Queen’s Park and Toronto City Hall put the squeeze on renters

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Appeared in the Toronto Sun, November 10, 2017
Queen’s Park and Toronto City Hall put the squeeze on renters

Statistics Canada recently released data from last year’s census on housing across the country, revealing, among other things, a spike in the number of renters in Toronto.

Let’s start with the numbers. Between 2011 and 2016, the City of Toronto gained roughly 65,000 households. Of these, almost 50,000 are renters—that’s more than three-quarters of the five-year gain. In 2011, average rents were just over $1,000. In 2016, they jumped to $1,242, with rental vacancy rates holding at between 1 and 2 per cent.

In the face of such dramatic change, one might assume that the government would help ensure an adequate supply of rental housing in the province. Unfortunately, Queen’s Park and city hall have done just the opposite.

Earlier this year, Premier Kathleen Wynne expanded rent control to all private rental units in Ontario. This policy, which limits rent increases, is nothing new. Rent control has existed in many forms and in many jurisdictions, from Stockholm to New York and Santa Monica, California. So too have its consequences.

Though ostensibly aimed at protecting renters, rent control actually hurts them in the long run. When rents are capped, returns on rental investment decline, and developers and homebuilders have less incentive to provide rental units. When faced with these limits, developers are more likely to build condos. Indeed, developers recently decided to convert more than 1,000 units in the Greater Toronto Area from rental to market housing.

For existing rental units, capped rents mean landlords are less likely to maintain upkeep. As such, rent control deteriorates the rental stock over the long term, negatively impacting even renters who secured housing before the policy was enacted.

Beyond Queen’s Park, Toronto City Hall has also put the squeeze on renters. How? By constraining the housing supply, which leads to low vacancy rates and high rents.

Recent work by the Fraser Institute supports this. Between 2014 and 2016, researchers surveyed hundreds of homebuilders on their dealings with municipalities to obtain building permits. In Toronto, it takes almost 18 months (on average) from the moment developers approach city staff for a permit to the moment shovels break ground on new housing units. Eighteen months is a relatively long wait. In Burlington, for example, this process is three months shorter.

Obtaining permits is also not cheap. Beyond the cost of approval delays, building permits often require or trigger additional fees and levies for changes to zoning or local amenities. Add to this ancillary legal fees or blueprints required for compliance, and average costs eclipse $46,000 per unit in Toronto—significantly higher than the $21,000 average in Hamilton, for example. While fees and levies can help pay for the city’s additional infrastructure needs caused by a growing housing stock, there’s certainly room for improvement.

When stacked up, these regulatory delays and costs can slow growth of the housing supply, affecting the laws of supply and demand, and ultimately raising prices for buyers and renters alike. Indeed, research shows that, between 2011 and 2016, Toronto would have accommodated more than 6,000 additional housing units during this five-year period had its regulatory climate more closely resembled other GTA municipalities. In other words, a whole new neighbourhood’s worth of housing was stifled by red tape. And since 2016, that number has surely grown.

Renters might be Toronto’s fastest-growing constituency—increasingly, their needs are synonymous with the city’s needs. It’s counterintuitive, therefore, that governments—both provincial and local—implement policies that hurt renters. These policies are probably well-intentioned, but their negative consequences should be understood and shared. Without recognizing these consequences, Queen’s Park and Toronto City Hall will continue to hurt the very people they aim to help.