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Ford’s PCs rolled back rent control to spur new rental construction. Here’s what happened next

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Renting in the Greater Toronto Area is becoming increasingly perilous for many tenants.

The average cost of rents in Toronto hit $2,898 in August, while throughout the region prices have generally skyrocketed by over 30 per cent in the last two years alone.

It’s not a mystery why. Demand is far outpacing supply, particularly when it comes to purpose-built rentals. That is, housing built specifically for stable, long-term rental accommodation that is usually professionally managed.

The shortage has been decades in the making. And now a “perfect storm” of factors has made the impact on the rental market and rent prices especially acute, says Shaun Hildebrand, president of real estate consulting and data firm Urbanation.

“There’s an intense level of competition among renters. Demand is growing on a number of fronts and there’s extremely limited amounts of supply,” he said.

In 2018, Ontario’s Progressive Conservative government took a controversial step to try to address a dearth of purpose-built rentals. Fresh off his election win, Premier Doug Ford rolled back rent controls on all units built or occupied after Nov. 15 that year, saying the move would provide “market-based incentives for supply growth.”

The government wagered that scrapping rent controls on newer units would encourage developers to build more purpose-built rentals, since the absence of rent controls, at least in theory, makes those projects more financially attractive.

Given the current circumstances for renters in the GTA, it may seem obvious the government’s rent control revisions did little to create more supply. But the reality is more complicated.

February report by industry groups and Urbanation found the changes did initially generate more developer interest in purpose-built rental projects. Between late 2018 and the end of 2022, the number of proposed rental units throughout the GTA nearly tripled from about 40,000 to more than 112,000, though less than a third were approved.

In the City of Toronto specifically, applications for purpose-built rentals more than doubled in 2019 from the previous year, according to a staff report.

Meanwhile, GTA rental starts (the number of units included in projects with shovels in the ground) hit a three-decade high of 5,958 in 2020, according to the industry report. That’s about triple the average pace of rental construction starts of the preceding two decades, it said.

But then the momentum stalled, and progress has remained largely stagnant since.

What happened to Toronto when rent control went away?

In 2018 Ontario rolled back some rent controls to incentivize developers to build more purpose-built rental units. But as CBC Toronto’s Shannon Martin found out, that’s not exactly what happened.

The COVID pandemic hit and along with it supply chain constraints. That coincided with an ongoing skilled labour shortage. Then came progressively higher interest rates. Since 2020, average construction costs have increased four times faster than rents, according to Urbanation.

Many proposed rental projects became commercially unfeasible very quickly, Hildebrand said.

Unfortunately for renters, this all corresponded with intensifying demand-side pressures.

High interest rates and astronomical house prices have kept would-be homebuyers in the rental market. Those who do live in rent-controlled units are reluctant to leave, fearing huge increases in rent if they move into a new place. Landlords in Ontario can charge new tenants whatever the market may bear for a previously vacated unit, a practice known as vacancy decontrol.

The GTA continues to be a primary destination for new Canadians and has also seen a post-pandemic influx of international students, two demographics that typically rent.

Huge demand over next decade

A significant majority of purpose-built rentals in the GTA went up more than 40 years ago, according to the Canada Mortgage and Housing Corporation (CMHC). Construction slowed significantly in the intervening years, with investor-owned condos becoming the dominant source of rental supply in the region by far.

“We’re now paying the price of not building,” said Steve Pomeroy, a professor at McMaster University’s Canadian Housing Evidence Collaborative, about the pressures on renters.

Understanding Toronto’s rental market pain points

Toronto’s rental market has several pain points. CBC Toronto’s Shannon Martin speaks to several housing experts to better understand how Canada’s largest city has been pushed into a rental crisis.

Urbanation projects that demand for purpose-built rentals in the GTA will grow by about 300,000 units in the next decade. Even under a “pretty optimistic scenario,” the firm forecasts a deficit of more than 170,000 units over that same time period.

Notably, though, those projections were made before the federal government announced it is waiving the GST on long-term rental construction — a policy to spur development that’s long been favoured by housing experts and industry insiders.

Some GTA developers have already indicated the move could see more proposed rental projects, and stalled ones, move forward. But the existing supply deficit in the region is so substantial that some experts say a tax cut alone is unlikely to be a panacea.

