More Restrictions on Limited Rental Pool

[countmeout]

Link to the article discussing rental hike cap at 2.5% per year:
https://www.castanet.net/news/BC/237590/Gov-t-caps-rent-increases

More restrictions on a super tight rental market will reduce the supply further. Soon to see more units such as this closet space for rent:
https://classifieds.castanet.net/details/spacious_den_private_bath_lomiss/3610327/

The increase of rent needs to be tied to house costs such as property taxes. This would create a certainty that the investment will continue to turn a profit if costs increase. Property taxes were raised 2.99% & 4.24% in Kelowna and Vancouver this year. while the new rental cap will be 2.5% regardless of how much costs increase.
https://www.kelowna.ca/our-community/news-events/news/kelowna-sets-2018-final-tax-rate-299
https://www.cbc.ca/news/canada/british-columbia/city-vancouver-budget-increase-louie-affleck-1.4445367

A long term investment plan, calculated with small capped rent increases each year coupled with larger increases in property tax (along with other expenses) would not look good on a balance sheet. The increases both in rent and taxes compound each year growing the spread between them at a rapid pace not seen until year into the investment.

Investors will take their money elsewhere like the stock market or another province's housing market if investments in BC continue to become too risky for not enough reward. These investments are also renters homes but without profitability they would cease to exist.

The NDP is preparing for the BC government to create 114,000 non-profit, rent subsidized units for low income families. They are making the rental market a poor investment opportunity by trying to make it look like they are helping renters but at the same time creating a bunch of housing which will be subsidised by tax dollars. The NDP is creating a monopoly market on low income housing that will only continue as the number of rentals decrease from the poor investment opportunity and the availability of subsidized units. This will create more government dependency rather than letting the free market flourish. A 114,000 + voters will continue to vote NDP for they are completely dependent on the government subsidizing their housing.
https://www.bcndp.ca/affordability
https://www.theglobeandmail.com/investing/globe-wealth/article-how-investing-in-real-estate-can-easily-go-sideways/

The tax base will shrink due to more people living in subsidized homes. The amount of income tax collected from investors who invest in the BC market will shrink; less places will be rented by private investors due to poor returns. Restriction needs to be removed from creating basement suites. Faster processing of building applications with fewer fees and faster build times need to be approved to bring homes to market faster. These large hurdles keep would be investors out of the market when creating new homes. The NDP should invest some of the money they are spending on subsidized homes to create a streamlined application process for new developments. This money could hire a talented team aimed at getting more private investors in the new development market.

This social economy is something I will never vote for and I hope to inspire more capitalists to speak up about a free market and ability to continue to invest in BC in the future.

[GordonH]

Double edge sword here, balancing between landlords investment income & renters being able to pay the rent.

Of course if renter is unable to afford the rent then potential of having a new type of homeless happens.

[twobits]

Double edge sword here, balancing between landlords investment income & renters being able to pay the rent.

Of course if renter is unable to afford the rent then potential of having a new type of homeless happens.

It is not a double edged sword when a potential builder looks at an investment in property and building and asks "what is better....build to sell and make a very defined return on the current capital expenditure, or build to rent when I have no idea of what future taxes, insurance, and market values might be?". If market values of property are not included as a reason to increase rents above 2.5%, investment in new rental accommodation will disappear.
The NDP are so fricken stupid they can't understand that rent controls actually increase the price of rent to the very people they portray to help!!
You don't lower f'en rent by restricting supply.......you lower it by increasing rental supply with less onerous zoning, density, carbon taxes, and other stupid fee's and charges.
The builder won't get rich because other builders will be competing with the same rules. The winner with less gov't regs will be the purchaser and renter.

[GordonH]

Double edge sword here, balancing between landlords investment income & renters being able to pay the rent.

Of course if renter is unable to afford the rent then potential of having a new type of homeless happens.

