One of the more concerning ideas that seemed to be gaining traction over the summer is the implementation of ‘vacancy control’ for rental units. I’ll explain.
You may have heard of rent control – the idea that when a tenant occupies a unit, the rent can’t be raised by a meaningful amount for the length of their occupancy. This policy is in practice in several major North American cities that are dealing with an arguably more acute housing crisis than even us real estate obsessives in the Lower Mainland – places like San Francisco and New York. There have been many in depth dives into the benefits and downfalls of rent control, but it’s an active policy that at least has a few defensible results.
‘Vacancy control’, however, is one of these ideas that gets a cheer on first read from the tenants’ advocates among us, but that bears no weight under scrutiny.
It takes rent control a step further and ties the unit itself to restrictions on meaningful rent increases. This is in practice almost nowhere and, if implemented here, would certainly become the poster child for unintended consequences of well-meaning legislation.
Our co-founder, Daniel Greenhalgh, joins the dozens of developers in the Lower Mainland in putting the kibosh on this idea before it gains any more traction. “If this ever got passed, it would be the end of our industry as we know it. No one would build rental units. It would make zero sense financially. It’s easy to extrapolate out from that – one of the biggest causes of the housing crisis here is a lack of rental supply. This would destroy any attempt to solve that.”
Dan’s concerns mirror that of a group of thirty builders surveyed by the Urban Development Institute about what would happen if vacancy control ever went on the books. They said that of the nearly 20,000 purpose-built rental units that are currently in some stage of development in the Lower Mainland, about two-thirds would be delayed or cancelled.
That seems like a conservative estimate.
Dan points out another glaring problem with this idea: if enacted, there would be no incentive for the owner or landlord to properly maintain the unit. Not only would there be no resources for it, there would be nothing to gain from keeping the units modern, stylish and desirable. Swaths of buildings would see rapid decay.
Dan helps us make the concept even more concrete. “For my first two-bedroom apartment in 1993 in Abbotsford, I paid $450. It was a little under 1000 square feet. Today the rent there is $1350. So, let’s say this law was in place in ’93. The rent would increase at the rate of inflation – which is to say, about an average of $10 a year. Today, that unit would go for about $700 - just about half of what the market decided. And today, that unit would still look like it did in 1993.”
When we see these kinds of proposals get some momentum, it’s a little terrifying, but also galvanizing for the industry. There will inevitably be many similar attempts to harness and harass the developer boogeymen of the Lower Mainland, and these attempts will be given some extra fuel by being vocalized by an official ‘task force’. But it’s heartening to see that when truly poisonous ideas like this get floated, the response by our industry is swift, clear and unified. Vacancy control can never happen here.