One problem is timescale. Short and long-term demand are expected to remain high, while rental projects, particularly those with large and complex footprints, take years to materialize.

“It takes four or five years, minimum, to create a unit,” Pomeroy says. “An international student can get on a plane today and arrive by tonight or tomorrow. We can’t produce a rental unit that fast.”

A polarizing policy

Rent control has proven a politically divisive issue. The opposition New Democrats and Ontario Liberals were critical of Ford’s changes to the province’s rent control policy in 2018, and both parties have said they would reintroduce protections for all rental units if in government.

Critics of rent control argue that it deters both new construction and upgrades to existing rental units by landlords. Those who support it say the benefits to tenants, particularly a sense of financial stability, outweigh any potential negatives.

According to Pomeroy, the evidence from past decades presents a mixed picture. Rollbacks to rent controls in both Ontario and B.C. in the 1980s and 1990s, for example, did little to fuel construction of rental projects, he says.

That said, the lack of purpose-built rental housing in the GTA has quickly reached a critical point, with demand only forecasted to increase in coming years. Pomeroy says an ideal approach would limit the volatility of rent increases for non-rent controlled units, while ensuring new projects still make financial sense for developers.

“We have an under-supply of purpose-built rentals. And now we have to play catch up,” he said.

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Telus prioritizing ‘most important customers,’ avoiding ‘unprofitable’ offers: CFO

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Telus Corp. says it is avoiding offering “unprofitable” discounts as fierce competition in the Canadian telecommunications sector shows no sign of slowing down.

The company said Friday it had fewer net new customers during its third quarter compared with the same time last year, as it copes with increasingly “aggressive marketing and promotional pricing” that is prompting more customers to switch providers.

Telus said it added 347,000 net new customers, down around 14.5 per cent compared with last year. The figure includes 130,000 mobile phone subscribers and 34,000 internet customers, down 30,000 and 3,000, respectively, year-over-year.

The company reported its mobile phone churn rate — a metric measuring subscribers who cancelled their services — was 1.09 per cent in the third quarter, up from 1.03 per cent in the third quarter of 2023. That included a postpaid mobile phone churn rate of 0.90 per cent in its latest quarter.

Telus said its focus is on customer retention through its “industry-leading service and network quality, along with successful promotions and bundled offerings.”

“The customers we have are the most important customers we can get,” said chief financial officer Doug French in an interview.

“We’ve, again, just continued to focus on what matters most to our customers, from a product and customer service perspective, while not loading unprofitable customers.”

Meanwhile, Telus reported its net income attributable to common shares more than doubled during its third quarter.

The telecommunications company said it earned $280 million, up 105.9 per cent from the same three-month period in 2023. Earnings per diluted share for the quarter ended Sept. 30 was 19 cents compared with nine cents a year earlier.

It reported adjusted net income was $413 million, up 10.7 per cent year-over-year from $373 million in the same quarter last year. Operating revenue and other income for the quarter was $5.1 billion, up 1.8 per cent from the previous year.

Mobile phone average revenue per user was $58.85 in the third quarter, a decrease of $2.09 or 3.4 per cent from a year ago. Telus said the drop was attributable to customers signing up for base rate plans with lower prices, along with a decline in overage and roaming revenues.

It said customers are increasingly adopting unlimited data and Canada-U.S. plans which provide higher and more stable ARPU on a monthly basis.

“In a tough operating environment and relative to peers, we view Q3 results that were in line to slightly better than forecast as the best of the bunch,” said RBC analyst Drew McReynolds in a note.

Scotiabank analyst Maher Yaghi added that “the telecom industry in Canada remains very challenging for all players, however, Telus has been able to face these pressures” and still deliver growth.

The Big 3 telecom providers — which also include Rogers Communications Inc. and BCE Inc. — have frequently stressed that the market has grown more competitive in recent years, especially after the closing of Quebecor Inc.’s purchase of Freedom Mobile in April 2023.

Hailed as a fourth national carrier, Quebecor has invested in enhancements to Freedom’s network while offering more affordable plans as part of a set of commitments it was mandated by Ottawa to agree to.

The cost of telephone services in September was down eight per cent compared with a year earlier, according to Statistics Canada’s most recent inflation report last month.

“I think competition has been and continues to be, I’d say, quite intense in Canada, and we’ve obviously had to just manage our business the way we see fit,” said French.