It is not a double edged sword when a potential builder looks at an investment in property and building and asks "what is better....build to sell and make a very defined return on the current capital expenditure, or build to rent when I have no idea of what future taxes, insurance, and market values might be?". If market values of property are not included as a reason to increase rents above 2.5%, investment in new rental accommodation will disappear.
The NDP are so fricken stupid they can't understand that rent controls actually increase the price of rent to the very people they portray to help!!
You don't lower f'en rent by restricting supply.......you lower it by increasing rental supply with less onerous zoning, density, carbon taxes, and other stupid fee's and charges.
The builder won't get rich because other builders will be competing with the same rules. The winner with less gov't regs will be the purchaser and renter.

It won't matter if renters are unable to afford the rent, they sure as hell won't be able afford mortgage payment either.
Developers would be *bleep* either way.

[seewood]

I'd like to hear from a developer who would build a dedicated rental only building and continue to own it for the purpose of earning a return on their investment.

Any one?

If so, how's it going?

Reason I ask is acquaintances down south had purchased an apartment block, did some renos and after a couple of years, got tired of dealing with renters and the continual RTB hearings. Sold the building.

[hobbyguy]

https://www.businessinsider.com/does-rent-control-work-no-it-actually-increases-rent-prices-for-most-people-2015-9

"Rent control actually drives up the price of most rents by restricting the supply of new units onto the market. While some renters may get a bargain, most people never get access to rent-controlled flats. Once people move into a rent-controlled place, they are incentivised to never move out, because it is so cheap.

The classic rent-control lease in New York lasts indefinitely, so once someone is in, they can stay for the rest of their life. (In New York, it's commonplace inside rent controlled apartments to see cookers, radiators, and kitchen fittings that date back to the 1960s because landlords just won't replace them, and tenants won't move out.) "

https://www.bloomberg.com/view/articles/2018-01-18/yup-rent-control-does-more-harm-than-good

According to the basic theory of supply and demand, rent control causes housing shortages that reduce the number of low-income people who can live in a city. Even worse, rent control will tend to raise demand for housing — and therefore, rents — in other areas.



So what have we observed in metro Vancouver:

1. Consistent demolition of older apartment buildings to be replaced by "for sale" condos.
2. A severe shortage of rentals.
3. Skyrocketing rents and purchase prices as far out as Chilliwack.
4. Low rent accommodations that are allowed to simply rot away beneath tenants.
5. A huge rise in homelessness.

To varying degrees the same scenario playing out in other centers due to it being a provincial rent control. Plus the "over the top" "tenants rights" stuff further discourages investment in rental units.

It amazes me that the BC NDP/LEAP have never been able to look at the empirical data, and see that their ideology makes for bad policy. But then far left ideologues have never been able to do math and analysis, and certainly never been able to accept anything that doesn't fit their narrow ideological viewpoint.

[JLives]

Nothing will ever change until we start viewing housing as homes for people instead of money making investments. Not everything needs to be about profit. Our priorities are messed up.

[Veovis]

Nothing will ever change until we start viewing housing as homes for people instead of money making investments. Not everything needs to be about profit. Our priorities are messed up.

So you work for free? IF retired refuse all retirement funds?

Someone has to put up the money to build things, it's reasonable they are rewarded for such. This hatred of people that make money is weird as they take all the risks.

Now if you only mean people that buy a house and let it sit empty, yet that is BS and needs to be addressed, but so far nothing the NDP is implementing is helping actual speculation like that.

[Pete Podoski]

Nothing will ever change until we start viewing housing as homes for people instead of money making investments. Not everything needs to be about profit. Our priorities are messed up.

You go first then. Build a rental property on your own dime and rent it out with no profit.

I'm sure once your success is shared, we will have many others lining up to do the same.

[erinmore3775]

Hobbyguy recently wrote:

https://www.businessinsider.com/does-rent-control-work-no-it-actually-increases-rent-prices-for-most-people-2015-9

"Rent control actually drives up the price of most rents by restricting the supply of new units onto the market. While some renters may get a bargain, most people never get access to rent-controlled flats. Once people move into a rent-controlled place, they are incentivised to never move out, because it is so cheap.

