In an effort to help increase the province’s supply of affordable housing and protect renters from what many are calling exorbitant rent hikes, the Ontario Government has announced a comprehensive package of measures, including: bringing in a 15 per cent foreign buyer tax; expanding rent control to include post-1991 buildings; allowing Toronto to impose a tax on vacant homes; and using surplus lands for affordable housing.
While cash-strapped tenants and home-seekers are fundamentally in favour of these new measures, the question remains, what will it all mean for Ontario’s purpose-build rental industry?
The Federation of Rental Providers of Ontario (FRPO) has been vocally opposed to the removal of the 1991 Exemption since talks of this possibility abounded several months ago. To highlight its concerns, the association recently conducted a survey of its membership detailing the extent of damage the change could have on the province’s new rental supply.
While FRPO shares the government’s interest in protecting Ontario’s renters, Jim Murphy, FRPO President and CEO, objected to its decision to change rent control legislation without any formal consultation with the very industry it implicates.
“Today’s announcement by the Wynne government will put thousands of units, and millions of dollars in provincial revenues at risk,” he said. “It is a rash, politically motivated decision, which will hurt, not help, generations of Ontario renters.”
Defending the new measures, Ontario Premier Kathleen Wynn stated at a press conference today: “When young people can’t afford their own apartment or can’t imagine ever owning their own home, we know we have a problem. And when the rising cost of housing is making more and more people insecure about their future, and about their quality of life in Ontario, we know we have to act.”
Expanding rent control
According to the Fair Housing Plan, expanding rent control to all private rental units in Ontario—including those built after 1991—will ensure increases in rental costs can only rise at the rate posted in the annual provincial rent increase guideline. Over the past ten years, the annual rent increase guideline has averaged two per cent. The increase is capped at a maximum of 2.5 per cent. Under these changes, landlords would still be able to apply vacancy decontrol and seek above guideline increases where permitted.
The government will also introduce legislation that would, if passed, add new measures to the Residential Tenancies Act. This will include: developing a standard lease with explanatory information available in multiple languages; tightening provisions for “landlord’s own use” evictions; and ensuring that tenants are adequately compensated if asked to vacate under this rule.
The plan states it will prohibit above-guideline increases where elevator work orders have not been completed and make technical changes at the Landlord-Tenant Board to make the process fairer and easier for renters and landlords.
Joe Hoffer of Cohen Highley LLP has his doubts that the outlined measures will add up to much in the way of boosting our much-needed rental supply. “If the new construction (post-1991) exemption is completely eliminated, the other announced incentives to encourage new apartment construction will be of limited value, particularly if interest rates move upward,” he said. “While Toronto may not feel too much pain given the demand, the proposal will have adverse impacts across most of the rest of the province.”
Furthermore, Hoffer voiced concerns that the mandatory lease proposals will require most operators to revise their administrative processes and current leasing documents, which for many will be a costly exercise.
“This proposal seems to have come out of left field and there is no policy context or rationale advanced by the Province to justify this significant intrusion into what is, for the most part, a highly professionally run industry,” he said.