Ontario guidelines for rent increases please nobody
As housing prices continue to rise, more and more potential buyers are opting to rent, fueling a bit of a rental shortage in some urban centres. And then there's all those people who couldn't afford to buy a house no matter what.
One factor driving people to rent is an uncertain job market. Despite low mortgage rates, people are reluctant to get tied down in a mortgage if they don't know where they'll be working next.
To ease the squeeze on tenants facing maximum rent hikes of 3.1 per cent next year, residential rent increases would be capped at 2.5 per cent starting in 2013 under legislation proposed this week by the Ontario government.
Click here for a historical view of previous rent increase guidelines. The average from 2004 to 2011 was 1.89 per cent whereas it was 3.17 per cent from 1993 to 2003.
Not surprisingly, landlords are already starting to howl: “The government is unilaterally imposing a cap without any discussion with an entire industry and is initiating a policy that will be particularly devastating for small landlords," says Vince Brescia, president of the Federation of Rental-housing Providers of Ontario.
Landlords are concerned that such price caps could replicate the devastating housing market conditions seen in Ontario 25 years ago, when fixed rent controls were out of step with rising housing costs.
Tenant groups, of course, don't see it that way at all and are slamming the government for not doing enough to help renters.
“In the real world, tenants are losing their jobs, facing demands for wage freezes and rollbacks or living with a 1 percent increase in their social assistance cheques, says Kenn Hale, spkesman for the Advocacy Centre for Tenants Ontario.
Nor is there adequate protection in place for those who move around: "In the real world, when tenants move there is no limit on the rent increases that a landlord can charge an incoming tenant in any private-market building,” he adds.
1.3 million households in Ontario rent their homes, accounting for 29 per cent of all households in the province. Of those, one in five spends more than 50 per cent of their income on rent.
Are the proposed rent caps reasonable? Or do such caps keep properties off the market and deter new construction?
By Gordon Powers, MSN Money