Is it better for the province to give rent supplements to low income people than to build more social housing? This is an important question for BC residents to ask. Metro Vancouver counted 2770 homeless people in March this year, more than have ever been counted.

In addition, the Metro Vancouver report says, “We know the count underestimates the number of people who are actually homeless.” When you add in the hidden homelessness and people at risk of homelessness you get at least 116,000 people in BC who need decent housing they can afford.

Despite the growing crisis, BC’s Housing Minister Rich Coleman seems to have given up on building new social housing: “We don’t build social housing anymore,” he told the Vancouver Sun in February. Instead, Coleman said in a news release in April, “Rental assistance programs give low-income households more options. They are flexible, giving families and seniors the choice of where they want to live and the cash assistance helps with housing costs.” In April Coleman announced a slight increase in existing rent supplement programs which only apply to low income seniors and low income families who are not on welfare.

Coleman claims that rent supplements are cheaper than building social housing. The Vancouver Courier wrote on March 11,  “Coleman estimated 4,400 units would cost $1.3 billion and operating costs of about $70 million per year. He said rental assistance for 10,000 families in B.C. costs about $50 million per year.”

Are rent supplements really cheaper than building social housing? The Canadian Centre for Policy Alternatives compared the rent supplement and non-profit approaches to getting housing for low income people and concluded: “$100 million dollars could produce 24,000 affordable household years if it were spent on the non-profit approach [author’s note: building social housing], roughly 17,000 affordable household years if spent on the rent-supplement approach.”

When Coleman said it would cost $1.3 billion plus $70 million a year to provide 4400 units he was talking about the Downtown Eastside and probably supportive housing units which have staff to help people deal with issues. While these units do have operating costs above what people pay for rent, they are still cheaper than keeping people homeless on the street. The BC government has been building social housing for single people that costs about $200,000 per unit in Vancouver. If you assume that these units last for 60 years, and rent could cover basic maintenance, the cost per year per person is about $3300. This is lower than the $5000 per year that Coleman says rent supplements cost per family.

BC has two rent supplement programs, one for families and one for seniors. The programs are flawed because the people who need supplements the most – people on welfare who get only $375 a month for shelter expenses – aren’t eligible.  In fact, if you are a working family who loses your job and has to go on welfare, not only do you lose your pay cheque, you’ll lose your rent supplement. You would have to move to a much cheaper place, if you could find one.

Rent supplements are also flawed because they don’t provide security of tenure to tenants.  Tenants can still be evicted for a host of reasons that have nothing to do with their own behavior:  landlord needs the place for his relatives, wants to renovate, etc. Plus, you can lose your apartment if you lose your supplement because you have to go on welfare. Social housing provides an asset to the community and taxpayers. Rent supplements leave taxpayers and the community with nothing.

Rent supplements in areas where rent control is weak (as in BC) or non-existent are simply a windfall for private landlords and developers, as they can raise rents as much as they like to take advantage of any supplements. In BC landlords can raise rents as much as they like for new tenants.

US studies have shown that rent supplements had the effect of increasing rents for non-supplemented people who lived nearby. In one study of US housing ‘vouchers’, which is the rent supplement system there, Susin reported, “The main finding is that low-income households in metropolitan areas with more vouchers have experienced faster rent increases than those where vouchers are less abundant. In the 90 biggest metropolitan areas, vouchers have raised rents by 16 percent on average…. Considered as a transfer program, this result implies that vouchers have caused a $8.2 billion increase in the total rent paid by low-income non-recipients, while only providing a subsidy of $5.8 billion to recipients, resulting in a net loss of $2.4 billion to low-income households.

According to the Wellsley Institute, “Research in the United States, which relies heavily on rent supplements in the private rental market, shows that supplements inflate rents for all tenants, not just those receiving the subsidies. The economic cost to all tenants – measured in the higher rents – outweighs the economic value of the rent subsidies, creating a net loss for tenants in the private rental market.”

Rent supplements also maintain the scarcity of housing. In Vancouver the 2013 vacancy rate was 1.7%. A healthy vacancy rate is considered to be between 3 and 5%.[1] When housing is scarce, landlords can charge what desperate people are willing to pay. A government funded social housing program would increase the supply of housing and help create a healthy vacancy rate where tenants could shop around for the type of housing they need.

If rent supplements were used sparingly along with a program of building new social housing, they could be useful in getting people quickly into decent housing. But the BC government is ramping up its rent supplements, excluding the people who need them the most, and plans to build a meager 150 units per year in the whole province going into the future.

Who benefits from these policies? Landlords get extra cash for rent and don’t have any low rent competition. Who loses? Taxpayers pay the never-ending bill for high rents that landlords charge. And people who are homeless and at risk of homelessness still don’t get the housing they desperately need.

Notes:

[1] Andrew Yan, “Solving the Housing Crisis, Report on Affordable Housing in Vancouver,”  CCAP, Vancouver, 2006.