The Residencial Tenancy Act is Toronto is causing landlords and developers to have less incentive to give out more supply. As of May 30th, 2017 landlords can only increase their rent by the amount that is set by the Government of Ontario’s Rent Increase Guidelines and as of current day landlords can only increase by 1.5% as of current rent, following the rate of inflation in Toronto.
The government is trying to reduce the costs of rent to the tenants, starting by decreasing the rate in which the rent is increasing by. The government is also opening up some land owned by the government to be used to build 2000 new apartments, in putting efforts to increase supply. The government’s efforts in rent control might be ineffective considering that further increasing the supply will cause prices to fall, maybe not in the short run, but maybe in the long run.
Economists such as Benjamin Tal, the deputy Chief Economists at CIBC doubts the effectiveness of this policy. He said, “It’s Economics 101. You limit the ability to raise rent, you decrease supply”. What he’s saying could be true because as the landlord’s ability to control prices are limited, people would have less incentive to rent their properties to other people.
In my opinion, in the short run landlords will not really affected by the policy, but in the long run, it will definitely cause landlords’ incentive to decrease, or not the quality of the buildings will decrease as incentives decrease. Both will cause significant loss in for tenants, or consumer for apartments.
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