Rent Controls Make Sense, Unless You’re a Greedy Landlord

Rents continue to skyrocket in Toronto. The average asking rent for a two-bedroom unit has reached $3,400. To reasonably afford a one-bedroom unit, full-time workers must earn $26 per hour, nearly $10 more than the minimum wage. What’s worse, rent controls are becoming weaker in Ontario.

The Ford government abolished rent controls in units built after 2018. Occupied units built before that are subject to an annual rent increase guideline, which will be 2.5 per cent in 2024. 

To get around that, landlords are increasingly applying for above-guideline rent increases (AGIs), which can add up to 9 per cent over three years, on top of the guideline increases. There are no controls on vacant units, which pushes average rents up and creates a financial incentive for evictions. 

Against this backdrop, Toronto City Council is considering a new housing plan. If approved, any new unit built with city support will be subjected to rent controls. The city’s plan also asks the province to re-enact controls in units built after 2018.

Landlords and developers are sure to argue against these measures. They always argue against controls, saying regulation slows new construction, which is bad for everyone. 

But that’s not true.

The Canadian Mortgage and Housing Corporation (CMHC) — the government agency with the best housing data — has carefully analyzed the impact of rent controls on construction, which the agency calls “rent starts.” The analysis looked at big Canadian cities with and without rent controls from 1971 to 2019 — almost 50 years of data.

The main finding of the analysis: “There was no significant evidence that rental starts were lower in rent control markets than in no rent control markets.” 

Rent controls don’t slow construction or make rentals unprofitable. They simply put a limit on profit. The real reason landlords oppose rent controls is self-interest and greed. They want the freedom to squeeze tenants.

This article appeared in the 2023 Nov/Dec issue.