Photo: James Bombales

Last week, the Ontario government announced that, effective immediately, rent control rules will no longer apply to new housing units added to the province’s rental market.

The move was met with backlash from some affordable housing advocates, while many industry associations, including the Ontario Real Estate Association and the Toronto Real Estate Board, praised the decision. It largely reversed the primary aspects of the Wynne government’s April 2017 Fair Housing Plan.

Those against rent control argue that it discourages the construction of purpose-built rental units, cutting into an already low level of supply in a time when more and more people are looking to rent.

“Rent control is not good policy, price controls in any industry typically result in unintended consequences,” writes Bullpen Research & Consulting president Ben Myers, in a recent analysis of the decision.

According to Myers, the only way to avoid huge jumps in rental rates is to ensure there are as many rental units available as possible.

While he acknowledges that there were 2,876 purpose-built rental starts in 2018 — the highest level since 1993 — Myers says there are more factors at play in the jump in units than just rent control.

“There are several reasons that many of these projects moved forward this year,” he writes. “Population growth in Ontario is at a 30-year high, the mortgage stress test and higher rates have reduced ownership demand and increased rental demand.”

Ultimately, Myers doesn’t believe that removing rent control on new units will have a huge effect on the level of purpose-built rental supply in the Ontario housing market.

“This change won’t significantly move the needle on new purpose-built rental supply,” he writes. “If I had to put a number on it, I’d say we’ll get 500 to 1,000 more rental apartment starts per year because of the elimination of rent control over the next five years.”

But he does believe that the decision could lead to an increase in investors choosing to rent out condo units, which could provide much needed supply to a tight rental market.

“The biggest impact as a result of this move will be keeping private investors interested in buying pre-construction condos to lease out,” he writes. “Condo investors have been responsible for over 75 percent of all new rental supply for the past 20 years in the GTA and without them, rental rates in the GTA would be much, much worse.”

Communities featured in this article

More articles like this