An economic assessment of rent controls: The Ontario experience

  • Lawrence B. Smith
Article

Abstract

Rent controls have existed in Ontario since 1975. Although controls have undergone numerous changes, the basic approach has remained a modified cost-pass-through system with provision for the elimination of financial loss and for a return of new capital expenditures, and, prior to 1986, an exemption for new construction. This paper analyzes the economic consequences of the first twelve years of controls. The major effects have been to reduce rents on pre-1976 units but to increase rents on newly constructed post-1975 units, to reduce new construction, to accelerate deterioration and conversion of the existing rental stock, to generate a severe rental housing shortage, to create an environment for “key money,” to inefficiently and inequitably redistribute income, and to significantly exacerbate government budgetary deficits by reducing tax revenues and inducing increased government housing expenditures.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Arnott, Richard.Rent Control and Options for Decontrol in Ontario. Toronto: Ontario Economic Council, 1981.Google Scholar
  2. Canada Mortgage and Housing Corporation (CMHC), Toronto Office.Changes to the Existing Rental Apartment Stock in Metropolitan Toronto. Mimeo. 1985.Google Scholar
  3. Canada Mortgage and Housing Corporation (CMHC), Toronto Office.Rental Apartment Vacancy Survey. October, 1986.Google Scholar
  4. Chant, John.Complementary Policies to Rent Regulation. Paper prepared for the Commission of Inquiry into Residential Tenancies. Toronto. 1985.Google Scholar
  5. Ekos Research Associates, Inc.Report on the Study of Landlords and the Ontario Rent Review Process. Paper prepared for the Commission of Inquiry into Residential Tenancies. Toronto. 1985.Google Scholar
  6. Fallis, George and Smith, Lawrence B. “Uncontrolled Prices in a Controlled Market: The Case of Rent Controls.”American Economic Review 74 (March 1984), 193–200.Google Scholar
  7. Fallis, George and Smith, Lawrence B. “Price Effects of Rent Control on Controlled and Uncontrolled Rental Housing in Toronto: An Hedonic Index Approach.”Canadian Journal of Economics 18 (August 1985a), 652–659.Google Scholar
  8. Fallis, George and Smith, Lawrence B. “Rent Controls in Toronto: Tenant Rationing and Tenant Benefits.”Canadian Public Policy 11 (September 1985b), 543–550.Google Scholar
  9. Klein and Sears, et al.Study of Residential Intensification and Rental Housing Conservation. Study prepared for the Ontario Ministry of Municipal Affairs and Housing, and the Association of Municipalities of Ontario, Vol. 9. Toronto. 1983.Google Scholar
  10. Michael Mascall and Associates.Report on the Ontario Rental Housing Market. Paper prepared for the Commission of Inquiry into Residential Tenancies. 1985.Google Scholar
  11. Muller, R. Andrew.Rent Regulation and the Supply of Rental Housing. Paper prepared for the Commission of Inquiry into Residential Tenancies. Toronto. 1985.Google Scholar
  12. Muller, R. Andrew.The Effect of the Recommendations of the Rent Review Advisory Committee on New Rental Construction. Report for the Ministry of Housing. Mimeo. Toronto. May 1986.Google Scholar
  13. Ontario Ministry of Municipal Affairs and Housing.The Impact of Rent Review on Rental Housing in Ontario: A Staff Research Report. Toronto. July 1982.Google Scholar
  14. Peter Barnard Associates.Under Pressure: Prospects for Ontario's Low Rise Rental Stock. Study prepared for the Ministry of Municipal Affairs and Housing. Toronto. 1985.Google Scholar
  15. Rosen, Kenneth T. and Smith, Lawrence B. “The Price Adjustment Process for Rental Housing and the Natural Vacancy Rate.”American Economic Review 73 (September 1983), 779–786.Google Scholar
  16. Slack, Enid.The Costs of Rent Review. Paper prepared for the Commission of Inquiry into Residential Tenancies. Toronto. 1986.Google Scholar
  17. Smith, Lawrence B. “A Note on the Price Adjustment Mechanism for Rental Housing.”American Economic Review 64 (June 1974), 478–481.Google Scholar
  18. Smith, Lawrence B. “Canadian Housing Policy in the Seventies.”Land Economics 57 (August 1981) 338–352.Google Scholar
  19. Smith, Lawrence B. “The Crisis in Rental Housing: A Canadian Perspective.”Annals of the American Academy of Political and Social Science 465 (January 1983), 58–75.Google Scholar
  20. Smith, Lawrence B. “Household Headship Rates, Household Formation and Housing Demand in Canada.”Land Economics 60 (May 1984), 180–188.Google Scholar
  21. Smith, Lawrence B. “Rental Apartment Valuation: The Applicability of Rules of Thumb.”The Appraisal Journal (October 1985), 541–552.Google Scholar
  22. Smith, Lawrence B.; Rosen, Kenneth T.; Markandya, Anil; and Ullmo, Pierre. “The Demand for Housing, Headship Rates and Household Formation: An International Analysis.”Urban Studies 21 (November 1984), 407–414.Google Scholar
  23. Smith, Lawrence B. and Tomlinson, Peter. “Rent Controls in Ontario: Roofs or Ceilings?”American Real Estate and Urban Economics Association Journal 9 (Summer 1981), 93–114.Google Scholar
  24. Stanbury, William T. and Vertinsky, Ilan B.Design Characteristics of Systems of Rent Regulation and their Effects. Paper prepared for the Commission of Inquiry into Residential Tenancies. Toronto. 1985.Google Scholar
  25. Steele, Marion and Miron, John.Rent Regulation. Housing Affordability Problems and Market Imperfections. Research study #9, prepared for the Commission of Inquiry into Residential Tenancies. Toronto. 1984.Google Scholar
  26. Steele, Marion.Canadian Housing Allowances: An Economic Analysis. Ontario Economic Council. Toronto. 1986.Google Scholar

Copyright information

© Kluwer Academic Publishers 1988

Authors and Affiliations

  • Lawrence B. Smith
    • 1
  1. 1.University of TorontoTorontoCanada

Personalised recommendations