On Affordable Housing
Recently, there have been many news stories on radio, television and in print regarding the lack of affordable housing in Alberta (and Calgary in particular - although it applies to most large municipalities). The news stories have also covered the proposals of various groups and governments to deal with this problem.
First, I agree that housing costs have gotten a little out of control in Calgary (and Vancouver, Edmonton, Ft. McMurray). Additionally, rents are rising quickly as landlords' costs rise and the market becomes tight. This is an unfortunate reality of the free market when demand outstrips supply.
However, the solution is not to have the state interfere in the market in ways that have been shown to be at best ineffective and at worst detrimental.
Rent Controls
Some advocates have called on the provincial government to impose rent controls. In one way they already did, by changing the regulations on how often landlords could raise the rent from six months to twelve. The result: Landlords raised the rent significantly more because they realize they cannot adjust for increasing costs (due to property taxes, energy costs, maintenance costs) as often. This means that the landlords' must raise the rent further to reduce their risk over the next year. In the old system they could wait until events unfolded, thereby reducing risk.
Strict rent controls, such as those in Vancouver or New York, have clearly been shown not increase the availability of affordable housing. What they do is increase the affordability for the small group that already have low rents. But government regulated rents make the business of owning a low-rent building unattractive to an entrepreneur, because the state restricts how much profit they can make.
The solution to this problem is that the state should not impose rent controls, but should take action to make affordable housing more attractive to landlords.
Government owned housing
In Calgary recently, the cit council has proposed that all new developments (neighbourhoods) should be zoned to include affordable housing. Not a bad plan. However, one alderman (I don't recall which one) stated that the provincial government should purchase the land and build low income housing. So basically what this alderman wants is for Calgary to follow the lead of numerous US cities (New York, Chicago, Philadelphia) and Toronto to build what are affectionately known as "The Projects". While the projects started out as low income housing for working people they quickly became the "ghettos" of these cities with soaring crime rates.
Like most other programs, government ownership and operation do not result in quality housing for people or low cost for society. Private ownership would be far better in most cases.
For those that think that government owned property for housing of low income people is the solution, I would advise you to visit one of the hundreds of Indian Reserves in this country and then tell me whether nearly a century of government owned property has helped that group.
Solutions
A solution that should be seriously considered to increase the availability of affordable housing is for the cities and provinces to make private ownership attractive. For instance, if the city wants there to be low income housing, they should waive the requirement for property taxes on housing units that meet a predefined affordability criteria. This criteria must be linked to the income achievable by the landlord to prevent the state from reneging this promise after the housing units are built.
Second, the province could subsidize housing by paying landlords some portion of the rent charged for those tenants who are on very low incomes or fixed state-provided incomes in areas with high inflation (and therefore increasing costs for the landlord).
These plans would be far more effective in increasing the availability of affordable housing without resorting to "big stick" approaches like rent controls (which don't work anyway).
First, I agree that housing costs have gotten a little out of control in Calgary (and Vancouver, Edmonton, Ft. McMurray). Additionally, rents are rising quickly as landlords' costs rise and the market becomes tight. This is an unfortunate reality of the free market when demand outstrips supply.
However, the solution is not to have the state interfere in the market in ways that have been shown to be at best ineffective and at worst detrimental.
Rent Controls
Some advocates have called on the provincial government to impose rent controls. In one way they already did, by changing the regulations on how often landlords could raise the rent from six months to twelve. The result: Landlords raised the rent significantly more because they realize they cannot adjust for increasing costs (due to property taxes, energy costs, maintenance costs) as often. This means that the landlords' must raise the rent further to reduce their risk over the next year. In the old system they could wait until events unfolded, thereby reducing risk.
Strict rent controls, such as those in Vancouver or New York, have clearly been shown not increase the availability of affordable housing. What they do is increase the affordability for the small group that already have low rents. But government regulated rents make the business of owning a low-rent building unattractive to an entrepreneur, because the state restricts how much profit they can make.
The solution to this problem is that the state should not impose rent controls, but should take action to make affordable housing more attractive to landlords.
Government owned housing
In Calgary recently, the cit council has proposed that all new developments (neighbourhoods) should be zoned to include affordable housing. Not a bad plan. However, one alderman (I don't recall which one) stated that the provincial government should purchase the land and build low income housing. So basically what this alderman wants is for Calgary to follow the lead of numerous US cities (New York, Chicago, Philadelphia) and Toronto to build what are affectionately known as "The Projects". While the projects started out as low income housing for working people they quickly became the "ghettos" of these cities with soaring crime rates.
Like most other programs, government ownership and operation do not result in quality housing for people or low cost for society. Private ownership would be far better in most cases.
For those that think that government owned property for housing of low income people is the solution, I would advise you to visit one of the hundreds of Indian Reserves in this country and then tell me whether nearly a century of government owned property has helped that group.
Solutions
A solution that should be seriously considered to increase the availability of affordable housing is for the cities and provinces to make private ownership attractive. For instance, if the city wants there to be low income housing, they should waive the requirement for property taxes on housing units that meet a predefined affordability criteria. This criteria must be linked to the income achievable by the landlord to prevent the state from reneging this promise after the housing units are built.
Second, the province could subsidize housing by paying landlords some portion of the rent charged for those tenants who are on very low incomes or fixed state-provided incomes in areas with high inflation (and therefore increasing costs for the landlord).
These plans would be far more effective in increasing the availability of affordable housing without resorting to "big stick" approaches like rent controls (which don't work anyway).
posted by Technical Bard | 15:02
5 Comments:
One important thing that municipalities can do is to streamline planning approval eliminate excessive development charges ($30K per unit in Ottawa now, before you even put a shovel in the ground, so even the smallest, meanest unit is too expensive for a modest single-wage earner) and allow enough zoning flexibility to make it possible to build small but affordable units. Toronto has done this (Ottawa has not) and as a result there is a good choice of small but pleasant brand-new condos with good facilities and security in Toronto for $150-200K, sometimes even less. This takes some pressure off the rental housing stock and indeed makes many more units available for rent because many are purchased as investments.
I agree that housing projects are definitely not the way to go. There are buckets of them here in Ontario (a sorry legacy of the 60s and 70s) and they are all wretched places that trap too many people in a cycle of misery.
We live in an area where low cost housing townhouses/apartments are mixed in with single family homes. The only reason I can see that our crime rate is still very low in the area, is because of the schools, all the kids go to the same school. Kids make friends with anyone, never based on income, so we have a lot of interaction between low, middle and high income groups because of our kids. Our schools are the answer, every time I walk into my youngest's, it's like a tiny UN, but in this case everyone gets along, no one has an agenda, it's just kids being kids, making friends.
When we first moved into the area, I was worried that there would be a high turnover rate in the apartments, leading to some instability in the school, this has never happened.
Another important point is that, the apartments are only 3 story, not massive developments, this means that single home owners are not overrun by apartment tenants.
It works in my area, which is one of the more desired areas (southwest)in Edmonton.
No one group overwhelms any other, put up a 5000 unit low income complex, and we have problems.
Never allow low income housing as it attracts undesirables.I live in Windsor ON. where low income housing is almost the norm and their neighbourhoods are avoided.
There were always plenty of low income dwellings available before Trudeau changed the income tax act in 1972. Before that time high earners, Drs., Lawyers etc. could invest in revenue properties and write losses off against their high incomes. This was plenty of incentive to build low income housing so the supply was always adequate. Since Trudeau's liberals fixxed it we have had low income housing problems. Leave it to Liberals to screw things up.
Interesting solution. British Columbia already does this.
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