It’s a rental crisis, not a housing crisis

Peterborough’s housing supply and affordability problem isn’t related to fixer-upper homes selling for $1 million or more.

The problem here is rental apartments. A recent Canada Mortgage and Housing annual report put the local vacancy rate at 1 per cent, among the lowest of any city in Ontario.

The CMCH also found that more people looking for rental housing combined with near-zero new apartment construction has raised pricing pressure on the rental market to the highest level in 30 years. In theory, help is coming. The provincial government has decided to act on Toronto’s house price crisis with a 16-point plan aimed at virtually every aspect of the housing market.

If that tames spiralling single-family home prices in the GTA there will likely be a domino effect in Peterborough. But that would be cooling off something that is only just beginning to be felt.

Changes in the province’s plan that target rental housing could serve more purpose here.

The big one is rent control, which will be extended to cover all apartments. Until now controls applied only to units built before 1991.

Rent controls are controversial. Most economists say they actually have a negative effect in the long term. Knowing rent increases will be restricted to the rate of inflation or lower, developers stop building new apartments.

Whether that happens in Peterborough remains to be seen. Construction of new private apartments and townhouses has been extremely low for decades. To get worse, landlords would almost have to start tearing buildings down.

The province has adopted two primary initiatives to spur rental housing construction and offset any deadening effects of rent controls.

One is to have municipalities tax new apartment buildings at the same rate as single family homes. Peterborough historically taxed larger apartment buildings at nearly twice the single family rate. On a big apartment tower valued at $25 million that represents about an extra $300,000 a year.

But Peterborough is ahead of the game in that regard. New apartments here are already taxed at the single-family rate so no help will come from the provincial legislation.

Step two in the Queen’s Park pro-rental plan is to offer discounts on development charges for new multiple unit buildings. The city’s current charge is $11,700 per unit for buildings in the core area so savings could be substantial.

But again, the city is ahead of the game. In 2011 it began offering development charge rebates and other incentives that can save apartment developers hundreds of thousands of dollars.

Peterborough has a housing problem, not a crisis. It relates to scarcity of rental units. If the province wants to offer a housing solution that works here it should help build more publicly owned apartments.