Government buying condos. How will it affect the rental market?

Government buying condos. How will it affect the rental market?

With the Provincial and Federal government combining to purchase unsold condos in BC how is this going to affect the rental market. This is an unknown question we may not be able to answer for many years. Many of these units would have been sold or rented at lower prices in the current sales/rental market as prices are declining. Now that these units are not part of the market place it will slow down the decline in prices, and it may not. It will depend on how the government uses these properties. Who will they rent or sell the units to?.

If the government uses them for lower income housing it may not affect the rental or sales market very much. It will take a long time for the government to fill these units with renters. The people they will rent these units to are not likely applying to the majority of rental properties currently for rent. 

If they are units in condo buildings the tenants will be subject to the strata building bylaws. This may be a challenge for the government to manage on an ongoing basis. Government agencies are not set up to manage these types of properties long term. Who in the government is going to respond to and pay the bylaw infraction fines tenants incurr? 

The bylaw infraction process is hard to navigate for the average property owner of a rental property. A government trying to manage thousands of them could be very interesting. 

Maybe the government will hire outside property managers to manage these units on their behalf, which might be the best case scenario. The problem with this is the management company will want a fee that is profitable to them, I don’t see companies lining up to participate in this option if offered. This will increase the cost of owning these units. 

The government may be able to manage them for about five years before they become too difficult and too costly to justify.        

There are still a lot of new products entering the sales and rental markets and many already built products entering the sales and rental market everyday.  We anticipate they will eventually turn around and sell the units when the market increases, taking the profits as any owner would. This may not be a bad thing as then they could use the money to build more purpose built rental properties for lower income families which is what is needed.   

Buying these condos does affect in many ways the sales and rental market as it takes product out of the market. In a round about why this is going to slow the decrease in sales and rental prices which in turn increases the cost of housing to all. That is not the outcome the government is trying to achieve by purchasing these units. I am not sure I would call it a bailout, though I do believe there was some influence from the developers to have this happen even when they are saying differently. Many developers have come out to say they didn’t ask for this solution. If they didn’t ask for it then don’t sell the units to the government. 

I could be wrong but I don’t think the government can force them to sell the units to the government. I would like to see some developers refuse to sell their units to the government in this situation.  I am not holding my breath for that to happen.     

Time is the greatest test of decision making and in this case we will only know in five to ten years if this was a good decision or not. I am predicting it is the wrong thing to do long term. 

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