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Negative effects of the rent controls from the "Régie du Logement"

THE NEGATIVE EFFECTS OF THE RENT CONTROLS FROM THE “RÉGIE DU LOGEMENT”

In 1980, our Quebec government has installed rent control on all rental apartments in order, officially, to prevent excessive rent increases.

In the increases field, the system puts a ceiling on specific expenses, and uses indexes for other expenses, as for financing. However, its allows for increases to be lower without providing for re-adjustment for missed increases.

In its first 8 years, the system seemed to work well, in part due to the fact that the market would have put a ceiling anyway, and landlords seemed to be happy.

Between 1988 and 1998, the rental market was well depressed, and the rent fixing by the Rental Board was not blamed for strangling landlords.

Seeing a good way out, the Rental Board and the government, in that period, have lowered considerably some key indexes like "Net Return", "Management", "Maintenance" and "Major Repairs" by a clever picking of statistics, making it impossible to finance maintenance and renovation, and bring a reasonable return on investment.

As a consequence, we now feel two major consequences:

AGING OF PROPERTIES
By ridiculous indexes, mainly during the last 12 years, they allow about half of what is needed for maintenance and major works. It is presently a losing proposition to make major works and maintenance, their financing cost is double what they can bring as rent increases. Therefore, a large number of buildings require major renovations, the insurance companies point it out, the lenders too, but rents are not sufficient to cover the costs.

NO NEW CONSTRUCTION
Seeing no reasonable return, seeing requirements by insurers and lenders, seeing the heavy rights allowed to tenants, feeling that things are not getting better, investors stay away from conventional rental properties; they go into condos or senior citizens buildings.

The ridiculous indexes announced by the Rental Board on January 22nd 2004 confirm what landlords feared, and we pointed it to Minister Jean-Marc Fournier in two letters that follow. (26 janvier 2004)  (5 février 2004). You can also see the results in graphics and indexes that follow (Indices de la Régie) (Taux de vacances) (Logements mis en chantier).

Unless we see an immediate change in the government's policies, we will see few apartments available, tenants looking but not finding a place to live, buildings requiring major maintenance and repairs, burnt or downgraded buildings being renovated into condos, and this will last for a good ten years.

Pierre Aubry, President
Property Owners League of Montreal