Introduction: The Big Bang of Ontario’s Housing Crisis

The Big Bang attempts to explain how our universe began from just a single point called a singularity. The universe has been expanding ever since. Ontario’s housing crisis, more specifically the unaffordability and unavailability (shortage) crisis, also had a Big Bang moment—the singularity from which the housing crisis has been worsening over the long term ever since.

I was looking for over three years off-and-on to find the statistics, consequences, and the exact time period that vacancy control was in place in Ontario. Recently, a senior researcher at CMHC sent me a few links to documents authored by highly-accredited researchers hired by the Ontario government to analyze the issues of high housing costs, which finally gave me some of the answers I’d been looking for.

Our current, ever-worsening housing crisis can be tracked back to a single Big Bang moment in 1975.

Historical Context: Housing Issues Have Been Discussed for Decades

But first, everything … I mean literally everything that is being bandied (and bullied) about regarding rapidly increasing rents and housing purchase prices has been discussed ad nauseum for DECADES. The same uninformed but highly opinionated demands, one-dimensional solutions, types of outspoken players, rhetoric, bullying pressure tactics—it’s all been literally said and done before.

The 1981 Fraser Institute Report

Chapter 15 of a document titled, Rent Control Myths and Realities published by The Fraser Institute (1981), should be required reading for every current government housing-related policymaker, politician, tenant advocate, and socialist reformer.

The author “… addresses several widely held but fallacious arguments on behalf of rent control.

Debunked myths include the claim that the rental housing market is monopolistic, earns "excessive" profits, "exploits" tenants, is marked by an absentee landlord "menace," and places profit above human needs. Holding no brief for the landlord, however, the author finds "a grain of truth" in the critic's castigation of unscrupulous practices on the part of some real estate managers.”
Although there are no competent economists on any side of the political spectrum who have advocated rent controls, there are several pundits, journalists, and social critics enamored with this idea. Their arguments are hardly of the greatest intellectual moment; even though seemingly launched at the professional economists who make the anticontrol case, many of their diatribes are not even relevant to the topic.
-The Fraser Institute. (1981). Rent control myths and realities (Chapter 15).

Sound familiar?

The 1988 CMHC Report

This next extract could have been written in 2023 as well to describe the current plight of Ontario housing, but it was written in July 1988 in a CMHC report titled, Assessment Report Evaluation of Federal Rental Housing Programs:

“During much of the 1970's, factors such as high and rising inflation and interest rates coupled with the introduction of provincial rent controls, created large gaps between the rents that landlords were able or permitted to charge and the rents that were necessary to make it feasible to invest in rental housing.
As a result, periods of excess demand for rental accommodation persisted in many areas across the country, which in turn resulted in increased efforts by the federal government to stimulate the construction of rental housing units.”
-Canada Mortgage and Housing Corporation. (1988). Assessment report evaluation of federal rental housing programs.

The Impact of Vacancy Control: Direct and Indirect Costs

The above two documents and many others from the late 1970s to the 1990s are filled with in-depth, real-world housing statistics and analyses, backed by citations from the original data sources. The following is a summary of the consequences that I’ve extracted from those documents.

Vacancy Control in Effect: 1986 to 1997

Vacancy Control was in effect from 1986 to 1997 via a rent registry that maintained a listing of the rent of over 650,000 rental units in Ontario. This was implemented to prevent excessive rent increases (rent gouging) when a rental unit was vacated and to guarantee the next tenant the same rent rate.

Direct Costs of Vacancy Control

Ontario’s Rent Registry cost $35 million to create and about $10 million per year for 12 years (to 1997), totaling $155 million in 1997, which is the equivalent of about $269.2 million in 2023 dollars—approximately a quarter of a billion dollars.

A second source computed the total combined government lost revenue and expenditure costs of rent control in Ontario to be $152.4 million ($265 million in 2023) in 1980. Rent controls reduced gross rent rolls in Ontario (i.e., rent savings for tenants) by about $136 million ($236.2 million in 2023).

Therefore, the Rent Registry program cost $19 million ($33.0 million in 2023) more than the actual savings tenants received, BEFORE indirect costs.

The government introduced several expensive rental housing building construction incentives that temporarily lessened the number of rental housing losses, which undoubtedly would have been significantly worse without these programs. And then there were the tax revenue losses caused by the reduced rents, which reduced property values upon which government tax revenues are based.

Indirect Costs of Vacancy Control

The cost of Ontario’s A.R.P. (“Assisted Rental Program”) to finance over 40,000 units was about $36 million ($63 million in 2023). 

