CONTENTS
Monday 18 February 1991
Rent Control
Afternoon sitting
Adjournment
STANDING COMMITTEE ON GENERAL GOVERNMENT
Chair: Mancini, Remo (Essex South L)
Acting Chair: Abel, Donald (Wentworth North NDP)
Acting Chair: Ward, Margery (Don Mills NDP)
Vice-Chair: Brown, Michael A. (Algoma-Manitoulin L)
Bisson, Gilles (Cochrane South NDP)
Drainville, Dennis (Victoria-Haliburton NDP)
Duignan, Noel (Halton North NDP)
Harrington, Margaret H. (Niagara Falls NDP)
Mahoney, Steven W. (Mississauga West L)
Mammoliti, George (Yorkview NDP)
Murdoch, Bill (Grey PC)
O'Neill, Yvonne (Ottawa Rideau L)
Scott, Ian G. (St George-St. David L)
Turnbull, David (York Mills PC)
Substitutions:
Mahoney, Steven W. (Mississauga West L) for Mrs O'Neill
Owens, Stephen (Scarborough Centre NDP) for Mr Duignan
Poole, Dianne (Eglinton L) for Mr Scott
Tilson, David (Dufferin-Peel PC) for Mr B. Murdoch
Also taking part: Ward, Margery (Don Mills NDP)
Clerk: Deller, Deborah
Staff: Richmond, Jerry, Research Officer, Legislative Research Service
The committee met at 1008 in committee room 1.
RENT CONTROL
The Vice-Chair: Good morning. I see a quorum. Welcome to the standing committee on general government.
Today we are pleased to have with us the Minister of Housing, the Honourable David Cooke. Mr Cooke has a statement. I believe all members have a copy of this green paper that the minister will be speaking to today. I am pleased on behalf of the committee to welcome the minister with us and look forward to your statement, sir.
Hon Mr Cooke: If I might just begin, I have talked to the two opposition critics and indicated that I understand that the schedule has it that tomorrow you will be beginning clause-by-clause of Bill 4. I was scheduled to be here tomorrow, but I will be unable to be here because of a funeral that I must attend in my home constituency. In talking to the two critics, the arrangement, if it is acceptable, Mr Chairman, was that they would begin clause-by-clause of the bill and any sections of the bill that they wanted myself to be here for could be stood down, and I will be back here on Wednesday. I apologize for the inconvenience, but it is unavoidable.
I certainly appreciate the opportunity to appear before the committee again this morning to follow up our initiatives on rent regulation, although I must confess I would prefer to be where I was last week at this time.
Today I have the great pleasure of initiating the next step in a one-year process to develop and enact permanent rent control legislation. When I last appeared before the committee, I said that permanent legislation on a simple and effective system of rent control will have a significant impact on the wellbeing of a very large number of people in Ontario. It is important that we move forward as speedily as possible in order to remove uncertainty in the minds of both landlords and tenants. Tenants need real protection and they need certainty about their rights and obligations. So do landlords. To make long-term financial decisions about their businesses, they need to know as soon as possible and as clearly as possible the rules under which the rental market will operate in the future. For the same reason, they need certainty and predictability about these rules.
As members of the committee know, Bill 4 is an interim measure, a moratorium on rent increases above the guideline for a specified period no longer than two years. It was intended to provide protection to tenants against excessive rent increases during that period while we set about developing a permanent system of rent control that meets our long-term requirements.
When I addressed this committee on that interim legislation, I assured members that as we proceeded we would initiate intensive public consultation on a permanent system of rent control. I am pleased to take this opportunity to present to the committee the first step in that consultation process, a consultation paper outlining the issues involved in rent control and some options in dealing with them. The consultation paper seeks to ascertain the views of the public, not only tenants and landlords but anyone who has an interest in this topic, on the best approach for an effective system of rent control.
In regard to some issues, not all, the paper indicates options that the government prefers, but I hasten to emphasize that none of the options outlined in the paper represents a final decision in advance of consultation. They are only intended to draw attention to the issues and at most give an indication of our current thinking. We know that there is much that we can learn from listening to people and our thinking is therefore open to review and adjustment in light of new ideas that may emerge during this consultation.
Housing, in our view, is a fundamental need for individuals' and families' wellbeing and, in the larger context, for the quality of life we want for all our communities. We are committed to the ideal that people have a right to safe, secure and affordable housing. Providing access to that housing is a primary responsibility of all levels of government and all sectors of society. We recognize that the housing industry, which encompasses many activities, contributes significantly to the economic prosperity and social stability of Ontario.
The simple fact that more than three million Ontarians, one third of our entire population, rely on the rental market for their housing points to two realities: Any policy or strategy that seeks to ensure access to affordable housing must address the question of the percentage and predictability of rent increases and it must address the preservation of the available stock of affordable rental housing as well as the task of increasing the supply of all forms of affordable housing.
I see the consultation process we are starting today as the first in a series of consultations in developing a co-ordinated housing strategy for Ontario. Developing such a strategy through consultation will obviously take a sustained effort over a lengthy period. We want to begin that process now. Our immediate strategy includes steps to increase the supply of affordable housing, better use of government land for housing and measures to improve the quality of life in public housing.
With the committee's indulgence, my staff will be making a fairly detailed presentation this afternoon on the various aspects of rent control outlined in this consultation paper, but now I would like to touch on some of the principles which we think should guide any system of rent control.
The first principle, for obvious reasons, is real protection for tenants, the key area where the current system of rent regulation has demonstrably failed. As we have all seen, it failed to protect tenants against excessive rent increases which in some cases amounted to economic eviction, and it failed to protect them against inadequate maintenance standards.
Second, the legislation must be clearer and simpler and the administration less expensive and convoluted. Landlords and tenants need greater certainty about the scope, scale and timing of rent increases.
Third, tenants must have a say in the decisions affecting the units as well as the buildings in which they live. Tenants must be able to participate in those decisions which have a direct impact on their lives.
Fourth, tenants and landlords need an environment in which decisions on regular maintenance and repairs can be made without confrontation.
Fifth, but in no way less important than these other principles, we need to prevent the loss of existing housing stock.
Sixth, while the Landlord and Tenant Act needs to be retained as separate legislation covering aspects of tenant-landlord relations other than rents, it is also necessary to make the rent regulatory system more compatible with the act.
No amount of legislation can achieve any of these objectives unless two other conditions also exist: Tenants and landlords should be able to understand their rights and obligations under the legislation -- in other words, they need ready and easy access to information -- and there should be provision for fair and accessible mechanisms for deciding disputed issues.
In the consultation paper, basic issues, options and, where identified, preferred approaches are assessed against these principles. Nine major issue areas are addressed in the consultation paper:
1. the scope of rent control coverage -- options on what to include under rent control and how to determine whether a unit is covered by the legislation;
2. permitted annual increases -- options on the timing and the basis of an annual increase;
3. exceptions to the permitted annual increase -- whether increases above the guideline should be allowed and, if so, what should be allowed;
4. capital expenditures -- how capital expenditures on repairs and renovations should be addressed;
5. maintenance -- how to ensure maintenance standards;
6. rent reduction -- options on tenant challenges of any increase, landlord-tenant agreements on what services and facilities rents should guarantee and compensation for illegally charged rents;
7. rent information -- options for a central data bank containing rent information, commonly referred to as the rent registry;
8. decision-making and the administrative structure -- options on dispute resolution systems, assistance to parties in disputes, enforcement and other related matters;
9. conversions of rental properties -- options on a system to regulate conversion, demolition and renovation of rental properties.
As I said before, where preferred approaches are identified they are only intended to focus discussion, not to pre-empt it. We are ready to reconsider any of them as consultation proceeds.
I want to dwell for a moment on the issue of capital expenditures. This consultation is about rent control, which, as I have said on many occasions, is necessary to protect tenants against excessive rent increases and to ensure adequate maintenance standards. But we fully recognize that landlords too have legitimate concerns which must be addressed. Landlords have an interest not only in the way rent control affects their rental incomes, but also in the long-term viability of their properties and their proper maintenance.
These questions are as important to the government and to our society as they are for landlords, for the simple reason that rental housing is such a significant part of our housing stock and it must continue to be available. It is estimated that 65% of Ontario's rental housing stock is more than 20 years old, and in the context of a diminishing number of additions to this stock since the 1970s that proportion will only increase as time goes by.
The consultation paper reflects our recognition of these realities. It sets out the issues and raises a number of options in dealing with capital expenditures and regular maintenance. No preferred option is identified. We believe that the new law must respect the concerns of all sectors of society. This is reflected in the options suggested in the area of dispute settlement and decision-making.
The consultation paper recognizes the usefulness of funding both landlord and tenant groups and it recommends the creation of a rent control advisory committee to sustain an ongoing dialogue between landlord and tenant interests.
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With the release of the consultation paper, we are calling for submissions from interested individuals and groups by 5 April 1991. A newsletter summary of the main issues will be delivered to most apartments, all for which we have addresses on record at least, in the next few days so that tenants and landlords will have an opportunity to get back to us with their views. I appreciate the attention the committee will devote to reviewing this consultation paper.
I will be visiting many communities across Ontario during March and early April, along with my colleague Margaret Harrington, my parliamentary assistant, and Don Abel, the member for Wentworth North. On these visits we will be eliciting community views on all possible rent control options. I hope to present draft legislation for first reading by June and it is my wish that we will have a fairer and more effective legal framework for rent control in place by early 1992. It is important that we move forward with that permanent legislation as quickly as possible. Thousands of people, both landlords and tenants, are awaiting the certainty that only permanent legislation can provide.
I recognize the short time frame facing all committee members. I am confident the committee appreciates the urgency of our task and I hope to have your understanding and co-operation in accomplishing it. I look forward to the public dialogue you will begin next week.
As members of the committee will agree, it is important that we complete our work on Bill 4, so that we can then focus our attention on the next task ahead, the new legislation. I hope that the committee can now move forward to a clause-by-clause review of Bill 4 as the next step towards its adoption.
To summarize our approach to housing in Ontario very briefly, access to safe, secure and affordable housing is a basic right. We must and we shall develop a comprehensive strategy for housing in Ontario. Rent control is a necessary part of that strategy because one third of Ontario's residents rely on rental housing. We want to ensure that we have in place as early as possible a clear and effective system of rent control. I look forward to the continued understanding and co-operation of this committee as we move to ensure security and supply of affordable housing for the people of this province.
The Vice-Chair: Thank you, Minister. For the information of the committee, we will proceed with the critics from each of the two opposition parties and then there will be a general discussion of the minister's comments.
Ms Poole: I would like to make some preliminary comments about the minister's statement and the green paper. Because the members of the committee have had very little time to actually peruse the document, most of my comments will be geared to the process as opposed to the substance.
This government has repeatedly asserted that it desires to consult. Unfortunately, I think the consultation outlined in the minister's statement is nothing less than a mockery. I will give you several examples of this.
For instance, the deadline for submissions by the public is 5 April. That is six weeks. Most tenant groups, for instance, would barely have begun to meet, distribute copies of the consultation paper and begin to formulate their ideas, let alone put in a formal submission to the minister on what options they would like to see followed through. The same with small landlords -- they would not have the opportunity to give this document the in-depth look that they would like.
The minister has continued this mockery of a process by saying that he is going to travel to consult, but it is only with members of his own party. Other members on this committee or members of the opposition are not included and not invited on those travels.
We as a committee have been given all of three days next week in which to have this so-called public consultation and I personally have a great difficulty with that. We have made a preliminary decision as a committee that the only thing we could do is have consultation by invitation, not by advertising widely, because in three days we cannot even begin to tap the number of people who would like to address this. We have also put those who are coming next week at a decided disadvantage because they will have had all of one week in which to determine what their stand is, which recommendations they would like to pursue, and it really does disadvantage any presenter who is coming before us.
I think that the major difficulty I have with this whole business is that the process is being rushed. I can understand the minister's desire not to have Bill 4 in place any longer than necessary. We have heard in this committee the ramifications of this bill and the dislocation it has caused in the housing industry, so I would certainly agree that we do not want it in place any longer than we absolutely have to, but by the same token, we are talking a major revisitation of the whole rent review process, the whole rent control process. We are talking about a major shift in philosophy. We are talking about major changes to the housing industry and we are talking about having legislation on the table by June.
What type of consultation process can we have? What type of surveys, what type of statistics are available to back up the fact that the minister has already decided on preferred options? We do not have any of this material. As a committee our hands are tied and I think as opposition parties our hands are tied.
Rent review, as the minister has stated on many occasions, is an enormously complex system, not understood by very many tenants or landlords, let alone legislative members, and to think we are going to stand the world on its head and completely change it over the next couple of months is totally unrealistic. If we truly want consultation from the people of Ontario, then we are going to have to provide that time, and 5 April as a deadline does not provide that time.
Those are my major comments as far as process is concerned. As far as the substance of it is concerned, the ministry has gone through and outlined various options. I guess one comment I would like to make is that they have listed in most cases a preferred option, while the minister has mentioned that he does not want this to be taken as a final determination by the ministry but as a focus.
I have a problem with that. I think that any consultation he has is going to be geared towards this preferred option rather than truly exploring some of the options that may exist. Again, I point out that there are no statistics, surveys, research that the ministry has that can back up that these options that it considers to be preferred are in fact ideal ones.
We have heard a lot of rhetoric over the past weeks on Bill 4 and from the minister in the House about increasing the housing supply, about dealing with economic eviction, about a partnership with the private sector, about having increased consultation and goodwill between landlords and tenants, and to my mind this paper has not taken that holistic view. Those issues are not explored and it really leaves us hanging as to how all these various sectors are going to fit in here.
In conclusion, I would just like to say that I hope the minister will reconsider the process in particular and allow more consultation. I will not be recommending that this committee, the standing committee on general government, make any recommendations back to the minister because in three days, quite frankly, I do not think we will have enough information available to us to make those types of decisions.
So I would hope that the hearings would be extended once we are back in the House, that the minister might consider some flexibility as to the 5 April deadline and that he might consider that the summer should be used for a consultation process and then legislation should be tabled in the early fall so that we can get a long-term solution on the road as quickly as possible but at the same time allowing consultation.
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Mr Tilson: The Chair has asked the opposition critics to make comment on this document that has been presented to us by the Minister of Housing. It is very difficult to respond to this type of document, which is certainly most vague and certainly is full of meaningless rhetoric.
The minister says in his document that this is the first step of the consultation proceedings. I do not know what he thinks we have been doing for the last number of weeks going around this province listening to concerns of tenants, landlords, people who have lost their jobs, people who are going bankrupt, people who have lost contracts, investors who have said that they are not going to invest in the province of Ontario because of the housing policies. I do not know what he thinks we have been doing, because certainly the bulk of those proceedings have gone far beyond the intent of Bill 4 and have gone to areas that Bill 4 does not deal with. I wish to report to him that if he has not -- and of course he was present in Windsor and he saw some of the proceedings in Windsor, but I think even in that short period of time, he must see that the proceedings have started.
The difficulty I have is that obviously housing is one of the major social problems that this province has. There are 350,000 households that are paying 30% or more of their income towards rent. This document does not deal with the war on poverty. It does not deal with that at all. It does not deal with the 40,000 people who are on the waiting lists for non-profit housing. It does not deal with that at all.
I think that the minister is going to have to provide some sort of response to the people who have said that they are losing their jobs, the thousands of jobs that have been lost and it is anticipated will be lost, the landlords that are telling us that because of the retroactive aspect of this legislation they are going bankrupt, the deterioration of the standard of living for tenants across this province -- it has already started; landlords are simply saying that because of this interim legislation there will be no capital expenditures being made because they simply cannot afford it -- the indication of the loss of confidence of investors, both from within and without the province. This green paper does not deal with those items.
Clearly this paper suggests substantial increases in bureaucracy, and that certainly was one of the major concerns of the Progressive Conservative Party during the election and continues to be one of our concerns, that bureaucracy is on the increase. This government has not dealt with that. If anything, the bureaucracy will increase even more than it already has.
With respect to what the minister's plans are, he says that he hopes to have representations from individuals by 5 April of this year, and that is going to be very difficult, for people to comment on such a comprehensive policy around this province.
I must confess I find it very difficult, individual members of the New Democratic Party going around the province hearing concerns. I for the life of me cannot understand why other members of the Legislature are not invited from the Progressive Conservative Party and the Liberal Party to participate in these proceedings as well, because there are other points of view.
I repeat that the government obviously represented to the public that it had a plan for housing during the election. It has had six months to create a housing policy, we sat for a month in December, and now all we get is vague statements and vague generalities. I for the life of me think that the Agenda for the People is a sham, that they are still thinking about what they are going to do.
I am concerned with some of the concepts that are in the paper. I have had a chance to peruse it this morning. I have not had a chance to discuss it with members of my caucus or advisers. The paper seems to indicate that nonprofit housing will not come under this subject, which I assume means that the government people who are going to be administering these types of housing feel that they cannot stand the process that is being suggested. In other words, they are going to be allowed to do the very things that the government is telling the landlords not to do. I have a lot of difficulty with that. I have sat on a non-profit housing committee which talks about maintaining buildings, and yet -- unless I am misreading it, and perhaps the minister can tell me I am; I do not think I am -- non-profit housing will be outside this legislation.
The whole issue, as I indicated earlier, of how are we going to solve the issue of poverty was one of the major concerns that we heard in our hearings, that people, the tenants, simply cannot afford any rents. What are they going to do about that?
This committee has been asked by the minister to comment on this paper. I submit that it will be very difficult in the time frame allowed for this committee to make proper statements or make an intelligent comment. The NDP themselves will be going around the province listening to people, listening to their reaction as to the paper. This committee will not. This committee is setting aside three days next week to hear selected sectors of the housing community talk on this paper. I doubt very much whether they will have sufficient time to adequately prepare to make submissions to us.
The Progressive Conservative Party has continually asked that more people be allowed to come and comment on Bill 4. There have been 150 applicants that I know of, people who have wanted to be heard and cannot be heard, and yet this committee, during the Bill 4 hearings, is being asked to comment on a vague housing statement that hopefully the government would have resolved by now. I am disappointed in the vagueness of it and I hope that this process will be speeded up considerably by the Minister of Housing. Those are my comments, subject to further discussion which we will make later.
The Vice-Chair: Thank you, Mr Tilson. Just so the committee knows, the minister will now make a brief response and then we will open it up and the committee can discuss the issues with the minister.
Hon Mr Cooke: Thank you, Mr Chair, and I appreciate the comments of the critics for the official opposition and for the third party.
I guess what I would start off by saying is that if it is the feeling of both the opposition parties that they would prefer, as Ms Poole has suggested, that we instead go through several months of consultation and not have the permanent legislation ready until the fall, which would then mean public hearings would take place about a year from now and the implementation of the permanent legislation would be in the fall of 1992, if that is the position that is being suggested by both the opposition critics, then I am prepared to sit down, along with my parliamentary assistant and the two opposition critics, and discuss that. If that is the position that you are taking, that we should go through a longer process and therefore not have the permanent legislation in place until the fall of 1992,1 am prepared to discuss that.
We were moving on this time line because we felt it was the position of the landlord community and the position of the opposition critics that it was important to get the permanent legislation in place as quickly as possible, and I readily admit that as a result of that we have to go through a quicker process of consultation than I would certainly have preferred in the first instance. I do think that it is important to get on with the process, but we can talk about that.
Ms Poole: Mr Chair, on a point of order: I would just like to clarify for the minister that I was not suggesting that the permanent legislation come in in the fall of 1992, it was the fall of 1991, that it be introduced --
Hon Mr Cooke: That results in permanent legislation being enacted for the fall of 1992.
Ms Poole: No, it does not, because what I would be proposing is that --
Mr Mammoliti: Is that a point of order?
The Vice-Chair: I think it is actually a point of information. Perhaps, Ms Poole, you could allow the minister to continue.
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Hon Mr Cooke: The point is that if the legislation came in the fall, by the time the legislation got second reading in the fall and then there were public hearings on the legislation -- and I would assume that the opposition critics would agree with me that the permanent legislation should have public hearings by a standing committee of the Legislature with hearings across the province, and that would have to take place in the winter break of 1992 -- the legislation would then come back to the House for third reading in the spring of 1992, and after it got approved by the Legislature, then there is a period of a few months to develop the regulations associated with the bill. So the earliest that the bill could be in place under your scenario is the fall of 1992, and that is just a reality.
