New apartment development 'at risk' if province changes rent rules, organization warns

Developers working on new rental housing buildings will convert their projects into condos if the province changes its rent control rules, according to the group that represents them.

Jim Murphy, president and CEO of the Federation of Rental-housing Providers of Ontario (FRPO), says there was a 50 per cent increase in the number of purpose-built apartment buildings last year and many more in the works. But he warns that increase could stall if the province changes its rent control legislation.

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At Queen's Park, stories of massive rent increases — including those highlighted by CBC Toronto's series No Fixed Address — have prompted calls to rework the so-called "1991 loophole," which nixes almost all rent control on condo-apartments and dedicated rental units built after that year.

No Fixed Address: What's the deal with the 1991 'loophole?'

8 years ago

Duration 3:01

CBC Toronto gives you a history lesson on everything you need to know about the so-called "1991 loophole," which allows some landlords to hike rents by huge amounts while others are subject to strict controls.

The huge rent spikes that have come as a result are "not acceptable," Murphy says.

"But we also need to have a solution that doesn't act as a deterrent to new rental supply."

The FRPO recently surveyed some of its biggest members and found 14 of 15 were working on new rental projects. Now, the uncertainty about how much money those developments could make in the future, Murphy said, puts them "at risk."

The province hasn't made any changes yet, but it could announce some new measures in the new budget on April 27. An NDP MPP's private members' bill that would have nixed the 1991 exemption was rejected at the beginning of April, with Premier Kathleen Wynne vowing at the time that her government would make changes soon.

'We still want you to build,' Tory tells apartment developers

Toronto Mayor John Tory, who met with the federal and provincial finance ministers Tuesday afternoon to discuss how to cool the city's housing market, seems to agree with Murphy that major changes could be problematic.

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"I worry," Tory told CBC Radio's Metro Morning, "this will choke off those developments and people will stop building rental apartment buildings."

The city has been working to increase the number of affordable rental units in the city, in part by freeing up city-owned lands that were once the domain of the police or TTC.

The message to developers should be clear, Tory said: "we still want you to build."

Province should consider incentives, mayor says

Tory suggested if the province does extend its rent control, it should offer rebates — perhaps by dropping taxes on building materials — for developers working on rental housing.

Murphy said rebates wouldn't "make or break" projects, adding the decision to build them is based on a number of factors including the price of land and what borrowing rates are available.

Instead, the FRPO is recommending the province change its rules to put a 10 per cent cap on the amount landlords can raise the rent in buildings built after 1991. It's also recommending a "rolling" exemption for newer rentals, so developers can make sure their costs are covered.