies)

Rent controls should not be blamed for Manitoba's minuscule vacancy rate or the dilapidated condition of some apartment buildings, according to a report to be released today.

The 39-page study, authored by University of Winnipeg economics professor Hugh Grant, also concludes "there is no evidence" that caps on rent have slowed the pace of new apartment construction or spurred a recent spike in condo conversions.

Report's stats

Manitoba's rental housing vacancy rate stood at 0.9% (0.8% in Winnipeg) in October.

Canada's apartment vacancy rate was slightly under 3%.

Manitoba introduced rent regulations in 1976, and they have been in place continuously since 1982.

Besides Manitoba, British Columbia, Ontario and Prince Edward Island have rent controls. Quebec operates a rent arbitration system, issuing binding orders in rental disputes between landlords and tenants.

Rent controls don't apply to new units (for a period of 20 years) or to those that rent for above $1,120 a month (as of Dec. 31).

-- Source: Report on Manitoba's rent program

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Furthermore, the provincial government-commissioned report says there is no proof rent regulations have "unduly restricted" rent rises in Manitoba. That's because the rules allow landlords to pass on their increased costs to tenants.

Family Services and Consumer Affairs Minister Gord Mackintosh said the report vindicates the government's approach to protecting renters.

"We're on the right path," he said Monday.

However, an organization that represents Manitoba landlords dismissed the findings Monday as "incorrect."

Wally Ruban, president of the Professional Property Managers Association, said the vacancy numbers don't lie.

"In a healthy rental market, there is tons of competition. Vacancy would be in the three-plus (per cent) range," he said, not less than one per cent as is the case in Winnipeg. He blamed two decades of rent controls for the current predicament.

Mackintosh said the government commissioned the study to find out whether, in fact, rent controls are to blame for the ultra-low vacancy rate. He said it is now convinced they are not.

In his report, Grant contends the rental shortage is largely due to a rapid increase in demand sparked by an aggressive immigration policy, specifically the Provincial Nominee Program. Rental construction has been slow to catch up, a situation that is not unusual in the housing market, he said.

Grant said a 20-year exemption from rent controls on newly built suites minimizes rent controls as a deterrent to new construction. Although Winnipeg apartment construction lagged throughout the 1990s, it has been well above the average of other large Canadian centres over the past five years, he said.

The impact of condominium conversions on the number of rental units in Winnipeg "has been exaggerated," Grant said. Conversions peaked in the mid-1990s and have been lower ever since, he said. And rental vacancy figures don't take into account the untold number of condos that are rented out.

The study also disputes the notion that rent controls are to blame for buildings falling into disrepair. In fact, incentives built into the rules -- such as temporary exemptions from rent caps -- have encouraged, rather than discouraged, improvements to properties, the report said.

A study gleaned from 2006 census information showed the percentage of rundown rental units in Winnipeg was higher than the national average. But when only apartments constructed after the Second World War were considered, the city scored better than average.

Grant said one of the major benefits of rent controls is to prevent landlords gouging when vacancy rates are tight, as is the current situation.

But while he gave Manitoba's rent control rules a thumbs-up, the 25-year U of W economics prof warned they should not reduce landlords' incomes to the point that they can't meet operating costs or achieve a fair return on investment.

larry.kusch@freepress.mb.ca

Republished from the Winnipeg Free Press print edition February 15, 2011 A5

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