Sam Kolias says NO
The chief executive officer and chairman of the board at Boardwalk REIT
Some people believe rent controls work. They don’t. The fact is rent controls haven’t worked in countless jurisdictions, including Vancouver, Toronto and New York.
In every place with rent controls, rents have risen alongside an evaporation of much-needed new housing supply; new housing supply creates competition and lowers prices. The most-affordable housing in Canada is in the two provinces that avoid this devastating public policy: Alberta and Saskatchewan. Alberta repealed a temporary rent cap in 1977 and Saskatchewan replaced its act from 1973 in 2007. Some 90 per cent of housing is supplied by the private sector, and Alberta and Saskatchewan see the highest investment per capita in apartment development of all the provinces.
Missing from many arguments for rent control is the critical law of supply and demand. It’s a law, not a theory, for a reason.
Rent controls make it difficult for housing providers to have enough cash flow to properly maintain the housing. This is just basic math. Rent controls lead to residents living in less-than-favourable conditions, as is seen in countless rent control jurisdictions. Rent controls also deter much-needed investment and development in new housing. Sadly, rent controls can even favour those more fortunate people who don’t require affordable housing, but who nonetheless remain in price-controlled rental housing to finance their lifestyle, including second homes, vacations and luxury cars.
Real solutions lie firstly in taxation policies that stimulate investment for the creation of affordable housing and secondly in ensuring access to lower-cost capital for the development of more purpose-built housing. Both policies generate new housing supply and create a necessary but controllable level of vacancy, which in turn drives competition, which in turn lowers rents. This is supply and demand in action.
Rent supplements are another essential solution, as they go to people in need, not to everyone; rent controls make no such distinction.
Other viable solutions include a government acquisition fund allowing community housing providers direct access to capital in order to acquire existing housing in established neighbourhoods from private landlords. This provides faster access to affordable housing than new builds, which cost more and take longer. Further, we can incentivize private landlords through the non-taxation of capital gains and recaptured depreciation from sales to social housing providers, leading to more housing across the entire housing spectrum. Carrots work! Just look at Canada’s tax incentives in the 1970s, which encouraged building housing and created a much-needed supply of affordable housing. It worked then and it will work now! These are tried and tested laws of economics.
At the end of the day we’re all customers. Together let’s ensure quality affordable housing is accessible to all Canadians.
Annie Hodgins says YES
The executive director of the Canadian Centre for Housing Rights
Rents are out of control across Canada, but Alberta tops the charts. From March 2023 to March 2024, Alberta saw the highest average rent increases of any province—a staggering 20 per cent, well above inflation. Edmonton and Calgary saw the highest increases of the largest Canadian cities, at 17.3 per cent and 10.6 per cent respectively. As rents climb even further, the number of Albertans experiencing chronic homelessness has risen to nearly 7,000.
Why are rents being raised even as people struggle with an affordability crisis? It’s simple: because so much housing is owned by companies whose goal is to increase profit, and Alberta’s laws allow it. Rental housing is a scarce resource that’s mostly owned by a small number of large investment vehicles such as real estate investment trusts (REITs). Over the past few decades rental housing ownership has become much more concentrated—a process called “financialization,” which governments have done little to discourage. Alberta has Canada’s highest rate of financialization, with 24 per cent of its apartment buildings owned by REITs.
Housing is a basic need—and human right—yet tenants in a hyperfinancialized and overpriced housing market have no choice but to accept exorbitant increases to avoid homelessness. Albertans are spending their savings and skipping meals to feed investors’ hunger for higher profits.
Canada relies on the private market to supply much of its rental housing. Landlords argue they need to steadily raise rents to match increases to their operating costs and maintain a healthy profit margin for their businesses. But in Alberta landlords’ profit margins aren’t stable; they’re growing. Canada’s five largest publicly traded REITs reported 7–13 per cent increases to their profitability in 2023, with the highest reported by Boardwalk. Those extra profits come directly from the pockets of cash-strapped renters. People who can’t pay end up in overcrowded or unsafe conditions, in shelters or on the street.
