# Is there an economic incentive in keeping rental apartments scarce in Canada? **URL:** \ **Category:** In My Humble Opinion\ **Created:** [May 20, 2024, 1:47pm UTC](https://boards.straightdope.com/t/is-there-an-economic-incentive-in-keeping-rental-apartments-scarce-in-canada/1001807 "2024-05-20T13:47:38Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![Heracles](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/heracles/32/487_2.png) [@Heracles](https://boards.straightdope.com/u/Heracles)\ **Post date:** [May 20, 2024, 1:47pm UTC](https://boards.straightdope.com/t/is-there-an-economic-incentive-in-keeping-rental-apartments-scarce-in-canada/1001807/1 "2024-05-20T13:47:38Z")
In Québec and Ontario, there’s a shortage of apartments available for rent, and those apartments that are available have seen their rents go up substantially over the past 3 years. And there are not enough being built to meet demand. I see several factors at play here: - Inflation, which affects cost of materials and cost of labour, and is eventually reflected in rents; - Interest rates that are higher than 5 years ago, raising the cost of financing new construction, which is an incentive to build for the condo (sales) market rather than rent out apartments; - AirBNB and similar platforms making it easy to make more money from an apartment than a normal lease (there are regulations against using rental apartments for short-term rentals, I don’t know if they are applied); - High immigration, which increases demand for apartments; - Regulations on landlord-tenant relations and rent increases, which don’t exist in the condo market. But I’m wondering if there might also be an additional factor where large rental property owners (mostly REITs I guess) figure they have a choice between (A) building new apartment buildings and renting them out, getting rent from more renters, or (B) keeping the supply of apartments scarce so that they make more money per apartment. If (B) makes as much money as (A) and is less risky, maybe large landlords won’t build more apartments? ---
**Author:** ![Jackmannii](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jackmannii/32/311_2.png) [@Jackmannii](https://boards.straightdope.com/u/Jackmannii)\ **Post date:** [May 20, 2024, 2:09pm UTC](https://boards.straightdope.com/t/is-there-an-economic-incentive-in-keeping-rental-apartments-scarce-in-canada/1001807/2 "2024-05-20T14:09:55Z")
Might want to look also at whether zoning regulations are a factor. Construction costs [may be the biggest obstacle](https://apps.bostonglobe.com/2023/10/special-projects/spotlight-boston-housing/construction-costs/#:~:text=While%20rents%20in%20Greater%20Boston,climbed%20almost%20twice%20that%20fast.&text=For%20all%20their%20present%20challenges,kind%20to%20developers%20in%20Boston). In the Boston area, rents have climbed 30% since 2017, but costs of construction materials have increased at nearly double that rate. > [@](#): > > New housing often costs $500,000 to $600,000 per unit to finance and build, with high-rises closer to downtown Boston costing even more. Those numbers are baked in from the start, setting a floor on future rents before the first shovel even hits the ground. > > And they’re a big reason why building our way out of the housing crisis that’s gripping Greater Boston has proven to be so hard. ---
**Author:** ![zimaane](https://avatars.discourse-cdn.com/v4/letter/z/a3d4f5/32.png) [@zimaane](https://boards.straightdope.com/u/zimaane)\ **Post date:** [May 20, 2024, 2:30pm UTC](https://boards.straightdope.com/t/is-there-an-economic-incentive-in-keeping-rental-apartments-scarce-in-canada/1001807/3 "2024-05-20T14:30:37Z")
> [@Heracles](#): > > But I’m wondering if there might also be an additional factor where large rental property owners (mostly REITs I guess) figure they have a choice between (A) building new apartment buildings and renting them out, getting rent from more renters, or (B) keeping the supply of apartments scarce so that they make more money per apartment. If (B) makes as much money as (A) and is less risky, maybe large landlords won’t build more apartments? It is possible that this is a factor in the price increases. It would depend on how many rental property owners there are, how well they can coordinate their decisions, and how much legal risk they are willing to take. Suppose that there a group of large property owners. If they all agree to stop building new apartments, then they can raise prices. However in that case, any one of them will be tempted to build a new apartment building to take advantage of the higher rent they can earn. It becomes a prisoner’s dilemna problem, except with a lot of players who can profit at the expense of the group. In all likelihood, once a few players deviate, the scheme breaks down. ---
