Olivia Chow says she has a notion that will help fix Toronto’s housing affordability problem: Expand rent control. It’s just one idea in the mayoral candidate’s multiplank housing platform, but it’s a particularly bad one.
Numerous studies and decades of experience have shown that putting controls on annual rent increases usually backfires. Landlords spend less on maintenance, so their properties deteriorate. Developers build fewer rental units because the profits aren’t there. The result is to worsen the housing shortage that helped cause prices to soar in the first place.
Ontario has had rent control since 1975. For years, buildings constructed after 1991 were exempted. A Liberal government ended that in 2018, but the Progressive Conservative government that succeeded it decreed that new buildings would once again be exempted, so now those built after 2018 are free of controls.
That still leaves the bulk of rental properties under the rent-control regime. The most that landlords can raise rents this year is 2.5 per cent. In 2022, it was 1.2 per cent; in 2021, during pandemic times, 0 per cent; in 2020, 2.2 per cent.
Landlords can raise the rent above the limit when a tenant moves out and another moves in. Taking a page from the policy book of Ontario’s NDP, her party when she was in federal politics, Ms. Chow would lobby Queen’s Park to end this rule. A Renters Action Committee, with her in its ranks, would push for “real rent control for all rental units” tied “to the unit and not just the tenant.”
On her website, she proclaims: “To the renters of Toronto – as your new mayor I will act, I will make life easier for you, I have your back.”
That may win some votes for Ms. Chow, a former MP and city councillor. She is one of the leading candidates to replace former mayor John Tory, who resigned earlier this year. Rent control for all is an appealing pitch at a time of high inflation and soaring rents. But it’s a classic example of short-term thinking.
Short term, renters would catch a break. Long term, everyone would suffer. Fixed prices tend to cause shortages, whether it’s in bread or apartments. In an ordinary, working marketplace, high prices spur producers to make more of the desired commodity. Higher supply eases the upward pressure on prices. A regulated market with controlled prices stifles this process of self-correction.
A 2018 study of rent control in San Francisco found that many landlords converted their rented apartments to condos, or redeveloped their buildings to make them exempt from controls. That led to a sharp drop in the supply of affordable rental housing. It also led to increasing gentrification as higher income people moved into the converted buildings.
Many cities around the world – Stockholm, Berlin, New York, Vancouver – have embraced rent controls anyway. The reasons are obvious. Landlords are far outnumbered by renters, who represent a strong voting block. Landlords are an unpopular, often stereotyped group, even though many are just hard-working business people. Imposing rent controls makes them, in effect, subsidize renters. Controls cost governments nothing.
Ms. Chow’s platform is full of measures to help tenants fight unfair evictions, illegal rent increases and cheapskate landlords who let apartments fall into disrepair. Nothing is said about the many responsible landlords who face rising costs for insurance, taxes, debt interest, water and repairs and yet have their income capped by rent controls.
Tenants deserve protection, of course. The provincial government just announced that it is beefing up the hard-pressed Landlord and Tenant Board to help it cope with disputes. It is also toughening penalties for landlords who carry out “renovictions” – evicting a tenant by claiming they need to do big renovations. But distorting the market by imposing limits on rent increases is not the way to help.
Canada is due to absorb millions of new immigrants in the coming decades. Many will be renters. We need to think not just of current tenants but future ones, among them the young people who will be moving into their first houses and apartments.
A policy that undermines the incentive to build and maintain rental stock is cheating the future. Instead of doing as Ms. Chow suggests and lobbying the province to expand rent controls, Toronto should be pushing to do away with them altogether.