Late last year, the Ontario government announced that it would be removing rent control on a large number of apartments in the province. Reactions from commentators on both sides of the issue were swift.
In Toronto, those in favour of the changes believe they’ll lead to the construction of more units—and provide a boost to the local rental market. Those who oppose them argue that it could make finding affordable housing more difficult, while pushing tenants who currently live in rent-controlled apartments to stay put for longer.
What does it all mean for you? Whether you’re a renter or a landlord, here’s what you need to know about the recent changes to rent control in Ontario…
Which units are impacted?
Let’s start with who’s impacted by the changes. Rent control has been removed for new rentals—those constructed on or after November 15th, 2018. A unit that fits the criteria could be part of a brand new development, or it could be a new addition to a pre-existing building. Older condos that were unoccupied as of the date above are also exempt.
Toronto has one of the lowest vacancy rates in the country at 1.1 per cent. Simply put, we need more purpose-built rentals to house our growing population. By removing rent control for new units, the government hopes to encourage developers to create more housing. How? By creating an environment where they can receive higher returns on their investments.
The biggest public criticism of this strategy is that it could make rents less affordable. One of the major worries is that tenants in buildings where rent control remains intact won’t want to leave—and those searching for housing will continue struggling to find it. Some commentators have also pointed out that in 2018, construction began on a record 11,172 units in Toronto—which means a large number of condos were being built under rent control.
Having said all of that, there’s no doubt that the recent rule change has the potential to drive the construction of new units by opening up the market. Only time will tell what net effect this has.
What it means for tenants
Rules related to rent increases are set out in the province’s guidelines. If you’re renting a unit built before November 15th of last year, your rent can’t be raised by more than 1.8 per cent in 2019. That said, it’s possible to find good value in both older and brand new buildings.
While finding a unit within your price range may be a challenge, this was also the case before the new rent control rules were announced. When you get right down to it, finding an apartment that will meet your needs in Toronto may take some perseverance.
What it means for landlords
For investors, the removal of rent control will allow you to charge more in rent for brand new units. On the one hand, you could receive a higher return on your investment. On the other, it’s important to manage your expectations. Generally speaking, tenants won’t pay exorbitant rent simply because the government says you can ask for it. Your goal should be to rent your space out at fair-market value.
I know landlords sometimes have it tough. There are monthly expenses to cover—like maintenance fees and property taxes. In some cases, they could come out of your pocket. Luckily, doing a bit of basic math, choosing your unit wisely, and having some cash on hand for extra expenses can help you maximize your ROI and overcome potential financial strain.
For guidance when you’re purchasing an investment unit, ask a real estate agent with condo market expertise.
Looking to purchase an investment condo? I know the Toronto market, and how to buy a new unit that offers high potential returns. Contact me with any questions and inquires. Call or text: 416-500-5360 / Email: firstname.lastname@example.org