**Author:** ![Humans](https://avatars.discourse-cdn.com/v4/letter/h/dfb087/32.png) [@Humans](https://boards.straightdope.com/u/Humans)\ **Post date:** [May 20, 2024, 4:54pm UTC](https://boards.straightdope.com/t/is-there-an-economic-incentive-in-keeping-rental-apartments-scarce-in-canada/1001807/4 "2024-05-20T16:54:42Z")
B is only possible if it’s a monopoly or oligopoly. But there are quite a few landlords and construction companies, it’s very unlikely that they are all colluding with one another. I’m not sure why your house prices and rent is so high compared to wages when you have so much land. You also have no shortage of lumber. Could be government making it hard to get permits for new construction that’s artificially keeping supply low (or some other government policy) ---
**Author:** ![Northern\_Piper](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/northern_piper/32/5304_2.png) [@Northern\_Piper](https://boards.straightdope.com/u/Northern_Piper)\ **Post date:** [May 20, 2024, 6:11pm UTC](https://boards.straightdope.com/t/is-there-an-economic-incentive-in-keeping-rental-apartments-scarce-in-canada/1001807/5 "2024-05-20T18:11:01Z")
> [@Humans](#): > > I’m not sure why your house prices and rent is so high compared to wages when you have so much land The areas around the three major cities in Canada (Toronto, Montreal, and Vancouver) are very well-settled, with high population densities. Areas with low population densities with more available land would put you into areas with two hour commutes to the major centres where the jobs are. (Vancouver also has those mountains close by, which drastically limits expansion). To help context, although Canada is a huge country, the usual stat is that about 90% of the population lives within 100 miles of the US border. It’s a highly concentrated population distribution. ---
**Author:** ![Northern\_Piper](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/northern_piper/32/5304_2.png) [@Northern\_Piper](https://boards.straightdope.com/u/Northern_Piper)\ **Post date:** [May 20, 2024, 6:20pm UTC](https://boards.straightdope.com/t/is-there-an-economic-incentive-in-keeping-rental-apartments-scarce-in-canada/1001807/6 "2024-05-20T18:20:00Z")
> [@Humans](#): > > B is only possible if it’s a monopoly or oligopoly. Option B is also a criminal offence, if it’s done collaboratively. ---
**Author:** ![suranyi](https://avatars.discourse-cdn.com/v4/letter/s/e36b37/32.png) [@suranyi](https://boards.straightdope.com/u/suranyi)\ **Post date:** [May 20, 2024, 6:31pm UTC](https://boards.straightdope.com/t/is-there-an-economic-incentive-in-keeping-rental-apartments-scarce-in-canada/1001807/7 "2024-05-20T18:31:49Z")
> [@Heracles](#): > > In Québec and Ontario, there’s a shortage of apartments available for rent, and those apartments that are available have seen their rents go up substantially over the past 3 years. This problem is not limited to Quebec and Ontario. I would say this problem exists in every major city in North America, and maybe every major city in the “first world”. ---
**Author:** ![Humans](https://avatars.discourse-cdn.com/v4/letter/h/dfb087/32.png) [@Humans](https://boards.straightdope.com/u/Humans)\ **Post date:** [May 20, 2024, 6:42pm UTC](https://boards.straightdope.com/t/is-there-an-economic-incentive-in-keeping-rental-apartments-scarce-in-canada/1001807/8 "2024-05-20T18:42:32Z")
House prices in Canada is worse than most US cities, especially when you also account for the weaker wages I blame the government and their zoning laws ---
**Author:** ![Saint\_Cad](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/saint_cad/32/18907_2.png) [@Saint\_Cad](https://boards.straightdope.com/u/Saint_Cad)\ **Post date:** [May 20, 2024, 6:50pm UTC](https://boards.straightdope.com/t/is-there-an-economic-incentive-in-keeping-rental-apartments-scarce-in-canada/1001807/9 "2024-05-20T18:50:24Z")
> [@zimaane](#): > > It would depend on how many rental property owners there are, how well they can coordinate their decisions, I thought I saw a stat recently that there are fewer rental owners and they are buying more houses each. Maybe that’s a Denver thing. ---