The classic rent-control lease in New York lasts indefinitely, so once someone is in, they can stay for the rest of their life. (In New York, it's commonplace inside rent controlled apartments to see cookers, radiators, and kitchen fittings that date back to the 1960s because landlords just won't replace them, and tenants won't move out.) "

I was surprised that you used this article as a reference. I make the assumption HG, that you are using this article to point out the fallacy of rent controls. However, the author, in the same article, offers a more viable solution to rent controls. I would be interested to know if you support it?

Noah Smith states, "In the end, the strongest argument against rent control is that there are better ways to protect vulnerable renters. Diamond and her coauthors suggest an idea that I’ve also endorsed in the past — a citywide system of government social insurance for renters. Households that see their rents go up could be eligible for tax credits or welfare payments to offset rent hikes, and vouchers to help pay the cost of moving. The money for the system would come from taxes on landlords, which would effectively spread the cost among all renters and landowners instead of laying the burden on the vulnerable few."

HG, you wrote, “…to varying degrees the same scenario [lack of affordable rental housing is] playing out in other centers due to it being a provincial rent control. Plus the "over the top" "tenants rights" stuff further discourages investment in rental units…” I am wondering if you truly support Noah Smith's alternative to rent control? If you do not, what alternatives are you suggesting? Would you consider tax rebates to rental developers, tax freezes for rental development, or simply a return to the good old days of renting in BC before 1974?

[hobbyguy]

^^ there are balances.

Vienna is good model. No model is perfect, but their model seems to work pretty well. The city controls about 40% of the rental market, a chunk of that long term leased to the city as part of development permits. The city then rents out that 40% on an income adjusted basis.

There is always the problem with income cut offs, but it seems to work fairly well.

Mind you, home/townhouse/apartment ownership is very low in Vienna. People there accepted long ago that the ownership model simply doesn't work for mature/maturing cities.

Landlords in the 40% of the market are able to be profitable and there are vacancies, which makes it a competitive situation. What has happened though, as new build costs have risen, is that very little new private rental accommodation has been built.

However, the city of Vienna has a budget of almost $1 billion to build/replace rental units as needed.

So 80% of the total market is rental, and rents are largely limited to what is competitive with city rates.

That 80% number is close to what Singapore does....

https://www.ft.com/content/aa8e14e6-11a8-11e8-a765-993b2440bd73

So yes, social housing on a broad scale is required in mature/maturing cities. Unfortunately the junior varsity NDP/LEAP in Vancouver/Burnaby/Richmond have consistently diverted social housing money to pet projects (like bicycle paths) and Vancouver at 8% social housing is the highest.

The other model that works, and could be made to work in metro Vancouver, is the "London" model, where housing is built 50-80 miles away and an efficient commuter train system brings people to work. But once again, it requires - as they do in England - "council flats" - social housing.

One thing that is common to all three examples is that funding mechanisms and social housing construction are funded and controlled at the city level. A provincial 'one size fits all" is not used. It is far more efficient and focused to have it at the city level, but you can't have idiots like demovictions Derek Corrigan (NDP) saying and believing things like "social housing is not my responsibility".

You also can not have the silliness that the BC NDP/LEAP have been peddling that somehow they can wave a magic wand and make home ownership "affordable" once again. That model is almost certainly in the past for maturing cities like Vancouver where there is no more land.

[erinmore3775]

Your suggestions, HG, are excellent and in most cases working well in other jurisdictions.

As you have pointed out, "One thing that is common to all three examples is that funding mechanisms and social housing construction are funded and controlled at the city level. A provincial 'one size fits all" is not used. It is far more efficient and focused to have it at the city level, but you can't have idiots like demovictions Derek Corrigan (NDP) saying and believing things like "social housing is not my responsibility".

It is time for a budgetary line item for a set amount of money to be directed to municipalities for the development of municipality directed rental housing. The best way to use this money would be through public/private partnerships or in some cases just municipally directed developments.

