The Price of Housing (2)

 

With substantial hikes in rent squeezing the budgets of those who don’t own their home, a number of proposals have been put forth to address housing availability in general.
 
Reducing inflationary pressure on rent is tricky.  In Gatineau there has recently been somewhat of a shift towards building rental complexes as opposed to condos, something that is sure to help.  The main answer will certainly be increasing supply. 
 
A federal program to provide loans for affordable housing has been criticized for assisting development of buildings that are still quite pricey for tenants.  The program's shortcomings are two-fold:  First, it looks at median income in a region when setting requirements for the prices of rent.  In Gatineau, the median wage is quite high due to high quality jobs in the federal government.  Yet those who don’t manage to get a job with the government often earn much less.  The program for loans for affordable housing would likely be more effective if it looked at, say, incomes of the bottom quarter of earners.  And even with these loans, the costs of materials and labour have skyrocketed for developers, meaning that they have a hard time breaking even without charging high rents even when receiving loans from governments.
 
Until the construction industry cools down, there may be little alternative for governments than to directly fund construction of low-income housing using grants instead of loans.  This could be seen as another part of the social safety net, similar to payments for child benefits, sales tax rebates and pension supplements for low income seniors.  Otherwise low income families are likely to find themselves in ever more precarious situations. 
 
Rent controls benefit those who have already found an apartment, but without further financial assistance to developers, limiting how much is charged for rent discourages construction of rental units and makes it very difficult for newcomers to find an affordable apartment, not to mention devastating for those who had a reasonably priced unit but lose it.  Affordable housing buildings should be centrally located as well, since long commutes for lower income families are quite a burden, requiring them to have at least one and often multiple vehicles.
 
Requiring developers to include some low-rent units in their buildings has also been discussed over the last few years, but the details of how this works will be key.  Designing thorough legislation that will ensure low-income families have fair access to the units will be quite a challenge, as owners may find loopholes that allow them to restrict access to these units to certain groups, or they could leave them missing certain facilities, or have them come with hidden costs.  We may also see that other tenants in the building end up paying more to compensate for the few low rent units, amounting to an extra burden on middle class renters.  As this approach of inclusive construction gains interest across the world, it will be important to follow its results and learn lessons from other regions that have experimented with it.
Ian Barrett