The term rent control is quite familiar to most people who rent apartments or houses. However, people are less familiar with the term and concept of vacancy decontrol.
What is vacancy decontrol?
Vacancy decontrol means that a landlord can hike up the price of a vacant rental property for new tenants. Essentially, the landlord can increase rent for new tenants to any amount as long as the new tenants will pay it. The limitation for the landlord is that if he or she increases rent for potential new tenants too much, he may have trouble finding renters for the property.
Which provinces have vacancy decontrol in Canada?
The best example of a province that has implemented vacancy decontrol is Ontario.
Ontario implemented vacancy decontrol in its 2006 Residential Tenancies Act. Although vacancy decontrol is not named in the act, it is captured in s. 113 entitled “Lawful rent for new tenant.” The section states:
“Subject to section 111, the lawful rent for the first rental period for a new tenant under a new tenancy agreement is the rent first charged to the tenant.”
The section outlines that the landlord sets the rent at whichever rate he or she wants with a new tenant. However, once the rate is set for the new tenant, rent control kicks in and the landlord can only increase rent by the rate set by the government.
What are the effects of implementing vacancy decontrol?
The problem with vacancy decontrol is that the amount that a pre-tenancy rent can be increased to can be a large amount as long as somebody is willing to pay it, which can inflate rent for other people. That means units apartments and house rentals may become unaffordable for people.
Another side effect for vacancy decontrol is that it gives landlords no incentive to retain current tenants if the housing market rises and they know they could hike the price of units if they got new tenants.
As vacancy decontrol is often accompanied by rent control, some landlords may be eager for a revolving door when it comes to tenants. If there is rent control with vacancy control that usually means that existing tenants rent cannot be hiked more than what the government allows.
Where did vacancy decontrol come from?
Not surprisingly the concept of vacancy decontrol is one we inherited from Great Britain.
Due to the housing shortage that stemmed from WWI, house prices increased substantially in the mid to late 1910’s, and many people couldn’t afford rent anymore. As no rent control existed at the time people were forced out of their homes if they couldn’t afford the much higher rents.
As a result of the housing crisis, the British government passed “The Increase of Rent and Mortgage Interest (Restrictions) Act 1920”. The act effectively put in place temporary rent control. However, it also refused to decontrol rents completely and so while rent control was implemented so was vacancy decontrol for vacant properties.
So, where vacancy decontrol exists, as in Ontario, landlords are allowed to hike up prices substantially. However, consumers looking for affordable housing can also price shop and try to negotiate the rent with the landlord.
Residential Tenancies Act, 2006 Ontario