Sunday, April 30, 2006

This Space For Rent

With apartment vacancies in Toronto at record highs, landlords are throwing all sorts of incentives at potential tenants to rent or current tenants to stay on--a month or two of free rent, free parking, free cable and internet access, and so forth.

Now with the return of rent control in Ontario, landlords are going to see profit margins thinned by rising property taxes and energy costs shaved down even more:

New restrictions on "above-guideline increases." Currently, landlords may increase rents by more than the government-mandated percentage to cover the costs of capital projects, such as major renovations. The new legislation will make it clear that the costs of routine maintenance cannot be passed on to tenants this way.

Restoration of the "costs no longer borne" clause. Under this clause, landlords who get above-guideline increases for capital projects would have to roll back rents once the project is paid for.

Restoration of "orders prohibiting rent increases." The legislation will give the rental housing tribunal the power to freeze rents on apartment buildings that are subject to outstanding work orders from the municipality.

Elimination of "default eviction orders." Now, if a tenant does not dispute a landlord's claims of non-payment of rent, the tribunal may issue an eviction order without a hearing. The legislation will require a hearing.

At least one of the more objectionable proposals--rent controls--will not be in the legislation. The Federation Of Rental Housing Providers-Ontario has a collection of articles explaining how rent controls don't actually benefit the great mass of tenants and disadvantages decent landlords--not slum lords--at the same time.

Artificially holding rents down doesn't help poorer and newer tenants in the long run, but it certainly allows longer-term tenants a great advantage and landlords a disincentive to improve their properties or keep current tenants satisfied.

And deadbeat tenants will be able to game the system a little longer. Instead of having to actively pursue an appeal of an eviction order, they can sit back and wait for the appeal to be scheduled, and keep on defaulting.

And if capital projects do significantly increase the value of a rental property, shouldn't a landlord be able to charge more for what has become a more desirable property?

I rent myself, and I've known good landlords and bad, but my sympathies have generally been with the landlords in this market. With interest rates at record lows and all sorts of new mortgages being offered at easy terms, this is not a landlord's market, and it won't ever be again if this legislation goes through.

Source: Toronto Star


Anonymous said...

The Provincial government will create a housing shortage at the exact time that housing shortages would finally be relieved in Toronto. Brilliant. McLiar and the socialist hordes are complete dumb*sses.

Anonymous said...

Property taxes have gone up at least 3% in each of the last three years thx. to David Miller. The average one bedroom apartment goes for $800/month. People need to have a roommate to afford that. The
idea is to get one while still being able to save for your own house. Even if people can, why should they? Thus, you get the great exodus, and not only that, business is leaving the City to.

James said...

Whoa, did I find some interesting stuff on the Federation of Metro Toronto Tenants Associations page.

Look what I found on their FMTA sells out tenants article

This is a story about how in 1986, the Federation of Metro Tenants Associations demanded from the Ontario Liberal government of David Peterson that they must chose 9 people to represent all tenants in Ontario, and how those tenant representatives sold us all out to the Liberals.

Two of those tenant representatives are now the lead "tenant stakeholders" the Dalton McGuinty government is talking with, Dan McIntyre, head of the Federation of Metro Tenants Associations, and Kathy Laird, Legal Director of the Advocacy Centre for Tenants Ontario. We hope to get the complete list soon, and how many of them went to work for the government shortly after selling out the tenants of Ontario.

The Chair of that Committee, Leslie Robinson is who is quoted extensively in this article was put in charge of picking the Board of Directors and setting up the structure of the Advocacy Centre for Tenants Ontario, and Kathy Laird as Legal Director.

The results of the Residential Rent Regulation Act of 1986 that they supported, were the largest rent increases in Ontario history, with many buildings recieving one year rent increases of 20%, with some reaching 30 and 40% in a single year.

Rent Reform's Elusive Accord

Tenant reps are endorsing the Liberals' new rent review law but the associations they hail from want nothng to do with it.

Now, December 11-17, 1986
by Jane Story

A year ago, housing minister Alvin Curling, formed an advisory committe made up of nine landlord and nine tenant representatives. After months of negotiations, an agreement was reached by both sides and the committee's recommendations were incorporated into a new version of the Residential Rent Regulation act, now Bill 51, passed by the legislature yesterday (Wednesday).

It's obvious that such consensus is political manna for a party that hopes to woo both financially powerful owners and vote-heavy renters. Curling calls it an "historic agreement." But Curling's political gain may be at the tenant movement's expense. It looks like the historic divide between landlord and tenant has shifted bearings for the moment into a rift between tenant organizations which have denounced the bill and some tenant organizers who have given their support.

Bill 51 replaces rent review legislation that limits landlords to annual rent hikes of 4 per cent. The previous legislation had long been considered unsatisfactory, both by tenants — because so many buildings were exempted — and by landlords and the construction industry who say the impairment of profit crushed the incentive to build new rental housing in a market that is increasingly desperate for it.