We canvassed this option very carefully. If there had been a different alternative that would have allowed for a longer period of time of consultation on this document, I would have taken that alternative, but this was the compromise. So I share your concern, but there was no other alternative other than this if we were to get the legislation in place for early 1992. If you have some other alternative that is workable, then I am more than willing to sit down with the opposition critics to adjust the timetable.
I guess I would also apologize if I gave the wrong impression to the Conservative critic. I understand that the consultation that you have been going through in the last few weeks on Bill 4 has not just been on Bill 4, that it has been on the whole principle of rent regulation, and I understand that very clearly. The point we were making in our statement today is that in terms of the options that we see and the consultation on the green paper, the process is beginning today.
I think you make a valid point that the consultation you have been going through on Bill 4 will serve this committee well in developing its response to the consultation document as well, because you have had lots of indication from many people across the province on not just Bill 4 but their own philosophy and ideas towards rent regulation.
I would indicate to the Conservative critic that it was not our intention in this document to deal with the whole issue of poverty and waiting lists and supply. We have indicated that there will be other consultation documents that will be coming out on the supply issue. We have already taken the initial action of going through a somewhat elaborate process of reallocation of the Homes Now units under the former government's program so that at the end of this year we will have come very close to building all, or getting under construction all 30,000 units under the Homes Now program, which would not have happened if we had not gone through the process of reallocation. And I would say that I believe that you will have to look to the provincial budget to see what kind of a response there is for additional housing supply from this government, and I believe that you will see a response in the budget.
The waiting list issue is very much real, but, again, that deals with supply and we will be having some proposals and a consultation document on what the framework of supply should be and what type of strategy, because I agree with comments that you have made in the past, that if we just do the same old thing in the same old way, the waiting list, which is currently 43,000, will not disappear. In fact, if you take a look at the recommendation from the Ontario Housing Corp that we should extend our waiting list to refugees, which I certainly agree with, that waiting list could potentially jump from the 43,000 who are currently on the list to 93,000. And without any federal government assistance in dealing with the refugee and immigration issues in Ontario, we have to do it alone at the provincial level, because the federal government has not helped us out. So the whole issue of supply and waiting lists is a major issue that we are going to need your input on and the input of people across this province.
The paper, I believe, does deal with some of the problems that you have identified and other people have identified with Bill 4, and it does, I believe, deal with the issue of bureaucracy. It is our hope and our expectation that whatever final system we come up with will cut down on the size of the bureaucracy and will cut down on the amount of money that we spend on rent regulation in this province. That is certainly our goal.
I think that as best as possible covers some of the comments that have been made by the opposition critics. I appreciate their comments and hope that we can have some time to talk to one another about it now.
The Vice-Chair: Thank you, Minister. I have a number of names on the list, for members' information, Mr Turnbull, then Mrs Poole and Mr Mahoney.
Mr Turnbull: Minister, in your opening statement you say, "Tenants need real protection, and they need certainty about their rights and obligations." We absolutely agree with you on that. You go on to say: "So do landlords. To make long-term financial decisions about their business, they need to know as soon as possible and as clearly as possible, the rules under which the rental market will operate in the future. And, for the same reason, they need certainty and predictability about those rules."
In view of the various statistics which are presented in your discussion paper today, and in fact which have been presented in testimony before these hearings, we see that at least two thirds of all capital costs are in fact necessary. In fact, your definition is possibly questionable, because the Ministry of Energy is concerned about getting energy-efficient appliances and it is suggested in here that appliances are not necessary. Putting that on the side for a moment, it further identifies that $7 billion worth of repairs will be needed by the year 2000.
In view of your statements that landlords need predictability and certainty and the fact that we know that so many of these renovations and repairs are necessary, and in the discussion paper they say there has to be a way of recovering that, will you immediately move to get rid of the retroactive aspects of Bill 4, which are having the effect of destroying small landlords who, within the framework of the law, entered into these renovations which your discussion paper says were necessary?
Hon Mr Cooke: I think what the discussion paper is indicating to you is that in any permanent system of rent control in the province there has to be a mechanism of dealing with capital. I have indicated that right from the beginning. Before Bill 4 was even introduced into the Legislature, I indicated that any permanent system of rent control was going to have to deal with the issue of capital. That is the purpose of the discussion document, to discuss with you and other people in the province how we might best handle the capital needs of the rental sector in the province.
I certainly agree the permanent system is going to have to deal with that, but if you take a look at what has existed in the past, the legislation that the previous government introduced did not guarantee that there was adequate maintenance occurring. In fact, what it encouraged was neglect of a building and then bunching up of capital renovations so that all at once there would be one shock to a building.
What we are suggesting is that any permanent system that comes into place has to be a system that encourages ongoing and long-term planning and maintenance of apartment buildings. I believe that the discussion document has some options listed that would do that, but I do not think that the difficulty of long-term maintenance problems is going to be solved by the solution. I mean, it is politically advantageous for you to make those kinds of comments in the committee, but we are looking at the long-term solution here.
Mr Turnbull: Minister, I have to object to you suggesting it is politically advantageous. There are people who are facing bankruptcy, who entered into renovations within the framework of the law, and your discussion paper quite clearly identifies that at least two thirds of the work, by the ministry's own definition, was necessary. They entered into those expenses within the framework of the law. Will you not at least remove the retroactive aspect, which has been so much difficulty to all of the people here?
Hon Mr Cooke: I have indicated to you several times that the choosing of a date for Bill 4 was extremely difficult and any date that we chose was going to develop some controversy. I have also indicated to you that one of the items we would like to receive your input on, and certainly the input of people from across the province, is that the permanent system that we bring in -- I am prepared to consider, as we go through the consultation process, the option of landlords who are in that predicament, who have expended capital and are not able to recover it under Bill 4, that we can look to the ability for them to be able to apply under that permanent legislation. I think that is one of the issues I need to hear from you on and to hear from people on during the consultation period. I have indicated that for quite some time.
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Mr Turnbull: Minister, will you then at least ask the Minister of Financial Institutions to move immediately to pass interim legislation to ensure that there is no mortgage moved upon against a landlord because he cannot meet his obligations due to this retroactive legislation? This is an emergency. This is not something for light discussion. We are facing the complete demolition of some of the small landlords who have got their life savings, their pension plan, in a small apartment building. We are not talking about the big landlords. They can weather the storm; the small ones cannot.
Hon Mr Cooke: I believe that there are a lot of difficulties in our economy right now, and certainly the Premier has indicated, and I believe the Treasurer has indicated as well, that we are now into the worst recession since the Second World War, since the last Depression. The reason that the recession is being felt so badly in Ontario and in Quebec is because the policies of the federal government on high interest rates and the high dollar have hit particularly --
Mr Turnbull: Minister, you know this has got nothing to do with that. This has got everything to do with your retroactive legislation. It has got absolutely nothing to do with the high interest rates and it is absolutely ludicrous for you to suggest anything else.
Hon Mr Cooke: If you are trying to tell me that if it was not for Bill 4 no landlord would be going bankrupt, then I think you are living in a different world than I am. I know the problems of the economy.
Mr Turnbull: You obviously do not understand the legislation. They have acted within the law, and this is a regulated market, and now retroactively you are going to make these people go bankrupt.
Hon Mr Cooke: I do not agree with you. I do not agree how you analyse the effects of the bill and I have said that for quite some time. We have an honest disagreement. I mean, we disagree philosophically on rent control, period. That is a reality. That is why, you know, there are different political --
Mr Turnbull: This has got nothing to do with rent control. It has got everything to do with retroactive legislation.
The Vice-Chair: Order. Mrs Poole.
Ms Poole: I would just say to you, Minister, that perhaps you should discuss this matter with some of your colleagues who have sat on the Bill 4 hearings as far as the impact on a number of the small landlords and driving them into bankruptcy is concerned, because I think you may be perfectly right that some of these landlords would have faced bankruptcy anyway, but the information we have received as a committee is that most of the landlords who are coming to this committee are facing bankruptcy because of Bill 4. Whether or not you reinstate their right to apply for their losses once the permanent legislation is in place, bankrupt is bankrupt. They will not be able to recoup. I would ask if you could talk to them, particularly before we go into clause-by-clause, and look at this problem.
There are a couple of things. One is when you were talking about delaying the legislation by one year. I would suggest to you that what we are talking about, and what I am talking about in our caucus, is delaying the introduction of the legislation by three months, to delay it from June to September. This obviously would require two sets of hearings. The first would be the set of hearings on the consultation document, to go to the people and find out how they feel our rent review and our rent control laws should look. Once you have that material, you could then introduce your legislation in the fall of 1991. Public hearings on the legislation itself could be heard in the winter months, January to March 1992, which would mean the legislation would be in place six months later than if it would --
Hon Mr Cooke: There is a time period. I asked the same question when we were going through the timing of this and we discussed it within the ministry. The way that you have suggested it is exactly the way that I first approached it, and then it was explained to me the process that you have to go through, that it takes several months to develop the regulations to put in place the structures.
Ms Poole: Which it does in either event.
Hon Mr Cooke: But the thing is that it is not just simply a matter of delaying it for three months.
Ms Poole: I am saying six months total.
Hon Mr Cooke: "In six months" will mean the fall, because this will not be in place 1 January 1992. This will be in place in the winter of 1992, so that if the bill is passed by Christmas, then that gives us the opportunity to get the regulations done early in 1992 and get the bill functioning in late winter of 1992. But if we do not bring in the legislation for third reading until the spring session of 1992, then we are really looking at late fall, at the very earliest, that the legislation would be enacted. So there is a big difference between that six months, between having it done at the beginning of 1992 and having it done in late fall of 1992, a big difference. But if both of the opposition caucuses would prefer to proceed that way, I am willing to consider it.
Ms Poole: I personally feel very strongly that the delay of six months would be worth it to make sure the system that is put in place is fair and equitable and protects tenants and is not ill thought out. I was talking to the head of the Ottawa-Carleton Federation of Tenants Associations last week, and one of his major concerns is that it is to be rushed through and that not enough time be given for people to consult and to make sure that we are not rushing into something before we have thought it through. Perhaps we can have discussions on that with the three parties and reach a mutual decision on it.
One thing I wanted to ask you about, on page 24 of your consultation document, that the preferred approach would be that there be "no increase above the guideline for: interest rate changes, equalization, financial loss, hardship relief, economic loss, catch-up for below-market rents, maintenance costs, consultants' and other fees."
I wondered if the minister had ordered impact studies done by the ministry on these various provisions and has an estimate of what it might mean to the rental housing market.
Hon Mr Cooke: We can provide you with whatever information we have, but I can tell you that the idea behind this is that it has always seemed unfair that in most businesses, when people invest in those businesses, they do not expect to turn a profit immediately and they do not expect to have government intervention to guarantee them an eventual profit. Obviously, also under this section, we have had concerns, as you have in the past too, about the encouragement that the current legislation gives to the deliberate sale of buildings. So this whole area is an area that we certainly want to hear from people on during the consultation process, but this is our thinking at this point.
Ms Poole: I share your concern about the flipping of buildings, and I would certainly like to see provisions put into any legislation to ensure that tenants do not have to pay for that. But I am concerned that we do not have those impact studies, and to the best of my knowledge the Ministry of Housing does not have any, on what would be the ramifications, because while we have heard stories of abuse of some of these provisions, we have also heard stories where these provisions have basically not been abused but have been very helpful in bringing stability to the rental market. What I would like to ask you for is that the Ministry of Housing actually conduct impact studies and that it utilize the statistics that it has and procure any additional statistics that it might need in order to say what is going to happen if this is totally eliminated.
Hon Mr Cooke: Okay. Colleen was indicating that we do have some information. As I have told you, I have looked at some of it myself. We will give you whatever we have, and if there is additional information that you would like, we will see if we can get a hold of it. But I would say to you that you know as well as I do that while you can use the argument that this section of the current legislation has been helpful at bringing, as you said, stability to the market, there have been great concerns expressed by tenants about the phase-ins and how that just is a way of ultimately, over a period of time, making housing unaffordable. This is a major area that tenants have expressed concern about. As a tenant activist, you know that as well as I do. So I hope that your roots, your former roots anyway, of being involved in the tenant movement, you will not forget some of those things that you used to say when you would go to the tenant rallies that I went to.
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Ms Poole: I think, Minister, if you look at the record I have been very consistent. The things I am fighting now -- necessary repairs, having it capped, stopping flippings -- I still remain just as steadfast as I ever have been. I want changes to some of these things, there is no doubt about it. I do not like the way they are working under the current system.
What I am saying is that you have got a preferred option here of just completely eliminating them and I would like to see the impact. I do not know, it may be that there will not be a dramatic impact, but certainly there have been impacts under Bill 4 that I did not envisage when you first introduced the bill, that they were going to be as dramatic, and I want to prevent that from happening so that we have thought it out well. It may be at the end of the day we concur with you that many of these things you do decide should not be in, but I am saying we cannot make a qualified decision.
Hon Mr Cooke: We will get as much information as we can get for you.
Mr Mahoney: Minister, I do not know who devised this strategy but it is one of the cleverest manipulations of the committee process I think I have ever seen, both in my time here at Queen's Park and in my previous 10 years in municipal government. I think it is absolutely incredible. What you in fact are doing is putting forward one of the most distasteful pieces of legislation, in the form of Bill 4, and saying, "If you want us to leave Bill 4 in while we will take two years to go ahead through this consultation process, then that in fact becomes the decision of the opposition," and that is absolute nonsense. What you are doing is putting a gun to the head of the opposition and saying, "If you want to leave this terrible legislation in place" -- and you know as well as I do that our caucus supports the principle of protecting tenants, which is why many members of caucus voted in favour of it to get it out to committee for discussion.
Here we have a bill where your members have turned down 150 groups which wished to make presentations before this committee, which have serious concerns. We have a member of this committee asking you to reconsider a certain aspect of that bill that is going to bankrupt people and you tell us that you have a different philosophy. I do not know what in the world philosophy has got to do with the young man whom we saw in London, Ontario, who along with his wife is going to lose the 12 units that they have worked for the past 10 years to build up and lived in and renovated and done the work on personally. They are going bankrupt because they have conditional orders approved under the former legislation, and you are just wiping that out. That is not very philosophical.
I guess what I find so frustrating here is that you have brought in a paper with very few positions taken by your government. You certainly had positions in your agenda for power, there is no question about that. Your position on rent control was very clearly laid out in your agenda for power, but it is no longer part of the government's dialogue, and you come forward with really more problems than solutions that you have presented in this document. Turning things over, what you used to criticize us, rather eloquently and on a regular basis, for the passing on of responsibilities to the municipal level, you are even suggesting the municipalities administer a reserve fund created province-wide through some new tax that the NDP government is going to place on building revenues.
I am sure that my mayor and others would be extremely interested to discuss such a responsibility that you are suggesting. I realize you are putting it out as an option because it is easier than taking a position, it is easier than your government coming forward with a clear plan, which you were always so quick to do when in opposition. But I think you have manipulated this committee into a position where the opposition critics have to decide how long do we want to live with the distasteful aspects of Bill 4, because you are stuffing that down our throats, without a doubt. We have put forth amendments. We have not seen any from you.
So if we want to delay this and go out for long consultations on the green paper, it means that Bill 4 will be in place longer than of course we would like to see it, and some of us would not like to see it at all without the changes.
You talk about options, that you would like to sit down so amicably in this kinder, gentler place and work out with members of the opposition. An option would be for you to either agree to some of the amendments being put forward, particularly with regard to retroactivity, particularly with regard to conditional orders, particularly with regard to money already spent by landlords, agree to some changes in the legislation in Bill 4 and maybe, just maybe, you would find members of the opposition attempting to be a little more co-operative in coming up with a comprehensive strategy on housing and rent controls.
All three parties are responsible for rent controls. They were introduced by the Tories, who are now extremely opposed to them. They were exacerbated, I might say, by the Liberal regime, and we now have a lot of problems with them. And now what you are doing is just creating untold additional pressures and problems.
My critic put forward a very comprehensive list of amendments to Bill 4 on Friday morning at a press conference here at Queen's Park. I believe that the Conservatives have a number of amendments. I understand that there were some minor housekeeping amendments introduced in Ottawa. I was not with the committee in Ottawa, but I understand that some government member introduced some housekeeping, dotting of i's and crossing of t's -- really radical stuff.
I would like to suggest that the minister come forward with your suggested amendments, if indeed you have any, and that in a spirit of co-operation you do a couple of things: that you invite the critic from the Liberal Party and the Conservative Party to go with your entourage as you tour to listen to the people. I think that is the very least you should do, to get all viewpoints out there, so that our critics have an opportunity to hear what the people in Sault Ste Marie and Thunder Bay feel about this consultation paper, rather than getting it back from the honourable members opposite, or as perhaps massaged by you and your bureaucrats after you get an opportunity to get it back in the confines of your office. That would be number one, that you invite Ms Poole and Mr Tilson to accompany your group, perhaps with some staff from each party, to assist in deliberations and consultation, if you want true consultation. We, after all, do represent certain ridings in this province that have concerns. They are not all, as you know, represented by NDP. Some of us did survive and some of us feel we have very serious concerns.
Mr Mammoliti: What a shame.
Mr Mahoney: The second thing I would like to suggest, George -- there are some shames around here, I can tell you that -- is that you table whatever amendments you have and that you give serious control and stop talking to us about philosophy when it comes to people losing their businesses and their homes, when it comes to people declaring bankruptcy because of some unjust retroactive clause in a piece of legislation that you have brought forward.
You see, once Bill 4 is put in place and the legislation is hammered down, which in your majority way you can do in this system, the landlords are going to be bankrupt anyway, the small landlords that we are talking about. The large ones are going to weather the storm, as has been said. So I do not know that it much matters, once you get past implementation day of Bill 4, as to whether or not it stays there for six months, one year or two years. I do not really know if that matters, because they are going to be gone and out of business.
The people we are talking about are the people who have spent the money. Based on the existing legislation, based on commitments by the existing legislation, based on conditional orders, they have spent their money. You are ignoring them and pretending that it is a philosophical disagreement between you and the Tories or you and us, and that is absolute nonsense.
So I would ask you to invite our critics on your tour; I would ask you to table your amendments; I would ask you to allow for extension of public hearings on Bill 4 to allow the 150 people who have been shut out in this supposedly democratic process to come forward in some way and present their concerns; and I would ask you to show some compassion and understanding, as we have had to sit here and watch people break down emotionally in tears because your legislation is destroying their lives. I would ask you to consider those requests.
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Hon Mr Cooke: Every time rent regulation is dealt with, the member will understand that it becomes a very emotional issue. I remember the same scenes occurring after the 1985 election when the public was dealing with Mr Curling's legislation. So let's be realistic about it. Rent regulation is something that brings out very emotional reactions from people on both sides of the argument.
I would certainly be willing to sit down with the opposition critics and talk to them about the consultation process that we are carrying out as a government. I should indicate to you, and I think you will appreciate, that there is a difference between consultation that a committee of the Legislature carries out and consultation that is expected that a government is going to carry out. At this point I happen to be the minister and I thought that it was important that there be a consultation process that is carried out by the ministry and by the government. So I appreciate the argument that you are making, and it is something that I have thought about, but I thought that there should be a process that the government goes and consults on as well for the permanent legislation, because ultimately we will be developing a policy for the government that government will then present to the Legislature for its review. It is not unlike the process that your government followed for development of the county government reform process where you had a committee of only Liberal MPPs travel the province, but I certainly would be willing to sit down with your critic and with the critic for the third party to review with you the schedule that we have for our public consultation and see if there is a way that you can be plugged in to that to some extent.
I should indicate to you that it is not our intention to go and have meetings where we have debates among the three political parties about rent control. The purpose of this consultation is to go and listen to people and to try to elicit specific responses on specific issues that we need input on. I would not want to develop a process where the critics and the minister go on a tour and debate rent control for the people of the province. They can watch that on cable TV, I guess, once in a while.
We need to go out there and listen to people across the province about this issue. Some of the meetings that we have scheduled are public meetings, and I would suggest that either the critics and myself sit down and take a look at the schedule or that our staff will do that and take a look at it and see if there is a way that the critics can be brought in to some extent as well.
We have tabled our amendments to Bill 4, but I am certainly looking at the amendments that your member has presented. I would say that my initial reaction, without sitting down with ministry people or with my own staff, is that the effect of the amendments would basically be to mean that there would not be a moratorium. As you know, there already are 130,000 units in this province that are going to go through the current rent review system that are not affected by Bill 4. Every time you make an amendment, like the amendments that are suggested by your Housing critic, many more units go through the system under the current rules. So that while on one hand you argue about the financial hardship that landlords are experiencing, if we accepted the amendments from your critic the argument would very clearly be that there will be thousands of tenants who will experience financial hardship as a result of those amendments.
