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There’s no question housing is at a premium. Homes are often being snapped up just as quickly as realtors can hang their signs, offers above asking are common and rent for apartments can be expensive, even in just average buildings.
The province is attempting to help, with new regulations proposed that would change how landlords can apply for above-guideline rent increases and cap the amount of renovation cost that can be used to justify a rent increase.
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The effect, landlords say, is to double the time it takes to recoup the cost of renovations. As a result, they say projects are on hold, including a $10-million job planned by Globe Properties, which has 5,500 rental units under management.
The overall effect could go far beyond that, however. This isn’t a plea for mercy for landlords. There’s no expectation that any legislative changes must appeal to property owners. However, government must always be mindful of unintended consequences.
There have been legislative and administrative actions to limit conversions of apartments to condos: the province mandated such projects will need municipal approval and provide generous notice to tenants when vacancy rates are two per cent or less.
In 2011, when the provincial legislation hit and the city pondered a moratorium on condo conversions, WinnipegREALTORS (now the Winnipeg Regional Real Estate Board) warned the critical issue was less about conversions and more about a dearth of construction of new rental properties.
So, if legislative changes to rent control are going to put a chill on renovations of existing buildings, what will it mean for new construction? The effect may well be to encourage the demolition of older buildings and replacement with new: currently, buildings less than 20 years old are exempt, as are units $1,670 per month or more. The new law would up that exemption to $2,000 per month.
Massive buildings, such as Globe Properties’ Courts of St. James and other well-known buildings are likely safe from the wrecker’s ball. But what about smaller, older buildings? Will owners of those buildings start crunching numbers to see if it makes sense to find a way out from under the rent control legislation?
It’s less of a problem for buildings in distressed neighbourhoods, but what about older buildings in high-demand areas? Could owners of 40-unit buildings in Wolseley or Crescentwood crunch numbers and decide there’s a case to level $1,300/month units and replace them with upscale abodes for $2,000 or more?
In that example, it could mean an extra $336,000 a year in rental income. With the right financing, new just might be the better deal.
There’s a fine line to walk here, between providing affordable housing and keeping some private skin in the game. You only have to look at some publicly owned “projects” to realize government ownership of housing stock isn’t necessarily successful.
Lawmakers don’t need to roll out the red carpet and cater to landlords’ every whim, but they do need to be careful about which guardrails they’re putting up. At the end of the day, being a landlord still needs to make business sense.
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