According to a recent Victoria News article, rents in Victoria have risen at the fastest pace in the country in the past year. Why are rents rising like they are in Victoria?
The problem is that low-cost housing is being lost to new developments that are not ‘affordable’. The renter who lived in the original unit is not eligible for a mortgage to purchase the new unit. However, investors can buy new units and rent them to evicted tenants or put them on Airbnb for an amount that covers the investor’s mortgage. Tenants have no choice but to pay the rent the investor wants and end up paying the investor’s mortgage because they are not eligible to get it themselves (the system is broken).
With more and more people immigrating here with financial resources, the additional housing built will not create abundant supply.The law of supply and demand only works when supply increases. demand is not. Moreover, developers will stop building if prices start to fall (they argue that even if the Missing Middle Housing Initiative (MMHI) were implemented, there would not be enough profit now).
All of these factors are why the MMHI as it is currently written makes the situation worse instead of better. While there will be more incentive for developers to demolish the existing affordable housing stock and build new, more expensive units, it will not protect the displaced population. In addition, regular “residential” builders and residents have to compete for land with for-profit developers.
These are facts. We all see it happening. The solution should be more regulation, not less regulation.
Letter: New developments boosting rents in Victoria
Source link Letter: New developments boosting rents in Victoria