Do Rent Controls Restrict The Supply of Rental Housing?: An Interview with Murtaza Haider
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- Опубліковано 25 кві 2024
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In today’s episode, John talks to Murtaza Haider about rent controls in Canada and their potential impact on rental supply. Murtaza is a Data Science and Real Estate Management professor at Toronto Metropolitan University.
In the lively chat, we discuss why Ontario has seen very little growth in rental housing even though the new rental supply is not rent-controlled. We also discuss the differences in approach to rental housing between North American and European economists and governments. North Americans lean more towards a free market approach to rental housing, while Europeans have coupled adequate rental supply while maintaining policies that protect tenants.
Today's show links:
Ricardo Tranjan in the Toronto Star: www.thestar.com/opinion/contr...
Murtaza Haider in the Financial Post: financialpost.com/real-estate...
Rent Controls, Rental Prices and Rental Supply - CMHC Summary
tinyurl.com/2efscwuw
Study of the Impacts of Rent Control Policies - CMHC Report
tinyurl.com/458svhzj
Follow Murtaza Haider on Twitter: @regionomics
Contact Us:
John Pasalis, President and Broker, Realosophy Realty, Toronto | Email: askjohn@movesmartly.com | Twitter: @JohnPasalis
Urmi Desai, Editor/Host, Move Smartly | Email: editor@movesmartly.com | X-Twitter: @MoveSmartly
About This Show
The Move Smartly show is co-hosted by Urmi Desai, Editor of Move Smartly, and John Pasalis, President and Broker of Realosophy Realty. MoveSmartly.com and its media channels on UA-cam and various podcast platforms are powered by Realosophy Realty in Toronto, Canada.
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We rented my elderly mom’s basement so that she could earn some extra money. Beautiful bright walkout unit that provided a young couple a place and my mom some extra cash. Unfortunately the tenant destroyed the unit and stopped paying rent. My mom had to subsidize them for months until we were able to get them out. How fair is that?
I would like to see anyone not pay their mortgage, car lease, loan, and taxes, and get away with it!
Actually true story...😢😢😢😢😢
What is the problem with eviction at the end of signed term? Why should renters be allowed to stay there indefinitely? the only practical reason is to make rent control work, and effectively violate property rights of the owner. And by the way I am not a landlord, but I am an example of lower supply due to rent control and such. I have space and resources to build additional unit on my land and the only reason I am not doing that - ridiculous "renters rights". I am willing to take a risk within a term of rental agreement and I have no intention to increase rent over the market, but when I see a possibility of me loosing control over my property even after rent term expired due to government regulation - I am out, and you have one less unit on the market.
While we're evicting tenants at the end of their leases, let's evict homeowners at the end of their mortgage terms. After all, the bank could probably sell that house for a lot more than it sold for five years ago - which would result in a bigger mortgage and therefore more revenue for the bank.
If it's good for the goose, it's good for the gander, right?
@@user-jr1fd6ps2f Bank doesn't own the house, agreement between the owner and the bank is that owner pays back the money at the end. Bank is happy and landowner is happy no problem there. Agreement between renter and landlord is that house is rented for a year, but for some reason government steps in and says that renter can take the house hostage forever.
@@VitaliyMonastyrevMaybe it's time for that to change. We should be treating everyone equally.
@@user-jr1fd6ps2f Exactly, all contracts should be obeyed as written and it will be equal.
@@user-jr1fd6ps2f
What do you mean? at the end of your mortgage term you have to pay the interest rates available at that time, there’s no ‘mortgage controls’. Try not paying your mortgage and see what happens.
I disagree on only one point; It is NOT the responsibility of the government to house me and mine. It is my responsibility. My responsibility to maintain my reputation so landlords will agree to rent to me. My responsibility to earn enough money to pay rent and keep up the condition and cleanliness of the property. The government's responsibility is to the macro population in setting the parameters properly so the private sector will be incentivized to provide housing. The gov. has failed in two ways, one of which is taxation; they are doing their level best to DISincentivize landlords while still trumpeting the mantra of 'we will provide.' The other way they are hurting the situation is by legislation which is too one sided in favour of tenants. By making it more difficult to deal with bad renters, many people will NOT be landlords. In the dim distant past, many people ended up with an extra place and earned a bit of money by renting it out. Fast forward through a couple of terrible tenants and especially once the courts got through with them, they sold and will never own another rental property. It is notable that Alberta has a more balanced approach to tenants and there is no shortage of housing for rent here, albeit at somewhat higher prices than previously, though much lower than Ontario and BC.
