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Rent Controls in Ontario

Did you know that Rent Control started the first time in Ontario in the 1944 National Housing Act? It was a result of severe rent gouging by landlords, years of continuing pressures from union organizations, and of course of the increased demands for housing post-WWII. Due to severe lobbying by business interests rent controls were eliminated half-a-decade later.

From some time in the 1960's until 1972, developers had built many high-rise apartments due to major government incentives both in taxation, with accelerated capital cost allowance writeoffs and other programs, and assistance from Canada Mortgage and Housing Corporation (CMHC) a federal government body. In 1972, there were huge structural taxation changes made at the federal, provincial and municipal levels, which led to a tulmultuous drop in apartment construction. Apartment construction levels have never recovered. A few years later, tax breaks were brought in for condominium buildings which led to a big rise in their construction.

Here is a chart of Ontario apartment unit construction going back 5 years before rent controls:

Ontario apartment construction chart graph

Again by 1975, with landlords gouging tenants as apartment construction dropped to a trickle, the outrage started once again with good reason. The landlords and developers claimed that no apartments would be built if rent control was instituted, but of course as the above chart shows, by 1975, they had just about stopped building altogether without all the government incentives. And those apartments they were raising rents on by huge amounts had been built with the assistance of government incentives and subsidies.

In this April 26, 1975 article Rent Control the tenants are justifiably complaining, but then there wasn't even a law to say the landlord could not raise your rent more than once every 12 months. The landlords were of course threatening there would be no apartments built if rent controls were brought in, but they had already stopped building.

By Mid-75, most city mayor's were in support of rent control, but the Bill Davis, Progressive Conservative Ontario government was adamant it would never support controls and instead wanted to divert the problems to the cities, whom they were proposing they would give power to, to create municipal rent review boards. This substitute idea was widely attacked including in this August 2, 1975 article, Mayors say rent review won't save gouged tenants

With a September 8, 1975 election looming, the NDP's Stephen Lewis making lots of headway with tenants on his demands for rent control, Bill Davis and his Ontario Tory government changed their stance to one of supporting rent controls, but after the election tried to backtrack. October 10, 1975, Lastman urges Davis action on rent control and then this article shows the tories trying to backtrack What was said on rent reviews.

Of course as rents continued to skyrocket, see Study says rents in Metro up 13.3% there was ever increasing pressure on the Bill Davis government to keep their election campaign promises and bring in some form of rent controls. As pressure mounted, Ontario orders rent increases held to 8% the government did eventually bring in a law in 1986, that was effective retroactive to July 30, 1975 that brought some limits to rents for buildings already in existance.

At least one politician had the forsight to see the problems with rent control that permit automatic annual rent increases, Alderman says rent ceiling will become minimum boost Toronto Star, December 6, 1975. This has continued to be the case, with the very general rent increase guidelines over the past 27 years.

And here is a story out of Calgary about what happens in a booming market without rent controls: Rent Hike stuns building's tenants, Calgary Sun, April 5, 2006

Rent Control Myths

  1. Myth: Private landlords cannot afford to build new rental housing because of rent controls.

    Fact: As you can see from the above apartment contstruction chart, landlords stopped building after the government incentives were taken away, with level dropping dramically over the 3 years before rent control were put into effect. Investors do so for the profit, and they will build that which they believe will bring them the greatest profit, whether that be houses, condominium buildings, or luxury apartments, but certainly not "affordable housing"; only governments do that. I have had permission for almost two years now to put up a Masters Thesis on this issue, but I don't have a working scanner. The paper is called "Urban Rental Housing in Canada, 1900-1985" which points out that there has always been a shortage of afforable housing in Canada. I hope I can get the document scanned sometime soon.

    In 1994, the Appraisal Institute of Canada, issued a press release Apartment Ownership Proven To Be Good Long-term Investment in Ontario which was about a study of London Ontario apartments, their per unit resale price, versus, rent controls, recessions, vacancy rates and the bank prime rate. The conclusion was that if anything, rent controls helped to improve the profitability of landlords, by guaranteeing a government approved automatic increase, but missed the issue that this is likely due to allowing an annual rent increase based upon the increase of the "cost of living" based upon other goods and services and not the actual increase in cost to the landlord of operating the building. Additionally, the 2% annual "management fee" added onto the cost of living to get the "rent guideline increase" which was instituted retroactively from August 1, 1985, by the David Peterson government, and under successive governments, until pressure from this web site put an end to it after 2004(1). That 2% unearned bonus, compounded over 18 years, means that rents rose an extra 42.8% on top of inflation than they would have been without this gift to landlords, yet this is still commonly called "rent controls".

