Sunset Rent Control

Commentary, Housing Affordability, Richard Morantz

YOU’RE looking for an apartment in Manitoba. After spending many hours you finally find one you like that is available and it rents for $500 per month.

There is one problem in that the appliances are old and you ask the building owner to change them. Realizing you are going to be a great tenant, he readily agrees to buy you brand new appliances as long as you agree to pay an increased rent of $525.00 per month.

This proposal sounds reasonable to you, a lease is prepared and signed by both parties.

This sounds like a normal kind of transaction that is repeated countless times all over the world every day in all kinds of endeavours. Two competent and intelligent people making a deal to their mutual benefit.

However, this particular transaction in the province of Manitoba would be in contravention of the Residential Tenancies Act. Following the consummation of the deal the tenant would be able to make a complaint to the residential tenancies branch and would be successful in having the rent rolled back to $500.

This is but one small example of how the legislation interferes in people’s lives to their detriment. Here’s another.

Maybe you’re not a renter but a homeowner. Maybe you don’t even know anyone who rents. So you think the legislation doesn’t affect you. Well, think again.

After 23 years of government interference and manipulation, many of the rents in the suburbs of Winnipeg are below where they should be. Apartment buildings are assessed based on their cash flow.

Since the rents are lower than they should be, the assessments are also lower with the result that property taxes charged by the city to apartment owners are also lower.

The effect is a shift in tax burden to the beleaguered homeowner. In Winnipeg, property taxes are generally about three per cent of a house’s value. In other Canadian cities the rate is generally about one per cent. Since real estate value is a function of its taxes, we have lower house values.

The bottom line is that a massive wealth transfer has taken place from homeowners to tenants in this province. Maybe that’s still fine as far as you’re concerned because it’s a price worth paying to protect our least fortunate citizens. If that’s what you think you are dead wrong.

The government announces every September the “guideline” for the following year. That is the percentage that a building owner can increase the rent without application and this is how the overwhelming majority of apartment units are treated.

This rate applies to all apartments all over the province. It seems fair but it would be specious to take that position. The reason is that some areas are flourishing and in demand and growing and other areas have tremendous social problems.

Yet the rent goes up the same amount no matter where you are. As a result, you have rents in the wealthy areas that are lower than they should be and rents in poorer areas that are too high.

This has been going on for 23 years and is in effect a transfer of income from the poor to the wealthy.

While the legislation is well-intentioned it is doing untold damage to our economy. Despite record low vacancy rates there is still an enormous amount of deferred maintenance on the existing aging stock of rental properties and only an anemic number of new units being constructed.

This lost or delayed economic activity costs us all economically and in the quality of our lives. There are countless stories of newcomers unable to find a decent place to live.

While these problems have been recognized and acted upon in all other provinces, Manitoba stands alone in keeping this type of program in place. It is time for the government to recognize the distortions and damage rent control is doing to the economic and social well-being of the citizens and send it off into the sunset.