No shortage if housing in Alberta no surprise.
27:28 I think John complete missed his point here.
I think half the time John doesn't fully listen to the guest.
During most of his interviews his guest will make a point and he'll just say "that's interesting" then move on.
Didn't listen at all 😂
I agreed with Mr. Haider. See what government done has affected Canada productivity.
Great discussion. Agree with Mr Haider. Technically even if you live in your house there's no limits mortgage rates and property tax instead of purchase price. Also, if a place is rented out at locked in rates it does impact the resale price
That's a good point. A rent controlled unit would eliminate smart investors which could lower it's resale price. A landlord may also have to pay the tenant cash for keys in order to sell it. Investors have no incentive to buy right now and they aren't. I wonder what supply will look like 4 years from now.
32:06 100% the state of rent control buildings is such a shame.
that was a really pleasant and stimulating debate. Bravo for having him on and letting him speak.
Rent Control has been awful for the rental markets. The rate increases allowed by the gov't never comes close to covering inflation.
Social housing run by the gov't is NOT the solution for affordable housing. They are money pits for taxpayers that have always ended up as ghettos. Sure we should take care of the elderly, and other vulnerable people who just can't work, but affordable housing for others should come from private coops. That is, the gov't should set up a program to build private coops. These coops might be built by the city but is sold to private citizens basically at cost and these people pay a special mortgage and run the buildings themselves. If they want subsidized income, build buildings with commercial spaces that would rent at market cost and that rent would go to subsidize the rents.
Public housing is a disaster and always will be because the gov't refuses to deal with the trouble families, gangs, violent crime, repairs, the caustic social issues.
Appreciate you discussing both sides. thanks
He's right about the incentives part but what about the red tape? Its really a pain point not to be underestimated in adding supply.
at 28.01. Banks are not offering assistance to owners of tenanted homes only to owner occupied. Therefore the large payment deficit is borne by the home owner. Many of these tenanted homes are coming under power of sale and tenants may have to leave as the homes are seized and sold.
Great episode. Love the insight and perspective. I would encourage everyone to read the articles provided and google any counterarguments to get both perspectives.
The guest does believe in some form of control rather then complete free market anarchy in rentals. He said, the tenant shouldn't be subject to a landlord raising rent absurdly to evict the tenant. And he also talked about some form of tenure security for long term renter. I think this "lower bound" government involvement is one end of the spectrum of possible solutions. And the other "extreme" is the old style communism edict that fixed the rent levels seems to be in agreement (much like 100% free markets both agree would not work well). And so what is the higher bound of government involvement? I think the hard part and best answer is finding the ideal point of government involvement. That said, sure throwing tax dollars and creating an oversupply of purpose built rental will help as well. The other thing I would like discussed is coupling rental increases to inflation or some metric much like pensions are. That seems like a possible compromise.
Good catch, youre totally right
I meant to circle back and ask him about some of those points but I ran out of time. I agree, his position wasn't clear because it sounds like he believes in some form of rent control and tenure seurity
@john_pasalis in California, there is a 10% rent increase cap, in Oregon, it's different for different areas, but it ranges somewhere in 8 and 9% range. I think, it should be inflation plus X percentage. Not just inflation. I have seen some CMHC financing that ties affordable unit rent increase to annual inflation in the rental accommodation category, which is weird as it probably translates to market average rent increase. Ontario's and BCs model is the most stringent one, and they still have the highest rents. It is hard to tell what came first. Most rent controlled purpose built rental property owners in Ontario and BC would rather give a month or two free instead of lowering the gross rent. It is because they are stuck with that same gross rent for years and only get CPI adjustments. This CPI is often well below the inflation in the cost of constructions and maintenance of properties or increase in the mortgage costs.