**Author:** ![Northern\_Piper](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/northern_piper/32/5304_2.png) [@Northern\_Piper](https://boards.straightdope.com/u/Northern_Piper)\ **Post date:** [May 20, 2024, 6:55pm UTC](https://boards.straightdope.com/t/is-there-an-economic-incentive-in-keeping-rental-apartments-scarce-in-canada/1001807/10 "2024-05-20T18:55:58Z")
> [@Humans](#): > > I blame the government and their zoning laws And the basis for that conclusion is…? Bear in mind that housing is under provincial / municipal jurisdiction, so there is no single « government » to blame. ---
**Author:** ![FinsToTheLeft](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/finstotheleft/32/2930_2.png) [@FinsToTheLeft](https://boards.straightdope.com/u/FinsToTheLeft)\ **Post date:** [May 20, 2024, 7:24pm UTC](https://boards.straightdope.com/t/is-there-an-economic-incentive-in-keeping-rental-apartments-scarce-in-canada/1001807/11 "2024-05-20T19:24:40Z")
I think in a completely open market, scarcity has upward pressure on rents thus benefiting the landlords. Ontario and Quebec both have checks on this, but in completely different ways. In Ontario, anything occupied prior to Nov 15, 2018 is rent controlled and can only increase by a maximum of a government imposed rate. For 2024, that is 2.5%. Only capital improvements and municipal tax increases allow an additional 6% after approval by the Landlord Tenant Board. However, Ontario does not have vacancy control - a new tenant coming in pays whatever the LL and tenant agree to, that becomes the basis for the legal rent increases. Quebec on the other hand doesn’t really have hard rent increase limits, but they do have the TAL that essentially mediates increases if the LL and tenant don’t agree. Quebec does have vacancy control, so flipping tenants does not reset the base rent. Developers argue that rent control restricts the building of purpose built rentals since it limits return on capital. Alternatively, no rent control is inflationary and naturally limits new buildings as tenants can only afford so much. I’ll leave it to the economists to sort out who is correct. ---
**Author:** ![Hari\_Seldon](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/hari_seldon/32/5173_2.png) [@Hari\_Seldon](https://boards.straightdope.com/u/Hari_Seldon)\ **Post date:** [May 20, 2024, 10:17pm UTC](https://boards.straightdope.com/t/is-there-an-economic-incentive-in-keeping-rental-apartments-scarce-in-canada/1001807/12 "2024-05-20T22:17:29Z")
I am looking at a building that has rentals available for about 1/3 of what similar apartments cost in Brooklyn where my daughter lives. A 1 BR apt for under C$2000 for example. ---
**Author:** ![FinsToTheLeft](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/finstotheleft/32/2930_2.png) [@FinsToTheLeft](https://boards.straightdope.com/u/FinsToTheLeft)\ **Post date:** [May 20, 2024, 11:49pm UTC](https://boards.straightdope.com/t/is-there-an-economic-incentive-in-keeping-rental-apartments-scarce-in-canada/1001807/13 "2024-05-20T23:49:32Z")
My daughter just rented a place in Montreal, 5 bed/2 bath right downtown for just under $5000. You wouldn’t find that in Toronto, at least not any place you would want to live in if you had any choice. The average 1 bedroom is $2500, 2 bedroom is $3500. 5 bedroom is virtually unheard of. ---
**Author:** ![Humans](https://avatars.discourse-cdn.com/v4/letter/h/dfb087/32.png) [@Humans](https://boards.straightdope.com/u/Humans)\ **Post date:** [May 21, 2024, 12:00am UTC](https://boards.straightdope.com/t/is-there-an-economic-incentive-in-keeping-rental-apartments-scarce-in-canada/1001807/14 "2024-05-21T00:00:05Z")
That’s still very expensive. A person making the median Canadian salary would almost spend their entire salary for that rent ---
**Author:** ![Northern\_Piper](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/northern_piper/32/5304_2.png) [@Northern\_Piper](https://boards.straightdope.com/u/Northern_Piper)\ **Post date:** [May 21, 2024, 12:11am UTC](https://boards.straightdope.com/t/is-there-an-economic-incentive-in-keeping-rental-apartments-scarce-in-canada/1001807/15 "2024-05-21T00:11:46Z")
Have you got a cite yet to explain how high cost of apartments in Canada is “The government’s” fault? ---
