Despite rent controls, P.E.I. rental costs growing faster than most provinces

Rental costs on P.E.I. are rising at one of the fastest rates in the country, despite the province having what Housing Minister Rob Lantz describes as"the most rigorousrent control regulations" in Canada.

Data from Statistics Canada showrental costs on P.E.I. increased by 23.6 per cent between 2019 and 2023. Those numbers give P.E.I. the third largest increase in the country, well above the national average of 16.5 per cent.

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Growing rental costs have also been one of the key components driving P.E.I.'s inflation rate.

As to why rents have gone up so much even with rental controls in place there are a few reasons.

"Certainly with the pressure with population growth and rising costs and everything here, I guess it's not surprising" rents have increased, Lantz said Friday.

"We've got a lot of new development, a lot of new rental units in this province and they tend to come on the market at a much higher rate than our older stock that's been there a while."

Unless there's a funding agreement with government stipulating what rents have to be set at, new units come onto the market at whatever price the market will bear. Rent controls only kick in afterwards.

With a vacancy rate measured last fall at less than one per cent, the market currentlyfavours landlords, not tenants.

Last month, a researcher told the P.E.I. Federation of Municipalities that the province is currently short about 5,000 housing units, and that the province will need to build about 2,600 homes a year over the next decade in order to bring some balance to the market, given current rates of population growth.

Speaking in the legislative assembly Thursday,Lantz said his priority right now is to keep building and increase the housing supply as quickly as possible.

New legislation only goes so far

While P.E.I. has had rent controls in place for years, there was no upper limit on how big annual increases could beif they were approved by the Island Regulatory and Appeals Commission,until the new Residential Tenancy Act came into effect in April.

Under the new Act, there's up to three per cent that landlords can implement automatically, set by IRAC, and a further limit of three per cent above that landlords can obtain by applying for a higher increase through the regulator.

In the lead-up to the law coming into effect IRAC received applications for increases involving more than 1,500 rental units. In some cases landlords applied for and were granted increases of more than 30 per cent.

But Thursday in the legislature PC MLA Brad Trivers said the new cap is driving landords away.

"As predicted, landlords are getting out of the rental businessall across the Island. There's rental units coming up for sale in many places."

The Residential Rental Association of P.E.I. has also warned that as interest rates, heating and maintenance costs continue to climb, more and more landlords will find it too expensive to operate their units and move out of the rental market.

As a result, there have been calls on government to ease back rent controls by allowing rent increases of any amount when a unit has been sitting vacant to make sure that price is consistent with current market values.

Lantz said P.E.I. is the only province that doesn't allow that.

"A lot of people have brought that to my attention. We're not prepared to do anything like that right away.Again, I want to see how this Act unfolds in the market," Lantz said.

Opposition concerns

Liberal MLA Gord McNeilly has been advocating on behalf of constituents facing eviction after their landlord converted their apartments into condos and listed them for sale.

"People have been stressed out of their minds because of decisions that this government has made," McNeilly said during question period Friday, citing what he said is a lack of protection for tenants in such situations.

"We are not in good shape in our housing market here in Prince Edward Island. We're being thrown all over the place in our housing market and you don't have a plan," McNeilly said, speaking to Lantz.

The Green Party said there are other tools government could use to stabilize the rental market. The PCs never followed through on a commitment to establish a rental registry, a tool which has been shown to be effective in tracking illegal rent increases in the province.

"There's a lot of hesitancy there," said interim Green leader Karla Bernard. "It is a tool that we could have in our toolbox. I'm not sure why government isn't taking all the tools that they can to put in their toolbox during this time."

Lantz said the rent controls outlined in the Residential Tenancy Act are meant to strike a balance between keeping rents affordable for tenants and creating a market that private developers want to build and invest in.

He said he's willing to make changes if necessary, but with the Act in place for less than a year it's too early to know now whether that balance has been achieved.

"We're trying to protect tenants in a time of rising costs and economic uncertainty. Again, I just need to see a little bit more of how our new Act will affect the market."