Why are new buildings exempt from rent control in Canada?
TLDR
Not all rental units in Ontario are subject to rent control. New buildings, additions to existing ones, and most new basement apartments occupied for residential purposes after November 15, 2018, are exempt. For units outside of rent control, landlords can raise the rent to fair market value once a year after giving the tenant a 90-day notice. Increasing rent involves serving the N2 form, Notice of Rent Increase (Unit Partially Exempt). There’s no maximum amount for the increase as long as proper notice is given.
Why Are New Buildings Exempt from Rent Control in Canada?
Rent control is a topic that has been debated and discussed extensively in many countries, including Canada. The primary objective of rent control is to ensure housing affordability and tenancies on the rental market for dwellings. However, in Canada, as in many other jurisdictions, new buildings are often exempt from rent control regulations. This article delves into the reasons behind this exemption and its implications for the Canadian housing market.
Understanding Rent Control
Before diving into the specifics of the Canadian context, it’s essential to understand what rent control entails. Rent regulation is a system of laws administered by a court or a public authority which aims to ensure the affordability of housing and tenancies on the rental market for dwellings[^1^]. The term “rent control” can cover a spectrum of regulations, from setting the absolute amount of rent that can be charged to limiting the amount that rent can increase[^1^].
Why Exempt New Buildings?
The exemption of new buildings from rent control in Canada is rooted in several reasons:
- Encouraging Construction: One of the primary reasons for exempting new buildings from rent control is to encourage construction and development. There is a consensus among economists that rent control can reduce the quality and quantity of housing units[^1^]. By exempting new constructions, the government aims to incentivize developers to build more, thereby increasing the housing supply.
- Economic Considerations: Rent controls can sometimes deter private investment in the rental market[^1^]. Exempting new buildings can make the real estate market more attractive to investors, increasing economic activity in the housing sector.
- Balancing Tenant Protection with Market Dynamics: While rent control is designed to protect tenants from excessive rent increases, it’s also essential to ensure that landlords receive a return on their investment that is deemed fair[^1^]. By exempting new buildings, the government aims to balance protecting tenants and ensuring a fair return for landlords.
Is rent control only in Ontario or across Canada?
Rent control is not exclusive to Ontario; it’s a practice that extends across various regions in Canada. According to a CBC article, five provinces and one territory in Canada offer some form of rental control. This means that while Ontario might be one of the more prominent provinces when it comes to discussions on rent control, it’s not the only region implementing such measures. Each province or territory has its own set of rules and regulations regarding rent control, which can vary widely. It’s essential to understand the specific guidelines of each region to get a comprehensive view of rent control practices in Canada.
When were rent controls introduced in Ontario? And who introduced rent controls in Ontario?
On April 20, 2017, Ontario’s Premier Kathleen Wynne introduced the Fair Housing Plan. Before this, rent control in Ontario was limited to units built or occupied before November 1, 1991. The Fair Housing Plan expanded rent control to all private rental units, including those occupied after November 1, 1991, from April 20, 2017, to November 15, 2018. However, under Premier Doug Ford’s government in 2018, rent control was revised only to cover units created and occupied before November 15, 2018, excluding new constructions and certain basement apartments. The Residential Tenancies Act still oversees landlord-tenant relations. [^2^]
Implications for the Canadian Housing Market
The exemption of new buildings from rent control in Canada has both positive and negative implications:
- Positive Impacts: The exemption can lead to an increase in new housing developments, providing more options for renters. It can also lead to a more vibrant real estate market, attracting domestic and foreign investments.
- Negative Impacts: On the flip side, the exemption can lead to higher rents in new buildings, making them unaffordable for many renters. This can further exacerbate the housing affordability crisis in major Canadian cities.
Conclusion
The exemption of new buildings from rent control in Canada is a complex issue for both proponents and critics. While it aims to encourage construction and investment in the housing sector, it also has implications for housing affordability. As the Canadian housing market continues to evolve, it’s essential to balance protecting tenants and ensuring a vibrant real estate market.
Sources:
[^1^]: Rent regulation – Wikipedia
