Rental Housing Supply and Rent Decontrol in Ontario

What is the rationale for residential rent controls? I was asked this question back in 1983 by the Ontario Commission of Inquiry into Residential Tenancies and I wrote Research Report #6 for the Commission, entitled Market Imperfections and the Role of Rent Regulations in the Residential Rental Market (December 1984). The major change I would make to that report is its title. It should refer to ‘market failure,’ not the economic jargon of ‘market imperfections.’ A market fails when supply and demand do not and cannot function normally. We have had market failure in the residential rental market in Ontario for more than two decades. Changing a set of regulations enacted in response to market failure does nothing to address the underlying macroeconomic dynamics causing the problem. When there is inadequate market demand and thus little new supply in the rental housing sector vacancy rates remain low and tenants require adequate regulations to provide some degree of balance in the landlord/tenant relationship. The normal market dynamics of supply and demand no longer protect tenants from rent gouging or widespread discriminatory behaviour. There are no ‘normal’ market dynamics. Bill 96 is based on the assumption that there are normal market dynamics waiting to be unleashed once the shackles of inefficient regulation are removed. Given this failure of the residential rental market in the early 1970s in Ontario’s larger metropolitan areas there are four rationales for rent regulations. These are discussed in my 1984 report for the Ontario Commission of Inquiry. They are: 1. Security of tenure (protection from economic evictions); 2. Maintenance of the affordability of the existing rental stock; 3. Prevention of a regressive income redistribution; and 4. Mediation of conflicts relating to rental tenure (including protection from discrimination).

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