Committee Transcript 1991-Jan-16 | Legislative Assembly of Ontario

The Vice-Chair: This is the second day of committee hearings on Bill 4. I have an announcement to make, that a revised schedule for this afternoon's hearings will be available to committee members some time this morning. I would remind committee members that this means we are sitting until 6 o'clock so you can arrange your schedules accordingly. As soon as it is available to us, we will make it available to the members of the committee.

MINISTRY OF HOUSING

The Vice-Chair: This morning I would like to welcome the officials from the Ministry of Housing once again to brief us on this legislation. For the purposes of Hansard, I would like you to identify yourselves and then proceed with your presentation.

Mrs Beaumont: My name is Anne Beaumont. I am the assistant deputy minister of housing policy. I want to introduce you to my colleagues, Dana Richardson on my right, who is manager of existing stock policy, and Christina Sokulsky on my far right, senior solicitor in our legal branch.

We provided the committee yesterday with an outline of our remarks. You may find that helpful to you in following the presentations as we move through them this morning.

First, I am going to try to provide some context for your deliberations and for the presentations that will be made to you by giving you some information on the rental stock in the province, on the existing system of rent regulation and on the results of that system. I will also in the course of my presentation provide you with some information in response to your questions of yesterday morning that were directed to the Ministry of Housing specifically.

Let's look first of all at the rental stock: 63% of all homes in Ontario are owned and 37% are rented. That means there are approximately 1.25 million rental units; 84% of those or 1,050,000 are privately owned, and that is the stock with which the rent regulation system in this province deals. Of those units, 40% are in high-rise buildings; we would classify a high-rise as a building of five or more storeys. These buildings, you will find, are usually owned by numbered companies on behalf of corporations and are managed by property management firms, because the ownership and operation of these large buildings is big business. The remaining 60% of the units are in low-rise buildings. This would include individual units rented out by a family in its home and small, individually owned buildings. Perhaps surprisingly, 74% of the low-rise stock is also controlled by corporations.

Most of the rental units, not surprisingly, are located in large urban areas. Forty-five per cent of the rental stock is to be found in the Metro Toronto census area, 11% in Ottawa and 6% in Hamilton. We have a substantial proportion of the private rental stock in those three large centres.

We take a look, then, at the vacancy rate within buildings. You will no doubt have seen from your reading of the media that vacancy rates have been improving lately mainly because of the number of condominiums on the market, particularly in Toronto, but vacancy rates in the province are still very low, especially in the major centres. In October of last year, as you can see from the information sheet, vacancy rates province-wide were only 1.4%, and in the three large centres: 1% in Toronto, 0.5% in Ottawa and 1.3% in Hamilton. These figures are a long way from the 3% which has traditionally been held to be an indication that the market is operating in a healthy fashion.

The demand for rental housing has grown much faster than the rate at which the market is providing it. You can see from the figures on page 2 of the information sheet that private rental starts in recent years have generally been below the 12,000-a-year mark. Condominiums -- and this is why we provided the information on condominium starts -- have helped provide some relief from low vacancy rates, as approximately one half of all condominiums are rented out and in the last four years there was a very high production of condos, some would argue an overproduction of condos for the market that was available to buy them. As you can see in 1988 and 1989, condo starts were over 20,000 a year. These have certainly helped the rental market, but unfortunately when they do come on the rental market they tend to be at a very high rent level, partly because all new buildings tend to be at a high rent level because of the costs of construction and partly because condos, as they were designed to attract the purchaser, include a large number of luxury features and so do tend to be very expensive.

Rental stock that we have in the province is aging: 65% of the rental stock is more than 20 years old and much of the rental housing we have, in particular the high-rise rental housing, was built in the 1960s and early 1970s, and now, of course, major building systems are requiring repair or replacement regardless of whether they have been well maintained or not. If the maintenance has not been at adequate levels, obviously more money needs to be spent.