That is a judgement that I had to make and put forward Bill 4 with its dates in it and with the balance that I thought was appropriate. There are still 130,000 units, or more than 10% of the units in this province, that are going through the old system. That will increase considerably if we were to accept Ms Poole's amendments. So I have difficulty with that.
Finally, Mr Mahoney criticized the green paper because it did not have preferred options in every area. I would suggest that it does in most of the areas, but your critic just a few minutes ago criticized me for having any preferred options. So I am not sure whether we should have done it Dianne's way and had no preferred options or whether we should have done it Steve's way and had every one with a preferred option. Either way, obviously I would have been criticized.
Mr Mahoney: The price of being in power, I suppose.
Hon Mr Cooke: I do not mind.
Mr Mahoney: I am sure you do not.
A couple of things. First of all, I quite agree. I am not suggesting that you take the critics from each party around to conduct debates in all the communities. I think it would be important to listen. My concern is that I think our critics should be able to hear it first hand and not have it -- and I do not think there is any comparison between that and the county government situation at all. It is a totally different situation. We did other things in small business where we went around seeking input on behalf of the government, but we were not going around with either legislation having just been jammed down their throats or with the threat of some green paper coming in with all kinds of options. It was purely consultation to gain information in both of those cases, and that is not the case here.
You did answer on the amendments -- I have them here -- that were tabled in Ottawa, the government's amendments. I would ask you to recognize that there are a dozen of Ms Poole's amendments, and I would hope that if you do not like one of them, you would not use that as an excuse to ignore the other 10 or 11 that could have some merit. I would ask you to respond in some detail to each of those amendments. And I did not hear an answer about whether or not you would make arrangements for the 150 groups that have been shut out to come before this committee.
Hon Mr Cooke: I think that we have a tremendous amount of opportunity, when you take a look at the hearings that you have had so far on Bill 4 and then the hearings that you will have on the green paper, and I would hope that the House leaders will be able to work out some arrangement that when the House comes back there will be some opportunity for the committee to meet as well, and then when the permanent bill is introduced for second reading it will go out for public hearings in the summer, so there will be a large opportunity to do that.
Mr Mahoney: Not on this bill.
Hon Mr Cooke: Having served in opposition for 13 1/2 years, I know that every time there are public hearings on a bill, politically it is very useful to say that every person who has applied to the committee to be heard has not been heard and therefore the process is a sham. I said that many times myself when I was in opposition.
Mr Mahoney: Did you mean it?
Hon Mr Cooke: I meant it about as much as you did today.
Mr Mahoney: Then you definitely meant it.
Hon Mr Cooke: At some point there has to be an end to the public hearing process, because at some point we have to get on with deciding what we are going to do with the bill.
Mr Mahoney: So your answer is no on the 150 groups.
Hon Mr Cooke: As you know, I am not a member of the committee.
Mr Tilson: I have two questions of the minister. I am wondering if he is prepared now to elaborate on the road show that is being planned with Ms Harrington and Mr Abel and yourself. You indicated that you are going to some cities. I would like it if you could say which, or not necessarily which ones, but how many. And you have indicated that some of those meetings are public and some are not. Could you clarify some of those areas as to specifically what your plans are for consultations?
Hon Mr Cooke: I will get you a list of all the communities that we are going to, because I do not remember. I believe there are something like 20 communities that we are going to between the three of us, and there are seven public meetings. The difference, of course, between the public meeting is that at those public meetings anybody can attend and then other types of meetings we are having are specific meetings, whether it is with the landlords' group in eastern Ontario that I have met with once and I am going to go back and meet with again or the federation of tenants in Ottawa or smaller groups, those specific meetings where we deal with one group as opposed to a wide-open public meeting.
This will be, I believe, one of the largest consultation processes that a minister has ever had, and as I indicated in my opening statement today, we are also sending out to tenants rights across the province a summary of the consultation document and asking for their feedback as well. So there will be lots of input and I am sure that we would be willing to share the responses that we get back from tenants with the committee as well, the written responses, as best we can. I have no idea what the response will be.
Mr Tilson: I am wondering whether you are suggesting that perhaps this committee hold off on any thoughts that it may have as to the green paper until after that period of time, after your consultations.
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Hon Mr Cooke: I do not think so. I think that, as I indicated a few minutes ago, if you and I and Dianne would like to speak we can take a look and see if there is a way of plugging you in to some of the public meetings. But realistically, in terms of the timetable, if you do not have some hearings on the green paper and do not provide me with some kind of a response, there will not be the opportunity for the committee to do that, unless we adopt Dianne's scenario of a longer period of time. You know, believe it or not, and I am sure you do not, but there was not a deliberate attempt to set this up and manipulate the --
Mr Mahoney: You cannot be this good by accident.
Hon Mr Cooke: Well, that is exactly what happened.
Mr Tilson: Is it a fluke?
Hon Mr Cooke: It is a fluke.
Ms Poole: Are you saying the only way you can be this good is by accident?
Mr Mahoney: So it is like the election results.
Hon Mr Cooke: No, because that was a collective fluke.
Mr Tilson: I trust that more information will be made available as to those hearings that the government is proceeding with. I know that both the opposition parties would be interested in hearing that and having some sort of access to that consultation process.
As I say, I quite frankly find it very difficult for this committee to provide an intelligent response on three days of hearings when you are going to be going to 20 cities or more. Plus, when I see the amount of material that came to my office as an opposition member in response to Bill 4, and you probably received triple what I received, I shudder to think what we are going to receive on this. There are going to be a lot of people wanting to speak on this position, and I just find it impossible for this committee to provide comments on three days. I am not necessarily agreeing with Ms Poole as to stretching out the proceedings, but at the same time, I do not think that this legislation should be rammed down our throats.
I have one question that arose out of proceedings that took place in Ottawa, in which case it was pointed out to us that, contrary to the belief that the New Democratic Party has had in the past at least, that landlords, when they sustain losses, could simply write them off as a tax loss, that is not the case, and that has to do with implications not only from the federal government but from provincial government. My question to you is whether you were aware of this implication on Bill 4 and on the document that you have presented to us this morning.
Hon Mr Cooke: You will appreciate that I do not know what went on in Ottawa because I just got back in from out of town on Saturday, so I have not been briefed.
Mr Tilson: Physically you look good. The rest of it I am not so sure about.
Hon Mr Cooke: I am not going to ask you about the other half. But perhaps Colleen would like to respond.
Ms Parrish: I would say that we are aware of the fact that the deductibility of tax income for rental properties is somewhat complex. You cannot simply deduct losses on rental property against ordinary earned income, for instance. So it is not an absolute loss. It depends on the kind of business structure you have and what other kinds of losses there are. You can deduct losses and you can average them forward and backward and so on, but they are not deductible against ordinary earned income. That is my understanding.
Mr Tilson: As I understand it, the rationale that was given to us in Ottawa at least was that you had to show there was a reasonable expectation of a profit on apartment buildings in the future in order for a deduction to be given. That is the issue, and I guess my question to the minister or to his staff is whether they were aware of that implication when they drafted Bill 4 and when they drafted this green paper.
Hon Mr Cooke: Colleen has explained to you her point of view and I will want to get some more information to get a better understanding of the presentation on Friday.
Mr Tilson: Yes, I appreciate that. Mr Chair, before we rise this morning, I wish to put the committee on notice that I would like to make a motion on this subject.
The Vice-Chair: Thank you, Mr Tilson. Ms Poole.
Ms Poole: I feel like it is a ping-pong ball here going back and forth. Minister, I would like to talk to you about some of the amendments I tabled on Bill 4, because it is actually going to have an impact on how we deal with the consultation paper, the green paper. For instance, if it appears that you and your government are not willing to accept any amendments whatsoever on Bill 4, then we would have much greater reservations about leaving this bill in place for an extended period of time. Would you like to comment at this time on my amendment on capital expenditures, which actually very closely mirrors what you have considered as an option on page 27 of the long-term document, whereby the landlord would be allowed to claim for repairs that were, in the opinion of the minister, necessary to ensure the structural integrity of the building or the health and safety of the tenants or where there is a petition by two thirds of the tenants approving of the repair and that this approval would also be linked to ongoing, deliberate neglect and the quality of the repairs? Do you have any comments to make on that particular amendment at this time?
Hon Mr Cooke: I am not actually prepared to go through each of your amendments today. I was prepared to come here and talk in an initial way about the consultation document. We will be going through Bill 4 clause by clause starting tomorrow.
In a general way, I think the problem that I have with your amendments is that you are seeking to amend Bill 4 in such a way that it would, in your view, provide a permanent or a longer-lasting solution to the rent regulation issue. I think that many of your amendments are very helpful to me in terms of direction that I think you are suggesting we might want to go in with the permanent legislation, but with Bill 4 I think that, generally speaking, the bill is seen as being a temporary piece of legislation and we want to come up with the more permanent and long-lasting solutions in the permanent legislation.
Ms Poole: Perhaps I should clarify for you that my intention has never been to make Bill 4 a permanent piece of legislation; my intent has been to make Bill 4 livable until such time that the long-term legislation is in place. The amendments, whether for tenant protection, a provision for necessary capital repairs or the retroactivity, all three were offered in that spirit.
If your fairly ambitious plans of getting this legislation through within the year are not realized -- the long-term legislation, that is -- it means that Bill 4 can have a far greater devastating impact than you would have, I think, originally envisaged. To me, making Bill 4 livable does not equate with making Bill 4 permanent.
Hon Mr Cooke: Again, I have only read through your amendments and I have not gone through them in their entirety with people from the ministry, but I understand one of the difficulties with the amendment on capital is that under the current structure within the ministry there is not an administrative setup to try to make some of the decisions that you would like to make in terms of what is structurally necessary for capital changes in a building, and that while we might all be able to agree with the principle that you are talking about, if we accepted those types of amendments under the current legislation, they would not be workable because we have not got the structure in the ministry to back them up.
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Ms Poole: It seems to me we have a $40-million-a-year structure in the ministry right now that could very easily cope with this type of thing. I had long conversations with John Sweeney a year and a half ago when I was trying to get --
Hon Mr Cooke: He said it could not be done.
Ms Poole: No, John Sweeney said it could not be done, and the legal opinion he had from the ministry is that my amendments on necessary repairs could not be done via regulation, that there would have to be a legislative amendment to the actual act, which is what we have got here with Bill 4. The legal opinion said what I was trying to do was beyond the scope of regulations but not beyond the scope of a legislative amendment.
So I would ask you to revisit that issue, because if as a government you are going to decide not to accept any amendments on Bill 4, first of all, this whole hearing process has been a mockery, because my understanding was from day one you sat at the front of this committee, right where you are sitting right now, and said, "We will be entertaining amendments." I would not have spent hundreds and hundreds of hours working on this committee to try to get a fairer system if I had thought that no amendments were actually going to be entertained. I think we have to look at it comprehensively, because if you are going to look at the consultation document and try to make a decision on the time frame, surely you have to make a decision as to whether Bill 4 is livable in its current form and how long it is going to be livable for.
Mr Turnbull: Minister, as you are aware, under Bill 51 the "chronically depressed" clause was never enacted. There has been discussion with this committee -- and it is reflected in this discussion paper -- of the concept of capping the capital allowances. Have you considered introduction of the "chronically depressed" clause of Bill 51, because clearly if you have a 5% increase -- Ms Poole has actually suggested a 5% cap, and if you have a 5% cap on a $300 rent, that is $15, whereas if it is on a $1,000 rent, it is $50. We have heard around the province that there are places that have rents of $50 and $100 a month. There are not many of them, but there are some of them. Unless you enact the "chronically depressed" clause, I think the suggestion would be that you replace your roof shingle by shingle. So my question to you is, are you considering enacting the "chronically depressed" clause of Bill 51?
Hon Mr Cooke: I am not considering enacting anything under Bill 51. The green paper is a document that sets out issues that need to be discussed to develop a brand-new piece of legislation. In terms of the issue of "chronically depressed," like any other issue that must be decided upon, I will look forward to input from people during the consultation process. No final decision has been made on whether or not there will be a "chronically depressed" section in the permanent legislation.
The Vice-Chair: Seeing no other questions from the committee, I would suggest to the committee that we adjourn till --
Mr Tilson: Mr Chair, I do have a motion I wish to make before we rise.
The Vice-Chair: Right, of course.
Mr Tilson: Is there someone there who will write something down? I do not have it typed, unfortunately. It has to do with the taxation issue.
The Vice-Chair: I will attempt to write it down.
Mr Tilson: Oh, all right.
The Vice-Chair: Maybe you should attempt to write it down.
Mr Tilson: I can give you what has been scrawled out here, and hopefully it can be interpreted by you. I will read the motion, Mr Chair. Again, I think the purpose of making this motion now is that it becomes more and more apparent that the government has not considered this issue. We did make a motion in Ottawa, of course, which was defeated, that a tax expert be invited prior to the clause-by-clause discussions. It was conceded that a tax expert could be invited after the clause-by-clause discussion, which is a strange position to take. However, I honestly believe that this committee needs to receive this information from someone. The government obviously does not have --
The Vice-Chair: Excuse me, Mr Tilson. It would be helpful to me if you would put the motion and then we can discuss it.
Mr Tilson: All right. I will give it to you on a little piece of paper, Mr Chair, because that is all I have. Perhaps I could read it first, Mr Chair.
Mr Mahoney: It must be short, from the size of that.
Mr Tilson: Oh yes, it is.
The motion is that the committee invite a representative of the Ministry of Revenue to discuss the tax implications of any ruling by either the federal or provincial government which would have the effect of disallowing a claim for a loss due to there being no reasonable expectation of a profit on apartment buildings.
That is the motion and I think the government official has admitted that the information the government does have on that is very sketchy. I think at the very least, presumably, there is a representative from the Ministry of Revenue who could come tomorrow, on such short notice, to comment on this legislation and the tax implications, even from the provincial point of view, and I am sure that that official will have been discussing with his federal counterparts at the same time. The information that was given to this committee, as you recall, was that this seems to be a new development that has occurred from the federal Department of National Revenue, and in light of that I think the committee should receive this information before we get into the clause-by-clause discussions.
The Vice-Chair: Thank you, Mr Tilson. Is there further discussion of the motion?
Mr Tilson: I will say I am suggesting that that person, whoever it is, from the ministry come tomorrow morning, prior to the clause-by-clause discussion.
The Vice-Chair: Thank you, Mr Tilson. Mrs Poole?
Ms Poole: Mr Tilson just answered my question.
The Vice-Chair: Following on the discussion of Ottawa, maybe just for some clarification, I know that Mr Richmond of the research staff was looking into the Revenue Canada implications and was checking on that. Maybe it would be helpful to the committee if he could clarify that status.
Mr Richmond: With us being back in Toronto, I consulted with one of my colleagues, Ray McLellan, whom you may know from other committees, the standing committee on public accounts and the like. Ray has an economics background. I briefed him this morning and conveyed some stuff down to Toronto on Thursday or Friday. He is contacting senior officials with Revenue Canada in Ottawa to attempt to determine, as we heard in Ottawa from that woman, whether in fact Revenue Canada has recently changed its tax treatment policy vis-à-vis rental residential property to no longer allow as liberal a pass-through or write-off of losses. So we are attempting to get from high officials in Ottawa an answer to that question. As soon as we do, we will be conveying that information to the committee. We are also assembling a list of tax experts for the committee, for you to choose one of those officials, as I understand it, to come before the committee next week. As soon as we have this information, we will provide it through the Chair. That is really the status of those queries at the present time.
Mr Tilson: That information of course will be very useful. It is too bad it will not be available prior to the clause-by-clause. This information, however, I think could be. I think that it would be very simple for a member of the provincial Ministry of Revenue to appear before this committee and provide the comments as requested. I think as well it would be useful to have the minister present at the clause-by-clause discussions. He has indicated that, for personal reasons, he is unable to attend. In light of that, I think it would be all the more reason to enable a ministry official to come tomorrow morning.
Mr Mammoliti: I am just a little bit sceptical about voting on something and for nobody to show up. I mean, can somebody show up tomorrow morning or not?
Mr Tilson: You are the government.
Mr Mammoliti: Well, the staff are here. Maybe the staff can answer whether somebody is available or not. That is the question I would like to ask, will somebody be here? What is the point in voting if nobody is going to be here.
Ms Poole: He is talking about the Ministry of Revenue.
The Vice-Chair: Mr Mammoliti, in the absence of staff from the Ministry of Revenue, I do not think that undertaking can be given by anyone, but I would suggest that in all probability they would have someone --
Mr Mammoliti: That is an assumption.
The Vice-Chair: -- and if they cannot, I assume they will not be here.
Mr Mammoliti: How can we vote on it if we do not know for sure? How can I vote in favour of the motion if nobody has come forth and said they are going to be here?
The Vice-Chair: For clarification, Mr Mammoliti, the motion says "invite." That does not say they have to come.
Ms Poole: Just a matter of clarification: I was just speaking briefly to Mr Richmond, our researcher, and he mentioned that Ray McLellan is trying to reach Revenue Canada today, so we may have an answer quite shortly. I wondered whether perhaps the way we should leave it is to see, within the next 24 hours, what response we get from Revenue Canada, and if at that time it is deemed necessary that there be someone from the Ministry of Revenue to supplement, we could make that decision. So we could perhaps pass Mr Tilson's motion but without a time line on it.
The Vice-Chair: I think I heard a motion to table.
Mr Owens: I move to table Mr Tilson's motion.
The Vice-Chair: It is a motion to postpone.
Those in favour of Mr Owen's motion to postpone?
Opposed?
Motion agreed to.
Hon Mr Cooke: I just want to point out that Anne Beaumont, Colleen Parrish and Dana Richardson are the people who, along with others in the ministry, whether you agree with our green paper or not, have worked extremely hard at pulling this together and I just wanted to publicly express my appreciation of all the work from the ministry.
The Vice-Chair: The committee will adjourn until 2 o'clock, when we will hear from ministry officials. Before we go, I would comment that the subcommittee will be holding a short meeting, if Mr Abel, Mr Tilson and Mrs Poole could stay here for that brief meeting. See you at 2.
The committee recessed at 1143.
AFTERNOON SITTING
The committee resumed at 1408.
The Vice-Chair: Good afternoon. I see a quorum. This afternoon we have a number of faces familiar to this committee in front of us to lead us through a briefing on the green paper. I would ask the officials of the Ministry of Housing if they would introduce themselves just so Hansard knows who you are -- I think we do now -- and begin your presentation.
Ms Beaumont: I am Anne Beaumont. I am the assistant deputy minister of housing policy in the Ministry of Housing. On my right is Colleen Parrish, our director of housing policy; on my left Dana Richardson, who is manager of existing housing stock policy; and a face I think may not be familiar to you yet is Susan Taylor, who is the manager of rental housing protection administration.
The committee, as you indicated, has gotten to know some of us already during its deliberations on Bill 4, and during those discussions there have been many references to the form and the content of the anticipated tone of legislation on rent control. We are pleased to have the opportunity today to review with the committee the government's consultation paper. What we planned on doing is taking you through it fairly quickly. It is a rather complex paper. We wanted to explain the options addressed in it and allow plenty of time for discussion and questions from the committee.
Let me indicate right up front that if the committee wishes us to attend again at another time for further discussion and questioning, we would be quite happy to do that.
The Vice-Chair: Let me interrupt right now and ask the committee members if they would like to ask questions as we go through this presentation or wait till the end of a particular section. What are the wishes of the committee?
Mr Mammoliti: Better ask the opposition. They are the ones who ask all the questions.
Ms Poole: Originally I thought that the best way to deal with this would be to have questions at the end of each section. I am a little concerned, though, that we might not get through the entire document if we do that, so maybe it is best if we just jot down our questions as we go along and ask questions at the end. I am just thinking from the perspective of doing this in a timely fashion.
The Vice-Chair: Is that agreeable? Fine.
Ms Beaumont: Okay. When we made a presentation to the committee on Bill 4, we gave you at that time a history of rent review in this province, some statistical information and an explanation of some of the concepts behind rent regulation in Ontario. We do not plan on repeating that today. You have the material and additional material we have presented to you, but if you wanted more information we would be more than happy to provide it. You will find, as someone mentioned this morning, that the appendices to the green paper include a glossary and some of the key statistics.
The paper itself opens by placing rent control in a broader housing policy context and then indicates eight policy principles that guided the development of the options for rent control. The bulk of the paper addresses nine key issue areas and the background to each of those issues is established so that they can be more readily understood, because, as people have mentioned, it is quite a difficult concept.
