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Canada Ontario government says it still backs rent control, despite condo conversions

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The Ontario government is monitoring the housing market in the wake of its expansion of rent control but remains committed to the policy despite news that more than 1,000 planned rental units have been converted to condos in the Greater Toronto Area, Housing Minister Peter Milczyn says.

Premier Kathleen Wynne's government extended rent control to all private rental units in the province in April as part of a wide-ranging package of housing-policy changes.

More than 1,000 planned purpose-built rental units have since been converted to condominiums in the GTA, according to a new report commissioned by the Federation of Rental-housing Providers of Ontario (FRPO). The study warns that already low vacancy rates will drop further unless the government adopts policies to encourage developers to build at least 6,250 additional new rental units a year for the next decade in the province.

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In an interview, Mr. Milczyn said the expansion of rent control is part of a larger effort by the provincial government to increase housing affordability.

"I think it's working. We will continue to monitor it," he said. "But most importantly, we're going to continue working to get more supply into the marketplace."

Mr. Milczyn pointed to the government's announcement earlier this month that it is unlocking surplus provincially owned lands for the development of more than 2,000 new apartments in Toronto, with up to 30 per cent earmarked for affordable housing. He also noted the province's $125-million program to rebate development charges, reduced municipal property taxes for rental buildings, streamlining of the provincial approvals process and initiatives to work with municipalities on inclusionary zoning.

Mr. Milczyn said few private purpose-built rental units were constructed in the GTA in recent years.

"I don't believe that you can draw the conclusion that the rent control regime that we have implemented … is going to be substantially different in terms of how it impacts the market than what we've seen for decades where there was little purpose-built rental housing built."

In Ontario, rent hikes for all private apartments are now capped at around inflation to a maximum of 2.5 per cent a year. Landlords can apply for special increases if they do renovations or upgrades and can raise rents when a tenant moves out. Rent control previously applied only to apartments in buildings constructed before November, 1991.

The FRPO report, which was prepared by real estate consulting firm Urbanation, is the first to measure the impact of extending rent control by tracking the conversion of planned apartment projects to condos. The FRPO previously found in a survey of its members, who are mostly large property owners and management companies, that about 20,000 of more than 28,000 proposed purpose-built rental units in the GTA were under review as a result of the government's housing measures.

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Many economists had predicted that rent-control expansion would stall the construction of purpose-built rental units by reducing incentives for developers.

"It's Economics 101. You limit the ability to raise rent, you reduce supply," said Benjamin Tal, deputy chief economist at CIBC.

Graham Haines, research manager of the Ryerson City Building Institute, argued rent control isn't the sole reason behind the more than 1,000 rental units being converted to condos, noting that the continued strength of the GTA's condominium market simply makes such developments more enticing.

"Given that the returns are so good for condos, I think developers are just realizing it's better to stay in the condo game than try something else," he said.

Mr. Haines called on the government to provide more incentives to make building rental housing competitive with condos.

"I think we're starting to realize the importance of rental and actually actively building rental. And given rental obviously is not competitive, we need to find the right policies, the right incentives to make it competitive."

Rob Carrick discusses the increasing prices of rental properties and whether it makes more sense to buy a home instead of renting The Globe and Mail
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