Let the market work, with some positive measures from government
Lynda Pasacreta
Sun
Demonstrators demand affordable housing outside World Urban Forum III at the Vancouver Convention & Exhibition Centre in June. Photograph by : Glenn Baglo, Vancouver Sun
In the late 1960s and early 1970s, government intervention into a viable rental housing market brought new construction of purpose-built rental housing to a halt.
Rent controls were introduced and tax incentives were eliminated. The private market could not economically build rental housing.
We are now faced with limited aging stock of rental apartment buildings. With today’s increases in land and construction costs, no one, not even government, can build affordable housing.
In areas of rapid economic growth, sudden increases in demand for housing can result in housing shortages, and substantial price and rent increases as we have seen in the B.C. market this past year.
Vancouver, Victoria and Kelowna have all experienced tight rental markets over the past decade. Factor in a booming economy and you get people yelling at each other trying to figure out how to solve the problem, who is at fault and who should fix it. Everyone is taking sides, pointing fingers, and are just plain mad at each other.
How can we fix this? What is needed from all levels of government? There has been a lot of discussion on the issue of affordable housing across Canada for many years now. We know what is wrong and we know what needs to be fixed.
If the market is allowed to work, the supply of housing can increase rapidly. Government measures that could help increase the supply of rental housing include expediting land use, planning and building approvals for new construction; allowing builders to sell new housing without full finishes; allowing builders to include secondary suites in new subdivision housing; making surplus land available for new rental construction and rental conversion of all types; facilitating the expansion or addition of mobile home parks; reducing the income taxes on rental property; allowing deferral of tax on capital gains and recapture, and allowing increased capital cost allowances.
Rich Coleman, the minister responsible for housing, recently announced a new housing strategy for B.C. The government introduced a portable housing allowance, paid directly to tenants, that is immediately available to 15,000 families currently on a waiting list for low-income housing. The key element in this housing allowance program is the word “portable,” which means if a family that needs income assistance would like to move to another home in the province better suited to them, the housing allowance program moves with them. As the minister so eloquently announced in Victoria, he hopes this program is a huge success so that it can continue to expand to other residents in need.
Earlier this year, low-income seniors also benefited from an increase in the Shelter Aid for Elderly Renters Program which provides income assistance directly to elderly renters in need. The program was expanded to include seniors who pay pad rental fees in mobile home parks.
These types of initiatives immediately mitigate the effect of an increase in the demand for rental housing. Those 15,000 people on the waiting list for low-income housing are living in market housing right now. With the housing allowance program, they can choose to stay or move to another home that meets their family’s needs — for schooling, a better neighbourhood, or to be closer to work.
The Canadian Federation of Apartment Associations, Canadian Real Estate Association, REALpac (the association of major real property owners of multi-residential, office and commercial owners), Urban Development Institute and the Canadian Home Builders Association have all been lobbying the federal government for changes to the restrictive federal tax laws that discourage new development of rental housing.
The Conservative government seems amenable to these lobbying efforts.
There has been some progress with proposals to the federal government regarding changes to the rollover provisions that would allow tax deferrals on the proceeds of sales of rental property if a replacement property is purchased within a predetermined time period.
The lobbying continues on all fronts to force the federal government to bring back the tax incentives of the 1960s to encourage an increase in the supply of purpose-built rental housing.
Taking action now, while the economy is booming, by implementing government income assistance programs, removing restrictive federal taxes that impede increasing the supply of rental housing and by allowing the housing market to operate as freely as possible will ensure that B.C. residents receive adequate housing in the private market sector.
Lynda Pasacreta is chief executive officer of the B.C. Apartment Owners and Managers Association.
© The Vancouver Sun 2006
