Rent control tactics wrong for Ontario
Ontario's Finace Minister Charles Sousa along with Premier Kathleen Wynne announce the Liberals Fair Housing Plan in Liberty Village on April 20, 2017, in Toronto. (Veronica Henri/Toronto Sun/Postmedia Network)
The rent, a famous New York gubernatorial candidate once declared, is too damn high.
Queen's Park apparently thinks that's also true in Ontario. As part of 16 sweeping measures meant to address home prices, the Liberal government is instituting price controls on all rentals, even those built after 1991, ending a policy once meant to get developers to build more rental housing.
But who wants to build new properties, only to have rents - and therefore revenues - capped? That's why, until now, newer buildings were exempt from rent controls.
The proposal to end that, announced last Thursday by Premier Kathleen Wynne, would likely cap rent increases at roughly the rate of inflation. Mayor Jim Watson says the change makes sense, even though he hasn't heard of wild spikes in rents in Ottawa. But "rent control helps to level the playing field," he told the Citizen.
Except it doesn't work like that. Rent control, says a report earlier this month from CIBC focused on the GTA, "will mostly hurt the people it's trying to protect." There's a historical record to support this view. Ontario has had rent control since 1975. In 1988, a University of Toronto study said its effects were "to reduce new construction, to accelerate deterioration and conversion of the existing rental stock, to generate a severe rental housing shortage," among other impacts. The controls were eased in 1992.
Watson says the rental construction that 1991 loophole was supposed to bring never happened. Yet in 2015, 46 per cent of new apartment starts were for rental-specific properties in Ottawa, according to the Canada Mortgage Housing Corporation, levels unmatched since 2002. That doesn't mean perfect equilibrium: In Ottawa, 439 new rental units came available between October 2015 and 2016, but demand rose by 669 units, says CMHC. Which is to say, anything that's going to discourage supply - like rent control! - should be avoided.
The average one-bedroom apartment in Ottawa, according to the most recent CMHC data, rents for $982. Two years previous, it rented for $936. Overall, apartment rents increased by 4.8 per cent between October 2014 and October 2016. Compare that to Toronto, where the average was $1,132 in October 2016. Overall rents have gone up 5.7 per cent there.
If rental prices are a problem, they're best categorized as a problem in Toronto, not Ottawa. It may be that, for some, the rent is too damn high.
The trouble is that the government, hoping to somehow help, may do even more damage in the long run.