City Analysis - Ontario Overview
HSP is proud to share our research on rental affordability through our City Analysis, Ontario Overview! In this article, we will detail some developments of interest, explore market trends for the cost of rent, and illustrate what rent could have been in your city if rent control had stayed. As always, data and our working paper Ontario Rental Price Analysis will be provided for you to check out for yourself, just open the file and make a copy!
Key Points
Rent increases are accelerating across the Province, with the average increase for the majority of unit types in all cities analyzed increasing above the Ontario guideline level for the past 5 years.
Working people are being priced out of the city. Using our excel document Ontario Rental Price Analysis, available for download below, you can see the percent of income rent takes up at different levels of income.
Despite 20 years of building, for most starting points, rent is far higher than it would have been if the guideline level had been followed.
Our data analysis shows what many already know, rent is going up, Ontario's urban centers are becoming increasingly unaffordable, and rent control may have been a good idea after all.
By analyzing Canadian Mortgage and Housing Corporation (CMHC) data, we see that in Toronto, Kingston, London, Hamilton, Ottawa-Gatineau and Kitchener-Waterloo-Cambridge, rents have exceeded the Ontario guideline increases for most types of units for the past five years. Ottawa-Gatineau is the exception, which only saw majority above guideline increases for four of the past five years.
What this means
The Canadian Mortgage and Housing Corporation (CMHC) has sixteen different unit types, organized by structure and bedrooms. Examples of this includes, a two bedroom in a row structure, a three bedroom in an apartment structure of three units or more, or a one bedroom in an apartment structure of six units or more. This was likely done to ensure that unit prices were evaluated based on similar types of units, which theoretically offer similar conditions.
So when we say the housing market in an area had a majority above guideline increase, we mean that for at least seven of these thirteen types of units, the average rent increase market-wide was above the Ontario guideline. You can see the specifics for yourself in the attached file.
This finding shows that despite the intentions of government policy to stabilize rents and keep cities affordable to live in, the majority of landlords are ignoring the guideline.
Rent control in Ontario
Currently, rent control in Ontario only applies to units where a tenant is currently occupying. In these circumstances, increases are capped to the Ontario Maximum Increase Level, which is influenced by the Consumer Price Index for Ontario. The objective here is to keep rents constant with inflation. However, when a unit is re-signed with a new tenant, the landlord can reset the rental price to any amount they see fit.
Recently, Doug Ford's PC government began gutting these policies, making it so that any unit which is "newly built or occupied by a tenant for the first time... After November 15th 2018" would not be subject to any rent control, even when tenants stay (Rental Housing Business).
The justification behind such a move is to entice developers to build more rental units instead of condo developments, although, as our data shows, it does not appear to be working. Instead, what is likely happening, is that new rental units are having their initial rent levels be above the current market average, as is happening in Kingston. This will likely only push rents up higher, and do little to actually deflate the market.
Pricing out working people
Increasingly people are getting priced out of the market, or are forced to give up over 30% of their income to rent. For example, in all of the analyzed urban areas, a full-time minimum wage worker taking home $27,000 annually will spend over 30% of their income on rent for the average cost of any type of unit.
On our document Ontario Rental Price Analysis, available for download here, you can type a level of income in and see what percentage of income rent takes up. Listed income of interest includes the shelter allowance for Ontario Works and Ontario Disability Support Provision and the area-specific median after-tax income of lone-parent families and one-person households, median employment income for full-time workers and median after tax income for households. We also included a 75% of average rent cost control to illustrate lower cost unit rent.
What could have been
Holding past rent costs constant with the Ontario guideline rate, we analyzed the price differences between these hypothetical rent-controlled units and current 2020 rental prices. We found that all but a very small number of units in certain years had significant differences despite all of the talk about how scrapping rent control will spur construction, which will push prices down . To put this into perspective, in 2006 if you had begun renting a two bedroom unit in a row or apartment structure of three units or more in Hamilton, on average, your rent would be $3141.77 less annually than if you sought to rent a new unit of that type today.
Sources
Rental Housing Business. “Your Guide to Understanding Doug Fords Major Overhaul of Ontario's Rent Control Policies.” Rental Housing Business, https://www.rentalhousingbusiness.ca/your-guide-to-understanding-doug-fords-major-overhaul-of-ontarios-rent-control-policies/.