The Province imposed restrictions on rental increases by Landlords in residential rentals.
In November 2018, Ontario introduced a change to rental guidelines, specifically exempting new residential units first occupied after November 15, 2018, from the standard rent increase restrictions. This means that landlords of these newer units can increase rent by any amount, provided they give 90 days’ notice and wait 12 months between increases, while older units remain subject to the annual guideline increase.
Further, renters cannot be easily evicted. They have the right to stay and the Landlord really cannot get them out. The Landlord could reoccupy the premises, however what if the Landlord has more that one property? They can also use their own immediate family to occupy, but what if no one is available? They have to stay there for a year.
Also, they can sell the property to someone who states that they wish to occupy the property. If the Tenant refuses to leave it will often take 9 months to have the Landlord and Tenant Board (LTB) evict them.
Right now there is a shortage of available units. That’s why prices are so high and that’s also why the Province has stepped in to assist Tenants.
But, what if the Province stepped aside and simply let the real estate market take care of things? Encourage investment ownership. With lots of new investors coming forward, they would be competing with other Landlords. Prices would decrease and properties would be well-maintained because of the competition.
Right now, the current legislation effectively makes the Tenant like an Owner. They cannot be evicted, and with many, the rents are controlled. After 20 years, the Landlord will not make the amount of return they expected and will often sell. In the meantime, their Tenants are paying more that they should.
So, the Province could take steps to encourage investment ownership of investment properties. A discount could be provided with respect Land Transfer Taxes. The Federal government could lower the capital gains tax inclusion rate to 25% from 50%.
Rental increase limits for properties first occupied before 15 November 2018 could be eliminated.
Also, a cap on tenancies could be placed at 10 years. After that time, the Landlord could retake the property and rent it out to someone else. Now, the City of Toronto has stepped forward to assist the LTB with respect to renovictions. Why not simply restrict the tenancies to a decade? After that, the Tenant is on their own.
Rather than the City having to build thousands of units for tenants, the private sector will come forward and invest. However, investors should be encouraged have than discouraged.
Brian Madigan LL.B., Broker