Photo: James Bombales
Last month, the Ontario government announced it would be removing rent control on all new housing units, effective immediately.
The move was hailed by industry associations, including the Ontario Real Estate Association, as a chance to encourage the development of new purpose-built rental buildings.
And it’s true that rental supply in the city is dangerously low — the number of new rental units grew by just 7,308 this year, the smallest increase since 2016, with 80 percent of new units coming from the condo market.
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But according to Diana Petramala, a senior researcher at the Ryerson Centre for Urban Research and Land Development, the rent control change likely won’t make a big dent in Toronto’s high rents any time soon.
“With vacancy rates so low, demand pressures have led to high rents,” she writes. “Average rents in Toronto rose by 4.7 percent year-over-year in the purpose-built rental market (to $1,307), and by 5.5 percent on condos (to $2,235), in 2018.”
The change is rent control is unlikely to generate the level of new supply needed to put a downward pressure on rents, according to Petramala.
“In theory, removing rent control on new units should encourage modestly more investment in the rental stock over the long-term,” she writes. “In the meantime, however, the evidence shows that new renters (such as newcomers and millennials) face increasing rents. The average going rate for rent on these units has been rising by almost 9 percent per year for the last two years.”
Petramala believes that further steps need to be taken in order to seriously increase the amount of rental supply in the Toronto region. She cites the Ontario government’s commitment to increasing housing supply as a positive development for the tight Toronto rental market.
“The best way to keep rents under control is to increase supply of rental units. the fewer units available relative to demand, the bigger the rise in rents faced by households moving into them,” she concludes.