The most obvious change in the new legislation is the replacement of the flat 4 per cent ceiling with a complex formula that takes each landlord's costs into consideration. Curling calls it "the most responsive, constructive and sensitive system of rent review in North America." But Bill 51 is so complex that no one can confidently predict its exact impact. What is certain is that it will have a far reaching effect on all the basic housing issues — inclucing new building construction, the retention of existing rental housing, building maintenance and rental costs.

Not surprisingly, part of the battle centers around differing interpretations of the hypothetical impact of the new regulations. But the debate also touches on the deeper problem of devising strategy in a new political context. After 42 years of Tory closed-door politics, the new minority government's markedly consultative approach has raised new issues for grassroots organizing efforts. The current political scene makes concessions possible which were all but unattainable in the past, though it's clear that the Liberals will never stray too far from the business interests to which they are committed. The tenant movement is being forced to confront just where to draw the line between compromise and cooptation.

To both the Tories and the NDP, the minister pitched his bill as a landlord-tenant truce, and he warned the opposition against any changes that would disturb the delicate balance of interest that has been struck.

The NDP was unconvinced. Housing critic David Reville, the Riverdale MPP, proposed 60 amendments to the legislation and refutes the government's claim that a settlement between landlords and tenants has been reached.

Never consulted
"Basically, the people on the rent review advisory committee were appointed by the government. It is an agreement between nine tenant representatives and nine landlord representatives, but there is a bit of fast footwork in the terms of the description of these people as representatives," he says.

This sentiment is echoed by Bart Poesiat, a staffer at Parkdale Community Legal Clinic — long a leader in the area of tenant rights — though the chairperson of Curling's committee is Mary Hogan, who was the director of the Parkdale Community Legal Clinic when she agreed to sign on.

"The Parkdale Tenants' Association ws never consulted and never knew anything about the committee or even that the committee was being formed," says Poesiat.

"When the bill first came out, the Parkdale Tenants' Association called a meeting and a lot of tenants came out and a lot of questions were asked. It was obvious that the bill was taking money out of the pockets of tenants and transferring it into the pockets of landlords with the hope that they would then start building new housing."

It is certainly the government's contention that Bill 51 will "set the stage for a rebirth of investor interest in rental housing." But even Leslie Robinson, who sat on the tenants' side of the advisory committee, undercuts these expectations. If any new rental housing is created, she sees it happeing at the high end of the market, unaffordable for many tenants.

So why did Robinson, a respected tenant advocate and coordinator of the Federation of Metro Tenants' Associations for 12 years, agree to collaborate?

Robinson maintains that along with all the other tenant representatives, she was nominated by the federation, although it was understood that she would not be representing the federation or binding it to any accord.

The federation has since been very critical of the legislation and last month rallied tenants to protest its ascent. In a brief submitted to the legislative committee debating the bill, the federation contended that the new rent reforms will not end "the gouging that forces tenants to subsidize speculators" and will ultimately "make the rich richer and the poor poorer."

Robinson defends her position on the advisory committee, which she still holds.

"The report that I signed was a recommendation based on what I thought we could get out of the Liberals, not what I want to see ultimately. I can't say this is the best policy in the world or even that this is a fairly good policy, but given what the Liberal government was intending to do, this is what I think is the best we could get.

"I believed, and I still do, that we got more reforms and a better housing policy by participating in the process and signing the report than we would have got if we had pursued lobbying."

Included in Robinson's inventory of achievements is a commitment from the minister to build 3,000 non-profit housing units, a recommendation for security of tenure for roomers and boards, and Bill 11, passed last summer. Robinson argues that Bill 11, which prevents the demolition of existing housng or its conversion to high-priced condominiusm, would never have gone through if tenant reps on the advisory committee had not made support for Bill 51 conditional on the passing of Bill 11.

Robinson estimates that more than 10,000 units were saved in metro. Her critic scoff. They see Bill 11, effetive for only two years, as a weak law, already assured by the Liberal-NDP accord, and not worth the tradeoff.

Tenant groups are particularly opposed to the government's calculated rent guideline, a complex formula equalling 2 per cent plus two-thirds of a typical landlord's operating costs, which on average will increase rents by 5.2 per cent next year. Rents could go much higher since no ceiling has been put on increases.

More reforms
This arrangement is supposed to ensure good maintenance and tenant protection during periods of high inflation. But the metro tenants federation is skeptical. "Once all the weighing and averaging is over," the federation says, "the formula boils down to a very simple and unfair conclusion: pay the landlord for his cost increases and then pay 2 per cent of your rent more each year."

Robinson also sees the regulation as a concession to landlords that was necessary even though it weakens the bill from the tenant point of view.

"It was a concession to landlords who were saying, `If you want us to improve the maintenance, we have to increase our operating costs.' So we gave them the money but we didn't make any requirement for them to improve the maintenance. I expect some responsible landlords will improve their maintenance but irresponsible landlords will put that money in their pockets.

Bill's cost
"One per cent is to cover capital expenses and financial cost increases that the landlord would have endured rather than going to rent review. The extra one per cent is more profit for landlord. In my mind, it is the cost of Bill 11."

