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:
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
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.
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 landlords continue to say things like "rent controls are a psychological factor" preventing the
construction of new housing.
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 do, 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.
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
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.
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.
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.
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.
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
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.