With rents going up and making the GTA unaffordable for more and more people many believe aggressive rent control policies will address the problem. However CIBC economist Benjamin Tal thinks otherwise. While rent control policies implemented more than 20 years ago aimed at helping low-income Ontarians get affordable housing, today it isn’t and is infact making it harder to find affordable housing.
Amid calls for even stricter caps on how much landlords are allowed to hike rents in Toronto’s competitive market, economist Benjamin Tal argues any such policy would do more harm than good — even to those it’s ostensibly trying to protect.
Under current rules that were implemented in 1992 and subsequently left in place by every government that followed, buildings built after 1991 aren’t subject to any caps on how much a landlord is allowed to raise the rent each year.
But older buildings have a cap on how much the rent can rise every year, regardless of what the costs are or whatever conditions in the free market are.
The plan was to encourage landlords and developers to build more apartment units by removing artificial caps on their potential profits. But more than two decades later, Tal says, the effect has been to fund a boom in condominiums that operate as rental units largely outside of regulation.
Others aren’t so sure that less regulation is the answer. The Advocacy Centre for Tenants Ontario thinks the rules need to be updated to reflect the modern market.
Tal argues that rent control on older units causes them to fall into disrepair since landlords have little incentive to maintain them. “The turnover rate under rent control is lower as tenants stay in properties longer,” Tal said. “And naturally, landlords would spend the bare minimum to maintain their units, given that, in many cases, they do not need to attract other tenants.”
More “rent control will work to reduce the supply of rental units, and will inflate any segment of the market that is not under rent control,” Tal says.
Tal believes that by coupling increased investment in affordable housing with less rent control, he says the market is more likely to fix itself by removing arbitrary limitations on competition. – CINEWS