The options that were considered are indicated, including some that are felt to have some difficulties, and these are explained in the paper. In many cases, the government's current thinking is indicated as a preferred approach for consultation purposes, but let me emphasize, as the minister did this morning, that this is completely subject to the results of the consultation process. It was felt it may be easier for people to respond to the paper if they had an indication of the current thinking in some areas. As rent regulation is a complex subject with interrelated features, what you may think on one issue may be dependent on how you believe another issue should be addressed. You will note that in some areas no preferred option is indicated, notably in the area of capital, perhaps the most controversial issue in rent regulation, as you have heard over the last weeks.
My three colleagues will lead you through the various issues, but what I wanted to do was simply to comment on the policy context, and the development of rent control legislation is only one component of the government's planned development of a comprehensive housing strategy, based on four fundamental principles referred to by the minister and outlined on page 1 of the handout. Everyone. I assume, has the handout material. Those four principles are:
1. Access to safe, secure and affordable housing suitable to people's needs is a basic human right. The rent control legislation fits into that concept where we have the comments on safety, thinking of things such as maintenance; security from eviction; and affordability, which is an obvious link.
2. Housing is fundamental to individual and family wellbeing and the quality of life in Ontario communities, with the concept that you cannot have a well-functioning society when people are ill-housed.
3. Housing contributes significantly to the prosperity and stability of Ontario's economy. You can think of and you have had reference made to the large number of jobs in construction, and also you may have heard employers talk of the difficulty of sustaining business in this province when housing costs are very high and incompatible with income levels in a community.
4. Responsibility for the provision of housing is a shared responsibility among all levels of government and among all sectors of Ontario's economy and society. That is a comment on it being both a public and a private responsibility.
These principles guide us in what housing issues we tackle first and in how we tackle them and they have led to the establishment of priorities for housing policy development. These again are listed on page 1: the better use of government land for housing, improving the quality of life in public housing and strategies to increase the supply of affordable housing, in addition to rent control legislation. Work is proceeding within the ministry on all of these fronts and all of these areas will be subject to broad public consultation as the papers are developed.
This then forms the broad context of philosophy and priority-setting.
In the development of options for a new rent control system, again we established a series of specific policy objectives or principles. These have been used in the following way: As policy options were considered for each of the nine issues, they were tested against these principles, so I wanted to emphasize to you the importance of the principles and that you may want to constantly refer back to them as you review the paper as you think about the options listed and others that will be suggested.
Unfortunately, this is not a simple litmus test, as a particular option may strongly support one principle and violate another. For example, there may be options that would lead to greater tenant participation that may at the same time lead to increased complexity or less speedy decision-making. So it is not a simple ticking off of, do things comply or do they not comply to the principles?
Let me just read through, for the sake of Hansard as much as anything, the principles listed on page 5:
1. Enhanced tenant protection. As we talk of tenant protection here, we are thinking of both physical protection, for example from poor maintenance, and also protection from high and unpredictable rent increases.
2. Greater tenant participation in decision-making about their home.
3. A decreased complexity, both in the legislation itself and in the administration of that legislation, and together with that, greater predictability for all parties about the levels and timing of increases.
4. The legislation should at the same time be separate from the Landlord and Tenant Act, which deals with much broader issues than residential tenancies, but also the two pieces of legislation should be compatible so as again to decrease confusion that may exist in people's minds.
5. The creation of an environment of regular maintenance and repair. This leads us perhaps into the area of greatest controversy. No one disputes the need for maintenance, no one disputes the need for repair, and you have had many discussions around this table on how to ensure that this happens and who pays for it.
6. Enhanced information -- more, better, clearer information to both tenants and landlords.
7. Fair, accessible and speedy decision-making. I am not going to make any comment on that; that speaks for itself.
8. The retention of the existing rental stock. There were comments made just this morning on the need for more affordable rental housing than we have, and one of the principles is not to lose the rental stock that exists.
The paper, as I indicated earlier, addresses nine major issue areas. These are listed on page 6: The scope of rent control coverage; the basis of the annual increase; increases above the guideline; capital expenditure; maintenance; rent reduction; rent information; the decision-making mechanisms and administrative structure; and rental housing protection.
What we now want to do is to take you through each of those issue areas to discuss the issues with you and to discuss the options that are being considered. Dana is going to start.
Ms Richardson: I am going to begin by discussing the first two issue areas, the scope of rent control and the annual rent increase guideline.
The scope of rent control is found in the larger consultation paper on pages 7 to 9. The issue is, what should be covered by a rent control system so that landlords, tenants and others will know if a particular building or unit is indeed covered by the rent control legislation.
There were three major options considered: first of all, whether to have a specific list of inclusions and exclusions from the legislation. This is a very similar approach as found in the current legislation, the Residential Rent Regulation Act, which covers virtually all residential rental buildings in the province of Ontario now.
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There are some specific kinds of accommodation which are excluded from that coverage. The kinds of exclusions are such things as seasonal vacation homes, motels, hotels, transient living accommodation, nursing homes and other licensed facilities and staff accommodation when that accommodation is attached to the employment situation. Many of these kinds of exceptions are also set out in the Landlord and Tenant Act legislation, but the two pieces of legislation do not have exactly the same wording, nor do they have exactly to the precise detail the same coverage, so the second major option was to more closely mirror the landlord and tenant legislation. This would support the principle of compatibility, which was one of our main objectives in the exercise.
However, if mirroring the Landlord and Tenant Act is the chosen option, there are some differences that would be different from what the current coverage is right now. The Landlord and Tenant Act currently exempts from landlord and tenant legislation accommodation where the owner shares a kitchen and bathroom with the occupant or tenant, and that kind of situation could currently be covered by rent regulation. However, it was thought that if somebody could be evicted without any notice, the protection of rent control as to the amount of rent that would be paid is actually quite meaningless. If they refused to pay, they could simply be evicted. So bringing those two pieces of legislation together would mean that there would be some change in the current legislation for rent control coverage.
Some of the other things that we looked at were whether there were certain classes of buildings that could be exempted from rent control coverage, such as areas where there were landlord and tenant agreements, if there were very high rents in a particular building or if there were high vacancy rates in a certain location. However, this would reduce the protection that was provided to tenants in other situations in other parts of the province, so that failed the test of one of the major principles of this paper, which is increased tenant protection.
Taking all of these options into account, the preferred approach, as set out in the paper, is to follow the general coverage of the Landlord and Tenant Act, but with two exceptions.
The first exception would be that the accommodation component of certain unlicensed care facilities would be covered by rent control legislation. An example of these kinds of facilities would be rest and retirement homes that are not licensed -- they are not nursing homes or homes for the aged -- but they provide certain special services for seniors or for people who need extra medical or personal care. Currently under the legislation those kinds of facilities are exempt from both rent control and landlord and tenant protection. There is a commission of inquiry right now under Dr Ernie Lightman, who has been appointed by the Minister of Citizenship to look into these kinds of unlicensed facilities. However, it also overlaps with our rent control discussion, and so we are bringing it forward now as another element of our paper and what we are suggesting is that the separation be made between what is paid for the accommodation component and what is paid for the care services component of that kind of accommodation and to prohibit tying those two together unless it is a special arrangement, such as certain programs under the Ministry of Community and Social Services where the government funding depends on the tying of those two services and the accommodation.
The second exception to the Landlord and Tenant Act coverage would be to exclude non-profit housing units financially supported by the federal and provincial governments. This obviously will be a matter of some discussion and public debate, but it would maintain consistency within a project if all units were treated exactly the same instead of having market units and rent-geared-to-income units being treated differently in the same building.
So the final package then would be to virtually cover all residential rental buildings in the province and the exceptions would be those that are presently covered by the Landlord and Tenant Act and the two exceptions that I have just mentioned.
A related issue is, how do people find out if a certain building is covered? The proposal is that an application be made available that a landlord, tenant or under a minister's own motion or some other mechanism like could determine if a specific rental unit or a specific building was covered by rent control and then at the same time, unlike under the current system, have a determination made of what the lawful rent is. Under the current system you actually have to make two separate applications in certain circumstances to find out that piece of information.
The next major issue area concerns the annual rent increase, and it is found in the long paper on pages 11 to 14. This concerns what we have been referring to throughout as the annual rent increase guideline. There are a number of options and combinations of options that you could look at in this situation.
The first option would be whether to have a fixed or flexible guideline. A fixed guideline would remain the same over a number of years and would not be changed. Indeed, this was the system that was in Ontario prior to 1 August 1985, where for certain periods of time there was a fixed guideline, initially 8%, then 6% and then 4%. A flexible guideline would be one that would change, and the proposal is that it would change in accordance with inflation or some similar kinds of index. This actually increases complexity because every year you have to find out what the guideline is, but it can more closely mirror cost changes whereas a fixed guideline over a period of time might be either too high or too low.
In the current system we have a flexible guideline based on several formulae. The building operating cost index looks at 13 different cost categories and measures the change in a three-year period for each of those categories. They look at such things as the consumer price index for heating for the heating costs, the consumer price index for home owners' insurance for insurance costs and then very specifically at the Ontario municipal tax statements as to what the municipal tax increases have been on average in the past three years. That is the basis, and then there is a second formula called the residential complex cost index, RCCI, which then takes two thirds of the building operating cost, recognizing that in most cases a typical landlord does not spend every single penny on just operating costs, but it represents about two thirds of an individual landlord's costs. The basis, however, is 2%. The guideline could not go below 2%. It could be the greater of 2% or 2% plus two thirds of the building operating cost index. The 2% amount was made up of two factors, 1% for profit and 1% for ongoing capital repairs.
A third kind of option would be to design a new rent control index that would be simpler than the two formulae that we have now and it would still reflect inflation and costs that are experienced in operating a building.
A fourth approach would be simply to use the consumer price index or a variation of it. However, the consumer price index is a basket of goods that includes food, clothing and other things that are not applicable to operating a building. One could look at just the housing component of the consumer price index, but since rents feed into that, as well as home owners' costs, it becomes somewhat of a circular argument as to basing the next rent review guideline on the old rent review amount.
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Finally, one could have a special kind of guideline for different kinds of buildings or in different regions. For instance, you could have a different guideline for buildings that are more than 25 years old and require certain capital repairs, or you could have a different guideline for small buildings as opposed to large buildings because large buildings have elevators -- mobile home parks do not have elevators and only have roads and hydro and snow removal kinds of costs -- or you could break it down into regions, that in northern Ontario the guideline is something and in southern Ontario it is something else. But of course, as soon as you introduce that it increases the level of complexity by trying to specifically design those kinds of guidelines.
On page 13 in the large paper, we have set out a chart which compares the consumer price index, certain variations on that, and what the actual guidelines were since 1985, and you could see what some of the impacts would have been if there had been a different basis for the guideline.
The preferred approach that is set out in the consultation paper is that there be a new rent control index, that it be a flexible guideline, that it be inflation-based, that it also provide for three-year averaging and that there be an overall cap so that the guideline could never exceed a certain amount, no matter how high inflation rose. We do not set out what that cap would be, as that is going to be a matter for discussion, but the concept of having a cap is inherent in this preferred approach.
By having this kind of flexible, inflation-based guideline, it will smooth out the high peaks and low peaks of inflation, and what it also does is, in periods of very high inflation, the guideline would somewhat lag behind inflation, when tenants are least able to afford to pay the high inflation amount, and in periods of low inflation it somewhat catches up, and that is the time when they could afford to pay more because their other costs are less. You can see that kind of impact in the chart when you compare from year to year what an averaging kind of system does.
A related issue to what the guideline should be is the timing of the annual rent increases. Right now, each unit's rent can increase on the anniversary date once in a 12-month period. So in a particular building there could be 12 different anniversary periods for each month of the year, or indeed there could be even more if they are not actually on the first of the month. New tenants often do not know when the last rent increase was taken, and this has led to situations of illegal rents being charged.
So we looked at a number of options in this respect. The first was to continue our current method, that there would be variations from unit to unit within a building, but we also then looked at a province-wide rent date. One could choose 1 June or 1 September as the date that all rents in the province increase. Now this certainly provides the greatest level of certainty -- excuse my grammar -- and it could be publicly advertised so that all landlords and all tenants would know that on that particular day that is when rents can increase.
There are, of course, practical difficulties for people who would be moving at the same time in the year, as in Quebec, and it does have administrative implications for landlords, tenants and for the regulators, but to put it in some perspective, if you know that it is a certain date you can plan ahead, just like for your taxes, that something will happen on that particular day. And of course there would be transition issues moving from the old system to the new system so that there would not be a double rent increase for any particular person.
There are several variations on this kind of approach. One would be to make it regional, and that would spread out the administrative workload across the province. It could also be on the basis of building size: Buildings with seven units and less have a certain date and larger buildings have a different date.
The preferred approach for consultation would be to set a common rent date for each building or for each residential complex so that at least all of the units in that one building would increase at the same time. This information would be available on the rent registry and could be made known to new tenants when they moved in. It provides greater certainty than the current system, although not as much certainty as the province-wide rent date.
I am now going to turn it over to Colleen Parrish for the next section.
Ms Parrish: Dana has essentially outlined to you what a rent control system might cover and given you some options in that area, and then she has outlined to you what basis you could have for the annual rent increase that was permitted. I am going to walk you through the next two sections of the discussion paper.
Essentially they deal in a very generic sense with the question as to whether there should be any increase above the annual increase that is permitted and the options for that annual increase that Dana has dealt with. We essentially deal with one section that deals with increases above the guideline and then we follow that by a discussion of capital, which, as everyone knows, is one of the major areas of interest to both landlords and tenants.
The discussion of increases above the guideline starts on page 17 of the discussion paper, and essentially the issue that we address is really whether there should be increases above the guideline, and if so for what factors, and we also discuss to what degree. That is, if we do allow certain factors to increase above the annual guideline, should they in turn be limited in any way or should they just be permitted to the extent that the cost is there?
In the course of addressing possible factors for increases above the guideline, we look at extraordinary operating cost increases, financial loss, economic loss and hardship relief, which are all concepts that exist within the RRRA now, interest rate changes, we look at various other kinds of possible changes, we look at equalization and we look at the issue of chronically depressed rents or below-market rents, which I believe was one of the issues that was raised in discussion this morning. On the issue of extraordinary operating costs, under the current system there are 13 items which are permitted that could possibly increase rents.
The system for increasing rents above the guideline for extraordinary operating costs is probably best discussed by a little bit of an example. In the guideline, the famous BOCI that we have described to you, BOCI will tell you what the basis of the annual rent increase component is. For example, BOCI will say, "We assume that municipal taxes will go up 5%." If your municipal taxes as a landlord go up 7.5%, then you have passed the extraordinary operating cost test because your actual increase is more than 50% greater than the amount recognized in BOCI. So that is the test.
There is a second test that is also used to recognize extraordinary operating cost increases, and that is if your increase for any one of these costs is more than 1% of your rent revenue.
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So we looked essentially at the current system as to what the current items are that are allowed in the way of extraordinary operating increases. We looked at those 13 items, which are set out on the bottom on page 18 of your discussion paper, and also looked at the extraordinary operating cost concept.
One of the things we noted in our pursuit of trying to simplify the system a little bit was that the 1% revenue test is used by practically nobody. In our attempt to look at the current system, we decided that there are times when you want to have complexity because the price of complexity is worth it. That is, you have a complex system but you get something that is better, better for landlords or tenants or more fair. On the other hand, there are a fair number of things in the RRRA that are quite complicated but nobody seems to use them either. In other words, you have a system that is very complicated but nobody seems to much use it.
The only item that it is likely that anybody would ever get the 1% revenue test for would be municipal taxes. In our quest to find simpler ways of dealing with some of these issues, we have actually gone through and sort of tested where things are going. So the first issue we looked at was in terms of extraordinary operating cost increases.
We looked at a number of options in this area, but in the end the preferred option for extraordinary operating cost increases is to recognize municipal taxes, hydro, water and heating. In other words, if a landlord has an increase in taxes or utilities above the annual increase, we would suggest as a preferred approach that that be allowed to be passed through in the form of increased rent. We are suggesting that the 1% revenue rule, however, be deleted since it does not really seem to have any significant impact for the added complexity to the system.
The second issue that we looked at, on page 20 of your consultation paper, was the issue of consultants' and other fees or costs. This is the sort of miscellaneous category of things that have been passed through in the form of rent increases in the past. We looked at things such as the rent review consultants' fees, mortgage renewal fees, mortgage insurance fees, appraisal fees, excess vacancy loss and so on and so forth.
By and large, these have had a relatively small impact on rents. They have not been a significant impact on rent, but they probably are again an example of an increase in complexity in the system with relatively little positive impact one way or another.
One issue that I would identify particularly has been the issue of rent review consultants' fees. Landlords are able to pass through a part of the rent review consultants' fees, whereas of course tenants have to defend their case essentially on their own money. And although the amounts of money are not large, I guess the symbol is important in terms of fairness on both sides. Both sides have to finance their case one way or another.
So the preferred option for this reason, for reasons of simplicity and also for reasons of fairness, has not been to permit consultants' or other fees to be passed through in the form of increased rent for tenants and that is put forward as the option for discussion.
The next series of matters which are discussed starting on page 20 are financial loss, economic loss and hardship relief These are somewhat technical items that are recognized in the current RRRA. During the course of your travels around the province, you will have heard quite a few landlords coming forward with issues on financial loss. Essentially, economic loss is a cost which only relates to post-1976 buildings -- is that right? -- post-1975 buildings, buildings built after 1976 and onward. I always end up with a hole where nothing happens to the 1976 buildings at all. It is post-1975 buildings, starting in 1976. Those buildings, which of course were not captured by the original rent review legislation, were given a somewhat preferred position in the RRRA in terms of the amounts of money that they could pass through in the form of rent increases.
Financial loss is a sum of money that relates essentially to the purchase of the building, although it may also be generated by other costs that a landlord may be incurring. For example, it is possible for a landlord to be experiencing a loss simply because the costs of actually operating the building exceed the amount of revenue that the landlord receives.
The financial loss, economic loss and hardship relief, which is essentially an amount of money for pre-1976 buildings that have relatively low revenues or relatively low profits, is certainly one of the more contentious areas and one of the most complex areas in the bill. Large parts of the RRRA essentially deal with the issue of financial loss, economic loss and hardship relief. The issue of whether or not the capital investment of the landlord should be financed by moneys permitted in excess of the annual rent increase is indeed a very contentious issue between landlords and tenants. Tenants in essence take the position that moneys are available within the rents for these costs and that additional sums above the guideline should not be provided for the investment of the landlord. On the other hand, landlords feel that if such moneys are not permitted from rent increases above the guideline, it will be difficult for landlords to sell their properties and difficult for them to pay their ongoing costs.
On balance, the preferred option which is set out after a number of options are looked at, including whether or not we should recognize just financial loss or only certain kinds of financial loss such as financial loss for operating costs, is that there be no recognition of financial loss, economic loss or hardship relief.
I should note that next to capital costs, financial loss and economic loss are probably the largest single components of increases above the guideline; that is, next to capital they have the biggest financial impact.
Interest rate changes: Interest rate changes essentially are simply the amounts of money related to the fact that the mortgage rate or the loan rate may change. So you have a situation where you may have a mortgage on the property at 12%, it may go up to 14% and that difference between 12% and 14% is called the interest rate change. Again, I should note that interest rate changes are in fact recognized under Bill 4, with some limitations. On the other hand, there is no doubt that controlling interest rate changes is, again, an area of extreme complexity. The reason is that it does not take a great deal of ingenuity to think of ways that you can manipulate the combination of interest rate, capital amounts paid and all kinds of other transactions.
As a result, controlling interest rate changes to ensure that only a genuine interest rate change is passed through, and not something else, has in the past proved to be one of the more difficult areas of rent regulation. There is quite a bit of complexity in this area as well.
On balance, a number of options are considered on interest rate changes, such as limiting interest rate changes to ensure that there is no improper abuse and so on. Those options are outlined on page 22. On balance, the preferred option put forward on interest rate changes is not to recognize these in the form of rent increases.
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The next issue, which is discussed on page 22, is equalization. In theory, what happens on equalization is that you have two tenants in a building and let's suppose they both have a two-bedroom apartment. They are essentially the same, there is nothing really different about them. They might be on different floors, that is it. Over time, for a number of reasons it may very well be that the rent for tenant A's unit will be $600 and tenant B's rent will be $700 and essentially they have the same unit.
