New Brunswick government’s ‘rent control’ policy may ultimately hurt renters

The Holt government recently announced it will extend rent control in New Brunswick through 2027, capping rent increases at three per cent this year and next. That’s a mistake. The real problem in New Brunswick’s rental market is a shortage of rental homes—and rent control will make that shortage even worse.

The appeal of rent control is that, in the near term, caps can benefit some current renters by limiting how much landlords can increase the rent. Housing Minister David Hickey made this case when defending the policy: “We know that affordability is top of mind, and ultimately housing is the single biggest cost in New Brunswickers’ monthly budgets.”

But this view ignores the central problem with rent control. By limiting rent increases, the policy discourages the construction of new rental homes.

Rental housing does not appear by magic. Someone has to finance it, build it, insure it, pay taxes on it and maintain it. Developers will only build new rental homes if they expect rental income will cover construction costs. And current landlords will only invest in repairs and upkeep if rental income keeps pace with the cost of owning and operating the property. By capping rent increases while those costs continue to rise, the government makes it less attractive to build new rental homes and less attractive to maintain the ones that already exist.

This is not an idle concern. Over the past five years in New Brunswick, the cost of home maintenance and repairs has increased by 3.1 per cent per year, the cost of new residential construction has increased by 4.7 per cent per year, and property taxes have increased by 5.0 per cent per year. In other words, the major costs associated with building and maintaining a rental property have been rising faster than the three per cent rent cap.

Simply put, when government limits what rental properties can earn but not what they cost to build and maintain, it should expect less rental housing to be built—and existing rentals either to be converted into homes for ownership or allowed to fall into disrepair.

The result is a rental market with fewer choices.

New Brunswickers who do not currently rent but may want or need to soon—such as young people leaving their parents’ home, workers moving for a job or people changing their living arrangements after a divorce—may find there are too few units available to meet their needs.

Of course, some current renters will benefit from a rent cap in the short term. But they, too, may face problems if they want to move to a larger unit, a different neighbourhood or a new community for work or family reasons.

Even renters with no intention of moving can face new problems. If landlords cannot cover rising costs through rent increases, they may sell their rental units, tightening an already-tight rental market. And even when landlords keep renting, they may cut back on maintenance and repairs, knowing their tenants have fewer alternatives.

So, how can the Holt government actually help increase rental housing affordability for New Brunswickers?

In short, make it easier and cheaper to build rental homes. For starters, the government could stop taxing rental properties more heavily than owner-occupied homes. Municipal governments, for their part, could relax rules that restrict what kinds of homes can be built and where, reduce development fees on new homes, and speed up building permit approval times.

New Brunswick has a rental affordability problem. And particularly today, as families struggle with the rising cost of virtually everything, Minister Hickey and Premier Holt are right to recognize the rapid decline in affordability. But rent control is a classic example of a policy with narrow visible benefits, but broader less-visible costs. To help restore affordability, the government should instead remove barriers to new rental construction in New Brunswick rather than make it more expensive to create rental housing.