Canada’s skyrocketing cost of living has been an issue plaguing the Liberal government. Few things undercut support for a government more than citizens having trouble making ends meet, whether the government is responsible for it or not.
The Trudeau government has appeared to ignore the issue and remains fixated on carbon taxes, social justice, and overseas diplomacy. But when a person can’t pay the rent or afford groceries, policies in the name of climate change and conflicts in foreign nations become secondary concerns.
With national polling indicating the Liberals could be relegated to third- or even fourth-party status in the House of Commons if an election were held today, reality has finally sunk in. The government has realized the housing crisis must be addressed and has crafted policies to try to deal with it. Unfortunately, the policy the Liberals have planned for renters appears poorly thought out and could make it even harder for people to afford a home in Canada.
There are several problems with the government’s planned legislation.
To begin with, regulating residential rental markets is typically provincial jurisdiction. Every province has legislation dealing with the rights and obligations of renters and landlords. While there may be room to improve the legislation in the provinces, it isn’t the federal government’s role to insert itself into the matter. While the federal government says it intends to work with the provinces to implement this new bill of rights, there has been no indication that provinces are interested in ripping up their current legislation and embracing the federal initiative. Most of the provinces are already embroiled in battles with the feds over jurisdictional issues. They aren’t eager to dive into yet another one.
Compelling landlords and financial institutions to start using a person’s rental payment history as part of their credit rating may sound compelling at a glance, but it can offer some pitfalls. Adding more obligations to landlords in record keeping and reporting adds expense, thus leading to rental increases even if modest. It all adds up. Further, people need to remember that having a rental payment history added to a person’s credit rating could lead to an unfairly low credit rating. Many people with low or fixed incomes have roommates. What if one of the roommates was chronically late with their share of the rent, leading to an eventual eviction? Will they all share in having the black mark on their credit rating? How about a situation where a person had to escape an abusive partner and ended up wearing the broken lease on their credit rating?
Government efforts to control residential rental costs, whether through regulations or direct rent control, never lead to lower rents. In Canada, both B.C. and Ontario have had rent control in place for years. Those provinces have the highest rents in the country.
Investing in a rental property is expensive and can be risky. Prospective landlords need to be able to see a return on their investment and if government regulations cut too deeply into that, investors will take their money into different markets. Demonizing and punishing landlords only drives them out of the market. That’s why rent control always fails. When a shortage of rental supply happens, rents will have to rise.
Canada’s housing crisis is due to a lack of supply, not due to hurdles in credit ratings or a lack of regulation of rental properties.
Even if a person manages to get a fantastic credit rating through a good history of rental payments, they still will have a hard time qualifying to buy a million-dollar home in Toronto or Vancouver. It’s not a lack of credit keeping new buyers out of the market. It’s the high prices.
Housing prices will only stabilize if we add a massive amount of supply to the market, or reduce demand. The government is currently bringing in legislation that will reduce supply, and they refuse to consider taking measures to reduce demand.
The only way Canada can cool down housing demand is to cut the current rates of mass immigration, but the government refuses to entertain that notion.
It’s good that the Trudeau Liberals have recognized that the housing crisis needs to be addressed. Unfortunately, the Housing Bill of Rights is just political window dressing.