What the equalization system allows to happen now is the tenant says: "Well, you know, why should I pay $700 for this unit that somebody else is only paying $600 for? I would like to have my rent equalized." The landlord can respond by saying: "Well, sure, but we can't just have equalization downwards because then I as the landlord will end up with less money. Let's have equalization upwards as well." The idea of equalization is tenant A, who is paying $700, his rent comes down a little bit, and tenant B, who is paying $600, his comes up, and over time, because it is sort of phased in to avoid a big change in any one year, they eventually pay $650.
In theory, for the landlord this is completely revenue-neutral. The landlord should make no money on this, nor lose any money on this. The problem with that is that it assumes that there is perfect information, which is that in order to make equalization work you have to actually know what all the legal rents are. In some cases you do know what the legal rents are because you have good information and it has been filed or there has been a rent order. In other cases you do not know. The allegation that is often made is that equalization allows people to equalize up using as a base somewhere in the system an illegally taken rent which has occurred through a vacancy or perhaps because there was an unsophisticated tenant at one time. In a perfect world where you have perfect information, it should be revenue-neutral. Where there is uncertainty around information, that may not be happening.
The other thing about equalization is that it does create some tension and problems between tenants. It is very difficult to know what the pattern of equalization is. Certainly when you get complaints about equalization the most common kind of complaint you get is a new, young tenant moves in and complains that he is not paying the same as elderly Mrs Smith who has been in the building for a long time and so on. So the allegation made about equalization is that it tends to favour the newer tenants or perhaps the more sophisticated tenant who has the ability to figure out that there is this equalization stuff as opposed to the long-term or less sophisticated tenant. You could equally say that you could imagine a scenario in which the person who is really being prejudiced was perhaps a new immigrant or a young single mom, or whatever, moving into the complex.
However, equalization has certainly created a lot of bad feeling. In theory, it is completely revenue-neutral if you have perfect information. In practice, it has had certain problems and it has also created some considerable tensions between tenants over this issue. So on balance, although I think that equalization probably has some merits, and we put forward the merits it may have, this is not identified as one of the preferred options.
The last issue that is discussed is the issue of chronically depressed rents, which is discussed on page 23. The concept of chronically depressed rent was one that was built into the RRRA and was never proclaimed. One of the main reasons it was never proclaimed is that it is extremely difficult to implement and it is very difficult to know in fact what is below the market. If of course you raise all of the below-market rents, at some level you raise what the market is.
I guess there was an attempt at one stage to try to deal with below-market rents. That concept, although it exists, was never actually implemented, and as a result of that experience, catch-up for below-market rents is not identified as a preferred option. It may very well be that during the course of consultation we will come up with, or people will come up with, a better way of dealing with the problem than had been identified in the past. This seemed to be the best shot and it did not seem to be that workable, but perhaps during the course of consultation a better idea will come forward as to how this could be made more workable.
In terms of increases above the guideline, I would just like to summarize a preferred approach that is identified for consultation. It is also outlined, I should say, on page 24 of your discussion paper. Essentially, the number of costs above the guideline that are identified as preferred for the purposes of discussion are somewhat limited. They are limited to municipal taxes, hydro, water and heating. One of the reasons that this is identified is that, as you may recall in Dana's earlier discussion, there was some discussion about whether or not it would be appropriate to have a regional rent guideline. There are quite a few people who favour that because certainly the conditions in northern Ontario are quite different in terms of heating and so on and the conditions in southern Ontario are quite different in terms of taxes, for instance, and in terms of things like water costs.
However, having a regional guideline really creates a lot of complexity for relatively little gain and it was thought that by having an exception that just dealt with municipal taxes, water, hydro and heating, which tend to be more regionally sensitive than other factors, this would be a way of dealing with the regional issue. So if it is true that heating costs in northern Ontario go up more than the percentage recognized in the guideline for the whole province, you can do with that. It is a way of dealing with regional sensitivity without having the complexity of a whole regional system -- the guideline for northern, southern, eastern, etc.
The other concept which is discussed in this area is whether, if you permit any increases above the guideline for whatever factor, any of these factors -- interest rate changes, equalization, financial loss, or whatever -- there should be an overall cap. There are two ways of looking at the overall cap.
One is that you would just pick an overall cap number, and what that should be, again, would be a source of discussion during the consultation period.
Another way, which would probably create even more certainty, would be to say that the cap should be the same as any overall cap in the annual increase, so that in essence what you would have is you would have an annual increase and then you would have an overall control, which would be your ultimate cap, and then you would have flexibility for whatever in between. The amount that you would have would depend, in part, on how high your annual increase was. So in periods of high inflation you might not have that much room, in periods of low inflation you have a little bit more room, but you create some overall certainty. You allow flexibility above the guideline but you create an overall control and an overall cap.
So there are two kinds of caps you could have, one which is the same for everything and one which perhaps differs. There are a number of reasons to favour one approach as opposed to another. One criterion I think we would suggest would be simplicity.
The next area to discuss is capital expenditures. As you know, this is not an area where there are preferred options, so what I would like to do is to take you through the paper, starting on pages 25 and 26, which are essentially the overview section. We have in the appendix as well some statistical information, and I have also given you some statistical information in the past.
As you know, and as the minister mentioned this morning, Ontario's rental stock is aging. The RRRA system did allow the costs of repairs, renovations, replacements, new equipment and facilities to be passed through. There were no restrictions on the amount of capital expenditures that could be passed through in any one year.
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There was a tendency for capital expenditures to be sort of saved up and sort of bunched up and moved through the system together, and one of the reasons for that was that there was an economic advantage to doing that. When you came to rent review, that 1% that was in the base of your rent -- remember that Dana described that there was this system that had 2% plus two thirds of BOCI, which was this building index. You had 1% in your base for capital improvements. If you come to rent control, that 1% is counted as part of your overall capital, so if you come to rent review year after year after year, you keep losing your 1%. There is a real incentive for people to save them up and come together at once, because you only lose that 1% once, so there actually were some reasons for why that was occurring in the past.
Over time, as you all know from the press and from your own experience in your constituency, some capital work was identified by tenants as unnecessary or unwanted. There was no distinction in the RRRA as to the kind. In other words, preventing the garage from falling down was treated essentially the same as putting in microwaves. In that sense the system did not make those kinds of distinctions.
There is no doubt that there is a need for capital expenditure work to maintain adequate building standards in Ontario and extend the life of Ontario's existing rental stock. The great difficulty will be to find a method which is acceptable and which encourages the necessary work to be done in a timely and efficient manner, provides adequate funds to get the work done and provides enough flexibility that work of an aesthetic or cosmetic nature can be done without passing through large increases, because the reality of this is that some people want things done to their buildings which may not be necessary but may be something that individuals would like to have.
The discussion on capital expenditure addresses several types of issues. The first issue is funding the capital expenditure work; that is, what kind of system you could have for capital expenditures. The second is what limitations you might have on capital expenditure. So you say, "Okay, here is a possible system," and then the question is: "Okay, you've picked a system. Do you want to have some limitations on what you would allow to occur within that system?" The last issue which is addressed is the issue of transition; that is, what should we do about capital repairs that may have been done prior to the implementation of any new rent control system?
The first issue is essentially what kind of capital expenditure system you could have. There are a number of options put out and there is also the possibility of combining certain options if there is a desire to; for example, have one option for a period of time and another option later on, or some other combination of options.
The first system we discuss is a cost-pass-through into rents, and that is a system which is somewhat similar to the system we have now but could be implemented with appropriate limitations to deal with the problems that have been identified to date. Essentially, the way a cost-pass-through system works is that landlords come forward with costs associated with capital repairs and those costs could be passed through to tenants in the form of increased rents. The cost-pass-through system does provide sufficient funding to ensure that individual buildings can provide enough funding. Obviously it depends on how much is allowed to be passed through. There is a way, therefore, of bringing the landlord's application to some sort of objective source that will then validate whether or not it is an appropriate case. You can sort of marry the cost-pass-through to a number of restrictions, such as capping or tenant approval or desire to have only necessary work dealt with and so on.
However, cost-pass-through systems can still result in large rent increases that tenants find unacceptable. Without certain other kinds of limitations, cost-pass-through systems may not ensure that landlords are doing the kind of work that is actually needed to maintain the housing stock of Ontario. And there is no doubt that once you institute any sort of system that allows any increase above the guideline, you have to have an administrative system to deal with it. You have to have someone who will make a decision about capital, so you have to have an administration system to deal with that.
Another approach could be an approach such as the approach taken in the province of Quebec, and at a conceptual level what Quebec does is that it treats any expenditure on a building as if it were an investment. In other words, it says: "I'm a landlord. I can take my $10,000 and I can put it in the trust company and receive a return on that investment of 10%, or whatever I am getting, or I can take it and I can make a capital repair on my building, replacing the roof." Essentially the Quebec system says, "Let us treat that as if it were a capital investment on which this individual will receive a rate of return." What Quebec does is it sets a factor which it calls a rate of return. Landlords get this and that is what is passed through in the form of rent increase.
Another approach that could be taken to dealing with providing sufficient or providing some funds for capital repairs to buildings is the increased guideline amount. This system differs from the cost-pass-through system in that landlords would not have to apply for any more money; they would simply get it. All landlords would get this amount of money, not just landlords who were actually doing repairs, so in a way what would have to happen is that landlords would have to do their own self-policing. They would be getting more money in their guideline every year and they would have to make their own expenditures and plan for those expenditures over time. This is obviously a fairly simple system in the sense that you could simply add to the annual guideline, whatever it was, a certain amount of money for capital. That could be varied. For example, you could allow more for older buildings or more for -- you know, we had discussion before about buildings with elevators and so on and so forth. You could have some variations of that type.
The problem with that is that you would probably have to have significantly more enforcement because landlords would receive the money whether or not they in fact did anything with it. The other thing that may be considered problematic is that everybody would pay this. Currently 17% of all buildings come to rent review, and under a system of putting an increased amount in the guideline 100% of all the tenants would get this increase instead of just those people who were having increases related to work actually done in their building. Although it is a much simpler system, it has some disadvantages from that viewpoint. However, it is simpler to administer and you certainly do not need a complicated administrative structure to have that occur, at least not on the approval side; it may need more strength on the maintenance side.
The next two options we talk about are reserve funds, and there are two kinds of potential reserve funds, building-specific and province-wide. A reserve fund is a pool of money which is set aside and accumulated for the purposes of making capital repairs. For example, those of you who are familiar with the Condominium Act will know that condominiums are required to put aside a sinking fund and that thereafter members of the condominium corporation have to contribute a certain amount of their ongoing operating costs to their reserve fund. The idea is that this fund then pays for major repairs in their building.
The building-specific reserve funds could be funded through regular contributions from rent, there could be mechanisms for tenant participation and they could be used to repair the buildings. The problem with building-specific repair funds, of course, is that, unlike with condominiums, we are not starting with a new building, we are starting with many buildings which are 20, 30 and 40 years old. It may take some time for there to be enough money in that reserve fund for that building to pay for the repairs of that building; that is, it may take quite a while for the pool to be accumulated to help that particular building out.
Province-wide reserve funds would be a pool where all of the money that would go to a reserve fund would be put into a province-wide pool and then allocated to buildings as their need occurs. So over time every building would eventually come in, but it would be based on times. The question, of course, on a province-wide reserve fund would really be the question of cross-subsidy and fairness; that is, would landlords who have already maintained their buildings very well be putting money into the reserve fund which they would not get back; and their tenants, who are paying the rents, would they be putting money in and not getting the money back? You may have a system where certain tenants are subsidizing others through their rents, or certain landlords through their rents.
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In addition, you may have to have provincial funds because the amount of money would be fairly significant in the sense that if we had a 1% levy for the reserve fund province-wide, that would be $80 million and that would not cover even the current level of repairs that have been passed through in the rent control system. There is always a concern about the expenditure of public moneys, as to whether that is an appropriate course.
Mr Cordiano: What is the current level of expenditure?
Ms Parrish: The highest amount of expenditure passed through in any one year was $122 million, which I believe was last year. That is the highest amount of money that has been passed through in any given year, $122 million.
The last option we talk about in a generic sense is government programs. There is a low-rise rehabilitation program now in Ontario that members may be familiar with. Approximately 19,000 units have been committed under that program. There is a possibility of combining government programs with other cost-pass-through systems, with various reserve funds and so on. The issue is really the demands on government funds for many worthwhile factors.
Having looked at what are the generic options as to how you could do capital funding, there is also a series of issues, starting on page 32, that really relates to what kind of limitations. If you decided that you were going to permit rent increases to occur above the statutory guideline for capital repairs, and you had chosen one of these previous options as your preferred mechanism for getting the money in the system out of the system for capital repairs, then the issue is, do you allow anything or do you want to have some sort of limitation. There are a number of limitations that are discussed, and again, some of these could be combined.
The first issue is "necessary"; that is, whether or not there should be some distinction made between necessary capital improvements and other items that are of a luxury nature or are not necessary. It is very difficult to know what should be necessary. You could take a fairly basic approach, which is that if you have got a work order against your place or if you do not meet the basic minimum provincial standard, then that is necessary and nothing else is necessary. The problem with that is it does not encourage a very preventive approach, and in fact, because municipal standards vary quite a bit over the province, you may have a situation that this is necessary in Toronto but it is not necessary in Kapuskasing and so on. Therefore, you may have different standards of protection for tenants across the province.
Another thing that you could do about necessary would be to say that if something is being upgraded as opposed to worn out and replaced, that could be considered to be unnecessary or luxury or discretionary. I hate to use the word "luxury" in the sense that I think probably "discretionary" is a better way of putting it; it may or may not be luxury at some standard, but it certainly is discretionary in the sense that the building will not fall down without it.
There really are a lot of issues here, and I think we are very much looking forward to the input we get from the public as to what it considers to be necessary, whether a minimum standard is too low or whether there should be some other kind of standard related to maintaining the structural integrity and health of the building.
Even with a "necessary" criterion, it is still possible to have fairly significant rent increases occurring in a particular building, so the distinction between necessary and other kinds of capital does not necessarily -- excuse the pun -- does not ensure that you will not have large rent increases. You may still have large rent increases. Again, we have one of these problems where we have competing policy principles here related to capital. We want to have things that are reasonably affordable, but we also have to look at what is actually necessary.
Another approach that could be taken in terms of limitation is tenant approval. There are a number of approaches that could be taken to tenant approval. Some of those issues around tenant approval may be dependent on where the actual repair is occurring. In terms of tenant approval, one of the things we look at is the importance of having some information to tenants about expenditures. We could have a system in which tenants -- some proportion; either a majority of tenants, two thirds, 75% or all tenants -- could approve every single repair. That could be one approach.
Another approach would be to say that tenants should approve anything that is discretionary; that is, if it is necessary it should go through one system, but if it is truly discretionary -- that is, it is a new recreation centre or whatever -- it should be subject to tenant approval.
Another potential criterion for tenant approval could be the issue of where it is located; that is, if the repair is en suite, in the tenant's actual unit, there could be a requirement of a tenant approval which might not be appropriate if the approval is the elevator. So you might distinguish as to where the repair was taking place, taking the view that your unit is more likely to be seen as your home than the common area.
There are a number of possibilities in the area of tenant participation and approval, a sort of spectrum from complete involvement of the tenant through depending on the site and the nature of the repair.
Another limitation that could be taken in combination with some of the others as well is the issue of overall capping. The way to explain overall capping is probably to refer you to a chart on page 35. You may recall that before I talked a little bit about the possibility of doing two kinds of caps. One of the caps that you could look at would be simply a separate cap for different kinds of expenditures. You could say we will have an X% cap for extraordinary operating costs, an X% cap for capital and an X% cap for the overall inflationary statutory guideline; or you could pick just one cap and just always have that cap. It is a simpler message, although it does not reflect the complexity of the different kinds of costs, but you could have an overall cap. You could have this rent control guideline, which would vary with inflation, compressed, and then you could have some flexibility in the system to this overall rent control cap; or you could have a separate cap for each kind of expenditure, so you could have a series of caps.
Another approach could be to simply separate and remove any allowance for capital expenditures. One of the points that was made to you in the course of your hearings on Bill 4 was that the capital expenditure increase goes into the base rent and then over the years it is compounded. The landlord receives a certain amount of rent increase to replace the roof, that goes into the base and then, as the annual increase comes up, 5%, it is compounded at 5%, and then the year after that it is another and it is another and it is another. So people are saying, "Well, it's one thing for them to get this increase; it's another thing for them to get the compounding and to get it for ever." Because 10 years later perhaps this whole roof is paid off and the tenants are still paying not only the base amount but the percentage increase. So another limitation could very well be to take that out when it has been amortized over the useful life of the object to prevent the compounding effect.
The last issue in the area of capital -- and I have not been moving along quite as quickly as I had hoped, so I will try to finish this off -- is the issue of transition, which is that if during the course of consultation an acceptable approach on capital expenditures is identified, there could be consideration given as to whether the identified solution should apply to any capital work which was commenced or completed prior to the implementation of new rent control legislation.
In terms of transition, we look at a number of approaches to capital work and we look at a number of potential dates that any solution on capital could apply to any work that was done of a capital nature, providing it had not been compensated in the form of previous rent increases, or it could apply only to work that was done after the passage of the new rent control act or after the introduction of the new rent control act. There are a number of what I guess I would call starting periods that you could choose in a spectrum of starting periods as to whether or not the new capital expenditure rules should apply to any capital repairs completed or commenced prior to any new law being in place. That is essentially what the transition options are about.
Those two areas are obviously closely connected with the issue of maintenance, which is a critical tenant issue, and I am going to turn it back to my colleague Dana Richardson, who is going to walk you through the next two sections, on maintenance and rent reduction.
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Mr Turnbull: Can I have a couple of questions, Mr Chairman?
The Acting Chair (Mr Abel): I think we agreed that we would hold the questions until the end.
Mr Turnbull: No, what we said was section by section. Was that not what you suggested, Dianne?
Ms Poole: Actually, I said that was my preferred option, speaking of preferred options. I did not think they would get through the documents if we did not wait until the end. I think we are only halfway through them.
Mr Turnbull: I think we have a serious problem if you allow too much to go before us and we cannot get questions in. I think it is very relevant to what we --
The Acting Chair: Is everybody in agreement that these questions -- okay, go ahead, Mr Turnbull.
Ms Poole: So are you going to allow questions on everything that has gone on so far then?
Mr Turnbull: I understood after each section.
The Acting Chair: Okay, let's get a handle on this.
Mr Mahoney: Good idea.
The Acting Chair: We did have an agreement, I thought, that we would put off all the questions until the end. Now, is it the wish of the committee to stick to that or are we going to allow them section by section?
Ms M. Ward: I think it might be a good idea to have a break at this point, to have a question period. It may be less for people to assimilate. I do not really care.
Ms Poole: I have certainly got lots of questions.
Mr Cordiano: It might confuse the experts if we ask them questions.
Mr Mahoney: No offence to the presenters, they are doing a marvellous job, but if they are going to go until 5 o'clock presenting maybe we should go get a pillow and a blanket. I do not mean that as criticism; it is just that it is very difficult to sit and it might be more constructive for us to be participating as we go along.
Ms Harrington: I would agree.
Ms Poole: The trouble is Mahoney's attention span is only 10 minutes.
Mr Mahoney: That is right; you lost me about an hour ago.
Ms Parrish: It has always been my ambition to get a job as a sleeping pill, actually.
The Acting Chair: In hopes of keeping Mr Mahoney awake, and the others, is that the wish of the committee? We will allow some questions now, at the end of the section? Okay.
Mr Turnbull: A few questions: First of all, with respect to the discussions, the disallowing of financial loss and disallowing of interest rate changes, I am quite perplexed about that.
Maybe I should back up. We have heard a lot of testimony from landlords regarding the poor return on apartment buildings, and in fact in some cases the losses, and the knee-jerk reaction that we have heard from my colleagues on the opposite side there is, "Yes, but there's capital appreciation."
Could you explain to me how you could have capital appreciation if you do not allow financial losses? It seems to me that if you have got a loss on a building and you do not allow the phase-in of the financial loss clause, then what you continue to have is a loss on that building ad infinitum and there can therefore be no capital appreciation. I have got a series of questions, but that is the first question, as to how you arrived at the thought that the preferred route would be not to allow it.
Ms Parrish: It is my understanding that the basis of the preferred option was that the existence of financial loss in essence ensures that there will be a cycle of selling rental properties for more than the rental revenue and that as long as financial loss is permitted there will continue to be a tendency to purchase the buildings for more than the revenue will support and then pass that on in the form of increased rents.