The cost of O.R.C.G.P. ("Ontario Rental Construction Grant Program"), which supplemented A.R.P., was $4.7 million ($8 million in 2023). The tax loss from M.U.R.Bs (“Multiple Unit Residential Buildings”) in 1979, estimated by the Federal Finance Dept., was about $43 million ($75 million in 2023).

Rent control also reduced government capital gains tax by about $26 million ($45 million in 2023), while municipal tax loss from reduced construction of about 40,000 units was about $32 million ($56 million in 2023).

Thus, the total indirect cost amounted to $196 million ($341 million in 2023).

Total Costs of Rent Control in Ontario

The total costs (direct + indirect) amounted to $351 million, which, in 2023 dollars, is over $610 million—more than half a billion dollars to "save" $236 million in rent savings.

Not mentioned directly in the research documents is that the reduced gross rent rolls in Ontario of about $136 million ($236.2 million in 2023), divided by a 5% capitalization rate, means rent control obliterated $2.7 billion of Ontario’s property values, upon which much of the government’s tax revenue is based.

I haven’t yet found the costs of the Canada Rental Supply Plan (CRSP), and I also haven’t found data on the number of rental property bankruptcies during this period. The Government of Canada charges a fee for each search.

Ontario’s Debt Crisis

Ontario’s $400 billion debt in 2023 is the largest sub-national debt in the world and greater than 168 countries, including Russia. Ontario will pay $14.5 billion in interest costs alone in 2023-24.

The Price Paid by Tenants: Rent Control's Hidden Costs

Tenants who benefited from rent control may have thought they were getting a great bargain, but they paid for these losses in other ways.

From 1970 to 1973—before rent control—average annual rental starts were 36,846 (147,384 total over four years). Reacting in 1974 to pending rent control legislation, total rental starts dropped 40% to 22,260 in one year.

After one year of rent control in 1975, total rental starts dropped 72% to 10,394. In 1975, 7,786 originally designated rental starts were shifted to condominium status. In 1974, 10,306 rental units were under construction, and approximately 50% of those were converted to condominiums by 1975.

From 1976 to 1980, the average rental starts annually were 14,509 (58,036 total over four years), a 61% drop compared to the 1970-1973 period.

The Decline in Available Rental Units

The declines in the real value of rental dwellings compelled many single-family properties (e.g., condos, townhomes) to exit the rental market and sell their rental properties to high-demand, live-in homebuyers, further diminishing the rental housing stock.

Between 1976 and 1979, 10,882 (23%) owner-tenant-occupied rental dwellings disappeared, as tenant-owner-occupied dwellings (now called "second suites") were converted back into single living spaces for the homeowner. Second sources state that second suites were combined into larger non-rental units used by owner-tenant properties, reducing the rental stock by 3,261 units (12.3%) of the year 1976 stock.

Ontario's Growing Population

Ontario's population growth has accelerated over time:

• 1970: 7,488,000
• 1975: 8,260,161 (772,161 = 155,000/year)
• 1980: 8,693,157 (432,996 = 86,600/year)
• 1985: 9,230,294 (537,137 = 107,500/year)
• 1990: 10,189,985 (959,691 = 192,000/year)
• 2000: 11,576,994
• 2020: 14,718,133
• 2022: 15,262,660 (544,527 = 272,300/year)

Ontario’s annual population growth has increased from an average of 135,000 in the 1980s to over 250,000/year between 2020 and 2024. Federal immigration quotas are expected to continue increasing for the next two decades.

The Continued Struggle with Vacancy Control

Finally, despite all the historical data above, which is taken directly from government and academic sources, the Ontario Government has been under continued pressure to reintroduce a "Vacancy Control" program similar to the one abandoned in 1997. There is a group of influential stakeholders calling for vacancy control (taxes, subsidies, and rent caps) who ignore this history or fail to recognize its importance.

The power of those pushing for “Vacancy Control” today is so strong that it is already changing public policy back to the discredited and failed policies of Ontario’s past.

What Can We Learn from History?

What possible incentive is there for any investor or developer to construct rental housing, or for any homeowner to rent part of their home to a stranger, in Ontario?

Government never could, and still can’t, afford to build affordable housing, and it has a fundamental conflict of interest in doing so. Vacancy control policies have only worsened the shortage and affordability issues that continue to grow today.

The Big Bang of Ontario’s Housing Crisis

The Big Bang or Singularity of Ontario’s housing shortage crisis was the adoption of supposedly temporary rent controls in 1975.

Winston Churchill said, “Those that fail to learn from history are doomed to repeat it.” I’d humbly add, “… and the rest of us suffer for it.”

‍