[countmeout]

The government should not step in and build more social housing. A government is not efficient at managing anything that provides a service which could be private; look at ICBC.

Reducing wait times and pulling back restrictions on building applications while opening up more land would increase the supply of housing to a point where the demand will fall and prices would settle.

Creating a tiered system with social housing which is heavily subsidized will drive out investors thus creating more need for a greater number of subsidized rentals.

This social government will shrink its tax base. More money is generated in a free market that thrives and can be taxed to provide government services. Those services, in a capitalist society, do not include social housing for 114,000 new units. Home ownership in BC is 68%, 4.8 million people live in BC. 114,000 new units is an increase of 8% of rental units.

The people who get into these rentals will never leave. More units will be required and the cycle continues. The reason places like the US flourished so many years ago was due to a free market. Socialist ideologies do not work, look it up.

[hobbyguy]

The government should not step in and build more social housing. A government is not efficient at managing anything that provides a service which could be private; look at ICBC.

Reducing wait times and pulling back restrictions on building applications while opening up more land would increase the supply of housing to a point where the demand will fall and prices would settle.

Creating a tiered system with social housing which is heavily subsidized will drive out investors thus creating more need for a greater number of subsidized rentals.

This social government will shrink its tax base. More money is generated in a free market that thrives and can be taxed to provide government services. Those services, in a capitalist society, do not include social housing for 114,000 new units. Home ownership in BC is 68%, 4.8 million people live in BC. 114,000 new units is an increase of 8% of rental units.

The people who get into these rentals will never leave. More units will be required and the cycle continues. The reason places like the US flourished so many years ago was due to a free market. Socialist ideologies do not work, look it up.

The social housing model in Vienna is self-supporting. It is income based. Basically, they set a maximum they will charge and then discount for low income people, with an income cut off where folks do not get into the program. That model also relies on a lot of private rental stock for those above the income cut off.

Yes, the social housing model in Vienna has reached an equilibrium point where it is not worthwhile to privately build more rental stock. No model is perfect... but leaving grampa or gramma homeless ain't any good either.

There are other things that can be done, but no municipal politician has shown the courage to do things like NOT issue demolition permits on existing rental stock (unless replaced with rentals), or restrict certain areas to rental buildings only.

[countmeout]

The Vienna Model:
https://thetyee.ca/Solutions/2018/06/06/Vienna-Housing-Affordability-Case-Cracked/

Even though the city was able to keep land prices down, land and housing still cost money. In the late 1920s, about 30 per cent of Vienna’s annual budget was spent buying land and financing housing construction.

Where did that money come from? Mostly from taxes on private property and land. They were levied on private apartment buildings and progressively increased with the assessed value of each unit. Very high taxes were also levied on vacant land, giving owners extra incentive to sell.

The robin hood government above is not something to be praised. The Vienna government taxed the hard working population to share the wealth with everyone, not those that perform. It removes the incentive to work and helps keep the unemployment rate around 9%.

There is also the issue with homeless in Vienna. Between 5,000 and 10,000 have been homeless at the same time. This is much higher than the 2,000 in Vancouver. Vienna has a higher population (3 times as high) but has had up to 5 times the amount of people without a place to call home.

Socialist ideas have a cozy feel to them, a noble cause to make everyone equal. Unfortunately these systems are not sustainable and eventually fail. History repeats itself. Take a read to find out more. The link below is only one opinion and it is best to read multiple sources and compare with multiple references to history.
http://www.aei.org/publication/why-socialism-always-fails/

There is a reason why early America and Canada were able to achieve such prosperity in a short amount of time. While the success can be attributed to the abundance of natural resource it cant also be linked to the way early government was set up.

If you still think the answer is socialist housing, take a look at our healthcare system. People, including close relatives to myself have left Canada to pay for faster and better care for serious conditions and returned back home after treatment. The wait times here are unbelievable and the doctor shortage will soon be out of our control. This is all due to an artificial market created by the government which drives out good talent to places where the compensation is more in line with the work performed. Do you really want to drive out all housing investors too?