**Author:** ![FinsToTheLeft](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/finstotheleft/32/2930_2.png) [@FinsToTheLeft](https://boards.straightdope.com/u/FinsToTheLeft)\ **Post date:** [May 21, 2024, 12:32am UTC](https://boards.straightdope.com/t/is-there-an-economic-incentive-in-keeping-rental-apartments-scarce-in-canada/1001807/16 "2024-05-21T00:32:02Z")
> [@Humans](#): > > That’s still very expensive. A person making the median Canadian salary would almost spend their entire salary for that rent A person on a median income probably doesn’t need a 5 bedroom apartment. This is for 5 students, each paying their own share. As comparison, I paid almost $1500/month for a shared room in residence for her this year. > [@Northern\_Piper](#): > > Have you got a cite yet to explain how high cost of apartments in Canada is “The government’s” fault? Doug Ford recently denied fourplexes as of right in Ontario, but @Humans comment about how “we have so much land” is also completely off base. Montreal, Toronto, and Vancouver are nothing like Saskatoon or Sudbury. ---
**Author:** ![Humans](https://avatars.discourse-cdn.com/v4/letter/h/dfb087/32.png) [@Humans](https://boards.straightdope.com/u/Humans)\ **Post date:** [May 21, 2024, 12:39am UTC](https://boards.straightdope.com/t/is-there-an-economic-incentive-in-keeping-rental-apartments-scarce-in-canada/1001807/17 "2024-05-21T00:39:40Z")
> **[Globe editorial: The secret to lower housing prices? It’s all in the zoning](https://www.theglobeandmail.com/opinion/editorials/article-the-secret-to-lower-housing-prices-its-all-in-the-zoning/)** > > Canada’s antiquated zoning laws are not serving the millions of Canadians who will be making their first foray into home ownership in the coming years ---
**Author:** ![echoreply](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/echoreply/32/3641_2.png) [@echoreply](https://boards.straightdope.com/u/echoreply)\ **Post date:** [May 21, 2024, 4:02am UTC](https://boards.straightdope.com/t/is-there-an-economic-incentive-in-keeping-rental-apartments-scarce-in-canada/1001807/18 "2024-05-21T04:02:13Z")
> [@Northern\_Piper](#): > > Have you got a cite yet to explain how high cost of apartments in Canada is “The government’s” fault Any government policy or regulation that limits building new housing is going to play some part in keeping rental prices up and rental supply down. This is often done through things like zoning, but can also be other things like stringent building codes, or even a central bank keeping interest rates high. Of course there is a flip side to all of that. Often the people already living there don’t want to be re-zoned, strict building codes may exist for safety reasons, and rampant growth and sprawl comes with its their own problems, like traffic and services. The switch does not have to be on or off. ---
**Author:** ![Euphonious\_Polemic](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/euphonious_polemic/32/3002_2.png) [@Euphonious\_Polemic](https://boards.straightdope.com/u/Euphonious_Polemic)\ **Post date:** [May 21, 2024, 4:16am UTC](https://boards.straightdope.com/t/is-there-an-economic-incentive-in-keeping-rental-apartments-scarce-in-canada/1001807/19 "2024-05-21T04:16:10Z")
> [@Humans](#): > > I blame the government and their zoning laws Your answer is simple… and wrong. The situation is very complex and not suited to single answers. “Blame the government” is usually a go-to simplistic answer for a lot of things. ---
**Author:** ![Humans](https://avatars.discourse-cdn.com/v4/letter/h/dfb087/32.png) [@Humans](https://boards.straightdope.com/u/Humans)\ **Post date:** [May 21, 2024, 4:32am UTC](https://boards.straightdope.com/t/is-there-an-economic-incentive-in-keeping-rental-apartments-scarce-in-canada/1001807/20 "2024-05-21T04:32:04Z")
It’s not wrong. It’s the main thing that’s artificially keeping the supply lower than it would naturally be. Econ 101, supply and demand says low supply with steady demand means increased prices. [Next page](https://boards.straightdope.com/t/is-there-an-economic-incentive-in-keeping-rental-apartments-scarce-in-canada/1001807.md?page=2)