Why a ‘renters rebate’ won’t help Metro Vancouverites
In a recent interview, B.C. Minister of Municipal Affairs and Housing Selina Robinson reaffirmed the provincial government’s commitment to a “renters rebate” of $400 per renter household, annually. As appealing as this idea may sound to renters feeling the squeeze of a tight rental market, it will do little to help them—especially in markets such as Metro Vancouver. Here’s why.
Rental vacancies are consistently below one per cent in Metro Vancouver, compared to almost three per cent in Greater Montreal and more than six per cent in Greater Calgary. Such a low vacancy rate is the hallmark of a tight rental market, comprised of many renters or would-be renters, and a dwindling number of available units.
Stiff competition at rental open houses and units going to the highest bidder. It’s this imbalance, between the number of available units and the number of would-be renters, that drives up rents and is key to understanding why the B.C. government’s proposed renters rebate won’t work.
According to recent research by U.S. economists Edward Glaeser and Joseph Gyourko, rent subsidies are not good for metro area housing markets where housing costs are far higher than the cost of construction (e.g. San Francisco). Why? Because in these markets, home prices reflect a scarcity of homes (rather than the cost of building and maintaining them), meaning whatever money is given to renters by government will serve only to bid up the cost of the few available units. With its razor-thin rental vacancy rate, Metro Vancouver’s housing market certainly falls within this category.
So, Metro Vancouver’s rental crisis is first and foremost a scarcity problem—not an income problem. Seen this way, provincial and local governments would far better serve the region’s renters by addressing the underlying causes of this scarcity. In particular, they can acknowledge the negative impacts of rents controls, restrictive zoning and building permit approval processes on the feasibility of meaningfully boosting the rental supply.