Real Estate

Rent control could stifle market supply

By AdvocateDaily.com Staff

Rent control measures could stifle market supply if the past is any guide, says Toronto real estate lawyer Peter Neilson.

The legislature at Queen’s Park recently introduced legislation that extends rent control to all private units in Ontario. The Rental Fairness Act, 2017 caps annual rent increases by landlords at an amount set by the province, with the rate for 2017 set at 1.5 per cent. The maximum increase allowed in any year under the new law is 2.5 per cent.

Rent control has a long history in Ontario, but in 1991 the provincial government exempted any units built after that year.

Neilson, a partner with Shibley Righton LLP, says the 1991 exception was made in an attempt to spur development of new rental units.

“They freed up the regime then because the rent control provisions stifled supply, and nobody was building anything,” he tells AdvocateDaily.com. “It’s too early to tell whether the same thing will happen again, but I personally think it could dry up new builds which may, in turn, affect the condo market.”

The legislation operates retroactively to April 20, negating any rent increase notices since that date for amounts over 1.5 per cent.

In addition, the provincial government claims the Act will enable a clampdown on abuse of the “landlord’s own use” provisions by property owners who claim they plan to move into the units themselves, and will also prohibit them from pursuing tenants for unauthorized charges.

Landlords are allowed to apply to the Landlord and Tenant Board to boost rent for current tenants by more than the guideline in certain circumstances, and they can also set any rate they like for new tenants.

In a statement welcoming the bill’s passage, Housing Minister Chris Ballard said it was welcome news for the 1.2 million private rental households in Ontario.

“Today is a good day for tenants in this province. In the face of dramatic rent increases and unfair practices, our government is answering the call to bring fairness and predictability to Ontario’s rental housing system.

"With the changes under the Rental Fairness Act, Ontarians can rest assured that they will continue to have an affordable place to call home,” Ballard said.

Neilson says the new law will affect many condo owners who have rented their units out for many years without having to worry about rent control.

“I had a client in a couple of days ago who had just closed on a condo, and he had no information about any of this stuff,” he says. “There are many people who have bought units as an investment but now have a whole new regime to adapt to if they plan on raising the rent.”

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