Swiss rent-control model actually drives up rents

Increasing the supply of rental units would help restore balance to the market in HRM

Thank you to Jacqueline Porter for her articulate opinion piece Nova Scotia, take note — Swiss have solved rent-control dilemma, Halifax Chronicle Herald, September 11, 2021. 

Ms. Porter’s article raises important points about the problems with rent control.

The Investment Property Owners of Nova Scotia (IPOANS) researched Switzerland’s rent control regime. The research concluded that the Swiss rent control regime actually created similar conditions to what we have been experiencing in Nova Scotia.

Currently, the Swiss apartment rental vacancy rate is under 1%. Apartment rents are rising above imposed government-mandated rent control increases because rents in new apartment units are much higher. The Swiss market is also experiencing higher rents due to significant capital investment in building upgrades to ageing rental properties. Sound familiar?

The Swiss rent control system is a complicated and complex program funded by the Government of Switzerland. Are those advocating for permanent rent control suggesting the same thing for Nova Scotia?  If so, at what cost to the taxpayers?

A recently published research study by a trio of Finnish economists, City-wide effects of new housing supply: Evidence from moving chains, concludes that private sector building developments help low-income renters. In short, a rapid increase in private-sector apartment developments results in apartment resident migration to newer buildings creating affordable rental units in recently vacated buildings.

As empirical evidence-based research has demonstrated that the Swiss rent control regime confirms, in the long-term, rent control disproportionately benefits affluent renters than renters in need of the most assistance; renters spending more than 30% of their income on shelter expenses.

None of this is terribly surprising, as Statistics Canada data shows that rents have gone up over the last 20 years in places that have permanent rent control – including Ontario and British Columbia – than in provinces like Nova Scotia that didn’t have it prior to November 2020.   The evidence here at home in Canada and around the world is clear: permanent rent control leads to higher rents for tenants.

So, if rent control is not the solution, what is the answer to Nova Scotia’s lack of affordable housing?

For a start, the Government of Nova Scotia can begin implementing the seventeen recommendations provided in The Nova Scotia Affordable Housing Commission’s report “Charting a new course for affordable housing in Nova Scotia.”

To rapidly increase HRM rental housing supply, HRM Planning Department must shorten the building permit approval process from years to months.

Increasing rental housing supply will return a much-needed balance to the supply and demand equation to stabilize market rents. More importantly, a balanced rental market would push out the small percentage of landlords currently taking advantage of Nova Scotia’s low vacancy rate to charge unreasonable rent increases.

Finally, no one organization will resolve Nova Scotia’s lack of affordable housing on its own. It will take a collaborative effort by all levels of government, the not-for-profit/social housing sector, and the private housing sector.

Nova Scotia’s private rental housing sector is ready to do its part.

Kevin Russell
Executive Director
The Investment Property Owners of Nova Scotia