The Ontario government's new rules extending rent control to all apartments in the province have at least some Toronto-area developers rethinking the rental projects they had planned to build.
Cary Green, whose family has spent generations building rental units in Toronto, says the uncertainty over the province's proposed changes means his company now is taking a second look at its latest roster of projects.
"We've got 1,200 units we are looking at putting on the market as new rentals. And now we've got to go back and look at each building individually to make sure it's sustainable," said Green, 60, standing inside a spacious new two-bedroom apartment his team recently completed north of Yonge Street and Eglinton Avenue.
"My only message to the government is: it's finally not broke. Don't fix it. Don't mess around with it."
The new rental rules were announced last month as part of the Liberal government's Ontario Fair Housing Plan. The hope is to protect tenants from exorbitant rent increases by removing the so-called 1991 loophole, which exempts units built after that year from rent control.
The Mike Harris government brought in the loophole to encourage developers to build more rental units, but tenants' groups have argued for years it was a "failed experiment."
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In the last two decades, new rental construction has barely registered compared to condo development.
But Green, and other rental developers who talked with CBC Toronto, say a number of factors in the market were just starting to shift in their favour.
Among them, Green says:
- Older rental buildings are getting too costly to repair so building new units makes sense.
- Long-term interest rates remain relatively low at about three per cent.
- Equity requirements to build new rental units have eased.
"This is Jupiter aligned with Mars. You mess with that, and you're going to see more condos. You're not going to see more new rentals," said Green.
Developer gives up on rental project
And, in fact, it's already happening.
David Horwood with Effort Trust, a Hamilton-based development company, says one of its rental projects slated for construction in Ancaster will now be turned into condominiums.
"It's frustrating to end up at this point," said Horwood. His team spent about four years working with local officials to plan and ultimately secure approval for the project.
"There is just too much risk at the moment for us to go ahead."
Horwood was part of a chorus of developers and landlord groups who petitioned the province to find another way to curb unlimited rent increases.
Now, in light of the new legislation, he says every single one of his projects is under review.
"There is some concern we haven't seen the last of these politically driven changes," said Horwood.
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So far it seems developers in Toronto are taking a wait-and-see approach.
"At this point, we are not aware of any applicant making changes to applications that are already in process," Sharon Hill with the city's planning division wrote In an email to CBC Toronto.
Think it's tough now? Just wait
Applications to build new rentals are up in recent years, but real-estate consulting firm Urbanation says the number of units actually being completed and hitting the market is not enough.
"In order to satisfy demand, the number of purpose-built rentals under construction would need to be about twice as high as current levels, which is unlikely to occur in the near term," Urbanation's Shaun Hildebrand wrote in an email to CBC Toronto.
As for expanding rent control? Hildebrand says that won't help.
"Supply will be squeezed even more so than it is today," he said.