Why would anyone want to be a landlord?

Canada’s housing crisis is truly a home-grown problem to which all governments have contributed. Photo Credit: iStock. 

It’s no secret that Canada is in dire need of housing – both for purchase and for rental. There are a number of reasons why we got here. For starters, an immense amount of red tape and added taxes from all levels of government mean long delays in receiving building permits and increased costs. Our out-of-control immigration numbers are greatly worsening demand pressures when we have no supply, further driving up prices. As real estate became so overpriced in Canada, new subdivisions started to be bought up by large equity funds as investments and were available only as rentals, not for purchase. 

Increased interest rates and supply chain problems following the pandemic made construction more expensive and less attractive to developers. Increased focus on the environment has led to resistance to opening up land for new development, even though Canada has much vacant land for its relatively small population. And we infernal baby boomers continue to live and stay heathier longer, so want to stay in our homes rather than putting them on the market for the next generation. 

All of these factors – most of which were avoidable as they were caused by bad government policy – have created large shortages in all forms of housing supply. Although some problems such as inflation and higher interest rates are faced by most developed countries around the world, Canada’s housing crisis is truly a home-grown problem to which all governments have contributed. 

Another factor that exclusively affects rental accommodation is the increasing burden of laws and regulations that favour tenants over landlords. Of course there are bad landlords – just as there are bad tenants – but the weight of regulations governing rental properties seem to assume that all landlords are bad and deserve to be heavily regulated. Since the number of tenants will always be larger than the number of landlords, politicians seeking votes tend to err on the side of tenants which means they end up making things worse. Not surprisingly, the recent pattern of severe rental unit shortages and high rents costs have meant many politicians feel even more political pressure to ease up on tenants at the cost of further punishing landlords. Naturally, this will worsen an already bad situation. 

Rent controls, which have been in place in about half of Canadian provinces for decades, may be politically appealing but if you have the slightest understanding of basic economics you know they will restrict supply, serve as a detriment to maintaining and upgrading properties and increase rents as landlords have to comply with all kinds of paperwork and incur costs in the process. 

In Ontario, the Landlord and Tenant Board (LTB) is renowned for incompetence and long delays. A report from the provincial Ombudsman last year found the LTB to be “fundamentally failing.” There is a massive backlog of almost 40,000 applications and delays of up to two years to schedule hearings. Ontario has also introduced more protection for tenants against so-called “renovictions,” in which a landlord tells a tenant they must leave because the property is being renovated. This is an issue that has been created by legislation that has so limited a landlord’s ability to get rid of a bad tenant that renovation is one of the few excuses they have left, so it tends to be overly used. The government created the problem in the first place, and is now doubling down to make it even worse. 

Other rules make it very difficult for landlords to get rid of non-paying or troublesome tenants. An infamous case in the Niagara region saw a landlord offer tenants $10,000 to leave. The tenants had not paid their rent for several months but still did not take the money. The big delays at the LTB meant that the case wouldn’t be heard for a number of months at best. After this incident, the landlord said she never want to be a landlord again as the experience was not only financially harmful but emotionally devastating. 

The coup de grace for housing was last week’s federal budget, which increased the taxes levied on an owner of a rental property by increasing the inclusion rate of the capital gains tax. Many small owners of rental properties purchased them as a means of eventually selling the property to finance their retirement. This will now become a much less attractive option if the capital gains tax change is not reversed. 

The federal budget also announced an absurdly ambitious housing plan to build just under 4 million homes by 2031. People who actually know something about house construction – which apparently includes no one in the Liberal government – say this is logistically impossible considering the time needed to build an average house and the shortage of skilled tradespersons to do so. The plan includes a renters’ bill of rights, which looks like it will be yet another measure to discourage landlords, not to mention that it also impinges on provincial jurisdiction over housing. 

Considering all of the foregoing, things will likely get even worse as housing shortages will not be resolved for years. This will lead to increased political pressure which, given past experience, will make things even worse for landlords. It’s hardly surprising that fewer people are interested in being landlords at a time they are sorely needed. And that doesn’t serve anyone’s interests.

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