With vacancy rate being virtually zero in the urban area of B.C, the real estate price skyrocketed and renting seems like the only option for many people. The legal loophole spotted in rent control raises the question whether or not the current rent control is a good way to help the homeless. Rent control has always been a controversial issue because although it ensures the affordability of housing, but the cost of inefficient market outcome, giving landlord the upper hand and subsidizing the well-off tenants is disastrous.
The Rent control is an example of price ceiling which the government set the maximum amount of landlords can charge their tenants, and it would be illegal to charge higher prices, ensuring affordability of housing. It uses the idea of robin hood principle, which take from the rich (landlords) and give to the poor (tenants).
Rent control has definitely caused an inefficient market outcome. The price of renting is set below the market-clearing levels, and apartment shortage is an inevitable outcome when quantity demanded greater than quantity supplied. The consumers (tenants) are frustrated and the quantity will adjust to quantity sold equals to quantity supplied only. The ultimate result of rent control is vacancy rate of zero and halt of new construction.
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With the shortage in supple, landlords have the power to choose whom they want the rent their property to, resulting in discriminating against the tenants they don’t like. The “termination clause” legal loophole allows Landlord to skirt the rent control policy by pushing tenants to sign fixed-term leases with vacate clauses. At the end of the year, the tenants have to either sign a new lease with a rent increase far in excess of the maximum or to leave their places. The maximum increase rate of rent is set at 2.9% for 2016, but in reality it has boosted