Rental rights advocates want to level the playing field and have post-November 1991 buildings follow the provincially legislated annual rent increase. Currently, these rental units are exempt from rent control.
On March 20th, a private members bill will be introduced by NDP MPP Peter Tabuns, calling for the end to what many people refer to as a “loophole” in the Residential Tenancies Act.
Technically, this isn’t a loophole. It was a rule specifically designed to encourage new purpose-built residential rental apartment buildings. Mike Harris, during his tenure as Mayor, felt that this would make it more lucrative to build these apartments, a move designed to help increase the supply of rentals in Toronto, at a time where rentals were in incredibly short supply.
It didn’t do much to spur on construction, but it did result in a two-tier system: Live in an older building (pre-November, 1991) and enjoy rent stability. Live in a newer building and give up the security of rent control. Any vacant unit can be increased without limit between tenants. And there is still a huge lack in purpose-built rental. Last year the GTA had over 18,000 new condos built while new apartments built totalled less than 10 per cent of that number.
The rule: Any residential rental unit that was not built or occupied as a rental unit prior to November, 1991, was exempt from having to follow the rent control increase annually stipulated by the provincial government. This provincially stipulated increase is passed down annually, in June. The maximum increase is capped at 2.5 per cent. For 2017 it’s 1.5 per cent, last year it was two per cent. This system offers stability to renters. They know the most their rent will be increased, and they can budget for it.
More on how the current rent control works here.
This leaves renters in new buildings in a precarious position. All of the other rules in the Residential Tenancies Act apply to all residential rental units – new or old – but the post-November 1991 buildings have no maximum increase. It’s seen as a major contributing factor to the affordable housing crisis in Ontario – specifically city centres like Toronto and the GTA.
Many tenants find themselves having to move from their homes because this rule is spiking their rent substantially beyond what they can afford – and it’s a domino effect. As each landlord maxes out what they think they can charge, other landlords follow suit. The disparity between purpose-built rent and condo rent continues to grow. According to the Toronto Real Estate Board, the price of the average one-bedroom condo rental was $1,176 in December, 2016. The Canadian Mortgage and Housing Corporation (CMHC) Rental Report for the Greater Toronto Area lists the average rent for a purpose-built rental apartment at $1,132 for 2016.
The disparity is extreme.
There is no safety net that rent will be anywhere close to a resident’s budget when the annual increase comes. Tenants in new buildings – which include new rental apartments, rental condos and even duplexes, triplexes and houses – may see a rent increase of hundreds or even thousands of dollars. And it’s legal.
“People deserve protection against unreasonable rent increases,” Tabuns told Metro Morning. “The exemption that exists now for buildings built after 1991 needs to go. It isn’t helping people anymore. In fact, it’s putting people in a very difficult position,” reported The Toronto Star. In response, Housing Minister Chris Ballard said Thursday it is “unacceptable” for Ontarians to face skyrocketing housing costs.
Renting is on the rise, vacancy rates are near record lows, the lack of a substantial infusion of new, purpose-built rental units and the skyrocketing price of real estate are contributing to a rental crisis. With housing prices up, more and more people are choosing to rent in the city rather than buy, based on affordability.“Rising costs of homeownership keep more people in rental.” says Dana Senagama Principal, Market Analysis, CMHC. The numbers are putting too heavy a stress on supply-and-demand, and the outcome is that landlords can capitalize on it. While the rental condo market was originally seen as a potential solution, those rental condo residents are suffering from the lack of rent control. When annual rent increases come up, the nominal 2.5 per cent doesn’t break a budget the way that a $500 increase can. On Monday March 19, we’ll see if those renters will get some relief.