It is really a question as to what behaviour you want to encourage in future. As long as financial loss is permitted, my understanding of the objection to it is that there will continue to be a system in which that becomes factored into the price of rental properties at which they are sold and it is true that the individuals who sell may make a profit and the next individuals who purchase will pay for that profit and then in turn will pass that on to the tenants. My understanding is that that is not an approach that the government wishes to perpetuate and that is my understanding of the policy rationale.
Mr Turnbull: Okay, next question. On interest rate changes you have suggested that there could be some sort of manipulation of interest rates so that some extra profit could be made. Is it not reasonable to put in just a simple mechanism whereby you police that it is at market rates, rather than just disallowing it holus-bolus?
Ms Parrish: There are a lot of mechanisms that you can put in place to try to deal with various abuses and there are quite a few of them in place or proposed in Bill 4. Some that are already in the RRRA are proposed in Bill 4.
I guess this is a real sort of test around simplicity. You can deal with abuses in the system, but they involve significant complexity, significant policing.
As well, once you get into interest rate issues, you also get into the sort of quid pro quo, which is, are you also going to have a system in which, if interest rates decline, you are going to go around and take them out of the rent base so that there is sort of equal treatment; that is, landlords, when their mortgages go up they get that and when it goes down that gets taken out.
I think there are ways of dealing with these potential abuses, but they certainly add significant complexity. When you have to factor in the sort of quid pro quo and the administrative burden associated with it, the issue really is, is it appropriate to do so?
Mr Turnbull: Have you got any data in the ministry to indicate that there was any abuse of interest rate adjustments?
Ms Parrish: It is very difficult to get data on whether or not there has been manipulation. Certainly the use of vendor takeback mortgages is quite widespread in this area, but there may be other reasons for that.
Mr Turnbull: It seems to me that vendor takeback mortgages are usually less than market rates, not more than.
Ms Parrish: Usually they are less, but there is also an issue as to whether there has been a deferral of the profit into capital, which is taxed in a more favourable way, as opposed to into interest, which is taxed in a less favourable way. So there is often the issue as to whether the whole transaction has been structured in a way which is beneficial for the principals to the transaction but may increase the costs to the tenants, which is really the whole issue there. There is no doubt that there are mechanisms for dealing with this, but they involve significant complexity and policing.
As to whether we have any data on this issue, that is something I will have to go back and check. I am not immediately familiar with this, although there may be some in the Royal LePage study.
Mr Turnbull: I am particularly curious about -- I understand that the problem you face is, on the one hand you are the experts who prepare these documents, but the options are chosen by your political masters. I understand that.
Of the areas that are recommended in this document where some extra costs can be passed through to the tenant, one of the significant areas is real estate taxes, which is one of the areas that not only is the government best able to control but in fact fought the last election on the basis that it was going to take a significant portion of the cost of education out of property taxes. Here we have got the ability to pass through property taxes, and yet the other areas which the government cannot control, it is proposing that the landlord just sit with those. Can you enlighten me as to what the philosophy on that was?
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Ms Beaumont: If I could perhaps comment on that, the minister indicated this morning in response to a question that what we were dealing with at this time was the proposed basis for rent control legislation and not the government's response to a whole series of issues. He was talking about combating poverty at the time. Similarly, we are here dealing with the basis for rent regulation and not the government's response to a restructuring of the tax system. There are other mechanisms in place that are examining the tax system, such as the Fair Tax Commission.
Mr Turnbull: I do not think that exactly answers my question, because I am saying you are specifically allowing, you have segmented out various items that you can ask for increases under this proposed legislation, under the recommendations, and there are other areas where you say, no, you do not recommend this. But one of the items that you do recommend to pass through is the area that the government can most directly affect, and the areas that it cannot affect, it says, "No, let's let the landlord eat it." There is an inconsistency in that, to me, and I cannot understand what the thinking could be.
Ms Beaumont: The provincial government can directly affect real property taxes really only through a restructuring of its municipal grant system or a restructuring of the property tax system, and neither of those are being addressed in this paper. The current system allows municipalities to set individual tax rates, and those differ and that is why they are addressed in the paper.
Mr Turnbull: Okay, I will address that to the minister then.
The Acting Chair: Can I interrupt here for just a minute, please?
Mr Turnbull: Yes.
The Acting Chair: We have a 70-page document with two appendices and we are only on page 37. Ms Poole and Mr Mahoney have some questions too.
Mr Turnbull: Let me just ask one more quick question then.
The Acting Chair: I have allowed six minutes so far. I want to be fair. If I gave them six, I think maybe we had better get back to the paper.
Mr Turnbull: Can I ask just one quick question? In preparing this document have you consulted with the Ministry of Energy about any proposals it may have for mandating that landlords would have to put in energy conservation equipment or windows or so forth?
Ms Beaumont: The ministry has had a lot of discussion with the Ministry of Energy, both because of its interest in this document and because of the ministry's own role as a landlord. So there is a lot of discussion going on between the two ministries in those areas.
Ms Poole: I will try to refer to either the green paper or your document as we go along. The first question I have is on page 1 of the paper you handed out today, "Ontario's Directions in Housing Policy." You have outlined three points for the overall housing strategy and you have outlined four points as fundamental principles. Are any of those strategies or those fundamental principles changes from the previous government's strategies or principles or is this just ongoing?
Ms Beaumont: I think if we look first of all at the principles, this is, to my knowledge, the first time a government has publicly pronounced on some principles underlying its policy development in the housing area.
As we look at the specific ones, the whole question of housing, the principle of housing as a right, is something that this government has talked about a considerable amount. I am not aware of discussions along that vein from previous governments.
The contribution housing can make to quality of life and the social, in essence that is talking about the social and community value of housing, perhaps not in these terms, but the principle has certainly been discussed previously.
The contribution of housing to the prosperity and stability of Ontario's economy again started to be talked about more commonly, I think, over the last couple of years, with concerns about the impact of rising prices, etc, prices of housing, value of housing, cost of housing.
The shared responsibility for the provision of housing is a principle that has been carried forward into practice, but I am not aware of it being articulated as a principle.
Ms Poole: Would that latter one be to replace the fact that there should be a partnership between the private sector and government?
Ms Beaumont: I think the wording of "shared responsibility" implies both partnerships -- that is, joint responsibility -- and that certain things are individual responsibilities of different levels of government and sectors.
You have asked as well, Ms Poole, on the components of housing policy and the ones that are being established there as priorities at this point in time.
There have been past government policies in many of these areas. I think what the focus is on now though is the nature of those policies, the way in which they are being addressed.
For example, on government land, there is an existing policy brought in by the last government, Housing First on government land. What is being re-examined at this point is how government land should be used for housing. Presumably the outcome of that deliberation could be a confirmation of an existing policy, could be a changed policy.
Ms Poole: Yes.
Ms Beaumont: As you deal with housing policy there are only certain things you start from, which is the land base, the structure, the cost, etc. It is just new ways of looking at those.
Ms Poole: I am going to go directly to the green paper because the time is short and I think the Chair is not going to allow too much latitude because we do not have much time.
Page 8: Here you are talking about enhancing the compatibility of rent control with the Landlord and Tenant Act while maintaining the separation of the two statutes. You have made a statement here which somewhat puzzles me, because you have said, "A number of approaches were considered for consultation but did not meet this policy objective." Then you list a number of areas which I assume were excluded from being examined in the scope of whether you wanted to change them as far as -- let me try that sentence again. There are a number of items that are being mentioned that are currently not being looked at in this green paper as far as removing them from the scope of rent control is concerned: for instance, agreements by landlord and tenant; whether the rent was high, for example $2,000 a month; high vacancy rates; and whether the landlord made available a certain number of rent-geared-to-income units.
I am taking that there is an unwillingness to look at these options because it violates your principle that the Landlord and Tenant Act and the rent control policies have to be compatible. Am I taking the right thing out of this, that you do not want to entertain discussion about whether we should be saying, if a landlord and tenant have an agreement per the Quebec model, then it is not going to be removed from the scope of rent control?
Ms Beaumont: No, those decisions were not based purely on compatibility with the Landlord and Tenant Act. Those areas would not be compatible with the Landlord and Tenant Act, but there were other factors as well.
Ms Poole: That is what I wondered if you could discuss, because one of our presentations, I believe the Stormont Dundas Glengarry Legal Clinic, highly touted the Quebec model where they do allow agreements by landlord and tenant, and I got the impression from this that you have automatically eliminated that for reasons that I am at a loss to understand. Perhaps you could elaborate on why these various things are not even going to be considered as to whether they should be removed from the scope of rent control.
Ms Parrish: I would start out by saying that anything that is identified as an option is open for discussion. If it is there, then obviously it is a real option, and we try to put forward options that we think are real. The government has identified preferred options in order to be up front as to its viewpoint, but if it is there, then it is a real option.
The argument made about a number of these things is that not only do they create the confusion around the Landlord and Tenant Act that people find the system difficult, but these all have advantages and disadvantages.
One of the comments that is often made about Quebec is that it is easier to have a system of agreements between landlords and tenants because of historically higher vacancy rates, so that tenants have more real bargaining power, and a much higher proportion of people in the rental market compared to Ontario, which still tends to be predominantly a province of home owners whereas Quebec, particularly in some of the big cities like Montreal, has a very high proportion of renters, and therefore it has a different kind of rental system. So those are the arguments that are made, and there are arguments about all of the issues.
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We did have a system in Ontario once that cut off at a high rental level and what happened I guess over time was that everybody tried to push over the top.
Again, high vacancy rates, the problem is that areas move in and out of vacancy and therefore it is in one day and out the next and so on, so it is not administratively that feasible.
But I think that the issue of new buildings is a very real issue that people want to hear about. Just because it is not the preferred option does not mean that it is not an option.
Ms Poole: So these have not been rejected as options, they are still open for discussion?
Ms Parrish: No.
Ms Poole: That was something I was somewhat confused about, because it sounded like the decision had already been made or you had already looked at it and did not find it feasible.
Ms Parrish: We just have not explained ourselves that well. That was not the intent.
Ms Beaumont: I think it is important that you go back to -- I think the minister was trying to reinforce the point in his comments this morning that the preferred approaches were put forward as an indication of the government's thinking at this point in time prior to the consultation, but that all the options indicated in here, and other options that no doubt will come forward in the consultation, are open for discussion in arriving at the conclusions as to what the act should contain and the approach that should be taken. It was felt that it is easier to have something that people can react to.
The Acting Chair: Mr Mahoney.
Mr Mahoney: Mr Chairman, I have questions, but I do not think that the critic for my party is finished and I would like her to have an opportunity to continue.
The Acting Chair: I wanted to be fair. I allowed Mr Tilson a certain amount of time and I did go beyond that for Ms Poole. And like I said, we do have quite a few pages to go through yet.
Mr Mahoney: But I understood, if I could just take a moment of your time, Mr Chair, that we were going through this paper in a consultative way to gain as much insight into the reasons for some of the preferred options and that there is going to be additional time beyond today. Even though we go back to Bill 4 tomorrow, we will be coming back to this. I would assume that these ladies would be available to come back to finish it another day and I do not know why we would limit any one of us in the opposition benches to five or six minutes of questions at any given time. Considering the significance of this document, which has been much touted for some time now as being the new saviour to housing problems in this province, I would like us to spend more time on that and I would like your ruling.
The Acting Chair: I think we will have to turn to the committee here. We kind of went into this without any real structure. It was agreed initially that we would go through the document and then ask questions. Midstream there was a change of heart. I tried to deal with that by way of consensus of the committee. We do have to have some kind of a limit on there or we are not going to get through the document.
Mr Mahoney: Well, Mr Chairman, I do not know. I have sat through some frustrating hearings on Bill 4 when we have been muzzled and had restrictions on the amount of time opposition members, or government members, if any of them had any concerns from time to time, had to put their concerns forward, and I frankly do not accept that we should be handcuffed in this way.
If you are looking to the committee, I would be prepared to move that questions be allowed to continue on the sections as we go through them until those questions have been satisfied.
The Acting Chair: You do realize that it may be a problem trying to get through this document. We have a very rigid schedule.
Mr Mahoney: Perhaps the rigidity of that schedule should be reviewed. If you are telling me that we are going to go through this very important document on the kind of time constraints that you are laying forward, I have a lot of concerns about that.
The Acting Chair: Any more discussion on the motion? That was a formal motion?
Mr Mahoney: Sure.
Mr Owens: Mr Chair, I would like to request time to find my colleagues as per --
The Acting Chair: On the motion, is there any more discussion? Okay. We can allow up to 20 minutes.
Ms Poole: Mr Chair, I just might point out if we are going to adjourn for 20 minutes, I think we just effectively guaranteed we cannot finish this document.
The Acting Chair: That is right.
Ms Poole: I wondered if we could try for some consensus on this.
Mr Mahoney: Allow more time.
Ms Poole: How long do you estimate it would take for the remaining --
The Acting Chair: I am sorry, we have a motion on the floor. You are discussing the motion?
Ms Poole: Yes.
The Acting Chair: Okay.
Ms Poole: I just wondered if I could have an estimate from the ministry people as to the amount of time they would need for the presentation portion of the balance of the document.
Ms Beaumont: About an hour.
Ms Poole: About an hour?
Ms Beaumont: Close to an hour, yes.
Ms Poole: My goodness. I talked to the ministry this morning and was told an hour and 20 minutes for the entire document presentation.
Mr Mahoney: Maybe you could help me out by telling me if, assuming we arrive at the end of the ministry presentation, you are then saying that each caucus is going to be allowed X minutes to ask questions. Is that the game plan?
The Acting Chair: I had not been informed. I have no direction from this committee at all as to what type of format we are going to follow. As I said, there has been no structure at all.
Mr Mahoney: Well, how did we arrive at the structure where we are operating under now?
The Acting Chair: I was not in the chair when this happened. It began and here I am.
Ms M. Ward: There was agreement that we go through the --
The Acting Chair: Initially, the agreement was that we go through the document and then ask questions.
Ms Poole: I think when I made that suggestion I had asked the ministry this morning how long it would take for the entire presentation and I was told, I believe, one hour 20 minutes. So I was estimating that half the time this afternoon would be for the document and half for questioning.
I would suggest that it may be of priority to get the ministry through the presentation today but that I think we should also allow for a continuation of the questions that we have at another time, because I just do not think it fair. I mean, I have three pages of questions which might certainly help with our witnesses next week. As long as we could make an arrangement at 5 o'clock, or whenever we adjourn today, that if we have not had sufficient questioning time we could go back to it either tomorrow morning at 9 or probably next week prior to beginning the presentations, then I would not have a problem with that.
Ms M. Ward: On a point of information, is not our adjournment time 6 o'clock?
The Acting Chair: It is 5 o'clock today.
Ms M. Ward: Oh, I understood it was 6.
Mr Turnbull: I would just like to say it seems ludicrous to me, given the fact that we are here, we have the witnesses here, Mrs Poole has a whole set of extra questions, you are prepared to allow a recess of 20 minutes to get extra NDP members to vote us down but you will not permit the extra time for her to ask the questions. I totally fail to understand the rationale and all I can say is "open government" is absolutely just a bogus term when that can happen.
The Acting Chair: Sir, I did not make the rules. Twenty minutes is the allowable time.
Mr Mahoney: You have got your group here now so --
Mr Owens: I do not think that is really the issue, if one side or the other wants to use the rules as they see fit, whether it is bogus or not in your opinion is not the issue. The rules are there and they are meant to be utilized.
Mr Turnbull: But she would have spent less than 20 minutes asking the questions.
Mr Owens: I think we had a suggestion for consensus, and unless I hear any objections from this side it sounds reasonable to me, that I think the operative point is to get through the presentation. If we have the need for more time for questions, then we should look at scheduling that.
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Mr Mahoney: I move the question be put on my motion.
The Acting Chair: Would the clerk read the question, please?
Clerk of the Committee: Mr Mahoney moved that more time be allowed for questions from members of the committee on the discussion paper briefing.
Mr Owens: At what point?
Mr Mahoney: It is pretty clear to me.
Ms Poole: Are committee members willing to sit till 6 tonight to facilitate this, or until the questions are finished?
The Acting Chair: The question has been put. Just for a point of clarification: "ask questions on the discussion paper." Is that now or when?
Mr Mahoney: That was now, to continue with the questioning.
The Acting Chair: Okay.
Those in favour of the motion?
Opposed?
Motion negatived.
Mr Mahoney: Do they still wish 20 minutes to go get their members? I just thought they might.
The Acting Chair: You were down for five minutes, and then we will go back. That is what we had originally agreed to, okay?
Mr Mahoney: Thank you.
On the issue of the financial loss area -- and I am not really sure who I am directing this to, so I will just sort of throw it out and you can quarterback it, I guess, from there -- you stated that you will not allow any adjustments in the rent for interest rate changes. What I would like is some clarification. Are we talking about interest rate changes that result as a result of -- a lot of duplication of terms in this, is there not? -- of a sale, or as a result of a maturity of a mortgage, or the expiry of the term of the mortgage? Do you follow what I am getting at? If it is time to renew a mortgage and interest rates happen to be at 18%, are you saying they cannot make any adjustment in the rent to cover that?
Ms Parrish: Yes, you are correct, sir. That is the impact of that. Interest rate change is different from financial loss. You have identified correctly the difference.
Mr Mahoney: What I am having some trouble understanding is if I am a home owner and my mortgage comes up -- and this of course happened to many home owners not too many years ago when we were up in the 20% range in interest rates; people lost their homes because they had to renew mortgages from 10% up to 20% and could not afford the increase in payments. What you are effectively doing is shielding tenants for all time from the marketplace, something that no one other than Ottawa at this stage has any control over, those interest rates. Why would they be treated differently?
I can see it on passing through a flip or something. You used the example of a vendor-take-back. Whether a VTB is below or above the going market rate, I do not know that that matters that much. I can understand not allowing for pass-through, thereby in effect controlling the flipping of buildings because it would not be economically feasible to do it. I have some difficulty in understanding why the property owner would be required to just simply eat the increase in interest rates that is certainly no fault of that person, nor is it of the tenant. Yet if you carry the philosophy that I certainly support, and that is that an apartment unit is a person's home -- just because he rents it does not mean it is not his home; it is his home; and someone else who owns a home, that is his home -- why would they not be treated in the same way? Are we in fact now going to set up a situation where it is more advantageous to rent than it is to own in this province?
Ms Parrish: The issue of interest rate pass-through, as I understand it, is that you prefer the approach that was taken in Bill 4, which permitted interest rate pass-through but did not deal with economic loss or financial loss, or whatever. That is a real option and it is on the table. On the other hand, many people argue that interest rate changes are part of the overall financing cost and are therefore part of the overall capital cost associated with the building, and therefore the argument is made that those costs, unlike the costs of heating and maintaining the building, should not be passed through to tenants because unlike home owners tenants never get the capital appreciation when the building is sold. That is the argument on the other side. I understand your views, and those are the arguments on the other side.
Mr Mahoney: No, I have not articulated my views and I do not think you should --
Ms Parrish: I am sorry, sir. I did not mean to be presumptuous.
Mr Mahoney: -- presume to put words in my mouth as to what I support and go for in any other way.
I am trying to arrive at an understanding of why we are in fact setting up a scenario -- and if indeed we are, then I want to know that -- where there are benefits -- I mean, your argument that the tenant does not reap the benefits of the increased value in the marketplace is quite valid. At the same time, under today's real estate market they do not run the risk of losing their shirt as a home owner. I can show you in just about every street in my riding where there are power-of-sale operations ongoing right now and at substantial losses from what people paid, and yet they have no protection from interest rates.
Perhaps what you are suggesting as a preferred option is something that we should extend. Rather than criticizing it here, perhaps, I say, by way of sort of trying to arrive at some answers, maybe this should be extended to home owners where there is interest rate protection that they just cannot -- why should we say that a landlord cannot pass on rate increases in interest rates but a bank can? Is a bank not a landlord when it holds your mortgage? Because they sure as heck own that home, even though it may be registered in your name. While there is a $200,000 debt registered against a $300,000 home, it is one third yours and yet you are now subject as a home owner to the whims of the financial institutions. And now this policy, as I understand it, the preferred option, would completely shield tenants.
