Rent control won’t solve the apartment crisis
With the exception of the last few years, we have seen almost no apartment buildings built over a 30-40 year period. This either means that it was not financially possible to build it, or that the developers did not want to make any money. It is likely that the developers want to make money, but it is not feasible. The environment for the majority of the last decades has not favored the development of apartment buildings and the repercussions have been the lack of rental supply. To help solve this problem, we need to find ways to encourage developers to build more purpose-built rental housing.
Rent control and related exemptions have been an important determinant of new construction. During the new apartment building boom of the 1970s, all new construction was exempt from rent control. This can still be seen with the exemption for all new construction built after November 2018, which has resulted in the construction of a few new apartments, although it is still insufficient.
Unfortunately, there has been a lot of talk lately, especially in Toronto, about the removal of vacancy screening as well as the 2018 exemption and whether they should be removed. Removing them would be a very bad idea. This would put new construction at risk and further exacerbate supply problems.
As properties age, the cost of repairs and maintenance increases. Insurance, heating, interest rates, taxes and utilities, among others, are increasing and have increased much faster than the rent increase guideline. Landlords have primarily been able to recoup these rising costs with rent increases on unit turnover. The proposal to stop rent increases on turnover will be disastrous for apartment buildings and the tenants who live in them. Rents won’t be able to keep up with rising costs, and property managers won’t have the funds to keep up with building maintenance.
Strict rent control was in place through the 1980s and part of the 1990s and the condition of the rental housing stock rapidly deteriorated. There was a shortage of apartments to rent with dozens of applicants for any available unit. Renters were so eager to find a unit that they did not expect units to be upgraded and offered to take a unit as is and do their own repairs. Some tenants were desperate enough to offer janitors money to get their request approved. The system was a mess, the buildings were rapidly deteriorating and getting worse every year. Property
This is a difficult situation to manage, as many low-income people struggle to pay their rent or find affordable housing. However, introducing tighter rent controls is not the solution and will ultimately lead to further loss of supply and increased unaffordability. An option to consider instead is portable housing or a universal housing subsidy program. Under such a program, everyone would be eligible to apply for a grant based on their income. Everyone can pay their rent and that rent would be enough to maintain and improve our rental housing stock. Suppliers would be able to build the new rental units we need, increase supply and hopefully keep rents reasonable.
For more information on these and other rental housing issues, you can visit our website at www.hamiltonapartmentassociation.ca or contact us directly.