    Private landlords have never built "affordable housing" in any numbers close to what demand is, and now it is even worse with the increased cost of serviced land due to free market demand, plus increased taxation, and difficulties for small projects or new developers to get mortagages and insurance. Then with the federal and Ontario governments getting out of the construction of public housing, we have this severe shorate of affordable housing. But many landlords continue to say things like "rent controls are a psychological factor" preventing the construction of new housing.

  2. Myth: Rent Controls must have an annual guideline rent increase.

    Fact: Just because all rent control programs I am aware of have had these yearly guidelines that end up amounting to minimum rent increases, doesn't mean it has to be that way. And adding an annual 2% gift to landlords as our rent laws in Ontario did from , is adding insult to injury. Just because there has been a annual guideline rent increase as part of the program doesn't mean there has to be one.

  3. Myth: Shelter Allowances are a good substitute for Rent Control

    Fact: No they are two different things. Shelter allowances are meant as supplements for those with low or fixed incomes, such as those on disability, seniors and welfare benefits. Rent Controls are meant to bring stability of prices to a market, for something that is both a societal and persona necessity. If you bring in shelter allowances without there also being rent controls, unscrupulous landlords knowing that people have more money to afford apartements with will just increase rents that much more, making these housing subsidies into landlord welfare.

  4. Myth: Free markets will provide fair rents. Without controls lots of apartments will be built and then prices will drop.

    Fact: This was the argument the Harris/Eves Progressive Conservative government used for bringing in the Tenant Protection Act. Even Liberal MPP David Caplan was supporting this as late as October 2000, during a CARP (Canadian Association for the 50-plus) meeting on affordable housing. This was also an election promise Mike Harris made in the 1995 election, and Housing Minister Al Leach was still using this excuse in 1997, see Rent control revamp will spur building boom: Leach. Of course we know rental apartment buildings are still not being built and with the latest release of CMHC statistics, see New rental statistics and their meaning that rents are skyrocketing.

  5. Myth: Landlords are losing money because of rent controls.

    Fact: Residential housing is one of the most profitable real estate sectors. Here is a July 5, 1996, Globe and Mail article Investors go apartment hunting or for something more recent here is a public press release from ResREIT announces record year-end results, 26% total return to investors as well as Apartment Ownership Proven To Be Good Long-term Investment in Ontario.

  6. Myth: Landlords could not afford to do repairs and other maintenance because of rent controls.

    Fact: Landlords generally are extremely profitable and if they weren't they would put their money where there is more profit. As the CMHC study, Testing Hypothesis About Rent Controls (executive summary) shows in spite of CMHC's assumption #7, that the myth was true, result #7 at the bottom of that page shows there is no evidence this is true. From tenants anecdotal experiences unscrupulous always try to avoid making any expenditures in their buildings even though the 2% annual gift in the rent increase guideline is supposed to be for repairs and capital improvements, but they get this 2% bonus anyways even if they don't do necessary repairs and maintenance.

  7. Myth: Vacancy Decontrol doesn't hurt because it doesn't affect tenants who remain in their apartments.

    Fact: It means many people can't afford to move, whether that move is to be closer to a job, or because of a breakup of a relationship, or to get a larger apartment because of the birth of a child, or to move out of one's parent's home.

  8. Myth: Loosening rent controls have improved the vacancy rate and lowered rents.

    Fact: All rental housing statistics are provided voluntarily to CMHC by landlords. Six months before the CMHC statistics were reported, landlords were already issuing stories to newspapers about rapidly dropping rents. Are these figures truthful, or have landlords been providing false figures for their own purposes? In spite of the rising vacancy rates, rents are continuing to skyrocket, see New rental statistics and their meaning

  9. Myth: Rent regulations primarily benefit the rich.

    Fact: According to the 1991 Census the median household income in Toronto was $64,000 for property owners versus $33,500 for renters; Renter households having only about 52% of the income of owners. And if there are any biases in these statistics, it would be lack of reporting from renter households meaning if anything, the median income of renters could be even lower. Those who have made claims that rent controls primarily benefit the rich either deny it later, or refuse to provide any evidence of their claims.

(1) In 2005, I received a call from the Executive Assistant to MPP, Mike Gravelle, asking me to take down my front page complaint about the 2% bonus, telling me they were getting rid of it, and so there is no need to post that anymore. When I asked why I was getting the personal phone call, I was told they were swamped with complaints about it. Here is a copy of what was on the front page of this web site up until 2005 2% Ontario landlord management bonus

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