Great argument by Mustafa, the privision of affordable housing is government's responsibility, but the government is punishing those that supply this housing. The government should build it if they want to control the pricing. Also, the laws severely limit the sale price of rented units. You can sell the property, but you can't give a vacant possession without significant headache. I have seen institutional investors regretting the above guideline increase as it gives a tiny increase and requires them to monitor it for years, with significant legal and administrative hurdles and overload. For a mom and pop home owner, the process is not even worth it. The mortgage can and did go up 20 to 30% for many homeowners, and a ton of properties are cashflow negative, but you can't increase the rent. This is nuts.
I'm a landlord in Toronto, and i can say rent controls would motivate me to sell real estate here and invest in US and global stocks
Official inflation understates real inflation by a wide margin. Money will flee from the real estate sector to go where its treated better. And when this happens we get less new housing construction
Great show. It highlights different side of the argument 👌 💯
John, I was impressed by your ability to listen quietly in the face of your guest's logically incoherent and at times contradictory arguments. I would love to see you examine this issue yourself - we could all benefit from your intelligent and evidence-based approach.
And of course, at the risk of beating a dead horse, the real solution to the problems raised by Ricardo and your guest is profit-cap rent control like Switzerland's, which has produced ample, sustained private sector investment and an impeccably-maintained housing stock. I know, I'm living in it now!
This guess you have brought on is very very interesting very smart man with some interesting points! Thank you for letting him speak you're very courteous.
If you restrain rent you are effectively restraining what a rental property can sell for.
Great interview, I lean towards your view myself however Mr. Haider did bring up a couple interesting points. Some of his arguments came across almost as inflammatory inverse situations rather than based in reality.
I am not a tenant nor a landlord but I could potentially find myself both paying rent for a bigger place with my girlfriend while renting out my existing 1 bedroom unit to help pay for the increased rent of the larger unit. Personally I think rent control needs to exist HOWEVER from sitting on the sidelines it has become abundantly obvious that landlords hold tremendous risk and there needs to be an overhaul in how the eviction process is handled. In my personal opinion not paying rent for as little as two months is grounds for immediate eviction and the fact that it takes over a year in some cases to get a bad tenant evicted is a huge problem. It also makes no sense that tenants can just decide to not pay rent with no repercussions what soever. Failing to not pay rent, remaining in the dwelling, and then holding landlords hostage with cash for keys demands is theft /fraud/extortion and should be criminally treated as such. If you fix this problem you reduce the risk for landlords, bringing down rent prices and increasing supply as more units will become available on the market.
That is what happens when mom and pop investing gets out of control. They supply of well qualified tenants is not infinite so investors will have to cut corners and not do their due diligence if they want to fill the units, particularly at these prices. If you rent to a bad tenant that is your problem as a land owner. Its just funny how investors think market forces should only apply to tenants.
Clearly we need a balance between making properties profitable and protecting tenants. Lower inflation/interest rates will help this so it starts with gov't - less size less spending.
I can empathize how most people don't understand the problem with pricing manipulation (ie. rent control). I wouldn't have understood this if I didn't happen to take Economics 101 in college. It's like math, physics, etc. (eg. 1+1=2; gravity causes objects to fall from high to low) Most people never understood nor studied these subjects. (I happen to be a math major and took an Economics course in school).
Economics 101 - when you manipulate the price, you artificially cause the natural equilibrium of supply and demand to shift, hence the supply and demand becomes out of balance (depending on how you manipulate the price, you get either excess supply, or excess demand)
Economics is sort of like the subject of math, physics, etc. These subjects study the way things naturally work: 1+1 equals 2; water flows from high to low due to gravity; supply and demand naturally creates an equilibrium.
The Economics concept of supply, demand, equilibrium, price manipulation also applies similarly to labor, job, wage.
I guess his whole point was there waant enough incentive for developers to invest in purpose built rentals
Sorry Haider, rental units are not in short supply because of government policy and nobody is intentionally restricting the cashflow of private Landlords. Vacancy rate is at 1.5 because of mass immigration and the lack of infrastructure. What are you talking about?!
The report "Rent Controls, Rental Prices and Rental Supply - CMHC Summary" clearly states,
"Tenancy deregulation regimes may lead to a decrease in rental supply. However, this result may not apply exclusively to tenancy deregulation but rather to ***** the presence of rent controls more broadly ***"
Essentially, the report says that rent controls cause the decrease in rental supply, aligning with what the guest was saying. I guess no one, even the host, is not really reading the report.
Great commentary to about the 25 minute mark but then it was too much of a stretch comparing landords/rent with home owners and price control.