Let me ask you if it would make sense, in your opinion, as you have said there is an option there, to put in a clause that would be very similar or tied into a "cost no longer borne" clause where if a landlord in a rental situation puts in new appliances and increases the rent, for example, for a period of time until those appliances are paid off -- what has been happening traditionally is the rent does not come down, of course, once the appliances are paid off; it simply becomes part of the base. Would it make any sense to have a scenario where you could have a "cost no longer borne" clause and tie interest rates into that, where you would say that if the interest rate at the time of renewal -- and I am not talking about the sale of a building or a flip or anything like that. I think there is perhaps good logic for not allowing pass-throughs because you can get 90%, maybe even 100%, financing if you are creative enough in the marketplace out there and simply pass on those usurious interest costs to the tenants. I do not support that, but if it is simply a matter of the mortgage coming due on the anniversary date and a renewal with a bona fide financial institution --
Mr Mammoliti: Is this a motion?
Mr Mahoney: It is a question you probably do not understand, George, but stick with me.
Mr Mammoliti: You lost me.
Mr Mahoney: I am sure I have. That probably happened several weeks ago.
The Acting Chair: Mr Mahoney, your time is just about up.
Mr Mahoney: Well, not if I am going to be heckled and interrupted when I am asking a very serious question to these people, Mr Chair.
The Acting Chair: Your time is just about up, sir.
Mr Mammoliti: Ask the question. Do not take 20 minutes to ask the question.
Mr Mahoney: Mr Chair, do you want to discipline your member?
The Acting Chair: Please wind it up, Mr Mahoney.
Mr Mahoney: Does it make any sense, then, to establish a situation where, as interest rates fluctuate upon renewal dates, you would fit that into a "cost no longer borne" scenario, up or down?
Ms Beaumont: I think that could be another option. As is indicated in this paper, what we have here is a series of options with an indication of the government's preferred option. There are other options and that could be an option. If you go back to the policy principles, one of the concerns with that would be complexity in the system, because what you would have to do is to track what is happening in particular rental situations.
Mr Mahoney: But you are going to --
Ms Beaumont: So you are going to subtract from the rent as well as add to the rent.
The Acting Chair: Okay, the time has expired. We will get back to the document now. As agreed, we have gone through the list of questions. The motion was defeated.
Ms Parrish: My colleague Dana Richardson will start with the issue of maintenance, on page 38.
Ms Richardson: I would like to deal now with the issue of maintenance. Inadequate maintenance is indeed one of the chief concerns of tenants in Ontario. Currently, we have a system that has both municipal and provincial standards of maintenance and methods of enforcement. Under the current system, under the Planning Act, a municipality has the discretion on whether to pass property standards bylaws, and of the 792 municipalities that have the power to do so, 440 have passed such bylaws.
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Mr Tilson: Point of order: I thought there was an amendment that stopped that, that they apply right across the province, provincial property standards.
Ms Richardson: No. I will explain that. Under the Residential Rent Regulation Act the Residential Rental Standards Board was created. The standards board has filed regulations for a provincial standard, but it applies only in areas where there is not a municipal standard or if that standard is not adequate or adequately enforced. So currently we do have a three-level system as far as maintenance enforcement is concerned. First of all there is municipal inspection and enforcement. Then the matter, if there is a work order, can be referred to the standards board for review as to whether there is compliance with the municipal standard and if it is substantial and subsisting. Then the standards board reviews it to the ministry for determination on whether there is a rent penalty. This system, when a work order first enters the standards board until there is a rent penalty, on average has been quite slow, an eight-and-a-half-month time period for the rent penalty to be issued. This is a matter of some concern.
We looked at a number of options in this regard. The first would be to make it mandatory that municipalities adopt and enforce minimum maintenance standards. This would be a change from the current system where a municipality has the discretion on whether to pass such a bylaw. And when a municipality has the discretion to do so, it has a choice about how high the standard should be, what should be the priorities in that particular community as far as property standards are concerned. If there were mandatory municipal bylaws, there would be at least greater consistency in that all municipalities would have such a bylaw although they might vary from municipality to municipality.
A second approach would be to look at a code for existing buildings which would be a province-wide maintenance standard and method of enforcement. It still might be administered through the municipalities but there would be one standard across the province. This would allow for greater consistency but what it would also mean is that it perhaps would have a higher standard than currently exists for certain municipalities where they have indeed chosen to have only certain aspects covered by a property standards bylaw or indeed not to have one at all. So it would add to the complexity and to the cost of administration and also the cost for landlords to meet a higher standard. Such a code for existing buildings could be phased in so far as how comprehensive it was, as to what other regulatory measures were included in it, such as the fire code and the plumbing code, etc. But it would take some time to develop this kind of standard bringing in all of these different kinds of regulations.
The third option was to look at the rent penalties that currently exist. Currently there is a rent penalty that is a temporary halt to the collection of a rent increase, and when there is compliance the landlord can go back and collect that increase that had been halted. Or there could be a permanent halt to a rent increase until there is compliance. That means the landlord could not go back and get the rent increase from the past. Depending on how serious the maintenance infraction was, there could be a system where you could reduce rents permanently or for a period of time if there was inadequate maintenance. Another way to deal with this would be not to allow an annual guideline increase if there is an outstanding municipal or provincial work order.
The preferred approach for consultation purposes is as follows: First, to retain the functions of the standards board but combine those functions with the decisions on rent penalties. This would require some administrative change, but it could speed up the resolution of maintenance issues and impose the rent penalties in a more timely fashion. It is tied very much to some further preferred approaches later on in the paper about what kind of hearing and administrative structure we would have for the rent control system.
The preferred approach would also assist the enforcement of maintenance standards with stronger rent penalties and more effective powers of entry and cost recovery for municipalities that have had to do the work because the health and safety of tenants was at risk, and their ability to collect the moneys spent as taxes. Finally, there would be fines for the failure to comply with maintenance standards or for charging tenants maintenance fees that would otherwise be covered in rent.
The next issue area concerns rent reduction. There are a number of features to rent reductions, and the three that we will be highlighting are: the challenge to increases within the guideline, illegal rent rebates and certain agreements between landlords and tenants.
Under the current system a tenant can challenge a guideline increase on three grounds: if there is a decrease in the standard of maintenance and repair, a decrease in services and facilities; an equalization, in that their rent is higher than a neighbour's rent in the same building; and for low maintenance standards.
The options considered would be to continue this system or to allow for certain modifications.
The first modification that was proposed would be, instead of having it on an individual basis, allow the whole complex to be decided at the same time when the maintenance standards or changes in services or operating costs apply to the whole building. Instead of having, for instance, 192 applications for the same thing, there would be one application that would cover the whole complex.
Another modification would be to increase the grounds on which there could be a challenge, and indeed, Mr Mahoney, one of the proposals is for financing costs no longer borne, which would be a reduction for interest rate changes, and similarly a capital expenditure cost no longer borne provision would be one of the options. Tenants could apply to have their rents reduced in those circumstances.
Finally, there is the option to continue the system where on a landlord's application to increase rents the tenants can raise inadequate maintenance levels or decreases in services and facilities as a defence to the rent increase.
Mr Mahoney: Can I get a clarification on that point, Mr Chair?
The Acting Chair: Point of information?
Mr Mahoney: Clarification just on the point that was made about the ability to apply for reduction in rent due to a reduction in the interest rates?
Ms Richardson: Right.
Mr Mahoney: Does that work in reverse? Would there be an ability to apply for an increase in rent based on increased interest rates?
Ms Richardson: Those two would be tied concepts, I would imagine. The financing costs no longer borne is not one of the preferred options. One of the reasons is that the increases are also not one of the preferred options, but those two things would possibly go together.
To summarize what the preferred option would be in this circumstance, it would be to allow tenants to challenge a guideline increase for matters that affect not only their own unit but also the whole building if there has been inadequate maintenance, if there has been a decrease in the services or in facilities or if there has been a municipal tax reassessment downwards, and also that tenants could bring forward their concerns in the context of a landlord's application.
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The second area about rent reduction concerns an ability for landlords and tenants to agree to change the rent, either to increase it or decrease it. related to the provision of services and facilities. Currently there is such a provision, but it only relates to parking and cablevision, so that if a tenant wants another parking space because he has a second car, he can make an agreement with the landlord without coming to rent review as long as the amount charged is the lawful amount for that parking space, and similarly, if he no longer needs the space they can make an agreement to reduce the rent.
The options that we considered would be to continue that system or to allow some modification in that system, and there are a number of areas where landlords and tenants commonly agree. One would be locker and storage areas, when you need one and then when you do not. Another would be on certain seasonal separate charges, such as air-conditioning. The use of an air-conditioner only in the summer months, for instance, is often something that landlords and tenants agree on. And similarly in the northern areas, the car plug-ins for block heaters are often offered on a seasonal basis. So the preferred approach would be to expand the list of the things that could be agreed upon but to regulate that amount by setting out, either by regulation or a rent order, how much could be charged for those extra services.
The final area concerning rent reduction is when there has been an illegal rent increase. There could have been an illegal rent increase taken because there was a higher than guideline increase or because there was a rent increase more often than once in a 12-month period, or indeed if the landlord had charged key money for when the tenant moved into the building.
We looked at a number of options in this area that would actually enhance the ability of tenants to recover moneys that had been illegally paid, and that would include looking at interest when there has been an illegal payment made and to extend the monetary jurisdiction from the current $3,000 to $10,000, which would be well within the new court reform guidelines.
Other features would be to look at allowing a deduction from the current rent when tenants are pursuing their remedies for collection or to allow them to obtain the money from the current landlord rather than having to chase the previous landlords to whom they had paid the illegal amount. And finally, in the case of a key-money offence, where currently there is no mechanism for a tenant to be required to be reimbursed after having paid the money, the landlord could actually be charged and fined for the offence, but there is no actual requirement in the legislation for repayment of the money to the tenant, so the suggestion is to make that available.
To summarize then, the preferred approaches would be to allow the compensation of illegally obtained money for key money, to extend the monetary jurisdiction to $10,000, to also provide for interest when there has been an illegal amount, and finally, to allow tenants to deduct the amount owed to them after a determination has been made by a rent order and deduct that amount from their future rent payments.
Those were the issues set out for rent reduction and maintenance. Now Colleen Parrish would like to deal with the next two sections, on rent information and decision-making.
Mr Tilson: Mr Chairman, can I ask a question on the subject that was just addressed?
The Acting Chair: I am sorry, the questions are all deferred to the end of the presentation.
Ms Parrish: I will try to move through the next two questions quickly. The next two sections essentially deal with a number of administrative and I guess system structure for any rent control system.
The first issue, rent information, starts on page 46, and essentially the question that is really being asked relates to the establishment of the rent registry, which was one of the reforms established under RRRA at the request of both landlords and tenants that there be a sort of neutral source that could tell you what the rents are and what are the legal rents. We looked at two options in this area and in the end indicated that the preferred approach is to maintain a government-administered rent registry system.
The second issue is, what should be the legal status of information recorded in the rent registry? Should it just be some information or should it have some greater legal status than just information? We looked at a number of options there and on balance we have recommended that the approach for consultation be that the rent recorded in the rent registry be deemed to be the legal rent. In other words, there is a prima facie case that this is the legal rent if it is the rent registry, so landlords and tenants can depend on that. On the other hand, that could be rebuttable. If someone had better evidence and could demonstrate that this was not the legal rent, that it was recorded wrongly, then that could be rebutted by someone coming to the rent registry.
The next issue is what rent information should be recorded on the registry. Again, this is rather a technical issue. Essentially under the RRRA there are two kinds of rents. There is the actual rent and there is the maximum legal rent that you could charge, and there is often a discrepancy. A landlord, for example, does not always take the statutory increase. The landlord might have been told, "You can take a 5.4% increase," but they only take 5%, so their legal maximum is actually 0.4% more than they are actually charging. So the question is, what should you put on the registry, the actual rent or this legal rent that the landlord could have charged but did not charge?
Then there is also the issue as to how we get information, for example, about all of these separate charges that landlords may or may not be agreeing to with tenants and whether or not landlords have increased the number of units in their building and so on and so forth.
On balance, we have suggested that we continue to maintain the distinction between the actual rent and the maximum rent or the legal rent the landlord could charge and that the rent registry should record the maximum legal rent, and also that the registry keep up to date with any orders and that landlords that actually change the number of units they have or make changes in services should record that.
One of the reasons that we have preferred the option of maintaining the maximum-rent concept, although it does have its critics, is that it substantially reduces the burden in the system of recording and figuring out what the rents are. Once you have to actually figure out what the actual rents are, then you have to have a very elaborate system of tracking that, whereas this system allows you to simply record that in and increase the rents by the statutory maximum and you know what the actual maximum is in the system. Any other system would have a lot of administrative problems associated with it.
The next issue is really for what time period should the rents be filed. The current RRRA required that the rents filed on the rent registry be July 1985 rents and landlords of larger complexes, seven and more buildings, were asked to file their 1985 rents. The issue is, as we move into a new rent control system, whether it is in place in 1991 or 1992, should we be saying to smaller landlords, "Please tell us what your July 1985 rents were," or whether that is not a somewhat unrealistic request.
The suggestion is that for the larger landlords, for which we have a good database on their rents, we should record their 1985 rents and keep them up to date, keep that registry up to date, and for the smaller buildings we should be asking them to provide 1990 rents, unless we have actual information about their rents between 1985 and 1990, which we may have because they may have an order and therefore we could simply record their order. The issue really is whether or not it is going to be too difficult to go back and obtain that information and not be essentially worse -- the sort of aggravation and worry that it would put landlords through, and particularly the smaller landlords, and confusion for the tenants.
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It is also suggested that we allow for verification of the first filing so that we have a reasonably good database to jump off of for the future and that we also be allowed to have powers in our statute to have periodic verification so that we can just sample periodically to make sure that our information base is up to date.
We also looked at the issue of whether or not we should have certain incentives to encourage registration in smaller buildings because up to now smaller buildings have not been required to register and this will be a considerable task to undertake, given the large number of small landlords. In the old system there was an incentive to file, and the incentive was essentially that you would reduce your rebate period. If you had an illegal rent, you would reduce your rebate period, which is six years, to two years. That was a little bit of an incentive to get you to file. We have not suggested that, because essentially we have suggested that we not go back to 1985 but we just proceed as of 1990 or whatever would be a current rent date. So we would essentially look at penalties for late filing, that we make that a continuing offence. In essence, we increase the enforcement in the area of penalties for information filing to have a better rent information system.
The next series of issues essentially deal with dispute resolution systems. Assuming that there is some decision that is going to be made in the system, that is, that there will be some discretion that will have to be exercised, either about a rent increase over the guideline or perhaps about reserve funds or perhaps about what is necessary or whatever, then there has to be some mechanism for deciding issues that have to be decided within the statute, and the question is, what is the best kind of system for resolving disputes about rents between landlords and tenants?
We have looked at essentially four main options. One is to maintain the current system, which is essentially an administrative review, in theory by the minister but in practice by the minister's delegated staff. Then that decision goes to the hearings board and the hearings board can have a hearing of up to three members to consider the decision that was made administratively, and then you can go to the courts.
That current system has been criticized as being somewhat long in terms of the period of time it takes to get a resolution. It is not uncommon that a case has gone to rent review and then the whole complex comes up again for review and the old issue from the previous year, the rent from the previous year, has still not been resolved. It is still in the system somewhere being resolved. So the criticism of that system has been that it takes a long time. On the other hand, an administrative system at the first level is quite efficient in comparison to a hearings system at the first level.
There are a number of modifications of the current system. In other words, you could have a current administrative system but essentially tighten up the hearings board approach by having only one member hear the case, for instance. You could also sort of I guess depoliticize the system by having the initial decision made by essentially a director of rents or some person other than the minister, which also I guess frankly reflects more on what really what happens, since of course ministers do not make these decisions themselves in real life.
The other approach would be to have one independent tribunal and the tribunal could hear the decision in the first case and then it could hear the appeal, which was the system they had under the Residential Tenancy Commission, and there are certainly some advantages to having an independent tribunal. On the other hand, having two hearing systems, particularly if the second hearing has three panel members hearing it, can be a more expensive system to run, and there are also some people who might feel: "Well, is the second group of hearing people really going to be independent? They are really working with these guys in the same organization." So there is also that perception around the independence of the decision-making.
The next approach, which is put forward as a preferred approach to see what the public thinks, is essentially a system where the first decision is a hearing system in which landlords and tenants have an opportunity to have a hearing before a hearings officer, and if there are issues of law which arise during that hearing that they wish to have resolved, those can go to the courts, but there should be no other appeal. This does allow members of the public to get what they often say they want, which is an opportunity to speak their mind. It can be made a little bit less intimidating for people who perhaps are not completely comfortable with complex written submissions, and the decision is, by and large, going to be final because in most cases there are not a lot of issues of law that are raised; they are mostly issues of fact which would be resolved in a fairly quick way and avoid long periods of delay. On balance, that approach is put forward for consultation.
I would also note that the kind of dispute resolution system you have probably depends quite a bit on what kinds of decisions you want to make. Clearly there is a limit to how many interesting things you can say about whether your heating bill went up or not, but if you decide to have issues such as, "Is this necessary?" "Did the tenants consent?" those are more sophisticated kinds of questions. So are questions like whether or not there is ongoing and deliberate neglect, whether there is failure of maintenance. Those involve more sophisticated kinds of questions. They could involve questions of credibility; that is, whether or not you believe the people who say, "Yes, I made a reasonable effort." Issues of credibility are usually tested in hearing processes because you can have sworn evidence and cross-examination and so on. So the kind of decision that you would want whoever they were to make is probably going to influence what kind of dispute resolution system you might ultimately want to pick. Those are connected.
We also looked at a number of issues around what kind of assistance could be provided to landlords and tenants who are affected by a rent decision. For example, we looked a whether or not there should be staff advisers to advise landlords and tenants, sort of like the workers' compensation system. We looked at whether there should be compulsory mediation or pre-hearings. For example, in auto insurance people are required to go through a process of mediation before they can have an arbitration of their accident benefits. We could encourage voluntary mediation or pre-hearing. There could be conditional order systems in order for people to resolve issues of capital, tenant consent and so on before they actually spend money. We could control agents, for instance, in this area. We could allow for the merger of applications to have more efficient hearings. One thing we could also look at in terms of giving landlords and tenants a greater opportunity to participate would be to have an advisory committee for greater dialogue.
On balance, we have indicated the preferred approach would be to provide funding to landlord and tenant groups to advise landlords and tenants, and the main reason was that it appears that, by and large, the government is perceived as being a good source of information but it appears that most groups feel more comfortable in choosing an advocate who is not a government employee. However, the option similar to the Workers' Compensation Board is certainly there.
The other is to improve the process of hearings by creating the power to have discretionary mediation, a prehearing -- not make people have mediation; I mean, if they are not going to get along, I guess there is not much point, but to have it as a discretionary mechanism -- to have a conditional order system, to have the ability to combine applications that are dealing with the same period of time and the same unit and to create a rent control advisory committee.
We also dealt with the issue of improved enforcement and we dealt with a whole lot of issues around what I guess I would call tightening the screws on the system to deal with situations that have been problematic in the past: dealing in a stronger way with key money offences; looking at issues where there has been harassment of tenants who have tried to carry out their rights to dispute rents; situations where there may have been an attempt to prevent inspections to ascertain whether there has been adequate maintenance. We also looked at issues as to whether there should be court-ordered restitution in the area of persons who have been subject to offences under this act. We have looked at limitation periods. We have looked at a number of possibilities.
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In the end, we have suggested that there should be additional offences created under the statute:
Failure to obey maintenance and standards orders that are issued by provincial rent regulators.
Make it an offence for superintendents to collect key money. What happens now is that the superintendent is only guilty of a key money offence if he is doing it on behalf of the landlord, and lots of times the landlord has no idea the superintendent is doing it; it is just the superintendent has decided to make a little money on the side. Right now we cannot prosecute them when that does occur.
If a landlord knowingly charges illegal rents: Right now we have a problem in that landlords inherit illegal rents. They did not create the illegal rents, they just continue to charge them. We cannot deal with them there.
Harassing tenants who try to exercise their rights under the statute and hindering inspections: We have suggested an extension of the limitation period for prosecution.
However, we have actually indicated that the failure to obey a rent rebate order should not actually be an offence.
The reason for this is that we provided enhanced civil remedies for people to pursue their remedies. We feel that is more appropriate than to use the quasi-criminal approach to this.
We are very interested in the issue as to whether it would be possible to tie the failure to obey a maintenance order with a rent penalty automatically. Right now we can penalize landlords who do not meet maintenance standards after a hearing. There have been a number of suggestions that there should be an automatic penalty: If you do not comply with your rent order, you should not be able to get, for example, a guideline increase until you do obey your maintenance order. That is a very interesting idea and we are looking into the sort of legal mechanism to see whether or not that would be possible to do.
