Should governments get involved in the rental market?


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    One of the most common arguments against renting out over the property is the problem of “renovation”. Basically, this happens when a landlord uses the excuse of “renovation” to kick their existing tenants out so they can raise the rent beyond the guidelines.

    This is not as problematic in small towns and suburbs, but is common in large cities where there are many jobs. As a result, fierce competition and low vacancy rates mean that everyone gets into a hunger-game-style battle for rent.

    Oddly enough, in the nine years we lived in Toronto, North America’s fourth largest city, we never encountered this problem. Maybe it’s luck, maybe it’s choosing the right landlord and rental type, but instead of renting a shiny new apartment a 5 minute walk from work we decided to try the top half of an older townhouse from the 1960s to rent within a 25 minute subway ride. The landlord, a white-haired man in his sixties and a self-proclaimed “dollar-less guy”, had bought the house decades ago and was less interested in maximizing profits than in minimizing landlords’ headaches. He was willing to rent us below market value for nearly a decade, as long as we took good care of the place and didn’t bother it too much. In fact, we got along so well that he offered to give a $ 50 / month discount to trusted friends or family members whom we would recommend upon our departure.

    Our rent of $ 850 / month from 2006 to 2015.

    But what if you can’t negotiate a cute deal with your landlord like us? Do you constantly worry about getting kicked out of your home because of a greedy landlord?

    Well, it turns out there is hope. I recently came across this article:

    Is a Small British Columbia City “Renovation” Statute Coming to Toronto?

    It turns out Toronto, New Westminster, BC (or “New West” as the cool kids like to call it) is considering copying to create a new statute that prevents renovations by:

    1. Hold landlords responsible for alternative accommodation when renters need to leave a unit for renovation.
    2. Enabling tenants to move into their or another unit for the same rent.

    After this law was implemented, the number of renovations in New West dropped from 333 to 0! And it has stayed that way since 2019.

    And then everyone lived happily ever after and no one was sued or threatened afterwards.

    HA! I wish.

    Immediately after this law was passed two years ago, a developer filed a lawsuit against the company. In fact, it went as far as the British Columbia Court of Appeals, but was eventually lost when the judge ruled that the city had the right to make the statute based on the provincial municipal charter.

    Take that, real estate mafia! This has caught the attention of other cities and they are trying to pass the same law.

    Could this type of law work in your city? Well, here’s the thing about rental controls. As with any government intervention in the free market, there are always pros and cons:

    Pros: Keeps the rent affordable

    San Francisco, New York, LA, almost all expensive cities in the US have some sort of rent control. Politically, this is a popular choice as most people ideally believe that it will help those who are struggling to afford to continue living in an expensive city instead of being forced onto the streets.

    And in a way they are right. Rent control is undeniably helpful … for existing tenants.

    But what about new tenants?

    Con: Reduces the housing stock

    The first major rent control paper, written by economists Milton Friedman and George Stigler in 1946, argues that rent control only helps existing tenants. It actually hurts new tenants by making it harder for them to find housing. This is because developers no longer have an incentive to build purpose-built rental units. Since there are no new buildings being built and existing tenants refusing to move out due to their sweet leases, the rental portfolio is even tighter.

    Pro: Attracts more people to the city

    Without rent control, people on lower incomes have no choice but to leave the city, making it harder for employers to hire workers. With affordable housing, more of these workers will be encouraged to stay and get to work more easily without having to travel long distances. New prospects won’t be afraid of moving to town for a job either.

    Con: Prevents landlords from keeping property

    A landlord can, among other things, stop caring for their property in a passive-aggressive manner in order to save money and drive away their tenants. There are laws that require landlords to maintain a safe living environment, but as we all know, these laws are not always followed. They can also leave the building in neglect and disorder, reducing the attractiveness of the neighborhood and increasing crime.

    While there are good intentions behind the New West Statute, only time will tell if it will reduce renovations in other cities or just the housing stock.

    In the meantime…

    If you rent, don’t live in BC and are worried about renovations, here are some tips I got while renting in crowded, expensive Toronto:

    Choose functional apartments

    Choose “functional” rentals over shiny new condos. They may be older and not as easy on the eyes, but they are definitely easier on your wallet. They also shorten your time to FI. In Toronto, you want to select units that have been built or rented first In front November 15, 2018. These units cannot increase the rent per annum beyond the provincial guidelines, which in Ontario was 2.2% in 2020.

    Find older landlords

    In addition to apartments, you can also rent spaces from older landlords (reverse agism for profit!) Who do not need the money. These landlords aren’t real estate investors, they just rent a second property or part of their maisonette to offset the cost of their mortgage (which is generally low because they bought the place decades ago). They also don’t want a lot of hassle and would rather be charging trustworthy tenants less than the market rent to avoid dealing with the tenant headache. Our current rental was an Airbnb turning into long term rental and the landlord gave us a deal because they trust us. Like us, you can negotiate a lower rent.

    Know your tenant rights

    Find out about your local laws and know your rights. Many tenants are being taken advantage of because they don’t know that the law is on their side. They are willing to go along with what the landlord says just because they are the landlord (e.g., in Toronto, when you find out your landlord lied about renting out their unit “to the family” just to see them listing them for a higher rent, or if the family member doesn’t live there for a full year, you can sue them for up to $ 50,000! And you have a full year after you move out to do so to do.)

    If all else fails, you can always move to New West!

    What do you think? Are you for or against rent control? Let’s hear it in the comments below!

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