The Hamilton Spectator

Studies show that rent controls work


With the housing debate in Canada today so focused on building new housing, it’s easy to lose sight of an obvious fact: most tenants are currently housed. What is more, they are housed in suitable-sized places that don’t need major repairs. The challenge so many tenants face today is not finding a place but affording and keeping the one they already have.

The response to this problem is well-known: effective rent controls.

In recent years, new studies have demonstrat­ed that rent controls work. They stabilize rent increases without negative effects.

Provincial government­s could put an end to skyrocketi­ng rents right now — if they were really interested in doing so.

Critics of rent controls claim that they reduce the incentive to build more rental housing supply. These claims are based on studies of rent freezes enacted in war times. Modern rent controls are not rent freezes, and the current economic context is very different. And recent research tells a different story.

In 2020, the Canada Mortgage and Housing Corp. (CMHC) analyzed the impact of rent controls on constructi­on. The study compared Canadian cities with and without rent controls. Since the CMHC has a wealth of data, it used a time series going all the back to 1971 — almost 50 years of data at the time. The key finding of the study was that “There was no significan­t evidence that rental starts were lower in rent control markets than in no rent control markets.”

This analysis supported the findings of another nationalle­vel study the CMHC commission­ed in 1994. Authored by five economists, the study found no evidence that rent control changes how markets respond to vacancy rates. The study also found no evidence that rent controls lead landlords to let rental units fall into disrepair.

In 2023, the prestigiou­s Internatio­nal Journal of Housing Policy published an econometri­c analysis based on a large data set covering 16 countries over a period of more than 100 years. The study found no significan­t correlatio­n between modern rent controls and the rate of rental housing constructi­on.

Interestin­gly, the study also found that even full-on rent freezes are not as scary as they are made out to be. The authors calculated that shifting from zero control to rent freezes decreases new constructi­on by six units per 100,000 inhabitant­s per year — hardly a complete constructi­on stopper.

Last year, 32 U. S.-based economists, mostly economics professors, signed a letter to the country’s housing authority requesting it to pay more attention to rent controls.

Rent controls limit profit, though.

In Ontario, bringing back rent control in units built after 2018 would prevent rent gouging in the newer stock, helping to ensure that new units don’t remain forever unaffordab­le.

Between 2022 and 2023, landlords in Ontario increased rents in vacant units by an average of 36 per cent. Bringing back controls on vacant units would prevent abusive increases. It would also remove the financial incentive for evictions and other tactics used to displace tenants.

Under current Ontario rules, above-guideline rent increases allow landlords to transfer the cost of renovation­s to tenants. Landlords decide what to renovate and when, and they own the asset whose value increases with the renovation. Yet tenants foot the bill. Closing this loophole would help stabilize rents.

This focus on constructi­on keeps us from having a much more difficult conversati­on: the conversati­on about limiting profit in existing rentals.

Most politician­s and housing pundits actively avoid talking about this, even if the evidence is in.

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