The last area is the issue of rental housing protection and my colleague Susan Taylor will be dealing with that issue.
Ms Taylor: We spent the last little while talking about changes to the Residential Rent Regulation Act.
Mr Tilson: My question, Mr Chair, is when do we get to ask questions here? Some time later in the day?
The Acting Chair: When the presentation is finished.
Ms Taylor: I am now going to deal with the Rental Housing Protection Act.
Experience has shown in the past that increased regulation of rents has sometimes led the owners of rental properties to change their properties so that they are no longer subject to rent regulation.
The Rental Housing Protection Act was passed in 1986 and it requires that the owner of a rental property who wants to convert, demolish, renovate or sever a rental property obtain municipal council's approval before doing that. There are three mandatory criteria which the municipal council must consider and one of those criteria must be met before an application can be approved. When a municipality is considering one of these applications, the province provides comments to the municipality.
We have considered whether this system should be changed, and the options considered were maintaining this system where municipalities administer the act, or continuing municipal administration but having a stronger provincial role in providing direction to the municipalities, or taking back administration of the act so that provincial officials or a provincial board would make decisions on these applications under the act.
The preferred approach for consultation is to continue with municipal administration of the act, to allow a certain amount of regional differentiation in how the act is administered, but to provide stronger provincial direction to municipal councils when they are making individual decisions.
The second issue under rental housing protection relates to extending coverage to smaller municipalities. Currently, municipalities are covered under the Rental Housing Protection Act by listing them in the regulation, and the listed municipalities are those which have populations of 50,000 or more. Therefore, small municipalities which may be part of a larger urban or metropolitan area may not be covered by the Rental Housing Protection Act. So an option would be to include municipalities based on criteria other than simply population, such as inclusion within a metropolitan housing market area, and that is the preferred option for consultation.
The third issue under the Rental Housing Protection Act relates to changing the criteria, which I mentioned earlier, that municipalities have to consider when they are reviewing an application under the Rental Housing Protection Act. Some of the options considered are whether the mandatory approval criteria should be changed to include criteria that would require tenant approval of an application and requiring applicants to show why they could not replace rental units and relocate tenants to similar units at similar rents before the municipality could approve the application on the basis that it would not have an adverse effect on the rental housing supply.
Another option would be to leave less discretion to municipal councils as to what is an adverse effect. It is fairly general in the regulations as they read now, to allow some municipal discretion, but that could be tightened up.
Another option would be to introduce mandatory protection for tenants; that is, to require municipalities to impose conditions that would provide for moving costs, provide for continued tenure for a specific period of time, or other appropriate conditions.
Another option would be to require mandatory, as we call them, linkage payments that would be required to be made to a municipal or a provincial housing fund and would be used to replace rental units that are allowed to be removed under the act.
The preferred approach is to authorize municipalities, when they are approving conversions or demolitions, to require such a linkage payment.
The next issue area relates to whether the Rental Housing Protection Act should be extended to cover smaller rental properties and condominiums. Currently, the Rental Housing Protection Act exempts rental properties with four units or less and it also exempts all registered condominiums.
An option considered was lowering the number of units that would be covered so that properties with two, three or four units would be subject to the act. Another option would be extending the Rental Housing Protection Act to cover units or properties, condominium properties, that are rented. The preferred approach is not to change the act in these areas.
The next issue area relates to extending coverage of the Rental Housing Protection Act to mobile home parks and to land lease communities. The Rental Housing Protection Act only covers mobile home parks in very limited circumstances currently and it has been suggested that the act should be extended to cover these kinds of properties, so that they would be protected from conversions to co-operatives or conversions to other uses by redevelopment of the property.
Another option would be, if there is extended coverage to cover mobile home parks, that coverage would either be in all municipalities, because many mobile home parks are located in municipalities with populations of under 50,000 which are not currently covered by the act, or extend the protection only in those municipalities that are over 50,000.
The preferred approach is to not deal with this issue at present, because there is an interministerial committee looking at many aspects of this type of community, and the government decided to await the report of that interministerial committee before making decisions in this area.
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The next issue relates to extending court powers under the Rental Housing Protection Act to allow the return of illegally renovated units to their former configuration and to reinstate tenants at the former rents. Currently there are provisions in the act that allow courts to order units that have been converted to be reconverted back to their rental residential use, to allow reinstatement of tenants and to allow the courts to order the cessation of that conversion work. There are not similar provisions for renovations. The options are to extend such authority to the courts to deal with renovations or to retain the current provisions, and the preferred approach for consultation is to extend the courts' powers to cover renovations.
The final issue relates to renovations and repairs that require vacant possession. Currently, the Rental Housing Protection Act allows municipalities controls over renovations and repairs that are so extensive that vacant possession is required. This was designed to allow municipalities to control luxury renovations or, as Colleen prefers to call them, discretionary renovations. However, if the new rent control system provides some acceptable treatment for determining and permitting necessary or minimum-standard capital improvements under the rent control system, then it is likely that it would be redundant to also approve such renovations under the Rental Housing Protection Act.
The preferred approach in this case is to eliminate Rental Housing Protection Act coverage for renovations and repairs where the number of units is not changing. If the landlord is reducing the number of units in the course of his renovation, then Rental Housing Protection Act approval would be required. But if the number of units is remaining the same, then Rental Housing Protection Act approval would not be required.
That completes our presentation on the discussion paper.
Ms Beaumont: Mr Chairman, that is the end of what has been a lengthy presentation on a very complex subject. As I indicated earlier, we are available for questions now or at the committee's discretion at any other time, and of course we will be continuing the practice we have had during your hearings on Bill 4 to have members of the staff from the ministry present at your meetings. So if questions come up during the course of your discussions, they can be answered or extra material provided.
The Acting Chair: We have a limited amount of time. If we give each caucus five minutes in rotation, does that seem to be a fair way to go about it? That is okay? And in rotation until we run out of time.
Mr Tilson: It will take Mahoney five minutes to say his name.
The Acting Chair: Then it will be your turn. Okay, we will start. Ms Poole was the first to have her hand up, so we will start with Ms Poole.
Interjection: There goes my five minutes.
Ms Poole: You bet your sweet bippy.
Turning to page 57 of the consultation document where you are talking about the administrative structure, when you say the preferred approach for consultation, where you are talking about the hearings, you say, "To support the administration of the system, provision should be made for some cost recovery through fees." Now, on the very next page, when they are talking about, "The preferred approach for consultation is to provide funding to landlord and tenant groups but not create Ministry of Housing landlord and tenant advisers," I am very confused by this. It sounds like on the one hand you are going to charge tenants and landlords a fee for the hearing and on the other hand you are going to give landlord and tenant groups money for consultation. Does this not seem inconsistent?
Ms Parrish: The fees charged would be very modest fees. Many people ask: "Should the taxpayer pay for the rent system or the rent review system or the rent control system? Should there not be some element of user pay?" There is in the court system. If you go to small claims court, you have to pay whatever it is to file your claim. Other people think it should be entirely borne through the taxpayers. I think that is an issue we want to hear about. The moneys that would be given to landlords and tenants would be moneys given to their groups to assist landlords and tenants through the system, to sort of give them information on where to go or those sorts of basic kinds of information, and also continue things like the after-hours service where tenants can phone and get basic information. There is also currently some funding now to small landlords as well, essentially to help them help themselves through the system.
Ms Poole: But you are proposing that the Ministry of Housing not provide advisers?
Ms Parrish: Not as the Workers' Compensation Board does. They actually have workers' advisers and employees' advisers. We do propose that there can be continuation of the educational component of the ministry, that the ministry continue to provide information, education, you know, how to do things, friendlier forms, but not have a system in which staff of the ministry explain to a particular landlord or tenant how to essentially defend his case or to create his case or whatever.
Ms Poole: Have you done a cost-benefit analysis of what the new system -- I mean, obviously you do not know exactly what the new system will entail, but you do know that it is going to change and you do know that certain things that are contained in the old act, certain complex things, will not be contained in the new act.
You have advocated that a new rental hearings board be set up, that the old rent review administrators would be -- not abandoned, but disbanded. Are you going to end up with more or less bureaucracy?
Ms Parrish: There is not going to be another hearings board there. The concept is that there would be a hearings officer system where it would be hearing at the first level and the appeals would be to the courts. So you would actually be eliminating an entire layer of bureaucracy which currently exists.
Unfortunately, I think the point that you made is very valid. It depends on what options are chosen in the end. Some of the decisions that might have to be made around capital, for example, are quite complicated.
Clearly, the less increase that you permit above the guideline, the greater your ability to reduce the bureaucracy. The more discretion you want to have exercised about whether something is necessary or whether something should be permitted or whether an interest rate increase is bona fide and not an improper arrangement, the more likely it is that you are going to have costs associated with that. So it really depends on the system that is chosen. Certainly there are a number of options here that would reduce costs and there are others that would probably increase costs.
Ms Poole: I think I probably only have time for one more question, so I would like it to be about the standards board. You have made recommendations as a preferred approach on page 39 to retain the functions of the standards board. I wonder if within that mandate you would be considering also expanding the functions of the standards board.
I think you probably will have seen the amendment by now that I tabled for Bill 4 where tenants could be advised by the standards board if a landlord was not making reasonable attempts to comply with a work order, so that the standards board could advise the tenant and the tenant could automatically deduct the guideline increase from the rent without having to go through a long, arduous rent review process. Could you see the standards board powers being expanded to cover this type of thing?
Ms Richardson: Our preferred approach -- it is something similar but not exactly the same as you have proposed -- would be to speed up the system by, instead of having a separate board make that determination as to whether it was a substandard maintenance subsisting violation, that decision would be made by the rent administrators or hearings officers at one point. It would speed up the system in that there would not be the separate level of decision-making at all. So instead of bringing the rent decision to the standards board, bringing the standards board function to the rent decision is what we are suggesting.
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Mr Tilson: Mr Chair, I find this whole process just preposterous, the very fact that I have got five minutes to speak --
Mr Mahoney: And I have none.
Mr Tilson: -- and Mr Mahoney has none and the minister expects us to provide intelligent comment on this green paper. Our time is restricted for the following week and our time is now restricted to five minutes to question very complicated issues.
Accordingly, Mr Chair, I would move that the time be extended to allow us to expand our questioning of these ministry officials.
The Acting Chair: We have a motion by Mr Tilson to expand the question period. Is there is a time limit on that, Mr Tilson?
Mr Tilson: I do not know why we should have any time limits. These are very serious issues. I can understand the issue of, obviously, not sitting into the evening, but there may be further time in which these officials may have to come back and we may have to question these officials on other areas. The way I understand the rules that have been established by this committee now, I, Mrs Poole and Mr Mahoney, we have got five minutes per party, per caucus, to question them. Mrs Poole I see is throwing away all kinds of notes. I am sure she would go on for a while longer, and I do not want to overdo complimenting her, but I am sure she would have many more legitimate questions.
The Acting Chair: Okay, thank you, Mr Tilson. The clerk was working on the motion. If she has it worded, maybe we could read it and then debate the motion.
Clerk of the Committee: Mr Tilson moved that the time for questions from committee members be expanded.
I do not know, Mr Tilson, whether you wanted to add specifically to an agreed-upon time or --
Ms Poole: You want to invite the ministry to come back?
Mr Tilson: Yes, to come back and we will talk some more. I mean, is this it, five minutes?
The Acting Chair: I did not set the time limit. It was already set at five. I am just following procedures.
Mr Owens: I was going to make a suggestion prior to Mr Tilson's motion. Understanding that this is a complex document and a complex issue, the folks from the ministry have indicated a willingness to come back, but my suggestion would be that we set up a time outside of the committee meeting for those members, whether it is government or opposition, to meet with the ministry officials to clarify any questions that they have.
My concern is in setting a precedent that may carry over into other functions. The schedule has been set and has been agreed to by all three parties.
Mr Mammoliti: I am going to have to agree with my colleague Mr Owens. I think that in order to expedite things, perhaps that may be the best way to go as well.
Mr Tilson: It is called a gag order.
Ms Harrington: I certainly think that with a document of this size, for all of us, no matter what party we are in, we do need time, first of all to go home and read it, and then have further questioning. This presentation has been most helpful, and it would have been good even to get the questions as we went through it, I thought, but now that we have sort of gone through it and we can see the whole extent of it, I think that there should be some time for questioning.
I know that the time has been very tight, as Mr Owens mentioned. I am trying to think of when. Obviously the ministry people are going to be available. I guess it is up to this committee to set when we could try to squeeze the extra time in. You may want to stay later tonight. Unfortunately I cannot, but I have no objection to the rest of you staying.
The Acting Chair: That is very kind of you. Mr Mahoney?
Mr Mahoney: Mr Chairman, I guess you kind of get the drift from the fact that this keeps coming back, this time by Mr Tilson, who was not with us the last time it came back and now he raises the same concerns that indeed I raised.
I support his motion, and I am hearing government members saying, "Gee whiz, we'd like to accommodate you, but there isn't time." I would like to remind them that you guys are running the show, you are setting the agenda and you are controlling the clock, and in fact by failing to extend hearings, by failing to allow for proper time for questions, you are taking away from our responsibility really, from our ability to do our job as members of the opposition. We have a responsibility on behalf of the people of this province as opposition members to question the officials who are before us, to probe and to question the government and the minister and the ministry and everybody involved in this process and we are being muzzled and not being allowed to do that.
I have never seen this. I just find it very objectionable and at the very least would like the committee to agree to the principle that we find more time to allow these questions to take place. Perhaps Thursday afternoon would be a goal. We are scheduled to sit I believe until 6 o'clock, if need be, on Thursday. I assume that is the end of our clause-by-clause process, and we should at the very least agree to the principle and I personally would like to see us agree to setting aside a couple of hours. I think it needs a couple of hours. I just go through a little of this document and you know, just as you go, off the top, you can get numerous questions of whether it is about catch-up to market or equalization or intervenor funding or new taxes that are being talked about or further municipal authority, further municipal power. I mean, it is almost endless.
I suggest, with respect, that we also have a responsibility to, within reason, respect the agenda of the government and make sure our questions are relevant and are on the bill and on the paper and on the issues that are before us, and they are. Mrs Poole has pages of notes, I have numerous questions, I am sure the Conservatives have numerous questions, and frankly, in your zeal to make your minister happy and to get the ball rolling so that you all look good in front of the Premier, you are taking away the opposition's ability to function, and I object to that strenuously, reverend -- sir.
The Acting Chair: Ms Poole, then Ms Harrington.
Ms Poole: That is a hard act to follow.
Just in relation to Mr Owens's concern that we are setting a precedent, I sat on four different committees in the last Parliament and never once was the opposition or members of the government blocked from having the ministry come back if we had not finished the questioning or finished the presentation. In fact, I do not think I ever recall an incident where the ministry got through its presentation and question-and-answering without having to come back. It seemed to be a matter of course. So I do not see that as a problem.
I think the only thing we have to do is decide when there would be some time that we could allot it, and I think on another occasion when we had the ministry troop back to see us we brought in some sandwiches for lunch and sat between 12 and 2. If that is possible for one day this week, maybe the Thursday, so it would give us all time to go through this, I think that might be a compromise that we could all live with and the ministry would get lunch and get to come back and be grilled for two more hours.
Ms Parrish: Oh, joy.
Mr Owens: You have got four more votes down there.
Ms Poole: Then that would also give -- government members have not had an opportunity to ask one question today and I am sure they would like to as well. I do not think this has to be a --
Mr Mammoliti: You have taken up all the time.
Ms Poole: Sure. I have no problem with that. If we are given two hours, I think it should be all members participating.
Ms Harrington: I just wanted to point out this is the first time that I have seen this document, and we certainly have questions too, because we are going to be dealing with it even more intimately than you.
I wanted to say a couple of things. First of all, this has been a very long day. We started, most of you, around 8 o'clock this morning in here, and to say that you want to go on at this point is sometimes beyond human effort.
But it is wrong to say that we want everybody to have five minutes. That is not the case at all. I want to point out to you, we are not muzzling you, we are going to be talking about this all summer, all spring -- I mean, it is going to go on for ever, it seems. So do not worry, you will hear lots about it.
I would move for some kind of compromise position that when it is agreeable to us, physically speaking, to deal with this -- I think it is best we go home and read it first again -- and for the ministry people to be here, the suggestion was made of a lunchtime, say Thursday lunch? That is only a start. We are going to give you all spring too.
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The Acting Chair: Are you making an amendment to the motion?
Mr Mammoliti: I would like to make that amendment, Mr Chair.
The Acting Chair: Just a minute, just a second.
Mr Mammoliti: Friendly amendment; lunchtime on Thursday.
The Acting Chair: Hold on now. Let's pull back on the reins here. Mrs Harrington, you still have the floor.
Ms Harrington: Oh. That was my suggestion.
The Acting Chair: You were going to pass to Mr Mammoliti? He is next on the list.
Ms Harrington: Sure.
Mr Mammoliti: I would like to make that amendment, Mr Chair.
The Acting Chair: Just chomping at the bit.
Mr Mammoliti: A friendly amendment, if possible, I do not know; Thursday at lunch, from 12 to 2.
The Acting Chair: I am just waiting for the clerk to write the motion.
Interjections.
Mr Tilson: I have no problem, as Mrs Poole has just stated, to take it as a starting point, but it may well be -- again, I remind the government members of the terms of reference that have been given to this committee. It was pointed out to me this morning, because I did ask for them specifically, that one of the terms of reference is for this committee to provide comment on the green paper. And I quite frankly do not intend to do it on five minutes, and maybe a lunch hour may not be enough time either. Obviously, if the government is throwing us morsels, I will take a morsel, but it may well be that more time is required. So if he is asking me to amend my motion, I would certainly agree with that --
The Acting Chair: Mr Mammoliti has done that.
Mr Tilson: -- on the understanding that we may require more time.
The Acting Chair: Okay. Maybe we had better have the clerk read the amendment before we get into any more debate on the amendment. We have to deal with the amendment before the new motion.
Mr Mahoney: Does that include morsels for lunch?
Ms Poole: Sandwiches, I guess; the sandwiches I asked for, or better.
Clerk of the Committee: Mr Tilson moved that the time for questions from committee members to ministry staff relating to the discussion paper be expanded.
Mr Mammoliti moved that the motion be amended by adding after the word "expanded" the words "to Thursday 21 February from 12 noon to 2 pm."
The Acting Chair: Any more discussion on the amendment? Okay, we will call the vote on the amendment. Those in favour?
Mr Mahoney: Are we voting on the motion, as amended?
The Acting Chair: We have to deal with the amendment before we deal with the main motion.
Ms Poole: Mr Tilson, do you agree to a friendly amendment?
Mr Mammoliti: He has agreed to the friendly amendment.
The Acting Chair: He likes giving me a hard time. I do not mind. It makes me feel wanted.
Ms Poole: Can we just agree to a friendly amendment so we have one vote?
Mr Tilson: Yes, I do.
Ms Poole: Mr Chair, he agrees to a friendly amendment, so we can have one vote.
The Acting Chair: One vote? All in favour? Mr Mahoney, is that a yes? Thank you, sir. Did it hurt?
Mr Mahoney: That is right. I want morsels.
The Acting Chair: We will now vote on the motion, as amended.
Mr Mahoney: Can Hansard show that my critic ripped my arm off and pulled it up into the air?
The Acting Chair: We will make sure it is sewn back on before we leave.
Mr Owens: Mr Chairman, I would like to suggest that the government's five minutes be added to our time on Thursday at lunch.
Mr Mahoney: The Tories have not had theirs.
Mr Tilson: I should get 10.
Mr Owens: No, no. Mr Tilson used his five minutes.
The Acting Chair: He had 15.
Mr Owens: In an admirable fashion. He used his five minutes as he saw fit.
Mr Mahoney: -- free vote on that motion.
The Acting Chair: Oh, oh. Mrs Harrington.
Ms Harrington: I just wanted to commend the staff for the document. At first it looked like tough going, but now that you have helped us through it, it is a little bit more readable and I think you have done an excellent job. Thank you.
I do not know if you want to comment on that.
Mr Mahoney: We commend the staff for doing that job, no problem -- not to be confused with agreeing with any of the contents.
Ms Poole: Nor the political direction.
The Acting Chair: I too would like to thank the staff for a very thorough document. We have run out of time, so we will stand adjourned until 10 am tomorrow morning in room 151. Thank you.
The committee adjourned at 1705.