Last November, Ontario’s government scrapped rent controls for new rental properties. Activists called it class warfare against low-income renters and predicted huge rises in rents.
“The class war fare (sic) launched by Doug Ford’s mean-spirited government continues. Their regressive policies including removal of rent control is going to make Toronto and Ontario less affordable and livable. That’s unacceptable. We must fight this,” tweeted a self-described “human rights activist” in Toronto.
A Toronto city councilor tweeted: “Doug Ford’s decision to remove rent control from new buildings will make Toronto even less affordable. It removes tenants’ rights & drives young people out of our city.”
Eight months later, Bloomberg reported that a spike in new apartment construction and permits had created a “record apartment surge” in Toronto. The rapid addition of new units pushed the vacancy rate up to its highest level in four years and slowed the high rate of rent increases.
“The vacancy rate rose to 1.5% in the second quarter, the highest since 2015, when research firm Urbanation began tracking the data. Rent increases eased to 7.6% from 10.3% last year, bringing the cost of an average-sized unit of 794 square feet to C$2,475 ($1,894).”
This outcome should have been as surprising as hearing a Canadian say “eh.”
Reams of research show that removing rent control laws raises rental property values, encouraging construction and leading to an increase in the supply of rental housing. That increase in supply, if not artificially restricted, puts downward pressure on rents.
A Stanford University study published in March found that rent control in San Francisco reduced the supply of rental housing by 15 percent. “Thus, while rent control prevents displacement of incumbent renters in the short run, the lost rental housing supply likely drove up market rents in the long run, ultimately undermining the goals of the law.”
“In addition, the conversion of existing rental properties to higher-end, owner-occupied condominium housing ultimately led to a housing stock increasingly directed towards higher income individuals. In this way, rent control contributed to the gentrification of San Francisco, contrary to the stated policy goal. Rent control appears to have increased income inequality in the city by both limiting displacement of minorities and attracting higher income residents.”
New Hampshire has its own version of rent control: Local land use regulations.
Needlessly burdensome restrictions on the size, location and type of apartments reduces the number of available units. These government-imposed constraints on the supply of rental units raise rents.
That, in turn, makes it harder for high-school and college graduates to afford to stay in New Hampshire after they leave the nest. And a shortage of rental units makes it more challenging for employers to recruit new talent, which puts an artificial restraint on economic growth.
It’s been widely reported this summer that many New Hampshire employers face a severe shortage of workers. A contributing factor is that many local governments have priced younger people out of the housing market.
More apartments would mean lower rents, which would make the state (Rockingham and Hillsborough Counties in particular) more accessible and attractive to the people employers are trying to hire. The same goes for single-family homes.
(H/T: Josiah Bartlett Center for Public Policy)
