Especially if the building is already paid off, it never made sense that rent needs to match market prices to cover costs. The tiny increase in property taxes and maintenance costs is more than covered by the allowed rent increases.
this post was submitted on 12 Oct 2023
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it never made sense that rent needs to match market prices to cover costs
Because you're not looking at it through the eyes of a greedy landlord that wants to make more money.
You're right. We should be removing their eyes!
I could see maintenance costs increases being not insignificant over time. Parts/appliances had gone up notably, as has materials and the cost of people to do the work. There's also some issues with receivables which may end up needing to be written off, and deliberate damage over time. Generally, these do need to be accounted for on a going-forward basis.
That said, none of these should have increased nearly so much as the cost of property and overall rents. They should account for a reasonable increase over time, instead what we see is increased to cover the cost of the mortgage on additional rental properties etc
Buildings have costs beyond mortgage, especially ones that are old enough to be paid off.
I support rent control, but "no sudden shifts in rent" rent control, not "rent must be frozen in amber and can only be raised below inflation levels" rent control. The market changes over time. Otherwise we get the "f you I got mine" problems we have with homeowners, where nobody has to care about new people looking for housing because every existing owner or renter can ignore market reality.
If we want to eat the rich, just tax them more. I like Jagmeet's idea to increase cap gains inclusion to 3/4 instead of 1/2.
Don’t worry, there isn’t a rent control anywhere in Canada that’s “frozen in amber”. I’m reminded of the economist Lawrence Summers who gave an example of worrying about the wrong thing in policy: “I’m overweight and I need to lose weight. It’s true that if I lose too much, I could starve to death and die, but that’s not my problem.”
Rent being too low is not our problem.
Rent controlled apartments are still capped at 2.5% increase per year.
Yes, while anybody who is not in a rent controlled unit is facing a bloodbath, plenty of people are seeing their rents go down once you figure in inflation. It's just that "dog doesn't bite man" is even less of a news story than "dog bites man".
Opportunity cost is the cost you have forgotten to account for. Having the building paid off does not reduce the cost.
Nope. Even setting aside rental income, the increase in property value itself has been plenty remunerative. Having the building paid off also allows one to borrow against the value of the asset, which offsets some opportunity costs.
I’m surprised people are actually arguing that real estate investors haven’t been richly rewarded enough. Ridiculous.
Even setting aside rental income, the increase in property value itself has been plenty remunerative.
You are entering personal opinion territory with that remark, which has no place in a discussion, but I will stricken the opinion part and work with what information remains. Given that, I take it to mean that a business seeking profit does not necessarily need to find profit by way of cashflow, but rather asset appreciation. Is that a fair assessment?
That is technically true. Agriculture in particular loves that model – and it has burned many, many, many farmers before. Remember the 1980s? They had to go as far as to have concerts to try and bail farmers out because it got so bad. It is super high risk. Farmers will often put up with that insane risk because they have a passion for farming and will take the risk just so that they can do what they love.
Does anyone have a passion for being a residential landlord? To the best of my knowledge, the answer is no. Landlords are in it purely as a business. And a business is going to focus on income fundamentals to not go down the road of needing concerts to save them when the promise of asset inflation fails.
Of course, with big risk comes the potential for big reward, but it seems there is no reason for residential landlords to take that gamble. It is not a passion project.
I don’t know where you got the idea that profiting off of land value is some exotic and untenable investment strategy, one that requires “insane risk” and “passion”. Your example of landlords being reduced to desperate concerts is very silly.
You dismiss this as “personal opinion” without explanation, but the objective fact is that land value has gone up a lot in Canada, and real estate has tons of arbitrary tax advantages (like the Smith Maneuver). This has made real estate a remunerative investment. That’s been the consensus of the domestic and international investment community, which has poured money into Canadian real estate. This is so obvious, I’m surprised I’m having to say it!
Are you responding to someone named “Rocket” by chance?
I am. What’s going on? Does it not show up that way on everyone’s account?
Nothing nefarious or anything; I blocked them a while ago and I see they’re still being an edgy contrarian and pissing people off. I had noticed a bunch of comments that seemed out of place and had a hunch it was Rocket. Haha
Yes it's very remunerative. But have you stopped to consider it could be even more so? /s
Want to really hurt these people? Build some competing buildings so they can't charge whatever they want for rent.
If it's so profitable, the public sector can pull it off and make a mint that can go to services.
It's win/win! Government gets more money to help people, and landlords face downward pressure on rent.
Great idea!
Just make sure it's not anywhere near me.
/s
I'm surprised no one ever talks about deposits. I've been renting for like 25 years and have moved a fair bit. Never had a deposit not returned. Yet I still pay it. Half months rent just locked away. Imagine opening a building for rent. 100 units. Each suite averages $2k. That's $100k like that. Poof. It's there. Always being replenished as people come and go. How many tenants actually fuck things up, badly enough to need repairs?
How about if you've been renting for 10 years without incident, you get a pass. flips water bottle