Great logic deductions from Haider! Great interview! John, John, let's not argue only to have something to say, 😀
Very good analysis
I'm just curious, among the economists who claim that rent controls don't work, how many are renters?
If rent controls didn't work, landlords wouldn't be against them.
Rent control is bad for most market participants. There is gobs of empirical evidence that shows this.
It does benefit a small minority of tenants (those with LLs that never sell, never serve notice for LL use of space, and properly maintain their units despite losing money every month via rent control) and it benefits a minority of LLs (those who have frequent turnover can get higher rents than they could without rent control because rent control reduces the vacancy rate)
But overall rent control causes more problems for market participants than it solves. If you’re intellectually honest this isn’t really debatable
Economics 101 - when you manipulate the price, you artificially cause the natural equilibrium of supply and demand to shift, hence the supply and demand becomes out of balance (depending on how you manipulate the price, you get either excess supply, or excess demand)
Economics is sort of like the subject of math, physics, etc. These subjects study the way things naturally work: 1+1 equals 2; water flows from high to low; supply and demand naturally creates an equilibrium.
The Economics concept of supply, demand, equilibrium, price manipulation also applies similarly to labor, job, wage.
@@HaydonAshurstFamily TBH I can empathize how most people don't understand the problem with pricing manipulation (ie. rent control). I wouldn't have known this if I didn't happen to take Economics 101 in college. It's like math, physics, etc. Most people never understood nor studied it. (I happen to be a math major and took an Economics course in school)
Rent control only constraints supply if the responsibility of purpose built rentals is all deferred to the private sector under a for profit model. The context is the reports you are quoting is lacking.
The Syria 🇸🇾 example is brilliant. Lots of houses in old eastern Germany 🇩🇪 were available. No housing stock here! Demographics is indeed key to understanding the needs of Canada's population.
Plenty of university stock in Ontario and Canada though but limited housing
It’s not ideology, it’s overwhelming empirical evidence (AND common sense)
Looking at observational data (90s, 70s) cannot prove causation. Basic sta101.
Cannot prove: Increasing rent control decreases purpose-built rentals. OR
Decreasing purpose-built rentals increases rent control.
These are separate statements btw which get mixed up.
There could be lots of other variables, like oh say... PRICE, QUANTITY(supply), DEMAND(population), LOCATION, INTEREST RATE, POLITICS, etc
The guest has a point that governments should build purpose-built rentals.
The host has a point that we need rental controls.
The two are not mutually exclusive.
Haven’t watched the video but the answer is yea
Great job talking about both sides of the argument, John. Respect to you sir.
Rent controls in Ontario simply restrict the growth of revenue year over year on a portion of rental units. It's a reasonable trade off to help protect existing tenants. On turnover rents go to market. The landlords know the rules of the game and price the asset accordingly. It's the same as other regulated industries such as electric utilities in many places where there are price controls in place and for good reason. I generally agree with John on this one. If you want more supply remove rent control for the first 10 years of a new build. That is enough to convince builders to build.
Sorry Haider the quality of the unit and state of good repair has no correlation to rent control policy. There are plenty of private ‘slum’ landlords in Toronto. Haider your arguments are all over the map. Rent control for purpose built rentals is required and on the flip side if tenant doesn’t pay, eviction should be a right of the landlord and swift. It’s only when abuses are allowed to happen on both sides do you get the shit show we are in right now. Purpose built rental housing is based on a different revenue model and must be subsidized by govt. with rent control. Private landlord investors, should not have rent controls, sure, but govt. regulation and taxation needs to be in place to prevent abuses, which we are finally seeing.
You’d be surprised, there are PBR condo buildings in Toronto that are not under rent control simply because they are new buildings. When I asked the sales-rep they mentioned that the PBR owner is allowed to raise prices because it’s a new building for the next 5 years
Contrary to economics 101, sorry
econ 101 are the lies they tell students before they learn actual economics
John needs to learn how to control his bias if he wants to be taken seriously. He's very arrogant. High on his success in real estate that has been 100% the result of constantly declining interest rates and 0% on his intellect. Steve Saretsky makes him look like a toddler.
John, the evidence does not support your belief that rent control doesn’t affect supply. In fact, the evidence overwhelmingly shows the opposite. You are not being objective.
