Photo: James Bombales<\/em><\/p>\nSome agree that rent control has been an impediment between more market supply and builders.<\/p>\n
\u201cThe fact that there is rent control is just one disincentive for purpose-built rental developers. It\u2019s just one sitting in a wide range of factors that go into to deciding if they want to build a rental building or not,\u201d says Ben Myers, president of Bullpen Research & Consulting.<\/p>\n
Rent control, Myers says, prevents tenant turnover in the market and misallocation \u2014 a tenant may choose to stay in a unit long enough that, as a result of rent control, the rental price of the unit falls below market value. If a developer can\u2019t guarantee that their purpose-built rental will lease out, construction financing becomes more expensive and difficult to secure. Myers explains that relaxed rent control will not only help landlords cover costs and make profit, but keep condo investors buying.<\/p>\n\n
\u201cThey feel that the rents are going up quickly and they can cover the costs of these ever-increasing new condo units, then they\u2019ll support the new housing market, they\u2019ll keep supply going and mitigate a bit of the craziness,\u201d he says.<\/p>\n
We don\u2019t want history to repeat itself, experts warn<\/h2>\n
Not everyone supports the new rent policy.<\/p>\n
\u201cWe definitely need the business model for purpose-built rental to be successful in Ontario, and across the country, because there is a serious shortage of rental supply, and building more rentals is an important part of the solution,\u201d says Dr. Paul Kershaw, founder of Generation Squeeze, a socioeconomic research foundation that focuses on young Canadians. \u201cBut a successful rental business model does not require opportunities for limitless rent increases.\u201d<\/p>\n
Kershaw refers to past limitations of rent control, such as policies enacted under the PC government led by Mike Harris, who, in 1997, introduced Bill 96 that scrapped rent control for buildings constructed after 1991 in order to motivate more purpose-built rentals. Some argue that this exemption did not deliver the supply of rental units that was promised. In 1997, there were 790 rental housing starts in Ontario, a 38 per cent drop from the year prior, according to Federation of Metro Tenants\u2019 Associations. By 2016, the number of housing starts increased up to 7,367.<\/p>\n
\u201cThere\u2019s little reason to expect that the elimination of any rent control on future units will be the policy lever that most attracts developers to prioritize rental over other kinds of new housing supply,\u201d says Kershaw.<\/p>\n
According to Urbanation, average Toronto rents increased 9.3 percent through 2018 to $2,309. The real estate research firm predicts that 2019 growth will ease to five percent as a result of a 30-year high on rental and condo buildings expected to complete this year. Over 5,000 purpose-built rentals are expected to be completed in 2019, the highest level achieved since the early 1990s.<\/p>\n
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