As we’ve noted on the blog before, there has been an "Affordable Housing Task Force" out and about in Alberta, trying to come up with recomendations to make housing more affordable. It appears as though they have given their recommendations to the government and the government has chosen to go ahead with just one of the recommendations – to allow rent increases only once a year.
I don’t really see what kind of difference this is going to make, it just means that instead of bring in rent increases gradually over the course of the year, landlords will do one lump sum increase. There were some other announcements about funding for different initiatives, like some new affordable spaces in Fort McMurray. The details are in the following article from the CBC:
Alberta moves to protect tenants, won’t curb rents
The Alberta government is changing some of the rules governing rent hikes, but won’t go as far as implementing rent control, Housing Minister Ray Danyluk announced Tuesday.
Under changes to be introduced in the legislature, landlords will only be allowed to increase rents only once a year instead of twice.
And landlords wanting to kick a tenant out to do major renovations or convert a rental to a condominium will have to give at least one year’s notice and won’t be allowed to increase the rent during that time.
Even though there is no cap on what the rent increase can be, Danyluk said he isn’t worried that renters will get gouged.
"I don’t believe that it’s going to jack up the price, but it gives some stability for the renter to know that he does have stability for an extended period of time."
By 2010, the provincial government will also introduce a province-wide program to help landlords and tenants resolve disputes outside court, Danyluk said.
Earlier this year, Premier Ed Stelmach struck an affordable housing task force to consult with the public and advise the government on what to do about the soaring housing prices and falling vacancy rates in Alberta.
Edmonton NDP MLA Ray Martin, who sat on the task force, said Tuesday that a large number of the recommendations were rejected, including a call for a cap on rent increases over two years.
"The premier seems to think having task forces is action," he said. "Unless you take that seriously, what’s the point of having task forces?"
Alberta promising 11,000 affordable units
The province is hoping provincial funding and partnerships with other governments and organizations will create more than 11,000 new affordable housing units over the next five years, Danyluk said.
Among the funding announced Tuesday:
- A new Municipal Sustainability Housing Program funded by $100 million a year for three years.
- $45 million for 300 affordable housing units in Fort McMurray.
- A new $7 million fund to assist people at risk of losing accommodations due to rent increase and newcomers "who may need temporary assistance until their first paycheque arrives."
- An extra $16 million for initiatives that help the homeless.
Liberal housing critic Dave Taylor said the money being invested in housing is substantial, but he would have liked to see more done to prevent apartments from being converted to condos.
"I believe when you’re dealing with a vacancy rate of 1.7 per cent or less — or [less than] one per cent in my constituency in Calgary — you need a moratorium on condo conversions until you can add supply to the system."
Martin says he would have particularly liked to see more money invested in transitional housing, to try to get people out of shelters and into their own homes.
an article in today’s journal just proved your ‘one lump sum’ theory. some landlord did a $400 raise on an old building!
Rent vs own calculators simply don’t prepare people for housing booms and busts in Alberta. Do they?
Live and learn. I don’t think we want the government too involved. Give it a couple more years and let’s make sure that we don’t bust and get stuck with a bunch of useless rent control laws that only hurt property owners.
Sheldon,
The government is trying to control the rent by bringing in the rent control act. They say the landlords cannot increase rent for 1 year if they have done so in the recent past. The government is also proposing to make all recent rent increases invalid.
What happens if the landlords now start serving vacate notices? This will make landlords move out of the current lease. Following this landlords are free to increase rent and sign new lease.
Sheldon, do you think the Rent Control Act will backfire and will make more people homeless?
Looking at the scenario, the government can propose rent control act but they cannot bind landlords to give property on rent for certain time period. The baseline is if landlords starts to enter into month to month lease they can get the place vacated anytime with 30 day notice and implement new rental rates in their new lease.
Any comments on the above?
As an update, those “lump sum” increases handed out last week are invalid. An update on the article in the Journal says “any tenant that had had a rent increase in the previous 365 days could not have their rent raised again (for another year.” That is a big burn to landlords. It’s one thing to put in rent controls, it’s another to basically make them retroactive.
Those landlords that are facing increasing costs (as I’m sure almost all are) and had plans in place to increase rent gradually through the year to offset those costs are now totally screwed! I have to admit when I heard about the new rent controls being put in place I didn’t think it was much of a solution, because landlords would just forecast their costs and increase rents once a year. I thought that would hurt tenants in the short term but the market would adjust over time. Now I see this as a major problem, since landlords have not had a chance to adjust – if they’ve increased their rent at all in the past year they have to wait, and I’m certain when the wait is over those increases are going to be big.
