By Ricardo Tranjan
With high rents making headlines every week, we would expect a lively debate on the most direct way to curb the problem: rent control.
Only five provinces control rent increases, with regulations full of exemptions and loopholes. Yet the prevailing view is that we don’t need to discuss the matter because the verdict is already in: all rent controls are always bad.
That’s not true.
A serious debate on how to make rent control effective while mitigating potential downsides would benefit tenants and the many sectors of the economy for whom high rents are bad for businesses. Such debate is happening in other countries.
In France, President Emmanuel Macron opposed the controls his predecessor enacted but then decided to keep them. In the United States, President Joe Biden’s proposed rent control plan triggered both praise and criticism. In England, new Labour Prime Minister Keir Starmer is facing internal pressure to act on the issue.
To kickstart this much-needed debate in Canada, we need to establish some basic facts.
First, there are many types of rent regulation, which interact with other housing measures, fiscal and monetary policies and the overall economic context.
Rent freezes enacted in the first half of the twentieth century (called first-generation rent controls) slowed down construction — the research is clear on this. But the context matters. Governments used rent freezes during economic depressions and wars, usually without an ending date, which created a lot of uncertainty. At the same time, fiscal and monetary policy prioritized war efforts, making housing one of the many secondary concerns.
In contrast, today’s rent regulations (called second-generation rent controls) allow rents to keep pace with inflation. In some provinces, rent regulations have rarely changed, creating predictability that one study linked to high housing starts. We also have the federal and some provincial governments incentivizing construction and a comparatively stable economic environment.
In 2020, the Canada Mortgage and Housing Corporation (CMHC) carefully analyzed the impact of rental controls enacted after 1971. The key finding of this study: “There was no significant evidence that rental starts were lower in rent control markets than in no rent control markets.”
In 2023, the International Journal of Housing Policy published a historical analysis that found that rent control negatively impacted construction “in their strict form of rent freezes.” More importantly for current debates, the study found no significant correlation between second-generation rent controls and housing starts.