04/05/2017 01:03 EDT | Updated 04/06/2017 10:01 EDT

Toronto Tenants See Rent Double As Industry Argues Against Controls

Stopping 100-per-cent rental rate hikes could come with its own problems.

The horror stories about massive hikes in rental prices are beginning to pile up in Toronto, prompting politicians to look at stricter rent controls in the city.

But the lending and real estate industries are coming out strongly against any such measures, arguing that it would only make things worse.

The debate reached new heights this week with news reports that a landlord in the city’s west end is doubling rents for at least two of the units they are renting out.

"I thought it was an April Fools joke," Liberty Village resident A.J. Merrick told the CBC. "There's no way I'd pay that much for this apartment."

Merrick received a letter from the landlord stating that the rent will double to $3,320 from $1,660 per month. He can accept the new rental rate or vacate the premises by July 1. CTV News reports that the same landlord, KSV Advisory, is doubling prices in other units as well.

"It is unfortunately a landlord's market."

— Joeita Gupta, Federation of Metro Tenants’ Associatons

Under a law passed in the 1990s by the provincial NDP government and made permanent by the successive Progressive Conservative government, Ontario’s existing rent controls do not apply to buildings built after 1991.

"For landlords, and I hate to say it, it becomes a form of economic eviction," Joeita Gupta of the Federation of Metro Tenants’ Associatons told CTV. "It is unfortunately a landlord's market."

In some instances, the situation has reached bizarre levels. A recent Airbnb posting in the city offered an SUV parked in the Distillery District as a place to sleep for $15 a night.

That has some politicians talking about ending the rent control loophole from the 1990s, and a private member’s bill from NDP MPP Peter Tabuns in front of the provincial parliament aims to do just that. The bill recently received the support of Toronto city council, though Mayor John Tory voted against it.

The real estate industry fears any move to expand rent controls would stop rental apartment construction in its tracks and make the situation worse.

"Even the very mention of rent control as an option is having a chilling effect on developers," CIBC economist Benjamin Tal wrote in a client note Tuesday. "From recent discussions with some developers we know that it's already impacting decisions."

Buildings under construction in Toronto. CIBC economist Benjamin Tal says the real estate industry has grown worried about a possible expansion of rent controls. (Photo: Getty Images)

Tal wrote that rent controls are one of the few things left-wing and right-wing economists agree are “a very bad idea.”

"The fact that an NDP government (in 1992) had to ease rent control requirements is a clear indication that something went very wrong," he wrote.

Tal warned that Toronto could see a New York-style housing crisis if rent controls are expanded.

“Roughly half of the apartments in [New York City] are under rent control, the other half is constantly undersupplied with a clear impact on prices,” he wrote.

Tal also noted that rent controls are tied to apartments, not people, creating a disincentive to move to new homes, further reducing the supply.

Ontario Premier Kathleen Wynne says she doesn't buy the argument that rent controls will dampen construction of new buildings, because few developers were building rental apartments anyway. (Photo: Reuters/Mathieu Belanger)

But Ontario Premier Kathleen Wynne isn’t buying it. She says that the lack of rent controls on buildings built after 1991 has not resulted in rental apartments being built.

“The reality is there hasn’t been any more rental built, there have not been rental buildings built in any comprehensive way,” she said Tuesday. “And so that argument does not actually hold water with me at this point.”

Tal argued that rent controls, which were first introduced in Ontario in the mid-1970s, have made things worse, resulting in the drying up of new apartment supply in the city. Bringing in tighter rent controls could kill the small resurgence in apartment construction the city has seen in recent years, he suggested.

“Rent control is the exact opposite of what the (Greater Toronto) market needs. We need more rental units not less,” Tal wrote.

— With a file from The Canadian Press

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