Who’s Driving Up Rent Rates | It’s Not Housing Providers

In the ongoing discourse about affordable housing, tenant associations, advocates, and various agencies often point fingers at housing providers for escalating rents. However, a closer look reveals a more nuanced reality. The root cause of soaring rents lies in the fundamental economic principle of supply and demand—there simply isn’t enough housing.

While media articles and calls-to-action frequently blame housing providers, experts, including the CMHC and advisory agencies, emphasize that affordable rent should ideally be 30% of a tenant’s gross income. This logic extends to other living costs like food, gasoline, electricity, and clothing. Curiously, these aspects are seldom discussed by tenants and their advocates, who consistently place blame on housing providers.

This narrow focus on housing providers is exacerbated by governmental support, perpetuating a misdirection that avoids addressing the true contributors to the issue. The age-old tactic of blame-shifting, or “scapegoating,” is employed to redirect attention from the actual offenders.

To shed light on the broader picture, here’s a breakdown of real estate-related costs, revealing who benefits the most from the revenue generated by rental housing and other real estate ventures.


ONGOING (Operational) COST
















Note: In a recent survey conducted by the American National Apartment Association, a startling revelation came to light: a staggering 50% of rental revenues play a pivotal role in meeting mortgage payments and property taxes. These financial obligations, deemed inflexible, carry significant implications for property owners, necessitating timely payments to both government entities and lenders. Failure to do so may lead to the ominous prospects of Power of Sale or Foreclosure. 










Understanding the Reality: Tenants and Property Taxes

In a common misconception, both tenants and many housing providers believe that property taxes are solely the responsibility of the housing providers. However, this belief is inaccurate. Much like how retailers and service providers collect HST on behalf of their customers, housing providers merely serve as intermediaries in the collection process. Unlike HST, property taxes are not explicitly reflected on rental receipts, creating an illusion that housing providers bear the burden.

The property tax rate is determined by the province’s assessed value of the property, calculated based on the property’s potential income at current market rent rates. Notably, this assessment doesn’t consider the property’s actual income, affected by rent controls. As the government assigns a higher value to a property, the municipality subsequently imposes a higher property tax.

Tax Disparities in Housing Sector: Small-Medium Providers Hit Harder

In a recent development, the government imposes a hefty 50% corporate tax on the net profits of small-to-medium housing providers. Surprisingly, large operators with five or more employees enjoy a significantly lower corporate tax rate of just 13%. This tax discrepancy raises questions about fairness and its impact on smaller players in the housing market.

Ontario’s Exclusive Utility Monopoly: A Burden on Tenants’ Wallets

Government-owned utilities wield considerable control, often monopolizing the market without the motivation to manage costs efficiently. In the realm of municipal utility monopolies, the absence of competition allows overhead costs to soar, posing challenges that would be unsustainable in a more open and competitive market.

Ontario stands out as the sole province imposing HST on electricity. Despite the illusion of HST “rebates,” which may be more smoke and mirrors than relief, the actual cost of electricity has consistently averaged around 10% per year over the last two decades. This financial strain is particularly significant for tenants, who often bear the brunt of electricity expenses.

Government Imposes 25% Levy on Surging Property Values

In a recent development impacting real estate, the government enforces a capital gains tax, equivalent to “50% of 50%,” on the augmented value of a property at the time of sale. This tax obligation, attributed to the increased property worth from its purchase to sale, is subsequently shouldered by the incoming tenants of the premises. Stay informed on this noteworthy update in our real estate news section.

Government Reclaims Depreciation Benefits from Housing Providers

In a significant development, the government is reclaiming all depreciation benefits granted to housing providers. The process involves reducing annual corporate tax payments by depreciating the property’s purchase value, known as Capital Cost Allowance (CCA). However, when a property changes hands, the government mandates the repayment of all depreciation claimed over the years, termed as “recoverable” capital cost allowance. This shift has implications for both landlords and tenants, as the recoverable tax burden is ultimately borne by tenants through their rent payments.

Lenders Claim a Share of One-Third of Rental Income

In the dynamic realm of real estate, lenders play a crucial role in shaping the landscape of rental properties. Recent estimates suggest that approximately 85% of rental properties carry some level of mortgage. Remarkably few properties enjoy a mortgage-free status, highlighting the pervasive influence of lending in the rental market. The prevalence of high-interest rates translates to elevated operating costs, placing the onus on tenants to cover these expenses for the property to not only sustain itself but also thrive in its operations. Discover more about the intricate dynamics between lenders and rental income in our latest news segment.