If being a landlord is such a burden why don't they just sell their properties?
Investments have risks, if the mortgage goes up, it should be on the landlord, ant not the tenant.
The landlord took the risk.
I know right. Those poor landlords, what a burden they bare supporting society.
If all the landlords sold their properties, there would be a lot fewer rentals. It might so happen; many landlords I speak with are planning to sell.
For landlords it’s an investment, does anyone invest their money not to earn interest or to loose money?
There should be balance so that both tenants and landlords can benefit. It should not be one sided.
@@EDA-du5os If many don't sell their properties, it means it's still worth it. Yes, no ones invests money wanting to lose it, but if the investment goes wrong do you put the burden on the renter, who is probably trying to save money to buy their FIRST home, or the landlord who probably has at least two? Want a super safe investment? Put you money in safe conservative investments.
You're missing one link, landlord can't raise the rent just because mortgage went up. What enables rent hike is hike of rental market and it is not the same thing, technically rent may go down when mortgage goes up.
Yes, landlord takes a risk of mortgage prices going up and a risk of rental market going down (nothing stops renter from jumping to cheaper rent) but ,respectively, tenant should take a risk of rent market going up.
@@VitaliyMonastyrev Tenants don't choose to rent, so they don't choose to take the risk. Investors choose that.
If there was no rent control in Toronto whatsoever, the whole economic issues we're having would be on the renter's back. Just because the landlord had money to buy something in the past, doesn't mean they should have that extra layer of protection. You can see what happens with rentals with no rent control in TO, landlords increase by 10, 15%. Do they really need that extra income or are just taking advantage of an awful rental market?
Sounds like people with money to buy stuff deserve special treatment in every situation.
The thing I agree in the video is that more purpose rentals should be available, 100%.
But painting landlords as the victims doesn't match with common people's reality.
I completely disagree with this guest he's obviously advocating for landlords to make more money at the expense of tenants and trying to shift the burden to governments to try and backfill their unrestricted greed with non-market housing. There's absolutely no evidence that relaxing of rent controls makes housing more affordable, quite the opposite. If they released rent controls in Canadian cities now rents would explode in price, and lack of capacity to build more means the prices would stay high. If landlords don't like it they can sell and invest in a more productive asset.
It is a basic economic concept: less supply will push prices higher and the reverse is true
No kidding - no one is forcing these people to invest in real estate. In fact we would all be better off if they invested in something productive!
Obviously it will push rents that were lower than the market up, but over the time it will put downward pressure on new rentals. Basically part of the reason current rent prices are so high is that rents for old renters are locked and every new landlord has to factor this as a risk.
@@mrfirstknight1 Economics doesn't matter for leftists, they would love to just confiscate those houses.
@@user-jr1fd6ps2f Not at all. End-users do not by pre-construction condos 4-5 years before they are built. Investors do. Private builders do not build without this investment. If you take away their incentive you get no new condos built which is exactly what is happening in Toronto. In turn prices go up and so do rents. As Mr. Haider said investors are not to be demonized for helping provide housing stock.
This guest is a complete i-d-i-o-t
We desperately need strong rent control right across Canada.
If to much income goes to rent then people can't save and spend into the economy.
PS the biggest issue with homes/rent Is that poor government policies have created a massive speculative price bubble And the only real solution is to put forward policy that create causes the price of homes and rents to drop dramatically
They tried that and it backfired. No one was moving out of their low rent apartments and rents for new builds shot way up! In addition, there was no longer an incentive for the private sector to build new condos (because rents were capped). It backfired!
Why do you think there is no rent control in condos occupied after Nov 2018? It was to incentivize private builders to build rental buildings. Why would the private sector build rental buildings if they are capped on their rents? I 100% agree with Mr. Haider, let the market be free. You can't demonize the investor because without the investor you do not have supply. And now investors are not buying and in 4 years we will have no supply. The government cares about next years election, not 4 years from now...
It sounds like there's not enough competition in the home building business. Because of wealth inequality, only a few large players can build homes, and they only want to build for other rich people, leaving the poor unhoused or spending >59% of income on rent.
Because home building is so lucrative, land prices and other costs go way up on account of their investment potential. Then home prices and rents have to go up again to maintain the same profits. Rinse and repeat.