When a business takes advantage of a crisis to overcharge for necessities, we call it price gouging. Price gouging is illegal in many places, but rent gouging is legal in Alberta. Landlords are charging rents far higher than is necessary to maintain their properties and make reasonable profits. It’s government’s responsibility to address this. BC, Manitoba, Ontario, PEI and Quebec have regulated rents for decades. Nova Scotia recently followed suit. Modern regulation can allow steady rent increases to match operating costs while prohibiting excessive increases. It’s a time-tested system that works.
“Alberta is calling” says the government, promising that Albertans spend less on housing and more on the finer things in life. But ask the nearly 10 per cent of Albertans in inadequate or unaffordable housing, or the 7,000 without any home at all, whether Alberta is still calling. Rent regulation alone won’t solve the housing crisis, but it is a necessary step.
sam kolias responds to annie hodgins
Rent controls haven’t worked in the past, and there is no evidence they will work now. According to the National Rent Ranking report (rentals.ca) from March 2024, some of the highest rents in Canada are in rent-controlled markets: Vancouver, Toronto, Ottawa and now Halifax. In fact, the 21 most expensive cities to rent in (the red/orange zone) are in rent-controlled provinces. Conversely, three of the five most-affordable cities (Saskatoon, Regina, Edmonton) are in non-regulated markets. Calgary sits in the top 10 most affordable. No one is going to the “red zones” expecting to find affordable housing; they’re coming to Alberta and Saskatchewan. Outside of Canada, one can look to the failed policy in Sweden, where rent control has resulted in an extreme supply shortage and wait times of 10 years or more for affordable housing. Beyond creating supply shortages and long wait times, rent-regulated markets induce excessive rent hikes when units turn over, as landlords seek to recoup losses imposed by years of rental caps.
Let’s examine why rent control has failed to work.
New housing supply creates competition, which lowers prices. It’s no coincidence that Alberta and Saskatchewan, both of which repealed rent caps, have the highest investment per capita in apartment development and the most affordable rents. Building more affordable housing requires the private sector to continue investing. But will people invest if they can’t make a profit? Profit is essential for financial survival. It provides the tools and capital necessary to improve products and services. Housing is a capital-intense product and requires a high level of investment. But profit isn’t found in the mission statement of any housing provider. Why? Ken Blanchard (US author and business professional) tells us why, and it’s no secret: “Profit is the applause you get for taking care of your customers and creating a motivating environment for your people.”
Rent controls inhibit the cash flow that housing providers require to properly maintain housing.
Those who suggest profits for housing providers come solely from the pockets of renters fail to recognize the many sound, innovative business practices used by housing providers, such as controlling expenses, sourcing competitive products and services and introducing sustainability standards. Some people argue REITs have become “financialized.” This is a new, vaguely defined and poorly employed term used against private housing providers. Publicly traded REITs represent less than 6 per cent of the purpose-built rental stock, which is less than 3 per cent of the total rental market in Canada. So the assertion that REITs control the market doesn’t compute.
At Boardwalk we annually invest over $100-million back into our communities to not only maintain but enhance our residents’ living experience. Without happy long-term residents, there is no profit to reinvest—and nearly every dollar of non-taxable income Boardwalk receives is reinvested back into affordable housing. No uniform rental cap applied across all housing providers could ensure operational sustainability and quality housing. The cost of housing varies by asset age, condition and upkeep, all of which is compounded by rising interest rates, making the sustainable provision of affordable housing in a rent-controlled market impossible.
Rent controls inhibit the cash flow that housing providers require to properly maintain housing. Such controls have led to renters living in dire conditions. They deter much-needed investment and development of new housing. A blunt, wide-sweeping public policy fails because it removes flexibility.
Real solutions are found in taxation policies that stimulate investment and ensure access to lower-cost capital. These drive the development of more purpose-built, affordable housing, creating controllable vacancy, which drives competition and decreases rents. Rent supplements are also essential and are most effective when provided to those in need, not simply everyone, as rent controls are.
As I say earlier, a viable solution would be a government acquisition fund that allows social housing providers direct access to capital to acquire existing housing in mature neighbourhoods from private landlords. This would prioritize immediate access to affordable housing versus the higher costs and longer wait times associated with new construction. As well, sound tax policies incentivize private landlords to create more housing across the entire housing spectrum. Tax incentives in the 1970s worked and created much-needed housing supply.
