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Housing minister says nixing rent control on new units will ‘solve’ lack of supply

Thestar.com
November 29, 2018
Tess Kalinowski

Ontario’s housing minister is standing by the government’s elimination of rent controls on new units as the best way to alleviate the Toronto region’s vacancy squeeze.

“Exempting new units from rent control will encourage large developers and small landlords to create more housing,” said Steve Clark.

Housing Minister Steve Clark, centre-right, meets developers and builders Wednesday at a new purpose-built rental building in Toronto. The minister is asking members of the public to take part in public consultations on increasing the housing supply.

“We want units built and that’s how we’re going to solve it. Our government’s open for business and this is a very important strategy for us,” he said Wednesday.

He made the remarks at a news conference inviting public input into the government’s consultations for its Housing Supply Action Plan. The backdrop was the Montgomery, a new apartment building on Yonge St. near Eglinton Ave. that is expected to rent for between $2,175 and $6,055 when it is finished next year.

Clark repeated the Progressive Conservative government’s promise to maintain the province’s 1.8 per cent annual rent increase guideline for 2018 and 2019 on units occupied before Nov. 15.

A report from Canada Mortgage and Housing Corp. (CMHC) also released Wednesday, shows rents are rising above that rate even though the 3,000 rental starts in the first nine months of 2018 were the most the region has seen in 24 years.

The Rental Market Survey reports that Toronto region rents rose 4.9 per cent to $1,359 on average between Oct. 2017 and Oct. 2018. A two-bedroom apartment in the City of Toronto climbed 5.2 per cent to an average rent of $1,455. In Oshawa, rent on a typical two-bedroom unit rose 6.1 per cent in the same period, even though Durham Region had the biggest rental stock increase with 740 added units.

Despite a 1 per cent increase in the number of purpose-built rentals in the Toronto region, vacancy rates persist near a 16-year low of 1.2 per cent, half the national average.

In the city, purpose-built rentals have a 1.1 per cent vacancy rate and the condos that account for about a third of the city’s rentals, showed a 0.7 per cent vacancy rate.

CMHC blames the tight market, including rising home ownership costs, for allowing landlords to charge 18 per cent more on average when new vacancies become available. That has slowed rental turnover rates to 11.2 per cent this year, from 14.5 per cent last year.

Clark said he wants tenants, as well as builders, homeowners and other stakeholders to tell the province how to provide more housing.

“Whether you’re a student looking for your first apartment or a growing family needing to move up from a one-bedroom to a two-bedroom, rental homes are few and far between. It’s no easier for people who want to buy a home. Bidding wars on condos and single-family homes are pricing people out of the market, especially first-time homebuyers,” he said.

The government is also eliminating a development charge rebate introduced by the previous Liberal government to encourage the construction of rental buildings.

The program was simply ineffective, said Jack Winberg, CEO of the Rockport Group, the developer behind The Montgomery. More than a quarter of the 230 units are already leased, he said.

The development fund “wasn’t really adding any significant value and, in the context of the problem, $125 million really was not significant ... It really wasn’t justified in terms of the overall housing supply problem,” he said.

A single downtown development can easily cost in excess of $100 million, said Winberg. “They’re very substantial capital projects,” he said, adding that rent controls have been an impediment to some rental developers.

Tenant advocates have criticized the elimination of rent controls on new buildings, saying that the exemption means tenants will be more reluctant to move and sets up renters for years of above-guideline increases.

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