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Home builders await rent control fate
TIMOTHY BLOEDOW
QUEEN'S PARK
Mike Harris' promise to eliminate NDP rent control legislation has taken a back
seat in the past month to the subsidized housing controversy, but now that
Ontario's government has made its decision regarding that matter, rent control
is once again rearing its head. David Horton, executive director of the Ontario
Home Builders Association said "there is absolute proof that the core problem
with housing in this problem is rent control."
The amount of rental housing in Ontario has decreased - NDP critics say
"dramatically" - in the Ottawa area over the past four years.
Linda Lalonde, chairman of the Social Assistance Recipients' Council of
Ottawa-Carleton, blames free enterprise, stating that "the reason we have
social housing is because the private market is not providing for it."
The conservatives and Liberals, however, hold the former NDP government
responsible for legislation that, they say, provides many disincentives to
landlords.
Drawing on research from the Fraser Institute, a political and economic think
tank, Freedom Party (Ontario) predicted such a situation in a 1991 proposal to
former NDP housing minister Dave Cooke: research in six countries revealed, "in
every case, government intervention produced a mix of housing deterioration
[and] a reduction - often to zero - in apartments available for rent."
In 1995, NDP rent control legislation prevented landlords from increasing their
rent by more than 2.9 percent per year, Lyn McLeod's Liberals claim. The limit
in 1992, prior to this legislation, was 6 percent. Although landlords could
apply for an additional 3 percent increase to reclaim capital expenditures,
significant restrictions existed.
For example, landlords are unable to increase their rents to recover costs from
interest rate charges, mortgage renewal costs or insurance.
The Liberals claim that "85% of Ontario's rental units are over 20 years old,
and the cost of repairs needed to these units is between $7-11 billion. Under
NDP legislation, it would take landlords over ten years to pay for such
periods."
Individuals, lobby groups, and municipal politicians are asking housing
minister Al Leach what the PCs' plan is to provide housing for the 11,000
people who were on waiting lists for subsidized housing.
Landlords and home builders insist that eliminating rent control is the answer
because the costs and red tape associated therewith discourage people from
becoming Iandlords, putting rental housing limits on the market.
In the past, reports Freedom Party, governments tried to rectify problems
caused by rent control by introducing additional policies such as subsidized
housing.
Andrew Falby and his partner believe they are victims of such policy, reported
The Financial Post. They own 100 rental units in Sarnia, and fear they will
soon have to declare bankruptcy due to Rae's policies.
Rae's government introduced 700 subsidized units to Sarnia, which has a total
of only 4,985 rental units. According to the Canada Mortgage and Housing
Corporation (CMHC) Sarnia has the fourth highest vacancy rate in Canada
today at about 12 percent. "Highrises have been devalued by 5%-7% per year
[25-35% in the past five years]," Mr. Falby added.
There is even a rumoured vacancy rate in subsidized units - of 8 percent, wrote
The Financial Post, adding that "this is another example of government
enterprise siphoning taxes of the private sector then competing against it by
providing goods or services that the private sector is providing."
The conservatives introduced rent control to Ontario in 1975 as a temporary
measure. Twenty years later, they intend substantially to restructure it -
eliminating it on all new housing, John Baird (PC, Nepean) said. Mike Harris
believes that private investors have the capability to offer better housing
than does his - or any - government, but at the same time he is committed to
ensuring that rental housing meets security and fire standards, and preventing
"unfair" and retroactive rent increases, Mr. Baird told The Ottawa Times.
Saying that landlords should only receive a "reasonable return" on their
investment, the Liberals affirm support for rent control in principle. The
Family Coalition Party, however, demands an end to it.
Freedom Party also opposes it, arguing that "governments are the problem," not
landlords, citing "high property taxes, development fees, inflationary monetary
policies, land transfer taxes, high interest rates, zoning regulations, [and]
arbitrary building codes and standards" as "primary causes making housing
unaffordable for an increasing number of people."