The principles of economics in a free market work. Consider non-controlled office rents in Toronto and how vacancy creates competition to keep prices affordable. Let these principles do what they have always done: ensure housing affordability for all Canadians.
—Co-authored with Boyd Belisle, vice president of community and culture, Boardwalk REIT
annie hodgins responds to sam kolias
Nobody can deny that rents are out of control across Canada. And higher rents mean higher profits for investors. While acknowledging that we’re in a housing affordability crisis, some continue to believe that governments shouldn’t do anything about it. A common argument is that we should rely on the market law of supply and demand to keep rents at reasonable levels.
However, evidence shows that relying on supply and demand hasn’t worked. In both Alberta and Saskatchewan, one-third of renters live in unaffordable housing, and those rates are only going to increase as rents continue to skyrocket. From early 2023 to early 2024 Alberta saw the highest average rent increase in Canada, and Saskatchewan wasn’t far behind. Both provinces may be seeing investment in rental housing, but the data show that investment isn’t translating into lower rents.
This comes as no surprise. When examining housing markets, economists used to rely on now-outdated models of supply and demand, which predicted that, left unattended, housing markets would naturally stabilize rents at rates that would both be affordable to renters and maintain reasonable profit margins for landlords. But those models didn’t account for the unique characteristics of the housing market and have been widely discredited. Modern economists now recognize that housing supply is inelastic: it doesn’t respond very much to price changes. Unlike elastic commodities such as widgets produced in a factory, building housing is expensive, requires land, takes time and produces a capital asset that lasts for decades. Housing demand is also inelastic: people can’t simply choose not to procure housing. This is, of course, because housing is a basic necessity of life that everyone is entitled to. The law of supply and demand may naturally prevent price gouging in elastic commodity markets, but it doesn’t stop rent gouging in the housing market. That’s exactly what we’re seeing in Alberta, where landlords’ profit margins are steadily increasing during an affordability crisis that is driving people out of their homes.
Reasonable rents aren’t maintained by relying on supply and demand. Other measures need to be taken.
Because we’ve seen that reasonable rents aren’t maintained by relying on supply and demand, other measures need to be taken to make sure everyone has a home they can afford. And we no longer have to rely on outdated theoretical models—economists now have a wealth of direct evidence to assess the effects of rent regulation. Here’s what we know:
Constructing new purpose-built rental housing is not an effective way to improve affordability. In some cases it can even raise the cost of existing homes. To actually ensure affordable rents through supply and demand, the Canada Mortgage and Housing Corporation (CMHC) calculates that the private market would need to build an impossible 5.8 million new units by 2030—vastly more than the 1.9 million units the market is projected to actually build.
Rent regulation works. Studies show that well-designed rent regulation is effective at stabilizing rents. The evidence disproves myths that rent regulation only benefits wealthy renters, or that it somehow leads to higher rents.
Rent regulation doesn’t deter investment. A study of 16 countries over 100 years found “no significant correlation between modern rent controls and the rate of rental housing construction.” In Canada, CMHC analyzed nearly 50 years of data and found “no significant evidence that rental starts were lower in rent-control markets than in no-rent-control markets.” Numerous other studies have found the same thing. The myth that rent regulation scares away investors is just that: a myth.
Rent regulation doesn’t impact building maintenance. CMHC found no evidence that rent controls lead landlords to let rental units fall into disrepair. Too many renters live in inadequately maintained homes in all provinces, but the rates aren’t noticeably higher in rent-regulated provinces. This may be because modern rent regulation systems notably allow landlords to pass expenses related to maintenance and upkeep through to tenants, or it may be that companies aren’t as cash-strapped as they claim. Either way, the evidence is clear that rent regulation doesn’t lead to disrepair.
Rent regulation is one part of a solution to the housing affordability crisis that would ensure no one is forced to live without a home. We also need programs to create and sustain more non-market affordable housing, such as social, non-profit and co-operative housing. We also need programs to build new affordable private-market housing—programs that include affordability requirements and don’t rely on outdated models of supply and demand. But while such programs are essential, they won’t address the wholesale loss of existing affordable housing happening now in Alberta and across Canada.
The evidence is clear: to keep existing housing affordable and renters in their homes, we need rent regulation, now.
____________________________________________
