Toronto King Portland Centre and Kingly Condos | 57.6m | 15s | Allied | Hariri Pontarini

The little eek face is linked to the headline, but the key paragraph of the article, linked to RioCan and this development is this:

And while the head of Canada’s largest real estate investment trust [referrng to Ed Sonshine of RioCan] told the Financial Post the decision to turn one of its project[sic] into a condominium as opposed to a rental unit is traced back to provincial rules which will tie rent increases to inflation, the REIT is still planning to go ahead with many other rental projects.
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So, the headline could have read Vast Majority Of Rentals Still A Go Despite Expanded Controls, but somehow the Financial Post and didn't skew it that way.

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The province's changes were meant to result in more purpose-built rental construction, and instead they're resulting in less. "The vast majority..." would be a bad headline because the laws weren't changed with the intent of slightly reducing the number of purpose-built rentals.
 
The expanded rent controls were meant to stop landlords from gouging huge rent increases, I'm not sure they were expected to increase the number of units built. There will be some casualties from the increased controls, of course, but right after the controls were put in developers were hopping around screaming "the sky is falling". The ceiling may have lowered a little, but the sky has not fallen, and that's the headline that the Financial Post has missed.

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And the unfortunate thing is, most of the public is uniformed about even the most basic things in this city. When people read articles like that, they buy it and dont even think twice.
 
interchange42 said:
The expanded rent controls were meant to stop landlords from gouging huge rent increases, I'm not sure they were expected to increase the number of units built. There will be some casualties from the increased controls, of course, but right after the controls were put in developers were hopping around screaming "the sky is falling". The ceiling may have lowered a little, but the sky has not fallen, and that's the headline that the Financial Post has missed.

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And, predictably, the blowhards are indeed blowing hard: http://www.bradjlamb.com/blog/2017/09/1000-planned-rental-units-lost-due-rent-controls/

Predictably, the lead-in was quite modest:

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I've heard that the development industry in talks with the Province was willing to support a reasonable rent control regime allowing inflation+2% maximum annual increases for all rentals, but the Premier wouldn't go along.
 
Maybe the government should also introduce a legislation to cap the increase of all costs to rental properties such as HST, land transfer tax, Property tax, development fees, mortgage interest, management fees, hydro, water, insurance and repair expenses etc. so that it can make the housing more affordable !?
 
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What people don't get on both sides of the argument is that the time scale to measure systemic changes to the overall housing supply can be measured in decades or even generations, not months or years. The unintended consequences of the new housing legislation are not conclusive yet, they are speculative.

The fact is that purpose built rental housing has never recovered from the last round of rent control let alone these new ones imposed by the current Liberal government.

The few high end units being proposed and built now (well at least in theory for now) are just green shoots. The economics of purpose built rental housing is still dubious at best.

While individuals or specific landlords may be "gouging" tenants and reeping above average returns, the vast majority of rental stock exists to produce steady income and single-digit returns on investment. That means if say your rent is $1000 a month your landlord makes no more than $50-$100 bucks. The other $900-950 goes to operate the building, pay debt, and comply with government laws and taxation.
 
Purpose-built residential rentals can be difficult to make money on. You have to be in it for the long run. Commercial rental is the gold mine, providing your property is well managed and attractive for businesses. With commercial property, the tenants pay their share of the building taxes, maintenance, and insurance in addition to their rent. You can increase the rent as much as you want because there are no rent controls. Talk about freedom. When I worked for a property management company, a restaurant owner sent a letter complaining that the government doesn't allow such high rent increases. My boss and I had a good laugh.
 
ponyboy said:
I've heard that the development industry in talks with the Province was willing to support a reasonable rent control regime allowing inflation+2% maximum annual increases for all rentals, but the Premier wouldn't go along.
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I know someone who was working on the legislation. They were originally planning to replace the 1991 rule with a rolling limit, where the strict rent control would apply to apartments older than some number of years (10 years, if I remember correctly) rather than just apartments built before November 1991. Newer apartments would've had a very loose rent control, that allowed most market-rate increases but effectively got rid of eviction-by-rent increase.

The Premier's Office got nervous after the CBC campaign and Peter Tabuns' private member's bill, and threw out that rent control proposal in favour of the NDP's proposal. The proposals for standard leases and restricting the personal use eviction were part of the original plan though.
 
I'm old enough to remember the late eighties and early nineties, when the headlines were full of stories about the tightness of the residential rental market. At that time, very little had been built in 20 years. Rent controls were killed for good reason.
 
The headline isn’t misleading at all. 1000 rental units (so far) have been converted to condo units. Obviously some developers believe that the new rent control laws will impact their future cash flows enough that their ROI on the project drops below an acceptable rate of return or at least below that return earned from selling the units individually as condos.

Think of it this way- if developer thought it would invest say $1 million of equity in a rental building and generate $1 million of profit (whether on paper or if it sold the building on completion) now the developer is looking at it and seeing it can only make some $750k of profit from the project. The future cash flows that it is projected to receive from the project are negatively impacted by the new rent controls.

However the condo market appears to still be strong so developer can still generate $1 million profit going that route and furthermore the developer has no political risk that further rental regulation negatively impact the value of its asset.

Compounding this problem further is the fact that interest rates have risen about 1% since last year already which also negatively impact the value of the asset all things being equal.

So have the new regs made the rental market tighter by decreasing the amount of new rental stock in the GTA/Ontario?

Without question to some extent at the very least. However, the degree of that impact is probably fairly small as the quantum of new rental housing being initially proposed and now canceled is not significant in the overall rental housing universe.

If the government (City/Province) actually want new rental housing they need to offer a better package of incentives for private developers or throw huge amounts of capital at the problem themselves, neither which appear politically tenable in today’s environment.
 
Northern Light said:
Rent Control was but one factor in the collapse of new rental construction. Larger factors have to do w/construction financing; as well as declining renter income.
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None of those larger factors have changed significantly in the time between when these 1,000 units were planned as purpose-built rentals and when they were changed to condo apartments.
 
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