N.B. housing strategy gets good review from housing expert, except for absence of rent cap

A housing researcher says New Brunswick's new 10-year housing strategy released last week is "actually quite good," although he disagrees the government's assertions about rent caps.

Steve Pomeroy is an Ottawa-based housing research consultant and lecturer at McMaster and Carleton universities and an advisor to the Office of the Federal Housing Advocate at the Canadian Human Rights Commission.

Pomeroy said overall, he's pleased with the strategy, which includes a rent bank to offer low-interest loans to renters and direct-to-tenant subsidies.

"I think compared to strategies in other provinces and the national housing strategy … it does tend to better into the demand side of the problem."

Rent-cap issues

One area Pomeroy disagrees with is the reasoning behind the lack of a rent cap.

Housing Minister Jill Green said this week a cap would lead to a decrease in the number of new units because developers wouldn't want to build if rents were held down.

But Pomeroy said that logic doesn't seem to play out.

He said industry successfully lobbied the governments of British Columbia and Ontario to phase out rent caps, but that didn't lead to an increase in the construction of new units.

"Having argued 'deregulate and we will build,' it took 15 to 20 years for any building to actually start happening," said Pomeroy.

He said provinces such as Alberta, which has always had lower regulation, has only recently seen an increase in development.

Conversely, Quebec, with much more regulation, has always had a thriving building industry.

Pomeroy also says the effect of rent caps on builders and landlords can be moderated.

"You could basically say we'll exempt new construction from the rent. Council will only rent regulate the rents in units that are more than five years old. And that way it would be a compromise approach to it."

Supply and demand

While it may seem counterintuitive, an increase in building may not lead to a decrease or even stabilization in rents, he said.

While the laws of supply and demand would normally apply, they don't work as well when it comes to housing according to Pomeroy.

He said housing is more like a bundle of services than a product. It can't be moved and is impacted by its surroundings, and it can't be cheaply produced somewhere else and imported.

"Prices are market-based, not cost-based, and as long as an area is attractive and people want to live there, they'll pay that higher price for those units," said Pomeroy. 

"The newer units that come on the market will always be at a higher price than the stuff that they replaced."