My thoughts right now are that the controls put in place only help tenants with a current long term lease in place. Anyone who needs to find new housing is going to pay a bigger premium, to offset the losses landlords face with their existing tenants.
Hey Sara,
I think your assessment is right on the $.
Given that governments in general pass legislation to appease or shut up people without thinking through the long-term socioeconomic ramifications, I suppose we shouldn’t be too surprised at this.
I wouldn’t want to be a landlord right now, though. I’ll be curious to see what, if any, impact this has on the demand on housing (e.g. how much of the market is investors who wanted rental properies who will now pull out)
Sara,
You did not address my earlier questions.
Landlords who could not increase the rent or are unable to increae in near future because of Rent Control Act will simply give vacate notice/s to exisiting renter/s. They will then advertise for new renters with substantial rent increase.
Any way Landlords win! I will be taking possession of a new condo in 4 months. Earlier I thought I will give it on rent for $1200/ month, now the price goes up to $1700/ month. Baseline is clear – Take it or leave it!
I think this Act will backfire and will create lot of problems.
Few more points for thought:
1. Leases that are going to expire in near future will not be renewed at old rates. Landlord will simply ask renters to vacate instead of entering into any dispute with the Rent Control Act.
2. These renters on leaving will start looking for new condos/ apartments/ houses for rent.
3. Housing that is available to these new renters will be at a steep price, as new landlords or new availability comes with steep price increase. Remember – Ed says landlords cannot increase rent for 12 months. So, better do a steep jump now.
4. Comes Fall, there will be renters living in apartments for great price [coz they are into long term lease] but very WORRIED for their lease time. And there will be new renters looking at very expensive housing.
5. The result will creat headache for Ed and his party for sure.
Ulysis,
Sorry for the delay to your question. I have been busy flipping burgers at $25./hr to help with my real estate career.
To sum up your question, I think you are asking me what I think of the Rent control act?
I can only say it is a very short sighted decision that offers temporary relief. It is a political solution to an economic reality, that will as of now have unexpected impacts.
Consider this. I have units that I am renting and I have been minimizing my rental increases to keep pace with utlities and other increases and have very happy tenants. I am now told I can only do one increase per year. This forces me to forecast and I will have no choice but to err on the side of caution and maybe over guesstimate how much I will have to increase. Better be safe than sorry. As an investor I’m not renting units to lose money, and if I can’t make money renting then I will have to sell, which will decrease the rental universe and theorhetically increase rents.
Hyperbole aside, it sucks for tenants. If they think they got good news with this they learn the opposite is true. Did the Journal report on whether or not the units that got the 400 a month rent increase were below market rents, or are the owners faced with an extraordinary assessment? Maybe the landlord was just peeved and doesn’t like the government telling him what to do with HIS units. So what happens if the owners have an extraordinary expense and they can’t increase the rent? Hello sale to numbered company of brother who hikes the rent.
All this does is create a false sense of security for tenants, and makes the owners create workarounds to get their market equilibrium. So net effect will be little change. Certainly less investors go for rental units -many of those investors may switch to flipping.
What the government should be doing is offering incentives to investors to put and keep units in the rental universe, which keeps up the competition. But I guess Soviet style economics is preferred.
LOL at the “Soviet style economics” statement
Ulysis, maybe you could contact the Journal or Sun with your theory and how landlords will get around this by vacating people. I think Sheldon is right–people don’t realize how much this will hurt, rather than help them in the long run.
Another article in the Journal today raised a really good point–where was the government years ago when landlords experienced astronomical vacancy rates?
One thing I’m confused about (I’m american, bear with me) is that is this legislation ‘valid’ or ‘law’ now? I read that one premier introduced it, but doesn’t the entire legislature of Alberta have to “pass” it? How did it become law within the day it was introduced? I would love someone’s help on this one because I’m a bit confused
Reese, that is a very good question about this legislation needing to be “passed.” I would think it needs to be read in legislature and passed before it becomes law. I don’t know the answer to that question. I tried calling the landlord and tenant board but found nothing on their helpline or web site, and after waiting on hold for a long time gave up. Perhaps someone else can enlighten us?