Khoa Debate

Affirmative Arguments:

1) From the perspective of landlords, the implementation of rent cap could lead to a preference for higher tenant turnover, because the landlords can adjust their rent more frequent with higher turnover. Therefore, smaller units will be more favourable because people live in small units tend to be younger people, who bring in higher turnover rate, compared to families. Hence, developers will see the market trend and build more small units. So, not only per unit of housing becomes more affordable but also more housing units we can build on a given amount of lands, which means higher supply.

On the other side, tenants will tend to stay longer because that can cap their rent. Therefore, it will reduce the nominator (rental income) and lower the property value. Also, it also makes vacancy more predictable and hence can reduce the risk for property buyers and developers, creating an incentive for developers and leading to an increase in supply.

-with increased urbanization and densification of young professionals and students, their purchasing power and rent cap would dictate their preferences for smaller units

-as the rent cap is put in place, these rentees would want to stay in their units longer at that capped rent; the capped rent will lower the overall income of the property which stabilizes the property value, slowing down the boom

-as landlords would prefer to rent out the smaller units in response to the demand, developers will also react by building more smaller units

-as a result, this could lead to an increase in supply of smaller units to satisfy demand, and higher supply overall can lower prices, stabilizing property value

2) The Non - Resident Speculation Tax (NRST) can benefit the province by higher tax income and allow the province government to be less financially dependent on their real estate related policy making. Meanwhile, it does deter off some foreign buyers. We can see the trend that the foreign buyers had been forced to turn to Toronto after a similar policy had been implemented in Vancouver, and then to Montreal after the NRST implemented in Toronto. This could reduce the overall demand and cool off the market.

3) The Equal Property Tax policy provides a lower tax on condos, which lowers the cost for developers and incentivises them to shift to building more multi-residential housing, which will increase supply and give the rental price a downward pressure.

 Negative Arguments:

1) The rent cap policy will introduce more small units to the market, changing the structure of housing market. Landlords can enjoy more frequent turnover rate. Combined with the low vacancy rate in Toronto (1%), a frequent turnover rate can allow the landlords to adjust the rent frequently. So, the higher rent can lead to a higher numerator, hence a higher property value (Demographic data)

A behavioural change of people who are turning to enjoy their lives in the city is heat up the market of larger units > push some demand from larger units to smaller units because of the limited purchasing power of younger people + smaller unit preference > overall demand for smaller units goes up.

Demand Side

-Toronto and Vancouver has accounted for all of Canada’s net job growth the past year and these two cities now account for more than 25 % of all Canadian jobs

-With increased urbanization driving young professionals, students, and millennials in general into bigger cities such as Toronto, this has increased rental rates and dropped vacancy rates in Toronto, which we know is around 1 %