Asked how long that environment could last, he said that’s out of Telus’ hands.

“What I can control, though, is how we go to market and how we lead with our products,” he said.

“I think the conditions within the market will have to adjust accordingly over time. We’ve continued to focus on digitization, continued to bring our cost structure down to compete, irrespective of the price and the current market conditions.”

Still, Canada’s telecom regulator continues to warn providers about customers facing more charges on their cellphone and internet bills.

On Tuesday, CRTC vice-president of consumer, analytics and strategy Scott Hutton called on providers to ensure they clearly inform their customers of charges such as early cancellation fees.

That followed statements from the regulator in recent weeks cautioning against rising international roaming fees and “surprise” price increases being found on their bills.

Hutton said the CRTC plans to launch public consultations in the coming weeks that will focus “on ensuring that information is clear and consistent, making it easier to compare offers and switch services or providers.”

“The CRTC is concerned with recent trends, which suggest that Canadians may not be benefiting from the full protections of our codes,” he said.

“We will continue to monitor developments and will take further action if our codes are not being followed.”

French said any initiative to boost transparency is a step in the right direction.

“I can’t say we are perfect across the board, but what I can say is we are absolutely taking it under consideration and trying to be the best at communicating with our customers,” he said.

“I think everyone looking in the mirror would say there’s room for improvement.”

This report by The Canadian Press was first published Nov. 8, 2024.

Companies in this story: (TSX:T)

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TC Energy cuts cost estimate for Southeast Gateway pipeline project in Mexico

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CALGARY – TC Energy Corp. has lowered the estimated cost of its Southeast Gateway pipeline project in Mexico.

It says it now expects the project to cost between US$3.9 billion and US$4.1 billion compared with its original estimate of US$4.5 billion.

The change came as the company reported a third-quarter profit attributable to common shareholders of C$1.46 billion or $1.40 per share compared with a loss of C$197 million or 19 cents per share in the same quarter last year.

Revenue for the quarter ended Sept. 30 totalled C$4.08 billion, up from C$3.94 billion in the third quarter of 2023.

TC Energy says its comparable earnings for its latest quarter amounted to C$1.03 per share compared with C$1.00 per share a year earlier.

The average analyst estimate had been for a profit of 95 cents per share, according to LSEG Data & Analytics.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:TRP)

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BCE reports Q3 loss on asset impairment charge, cuts revenue guidance

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BCE Inc. reported a loss in its latest quarter as it recorded $2.11 billion in asset impairment charges, mainly related to Bell Media’s TV and radio properties.

The company says its net loss attributable to common shareholders amounted to $1.24 billion or $1.36 per share for the quarter ended Sept. 30 compared with a profit of $640 million or 70 cents per share a year earlier.

On an adjusted basis, BCE says it earned 75 cents per share in its latest quarter compared with an adjusted profit of 81 cents per share in the same quarter last year.

“Bell’s results for the third quarter demonstrate that we are disciplined in our pursuit of profitable growth in an intensely competitive environment,” BCE chief executive Mirko Bibic said in a statement.

“Our focus this quarter, and throughout 2024, has been to attract higher-margin subscribers and reduce costs to help offset short-term revenue impacts from sustained competitive pricing pressures, slow economic growth and a media advertising market that is in transition.”

Operating revenue for the quarter totalled $5.97 billion, down from $6.08 billion in its third quarter of 2023.

BCE also said it now expects its revenue for 2024 to fall about 1.5 per cent compared with earlier guidance for an increase of zero to four per cent.

The company says the change comes as it faces lower-than-anticipated wireless product revenue and sustained pressure on wireless prices.

BCE added 33,111 net postpaid mobile phone subscribers, down 76.8 per cent from the same period last year, which was the company’s second-best performance on the metric since 2010.

It says the drop was driven by higher customer churn — a measure of subscribers who cancelled their service — amid greater competitive activity and promotional offer intensity. BCE’s monthly churn rate for the category was 1.28 per cent, up from 1.1 per cent during its previous third quarter.

The company also saw 11.6 per cent fewer gross subscriber activations “due to more targeted promotional offers and mobile device discounting compared to last year.”

Bell’s wireless mobile phone average revenue per user was $58.26, down 3.4 per cent from $60.28 in the third quarter of the prior year.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:BCE)

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