"In the last three or four years, I was hearing more tenants complain to me about the lack of supply and poor maintenance and the loss of housing through demolition than I was hearing tenants tell me the rent review guidelines are too high. I don't hear very many tenants say, `I can't pay an extra one per cent.' I hear a lot of people say, `I have no where to go and my buidlng is being torn down.'"

However, there are concerns with even modest rent increase because of the decline in the relative income of tenants. The federation points out that in 1983, tenants' incomes were more than 22 per cent lower than in 1971. According to Statistics Canada, almost one-fifth of tenants are already paying 40 per cent or more of their incomes in rent, while nearly one-third pay more than 30 per cent. The NDP estimates that tenants will have to fork up an extra $1.4 billion in rent over the next five years as a result of the new guidelines.

Another bone of contention for tenant groups is the new rent registry. "The problem with the rent registry is that it starts now," says Poesiat. "What we've always argued is that it should register rents going back to 1976, when rent review came into place. (Under the bill) if a tenant does prove that his rents are illegal and, say he has been paying rents for five years, he can only collect the excesd rents he has been paying since August 1985. This is like pardoning the landlord for committing crimes. It's an amnesty for landlords.

Landlord pardon
The advisory committee also recommended that registered rents be deemed legal if a landlord, who has not previously gone to rent review for an increase, can prove that if he had, the legal rent would now be close to what he is charging. This, too, amounts to a pardon, the committee admits.

The amnesty was a major demand of the landlords, says Robinson. "In deciding to give in to that demand, it seems that in making a tradeoff what we were talking about were lump sums of money on a fairly random basis. It's all dealing in the past, it's not going to bring rents down."

Extending rent control to properties built since 1975 is providing universal protection for tenants, the government claims. But critics don't consider this the case, since the registry exempts rooming and boarding housing, ostensibly because of administrative difficulties.

But the most controversial aspect of the new law is one which allows landlords an additional 2 per cent increase if their rates of return are less than 10 per cent or if the rent charged is deemed chronically depressed — more than 20 per cent below the going rate.

Robinson does not feel accountable for this provision, as it is the one aspect of the new law which the advisory committee did not recommend. The tenant representatives recognize that this provision to raise the lowest rent to market levels will erode affordable housing, particularly in Parkdale. Landlords did not recommend this provision either. They wanted more.

Though these disadvantaged landlords may prove difficult to distinguish, their tenants are more easily identified. A study commissioned by the advisory committee showed that over 40 per cent of tenants being charged depressed rents are paying 25 per cent or more of their incomes in rent. One quarter of these tenants are either retired or out of work. Critics predict hardship relief for landlords will mean economic eviction for tenants.

A scathing review of Bill 51 was prepared by the Tenant Umbrella Group, a committee of legal workers and lawyers which was formed to represent their clients at the hearings of the now defunct Thom Commission, the Conservative inquiry into rent review reforms."

The umbrella group challenges the Liberals' definition of chronically depressed rents, and questions the premise that market rents are desirable. They argue that fixing the price of accommodation at market levels assumes that market forces are in place — which they are not, as the present low vacancy rates indicate. They fear increase will bring affordable rents up to currenly illegal levels.

Scathing review
The relief clause also allows landlords to immediately raise their rents to the market rate if the unit becomes vacant or the tenant agrees to the increase. Reville foresees huge possibilities for coercion here.

"I see landlords forcing tenants to sign these agreements or getting them out just so they can fast track their units." Reville tried to have this section deleted.

Another consideration for the economic well-being of the landlrods is the clause to cover financial loss. The bill's critics say loss is incurred when properties are turned over for a fast buck — like the 1982 Cadillac Fairview deal. After that scam, a cap of 5 per cent spread over five years was put on claims for financial loss. Critics are concerned the erosion of this protection detected in Bill 51 will encourage speculation and building flips.

Robinson feels tenants should not have to pay for a landlord's financial losses, and says the tenant reps on the committee tried in vain to wipe out this provision.

One mistake
"We kept the 5 per cent but we didn't keep the five-year basis. In my mind, this is the one mistake we made and I think it will encourage the sale of more buildings. If there is one thing I wish the legislation would change, it is that."

Landlords have their reservations too about Bill 51, but say its is a step towards eliminating rent controls altogether.

Meanwhile, the advisory committee continues to meet, although at least three tenant representatives have since resigned from the tenant organizations they were initially affiliated with.

"By the time I quit (the federation)," says Robinson, "I was feeling I just couldn't keep wearing two hats. I realized what the differnece was. If you are an advisor to the minister, that's one thing and if you're representing tenants and saying, `This is the position tenants take,' that's another thing. I couldn't keep publicly clear what hat I was wearing."

"The question is, how is there going to be an assurance that the assigned representatives actually represent tenants. I think we represented them. I don't think we were representing any other interests, but if the advisory committee is going to continue, we have to make sure that there be more work done connecting the committee to tenant groups."

It may not be too late. The advisory committee could set about reforming the Landlord and Tenant Act next.