Economist expert: How rent control has worked in the Yukon so far

There has been a lot of controversy about the Liberal Alliance and NDP’s experience with rent control in the Yukon. Now, two years later, we have some data that shows how rent control works.

Let’s look at two ways you can determine success with rent control: keeping rent increases below the rate of inflation and increasing availability. Let us define the latter as the number of rental units increasing faster than the number of residents.

The data we have is from the Yukon Statistics Bureau, which just released its rent report for April 2023. We can compare that to April 2021, which was the month before rent control went into effect.

First, let’s review rent increases versus inflation.

Over the two years ending April 2023, the Whitehorse CPI rose 11.9 per cent overall (data for the entire Yukon region is not available).

The bureau’s rent data reveals that in the two years ending April 2023, the average rent for all unit types across Yukon rose 14.4 per cent. Meanwhile, apartments rose 17.1 percent, duplexes 12.1 percent, and detached homes 19.5 percent. Average apartment rents rose by much less, at 5.4 percent.

Looking at Whitehorse specifically, the average rent for all units rose 15.4 percent. Apartments rose by 17.1 percent, duplexes by 14.3 percent, and detached houses by 13.3 percent. Apartment prices increased by 4.8 percent.

So, the average rent for all units in Yukon rose 14.4 per cent, more than the overall inflation rate of 11.9 per cent. To date, rent control has not improved affordability. However, rent control advocates would argue that the situation would have been worse without rent control.

These numbers are largely consistent with other Statistics Canada data showing that “shelter” costs in Whitehorse rose by 14.7 per cent over the same period. This number is not completely comparable, because it includes both rental units and the cost of owning a home.

The major development that kept a lid on average rents was the significant increase in apartment rents in Whitehorse during this period. The number of rental housing units increased from 178 in April 2021 to 255 two years later. Since average apartment rents in Whitehorse rose only 4.8 percent, this suggests that many of these units were smaller, cheaper units.

Secondly, let’s look at availability.

Across Yukon during that biennium, the number of rental units rose from 2,363 to 2,446, an increase of 3.5 per cent. Duplex apartment prices rose by 6.8 percent, and apartment prices rose significantly by 40.1 percent as mentioned above. However, apartments actually decreased by 2.5 percent, as did detached houses, which shrank in supply by 7.6 percent.

In Whitehorse, where the majority of population growth occurred, the number of rental units rose from 2,217 to 2,304. This represents a 3.9 percent increase. Prices of duplex apartments rose by 3.9 percent and apartments by 43.3 percent. Apartments fell by 2.4 percent and detached homes rose by 2.9 percent.

The criterion here is population growth. Statistics Canada releases data with a lag and not for all months, so we’ll use the closest two-year period for which data is available: July 2020 to July 2022. Yukon’s population rose 3.9 per cent during that period.

Therefore, rental supply throughout Yukon has grown slightly slower than population growth. The experiment with rent control did not improve the supply.

Once again, growth in residential rents was critical. Excluding apartments, all other types of rents in Whitehorse rose by just 10 units, or 0.5 percent, during the period.

There are some questions we cannot answer with bureau data. One reason for this is that the rental market now includes fewer single-family homes and apartments than it did two years ago, which one would not expect in a normal market responding to shortages. Real estate circles are filled with rumors of people with rental homes deciding to sell due to rent control. There is also discussion about converting the apartments into apartments for sale rather than rental. A deeper analysis of each individual drug is needed to understand these trends.

Another question is what new renters pay compared to long-term renters. Existing tenants are protected by rent control, and some long-term tenants may enjoy rents well below the most recent market rates. Newcomers to Yukon must compete for the small number of vacant units.

The vacancy rate improved slightly during this period. In Whitehorse, for example, it rose from 1.7% in 2021 to 2% in 2023. So rent control advocates can say that even though rental supply has not kept pace with population growth, vacancy rates are at least better a little.

The big question is what happens next. Two years is a short time in real estate. Because planning, permitting, and constructing a rental unit take a long time, it is likely that many units were already under construction before rent control was announced. Landlords would continue these projects and put them on the market despite rent control. However, some say they have not initiated plans for any new units since rent control began.

If true, this suggests that the availability problem may get worse in the next few years, especially if the increase in new apartment rents slows. Tenants and landlords will be watching the Yukon Statistics Bureau’s upcoming report.

Keith Halliday is a Yukon economist, author of the young adult adventure novels “Aurors of the Yukon,” and co-host of the “History of the Klondike Gold Rush” podcast. He received the 2022 Canadian Community Newspaper Award for Outstanding Columnist.

You may also like...

Leave a Reply

Your email address will not be published. Required fields are marked *