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Ontario Premier Kathleen Wynne has promised rent control, following reports that some Toronto landlords are jacking rents up as much as double for occupants in their units.
There are currently no rent control rules for buildings built after 1991.
One major bank is arguing against the potential move.
“On this issue, economic theory is very clear: rent control is a bad idea. If rents are established at less than their equilibrium levels, both the quantity and quality of available rental units will fall. Under rent control, developers are less incentivized to build rental properties, a fact that exacerbates any price crunch,” Benjamin Tal, CIBC chief economist, wrote in a recent research report. “The turnover rate under rent control is lower as tenants stay in properties longer. And naturally, landlords would spend the bare minimum to maintain their units given that, in many cases, they do not need to attract other tenants.”
For her part, Wynne isn’t buying the argument that rent control will discourage the building of rentals.
“The reality is there hasn’t been any more rental built, there have not been rental buildings built in any comprehensive way,” she said last week, per the Canadian Press. “And so that argument does not actually hold water with me at this point.”
But Tal provided a real world example where rent control has had an adverse effect.
“New York City should be featured in any economic text book as an example of public policy that achieved the near opposite of its goals. Roughly half of the apartments in the city are under rent control, the other half is constantly undersupplied with a clear impact on prices,” he wrote. “And given that most housing programs tie government support to an apartment unit, not a person, the incentive to not move is enormous—further limiting supply. What’s more, the share of rent controlled units that are in poor maintenance is almost four times higher than seen among uncontrolled units.”
But with examples of 100% rent hikes in Canada’s hottest market surfacing, the government seems poised to take some action.
Should it be an overhaul to the current rent control rules?
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There have been suggestions that rent control needs to be put in place for properties built after 1991: Do you agree?