Ontario Housing Minister Steve Clark is wading into the troubled waters of affordable housing.
With rental availability at an all-time low and affordable housing a contradiction of terms. The new municipal affairs and housing minister is trying to find a formula that will address both problems.
“We’ve got a 17-year vacancy rate low, we have a crisis situation where people looking for housing opportunities … is at a peak,” Clark told Toronto Storeys in an exclusive interview. “We’ve got to develop more housing as fast as possible,” he said.
The high cost of housing and rent was on the lips of many voters during the recent municipal elections, particularly in the Greater Toronto and Hamilton Area.
The PC Plan
To start, the Progressive Conservative government has proposed to make new rental units exempt from rent control, effective Nov. 15—the position being that developers will once again start building rental units. The Federation of Rental Housing Providers of Ontario (FRPO) insists that would be the case.
Critics argue that lifting rent controls on new builds is counterproductive, especially in the Toronto area where rents are often as much as a mortgage payment and they worry the Tories’ Housing Supply Action Plan ignores the crisis in social housing.
“I’m the first one to say that the rent control exemption in the fall economic statement is just one thing,” said Clark, who has launched a public consultation on ways the government can remove barriers to building affordable, including streamlining development approval processes.
This government initiative effectively shuts the door on across-the-board rent controls introduced by the previous Liberal government, which included condominiums.
Clark On Public Consultation
Clark said the public consultation, which ends Jan. 25, 2019, will look at five themes: cost, mix, speed, rent and innovation.
“There is a lot of cost in the development approval process system … and in terms of speed, time is money … and we’ve also heard there is not the right mix, especially the missing middle, townhomes, multiplex, laneway homes … and on the rental side we hear issues both from landlords and from tenants,” he said.
“And finally, there is a lot of innovation out there, a lot of best practices that I think we should be looking at, and I encourage people to give us those innovative ideas on how to get more housing into the market more quickly,” he said.
The Land Transfer Tax Debate
Clark said a common complaint, especially from the Ontario Real Estate Association (OREA) is the cost of the land transfer taxes and HST, “and that some of those extra costs are a barrier for first time home buyers.”
Clark refused to take a position on the land transfer tax. However, when he was in opposition at Queen’s Park, he vehemently opposed giving Toronto the power to impose its own land transfer tax, which now brings in about $800 million a year. The Ontario Land Transfer Tax is two per cent on homes between $400,000 and $2 million.
“(The Land Transfer Tax) was something I was very concerned about when I was in opposition. I led the charge against extending the municipal land transfer passed by the City of Toronto. I’m very mindful in government that we don’t want to create a barrier to first time home buyers,” he said.
Keeping Up With Rental Demands
Tony Irwin, president and CEO of FRPO, said the lifting of rental controls on new builds was music to the ears of developers.
“There are people who want to build apartments,” he said.
As for making housing more affordable, Irwin said, “We need to do our part. We need to actually build more (rental) housing to give more options to people.”
He said the fact is if there is a greater supply of rental properties, landlords will have to set rent according to what the market will bear as opposed to “right now vacancy rates are very tight and that means rents are likely going to be higher.”
“If we have more supply those rents should come down.”
Irwin said a healthy rental vacancy rate is three per cent and according to a recent report from Canada Mortgage and Housing Corp. the rate in Toronto is 1.1 per cent and an average 1.8 per cent across the province.
In a FRPO statement released in 2017, the organization stated that the decision by the former Liberal government to impose rent control essentially ground things to a halt.
“The organization identified at least 20,000 units which will now be reviewed …. FRPO calculates that the potential investment in Ontario rental housing now at risk, should these projects not proceed, is $6.5 billion.”
“I’ve heard from members who have definitely said to me ‘we will be revisiting or re-examining projects or we have land that we haven’t done anything with and now we’re thinking we may well be able to move forward with a project for purpose-built rental,’” Irwin said.
He added, however, developers still face red tape at the municipal approval level. “It can take anywhere from three to five years just to get a project approved.”
Scrapping Rent Control Will Not Solve The Affordable Housing Crisis
New Democrats and Liberals agree on one thing – scrapping rent control on new apartment units will not solve the affordable housing crisis.
NDP MPP Suze Morrison (Toronto Centre) said the fact remains the previous Mike Harris Progressive Conservative government lifted rental controls retroactive to the early 1990s and did nothing to move the needle on new rental properties being built.
“When rent controls were cut last time around, we saw affordable housing development flat line across the province, so really we have been down this road before. We know that deregulating rent control simply doesn’t work. I think it is quite foolish to think … it would work now,” said the party’s housing critic.
“Without rent control landlords at any time can just jack up the prices on their tenants as a way of evicting them,” Morrison said.
Morrison said it is also clear to her the government has “taken social housing off the table at a time when we know what the issues with social housing are – it has been chronically underfunded for 15 years,” adding people are now waiting for up to 15 years on lists for subsidized housing.
Morrison suggested the current “truncated” public hearing into the Fall Economic Statement, which includes the rent control change, is little more than a sham because dozens of individuals and groups were turned away.
“They have fast-tracked this legislation to get it passed before the holiday … it’s outrageous,” she said.
Liberal MPP Nathalie Des Rosiers, Ottawa-Vanier said in a statement to Toronto Storeys that removing rent control creates two categories of tenants – those who are protected from unpredictable rent increases and those who are not.
“The free market isn’t free for everyone under Doug Ford, and this move will expose tenants to incredible uncertainty,” Des Rosiers stated.
“The argument that rent control decreased supply does not hold water,” she said, noting that while the province was operating under the two-tiered system that exempted post-1991 rental units from rent control, purpose-built private rental units accounted for only six per cent of new builds since 1992.