Vacancy control is the name given to preventing rent rates from being increased when a rental unit is vacant. According to the alleged experts, this is the panacea for Ontario’s housing unaffordability crisis.

Ontario’s Historical Experiment with Vacancy Control (1986-1997)

Experts never mention that Ontario implemented vacancy control for 12 years, between 1986 to 1997. Through its Rent Bureau, the province monitored over 650,000 rental units to ensure the next renter of a unit received the same rent as the previous renter. 

The provincial government spent $610 million to “save” tenants $236 million (in 2023 dollars). It would have been a much better use of the people’s money to give tenants the $236 million in the form of qualified rent supplements and use the remaining $374 million for better societal purposes than underwriting a massive, bureaucratic rent bureau. 

Those same tenants saving on rent paid more in personal and property taxes, and an estimated but unconfirmed 25% of rental property operators were either forced out of the business or went bankrupt. 

Despite the emotional appeal of tenant revenge and political gain, how realistically and objectively good was that for tenants?

Rent Control does not achieve its goal

When rent control was first implemented in 1975 (before vacancy control), total rental starts dropped 40% to 22,260 in one year. After one year of rent control, total rental (not housing) starts dropped 72% to 10,394. It was too late to cancel most of those remaining rental starts because they were already under construction.

Winston Churchill said, those who don’t study history are doomed to repeat it. 

In true prescient fashion, Ontario was the only province in 2023 that lost more rental housing than it produced, resulting in a 1% inventory loss or 6,548 units.

Why are rents so high? So many direct and indirect costs!

The causes of unaffordability can only be analyzed by looking at the costs involved, which none of the alleged experts ever do. 

A study of the real-estate related costs quickly identifies who receives the bulk of revenue generated from rental housing, and all other real estate.

What do all of the following have in common, besides substantially adding to the cost of rental housing: property tax, carbon tax (will be 65% of gas bill by 2030), corporate tax (50%), HST, recoverable capital cost allowance (paid back to government when property is sold), capital gains tax, rent guideline increases far below operating costs and inflation, no damage deposit, land transfer tax, development charges, cash-in-lieu fees, vacancy tax, inclusionary and exclusionary zoning, municipal licensing and forced inspections (at tenant’s ultimate cost), mortgage stress test, and first-time buyer incentives (creates more demand but no supply)? 

The answer quickly becomes apparent. 

Now add, government-owned utility costs, mortgage insurance, rapidly increased mortgage interest, LTB-empowered bad debt, cash for keys extortion, professional tenants, one-year LTB delays (41.5% of all 2023 LTB L1 applications were non-payment of rent), proposed speculation tax, NIMBYism, shortage of skilled trade labour (especially construction), collapsed supply chains, and consequent increased crime rate.

Almost all of the above are direct and indirect government-related costs. Small-to-medium housing providers take home a one-digit percentage of the income.

Government cannot afford affordable housing!

Government painted itself into a corner, creating an impossible paradox and consequent fundamental conflict of interest for itself. The underlying cause of housing unaffordability is that government cannot afford affordable housing. 

Every level of government generates a significant portion of its revenue from real estate, especially its perpetually recurring revenue from rental properties. 

A reduction in rent rates means a reduction in property value, upon which most real estate-related government revenue is based. Lower property value means lower government revenue, or higher taxes as most recently seen with Toronto’s 9.5% property tax hike.

It’s easy to deflect responsibility for multi-decade failed government housing policies and excessive government leaching of rental housing revenue by blaming vacancy de-control. 

Rent and vacancy control may temporarily freeze or limit the increase of existing rent rates, while convincing tenants that they’ve won. But it’s smoke and mirrors, intended to distract tenants from the primal cause of housing unaffordability. 

Vacancy and Rent Control = Wage Control  

Tenants would be enraged and vote every politician out of office that supported government-imposed wage control, yet that’s essentially what rent and vacancy control is for housing providers. 

Grade-school logic dictates that if income from a business won’t cover all operating expenses and generate a reasonable profit incentive for investors to cover their own investment and living costs then, no one is interested in that type of business, whether a lemonade stand or a rental property.

For high-end renters in the rental market, rent control is a savings plan. Low rents allow them to save for a home to purchase. As inventory shrinks though, high-end renters stay longer in their low-cost rental units and not move out to make room for the lower rungs of renters, which results in increased homelessness for the very bottom rung of renters.

The private sector builds housing.

Tenants don’t build housing. Government built less than 5% of all housing. 

CMHC states that more than 95% of all residential housing in Canada, including rental properties, were built by the private sector. 

The rental and homebuyer unaffordability crisis exists today precisely because the 95% of investors, of which almost 50% are “unincorporated individuals” (mom-and-pop and smallish operators), are unwilling to invest in housing in Ontario, or to open their vacant spaces in their homes (“second suites”). 

Who wants to provide housing under such conditions?

In such a toxic and blatant anti-housing provider environment as Ontario, who would want to take on the huge financial, legal and emotional risks of constructing or operating rental housing for a society that has incessantly targeted housing providers for decades as “rich, greedy and immoral?”

Why would any investor build rental housing when they can make the same, or better, return on investment by doing literally nothing and putting their money in bonds, lending money (mortgages) to home buyers and other non-residential real estate classes, just buying dividend-paying stocks, or building in markets that are housing provider-friendly?

Politicians, tenants, social activists, housing advocates, non-profit operators, academics, bureaucrats and most media should take note: this is the proverbial “biting the hand that feeds them.” 

Ultimately, chase away the money and there's no housing. Ontario is proving that … again … “in spades.”

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