Why Rent Controls Will Actually Increase Rents and Real Estate Prices in Toronto
The Provincial Government is about to bring in Rent Controls. On the surface this sounds like a good idea in a city with rents rapidly increasing and affordability eroding. It is an awful situation and not good for the City. However, the solution is not Rent Control. The solution is to increase the supply of rental housing both through the construction of new purpose built rental apartment buildings and also the construction of new Condominium buildings which function as rental housing to a large degree. Purpose built rental buildings are funded by pension funds and if rent controls are brought in there is not a chance that anyone and especially pension funds are going to want to be in the rental housing business. The same goes for the individual condo owner who purchases a condo as an investment and rents it out. Investors whether they are Pension Funds or individuals do not want to be in the rent control business. So, as a result the supply of new rental housing will come to a halt along with the supply of new condominiums for sale. We will not be building any residential housing while we are building unprecedented amounts of office space to house tens of thousands of new jobs.
The upshot, housing prices and rents will skyrocket. But how so you say? We have rent controls? The rent controls only apply to the year over year increase to the current tenant living in the rental unit. Once that person gives notice and vacates, the rent can be increased to any level which the market will accept. Far more people, far less housing for rent and for sale will accelerate rent increases and housing costs which is exactly the opposite of what the government should be doing. CREATE MORE HOUSING TO MEET THE GROWING DEMAND AND PRICES WILL STABILIZE!!!