The Toronto rental market appears to be spiraling out of control alongside the housing market.
The latest news has a 2-bedroom condo in Liberty Village doubling in rent, from $1,660 per month to $3,320. Sadly, it wasn’t an April Fools’ joke.
So what’s the solution? Many say that we need rent control to ease the pain. A recent report from CIBC disagrees.
Rent controls have existed in Ontario since 1975, but were eased under the NDP government in 1992. The changes meant any building built after 1991 was free to charge what they pleased. Originally a 5-year rent control freeze, this exemption became permanent under Mike Harris’ PC party.
So what’s the problem with rent control? The report argues that even talk of controls scares off developers from building purpose-built rental buildings, which is a problem given that an increased supply of rental units is exactly what Toronto needs to meet the growing demand.
“Affordability will be achieved only by increased supply,” says Benjamin Tal, deputy chief economist of CIBC World Markets.
While calls for rent control are understandable — especially as rents in the GTA are outpacing inflation — the report also suggests that newly enforced controls will serve to dissuade developers from investing in maintenance, will result in increased condo construction and unit hoarding, and will inflate those rental units that are bound by controls.
There is also serious fear that the rental construction rebound the city is currently experiencing would be stopped in its tracks. So while the motivation behind supporting rent controls is pure, the outcomes for low- and middle-income families could be devastating.