Saturday, August 04, 2007

Having Your Cake and Eat It Too

In Alberta, the notion of government intervention in any "free market" is anathema. When the topic of what to do with rental apartments in Alberta's terminally out of balance real estate market was raised late last year, the governing Conservatives swore up and down that they'd never impose rent controls - after all, that would be meddling in the "open market".

Anyone who has actually lived in Alberta in the last 24 months or so has long since figured out that our entire housing marketplace is horrendously out of balance. Demand has long since outstripped what supply did exist, and landlords have been "condo-izing" existing rental units at a blinding rate, and you could count the number of new rental units constructed on the fingers of one hand. (at least in Calgary)

The oh-so-generous landlords of Alberta have gotten together and agreed to place some 1,000 units available under a rent subsidy program. Superficially, this almost seems reasonable - after all it makes a certain number of units available to low income or working poor people who cannot quite manage to break into the housing market.

The problem is that this is a "cake-and-eat-it-too" for the landlords. They still get the inflated "open market" rent for their apartment, while the tenant pays a reduced amount. So, while the landlords think that this makes them "look good", they are basically looking at a way to get at some of the $20 million the government is using for rental subsidies in Alberta.

The net effect? A few people get "low income" housing - until the subsidies run out, at least. In the meantime, except for The Mustard Seed, nobody is actually building any rental accommodations to re-balance the marketplace.

I cannot blame the landlords entirely - anytime you put $20 million on the table, some people are going to try and suck up as much as they can without doing anything material. The real problem here is a government in Edmonton so tied to the dogma of "not intervening" in the oh-so-wonderful "free market". Instead of trying to rebalance the factors in the "supply-and-demand" curve, the government is simply throwing money at the people who already hold all the cards in a marketplace that is desperately out of balance.

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