Government Establishes 3% Annual Cap on Property Maintenance and Repairs

In a recent development, the government has implemented a cap on the budget allocated for maintenance and repairs of rental properties. According to the new regulation, property owners can allocate a maximum of 3% of their rental property income each year for maintenance and repairs, with a three-year limit, totaling 9%. For instance, if a property generates $100,000 in annual income, the Residential Tenancies Act allows a maximum of $9,000 for all “eligible” capital costs, distributed equally over three years at $3,000 per year. It is important to note that any additional capital expenditures are expected to be covered from the existing net profit of the rental property, as mandated by the government. Stay informed about these changes affecting property management and compliance with our latest news updates.

The Impact of Government Development Charges on Rental Rates

Discover the influence of municipal development charges on rental property rates in our latest report. Uncover insights into the construction costs for one rental unit across various municipalities with data sourced from the Altus Group Economic Consulting. Our findings, derived from the Canadian Home Builders Association’s October 17, 2022 study titled “Municipal Benchmarking Study,” provide a comprehensive overview of the financial landscape. Dive into the rankings as we break down the dollars and cents behind these charges, shedding light on the factors shaping rental rates for newly-constructed properties.



  • In recent findings, 8 out of the top 10 municipalities charging the highest development fees are located in Ontario, while the remaining 2 are in British Columbia. These regions not only bear the burden of exorbitant fees but also contend with the most stringent rental property legislation and severe housing shortages nationwide. Let’s delve into the intricacies that connect the dots between development fees, rental costs, and the housing crisis.
  • Imagine the financial puzzle faced by property developers in Toronto, where the municipality demands a staggering $190,000 solely for the approval to initiate a construction project. This figure doesn’t encompass land costs, construction expenses, numerous required studies, land transfer taxes (doubled in Toronto), legal fees, or carrying costs arising from prolonged delays in the municipal approval process, which averages a daunting 32 months (2.5 years).


  • Altus, in its comprehensive summary, reveals a significant shift in the housing landscape: From 2002 to 2006, single-detached units comprised 51.4% of all housing starts, but this percentage plummeted to 26.7% from 2017 to 2021. This data underscores the evolving dynamics of housing preferences and the impact of regulatory changes over the years.
  • The complexity of the development application process further compounds the challenges. Up to 60 different types of studies may be required as part of a new development application to a municipality, highlighting the intricate web of considerations developers must navigate.

For those invested in or contemplating real estate ventures in Ontario and BC, understanding the implications of high development fees, stringent regulations, and the evolving housing landscape is paramount. 

CMHC Imposes 54.8% Higher Premiums on ‘Affordable’ Housing Mortgage Insurance

In a noteworthy development, the Canada Mortgage and Housing Corporation (CMHC), a pivotal player in the federal government’s pursuit of housing affordability, is now charging a substantial 54.8% more for its MLI Select mortgage insurance designed for affordable housing compared to conventional mortgage insurance. The rationale behind this decision, as explained by CMHC, revolves around the need to balance risk in markets with elevated rent concerns against the social outcomes provided.

This move seems to highlight the significantly higher financial risk associated with affordable housing projects compared to their conventional private sector counterparts. The challenge arises from the narrow margin between the affordable rent rates and the uncontrollable operating and capital costs, creating a delicate balance. Essentially, CMHC is signaling that the risk of mortgage default is considerably higher in the realm of affordable housing.

The question that naturally arises is how imposing an additional 50% or more on the premium for affordable housing mortgage insurance contributes to the goal of making housing more affordable. It raises concerns about who ultimately bears the brunt of this increased financial burden. This development prompts a closer examination of the implications of such premium hikes on the overall affordability of housing in the Canadian market.


Explore the intricate web of hypocrisy and conflicts of interest surrounding the issue of housing unaffordability. Contrary to popular belief, housing providers emerge as a scapegoat rather than the primary cause behind skyrocketing rent prices—except for a few unfairly sensationalized cases. Delve into the shadows, and you’ll discover that the government plays a pivotal role, acting as a concealed financial black hole that absorbs the majority of real estate revenue. Moreover, it crafts legislation that unfairly places housing providers as the notorious “face” of unaffordable housing.

The solution often proposed—encouraging and constructing more “affordable” housing—poses a paradox. Implementing such measures translates to a substantial reduction in revenue for governments at all levels. It’s a classic conflict of interest: the government finds itself unable to afford affordable housing, leading to a perpetuating cycle of unaffordability.



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