P.E.I. government should end ‘rent control’ for sake of renters

The Lantz government is asking Islanders for their views on whether to extend the current cap on rent increases (to three per cent annually) in 2027. They should oppose this extension. A driving force behind Prince Edward Island’s affordability woes is a shortage of rental homes, and extending rent caps would make that shortage worse.

The appeal of rent control is that, in the short term, caps can help some current renters by limiting how much landlords can raise the rent. But it overlooks a major problem—limiting rent increases discourages the construction of new rental homes, and that can harm the very renters the rent cap is meant to help.

Rental housing does not appear on its own. Someone has to finance it, build it, insure it, maintain it, and pay taxes on it. Homebuilders will only build new rental homes if they expect rental income will cover construction costs. And current landlords will only invest in repairs and upkeep if rental income can keep pace with the cost of maintaining the property.

By capping rent increases while those costs continue to rise, the government makes it less attractive to build new rental homes and undercuts the rationale to maintain rental homes that already exist. This is not some abstract concern. Over the past five years in P.E.I., the cost of home maintenance and repairs has increased by 2.8 per cent per year and property taxes have increased by 3.4 per cent per year.

In other words, the major costs associated with building and maintaining a rental property have increased while rents have been capped. When government limits how much rent can increase, it may destroy the incentive to build new rental units and maintain existing ones.

The result is a rental market with fewer choices.

For Islanders who do not currently rent, but may want or need to soon, that could mean fewer options are available—and potentially none that meet their needs. Of course, some current renters may benefit from a rent cap in the short term. But these renters may face a rental market with fewer options if they need to move into another rental for work or to start a family.

Rent controls can even hurt renters with no intention of moving. If landlords cannot recover rising costs through rent increases, they may sell their rental units rather than continue renting them out. That can force tenants out into an already tight market. And even when landlords keep renting under a rent cap, they may cut back on maintenance and repairs, knowing their tenants have fewer alternatives.

Rent control is simply the wrong way to improve rental affordability. The Lantz government should focus instead on making it easier and cheaper to build rental homes. For starters, the government could stop effectively taxing rental properties more than owner-occupied homes. Municipal governments, for their part, could further streamline the rules that restrict what kinds of homes can be built and where, and keep development fees on new homes low.

Today, as families struggle with the rising cost of virtually everything, Islanders are right to want more affordable rent. But rent control is the wrong way to achieve that goal. Instead, to restore affordability, the government should remove the barriers to new rental construction in P.E.I.