CMB MAGAZINE cmba-achc.ca winter 2019 | 41
mortgagespecialists
Underlying these poor returns are the high
costs of land, construction and taxes (both
local property taxes and provincial sales taxes
on materials) relative to the earning potential
offered by rental income.
In short, it simply doesn't make financial
sense to build new rental housing, especially
when stringent rent controls cap earnings and
onerous zoning bylaws cap the number of
units builders can add to projects.
Trying to help struggling families is of
course a laudable goal, but spending tax dollars
to build units for a lucky few—while ignoring
the far greater potential of a healthy housing
market, enabled by a lot more homebuilding—
represents another lost opportunity to increase
affordability in B.C.
is article originally appeared in Fraser
Forum, the Fraser Institute blog. More at
fraserinstitute.org
T
he Horgan government
recently announced plans to spend
$492 million on the provision of
4,900 subsidized rental units in
British Columbia over the next two to three
years. ere's a clear need for units with below-
market rents, and this move will certainly help
some families. However, it ultimately picks
a few winners while doing nothing to bring
down costs for all renters.
Let's start with the problem. B.C. has a
chronic shortage of rental units. At last count,
only 0.9 per cent of Metro Vancouver's rental
units were vacant. e vacancy rate drops
to 0.7 per cent in Greater Victoria and 0.2 per
cent in Abbotsford—well below rates in other
Canadian metro areas.
Basically, there are far more would-be
renters than available units.
e result? Landlords can be very choosy
in selecting tenants. When dozens—if not
hundreds–of applicants vie for one unit, that
unit inevitably goes to the highest bidder with
the steadiest source of income. Again, a few
thousand subsidized units over several years
will undoubtedly help some working families
or low-income seniors, but in a province
of 600,000 renter households, a few thousand
are a drop in the bucket and will likely do little
to tip the scale in favour of all renters.
So what can government do to help
facilitate the many more market rental units
needed to bring rents down for all?
To start, governments—in Victoria and at
city hall—must better understand the economics
of building new rental housing. According to
a report commissioned by the Canada Housing
and Mortgage Corporation (CMHC), most
development scenarios (ranging from basic
to high-end projects) have meagre or negative
financial returns, giving builders little reason to
build new rental housing.
TARGETED RELIEF
Rather than help all renters, the B.C. government picks a lucky few
BY JOSEF FILIPOWICZ, SENIOR POLICY ANALYST, FRASER INSTITUTE
Priscilla-Du-Preez/unsplash
