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ErinreducedErin Ruddy, Editor - Canadian Apartment Magazine

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Fixing Ontario’s Rental Housing Crisis

Written by  Erin Ruddy

Queens Park

Apartment sector applauds new attitude at Queen’s Park

On June 7th, Ontario Progressive Conservative party leader Doug Ford was elected the province’s new premier in a majority vote that has left some industries fearing the worst and others optimistic of much-needed change. Since Ford launched his campaign, the rental housing industry has been vocally in favour of a PC win, citing former premier Kathleen Wynne’s restrictive legislation as one of the major obstacles to new housing development.

With reports of an annual shortfall of 6,000 rental units per year in Ontario, landlords aren’t the only ones seeking amendments to a broken system. Desperate residents in need of affordable places to call home are just as driven to see the rental shortage resolved, but there are no simple solutions to a dilemma with many complicated, interrelated causes.

A 2018 CMHC study showed that the steep rise in land costs in Toronto is one factor contributing to the lack of supply. Add in restrictive government policies, zoning limitations and “uncertainty and delay in the approval process,” and investors often abandon thoughts of new development before it has begun.

Will Doug Ford’s conservative government help overturn some of these obstacles?

“The industry has a list of changes on the table that, if implemented, will significantly improve investor confidence,” says Joe Hoffer, Partner at Cohen Highley LLP Lawyers. “The changes are easy legislative fixes without impairing tenants’ rights. FRPO (Federation of Rental-housing Providers of Ontario) is expected to present the industry proposals soon with some expectation the province will be receptive.”

Overseeing that process is Daryl Chong, FRPO’s Interim President and CEO. In his ongoing advocacy of apartment sector interests and his quest to eliminate policies that stifle, rather than spur, new development, Chong says he is hopeful that the new Ford government will usher in an era of growth and heightened activity.

“During his campaign, Doug Ford was able to articulate a vision of change that resonated with regular people,” Chong says. “His vision is one that respects the taxpayer and stands up for the average person. His government also demonstrates a better understanding of our industry, and is open to exploring ways we can work together to encourage more rental supply. I look forward to working with the new Minister of Municipal Affairs and Housing, Steve Clark, to discuss ways we can reset this broken system and hopefully relook some of those misguided government policies that continue to hold back new supply.”

Specifically, one of those “misguided” policies is rent control and the post-1991 exemption that was overturned in April 2017 as the Liberals pressed forward with measures to help ease financial pressures on renters. As part of what the then government called its Fair Housing Plan, allowable rental increases were limited to the rate posted in the annual provincial rent increase guideline (about two per cent on average) regardless of when it came onto the market. Landlords and developers argue that the policy compels them to set prices high from the outset in order to make a new project viable —in other words, forego building anything affordable.

Ford has frequently asserted his belief that overregulation leads to undersupply and that when it comes to matters of supply and demand “the market should take care of itself.” Nevertheless, according to a May 15th statement posted on the Ontario PC website, his party appears to have no current plans to address rent control.

“I have criss-crossed the province, and from one corner to the other, the people of Ontario have told me they are struggling. I have listened to the people, and I won’t take rent control away from anyone. Period,” he said. “When it comes to rent control, we’re going to maintain the status quo.”

As an industry that looks forward to the day rent controls are eradicated, what can be done in the meantime?  Here are a few key areas that will need to be addressed as the province moves toward an era of change—one that hopefully encourages rather than waylays the development of affordable rental housing:

1. A change to the government’s rent increase guideline
FRPO has been advocating a move towards a more sustainable CPI + “X%” cap on rent increases for existing buildings, and for a rolling exemption to the guideline for new construction.

2. Vacancy decontrol and above-guideline increases (AGIs)
These provisions allow for periodic catch-up in rents that would otherwise be frozen by legislation. FRPO will continue to educate government decision-makers on the importance of these provisions.

3. Streamlining planning and zoning approvals
Too many layers of municipal and provincial regulations are interfering with the pace of new construction. Streamlining these costly, onerous approvals is an essential step to speed up the development process.

4. Tax exemptions and incentives
Exploring government supports that help reduce the financial burden of new purpose-built apartment construction is a must for the industry to grow.