Real solutions -- not rent controls -- are needed:
Rent controls won't work.
I wish they would. I wish the government could wave a wand and fix Edmonton's dysfunctional rental market. But there's no magic cure for the mess in which our city suddenly finds itself.
We don't have enough rental units. We don't just have a shortage of "affordable" housing, we have a shortage of rental accommodation, period.
Right now, rental vacancy rates in Edmonton are at about 0.7 per cent. And the Canada Mortgage and Housing Corporation is estimating that vacancy rates are heading down to 0.5 per cent. It might was well be zero.
People are moving here every day, looking for work, looking for opportunity, hoping to ride our boom. Families are growing, as Edmonton experiences its biggest baby boom in a generation. And there's another pressure on the rental market -- a huge demographic cohort, the kids of the baby boomers, are hitting their early 20s in a giant wave and looking to move out on their own.
Normally when market demand goes up, so does supply. But around here, that basic market law isn't working. Because Edmonton's economy was stalled for much of the last 25 years, our rental inventory is extremely low. For decades, few new apartments were built. Much of our existing rental stock is old and run-down. Meanwhile, it's become so ridiculously expensive to build anything new, so difficult to hire construction crews, landlords and investors aren't rushing to build. Right now, the CMHC estimates that it would take monthly rents in the $1,500 to $2,000 range to convince developers to put up more apartments.
In this overheated market, it's more attractive for most property developers to put up condominiums than rental units. With condos, you can pre-sell the units to finance your construction costs. And because the condo is "sold" as it's built, investors get their money out faster.
What we desperately need in Edmonton are more rental units. But all the historic evidence suggests rent controls only make housing shortages worse.
They discourage investors from building new apartments. And they discourage owners of existing buildings from making needed repairs and improvements. The last thing we need right now is anything that gives developers a disincentive to build.
Monkeying with the market is a risky business. Why have we seen such an abrupt, remarkable spike in rents in the last few weeks? In part, it's because the provincial government suggested it might bring in rules to limit landlords to one rental increase a year. No surprise, then, that some landlords are hiking prices excessively now, because they fear this might be their last chance to do so. In a perverse way, the public and political debate around rent control has actually had the unintended effect of jacking up rents.
It might be possible for the province to come up with some middle-ground solution -- a regulation that rents can only rise by a certain percentage, over a certain time frame. But that, at best, would only provide temporary relief for today's renters. The province could also raise the rent allowance it pays to people on welfare and AISH; such increases are long overdue. But subsidies would only put upwards pressure on prices and do little to address the real problem -- our shortage of places to live.
I wish I had some alternate solution. Oh, there are a few small suggestions I could make. The city needs a program to encourage more Edmontonians to open up secondary rental suites in their homes. That might include municipal incentives to homeowners to upgrade their basements to conform to today's fire codes. The city could do more, too, to encourage people to take in boarders, not in self-contained suites but in extra bedrooms.
Certainly, all three levels of government could do more to fund and build rental units or affordable condos. But that will take time, especially in our manic construction zone. The city might consider, too, requiring any future condo development to include a certain number of below-market price rental suites -- thought that won't help in the short term either.
In that short term, we may have to open up more city parks and campsites for overnight stays on an emergency basis. Maybe that means setting up a bunch of work-camp trailers somewhere as temporary shelter for people, particularly families, who are in dire straits.
Truth is, for many, the so-called Alberta Advantage is going to get pretty ugly. The comfortable standard of living we took for granted through years of economic downturn is gone. Sure, there are more jobs to be had, more money to be earned. But there's a big downside.
The days of high vacancy rates and low rents are over. Harsh though it sounds, people are going to have to adjust their expectations. Instead of living alone in their own apartments, some may have to find roommates to split the rent or move it with family. Instead of renting in the city, some may have to look out of town. Sad to say, some may have to leave Edmonton altogether.
It's not fair. It's not nice. It's not what we're used to. But it's the painful reality we face. And we need to find ways to deal with it -- fixes that really work.
If this were a normal Paula Simons article, I would tell you that the highlighted portions are green. This time, rather, they're blue. That's pretty good, really.