You asked a question yesterday on the state of the stock. One of the pieces of information we distributed late yesterday afternoon was called Background: Available Data on the Condition of Ontario's Rental Stock. It looks like this: it is about half a dozen pages extracted from a report; there are some graphs on it and some text. Let me comment on a few of the things in that piece of material. In 1989, Statistics Canada -- based on a report by Statscan -- indicated that 29% or 349,000 of Ontario rental units were identified by occupants to be in need of major or minor repairs; the last couple of pages of this material indicate what was meant by major and minor repairs in that survey. Low-rise apartments accounted for the largest number of rental units identified as being in need of major repair, and the number of units in need of major repair has increased over the last 30 years because of the aging of the stock. The proportion of units in the rental stock identified as being in need of major repair has also increased over the last 30 years.

Other information included in this handout indicates that the proportion of tenants perceiving a deterioration in maintenance -- this is separate from need for repair -- has increased in the years 1977-87 in the six largest centres in the province. It is projected that there will be a significant increase in the number of rental units in need of major repair by the end of the century as the stock continues to age.

Statistics Canada information again indicated that rental renovation expenditure in Ontario has been relatively flat and has lagged significantly behind expenditure by home owners on their property.

You referenced in the question yesterday documentation for the Ministry of Housing's $10-billion estimate of outstanding renovation and repair work. The Ministry of Housing has not estimated $10 billion needed. The $10-billion estimate is a FRPO, Fair Rental, estimate, and that is derived from a ministry study that was undertaken in 1982. This is indicated on page 6 in the handout. In 1982, as part of a larger study, there was an examination of five high-rise buildings in Toronto, and based on estimated-to-be costs in those buildings, there was a projection of the need across the whole stock. That projection has been translated into 1989 dollars, which would be $4 billion to $7 billion needed over a 20-year period. FRPO took that figure and again increased the number to $10 billion. Our estimate would be $4 billion to $7 billion needed over a 20-year period.

On a similar subject, you asked for information on the low-rise program and, again, we distributed a single sheet last night on that program. This was a program introduced in December of 1985 and planned to rehabilitate 19,000 low-rise units by 1990.

In fact, by yesterday we had committed expenditures of something over $83 million for just over 19,000 units. This is full expenditure on the program, and there is no money available at this time for further allocation. That is something that has been reviewed.

You asked for a projection of the impact of Bill 4 on this. Our information indicates that of landlords who do get funds under the low-rise program, five sixths of them, 83%, do not come to rent review for an increase above the guideline, so 83% of them would not be affected by Bill 4 at all.

There is the possibility of landlords who get money under low-rise coming to rent review for the money they spend on capital which they do not get through the low-rise program, their share of expenditure. One in six of the landlords who get money under LRP do come for that and they have the potential of being affected, but that is a small proportion of the numbers.

Let me turn now to the rent regulation system we have in effect, starting on page 3 of your large handout. We have had various forms of rent regulation in this province since 1975 under three pieces of legislation. From 1975 to 1979 the Residential Premises Rent Review Act, commonly known as RPRRA -- I am going to give you some of the jargon for things in the legislation, because as you hear presentations you may hear a number of the people using jargon. There is a lot of jargon in rent regulation, believe me.

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The act you may hear referenced more frequently, though, is the one that was in effect from 1979 to 1986, the Residential Tenancies Act or the RTA. The act currently in place is the Residential Rent Regulation Act.

All three systems regulated not base rents but the rate of rent increase and all were based on the cost pass-through principle. We have set out for you what that principle is because it is a fundamental basis of rent regulation in this province. This operates so that the government in some way or other, and the ways are varied, establishes a guideline. Rents can be increased up to that guideline without the landlord being required to seek approval from a government body. A landlord could apply to a government body to get approval to increase rents above the guideline, but would have to justify costs which could be passed through into rents. So we have a level up to which you can raise rents and the potential of pass-through above that with justification and approval from a government body. That is the cost pass-through principle.

I am not going to comment on some of the earlier systems of rent regulation but only on the RRRA, which is the current one. It is that act which Bill 4 seeks to amend. You will see this on pages 4 and 5 of the handout. The RRRA is an interesting piece of legislation in many ways, in part because of the way it was developed. The features found in the act were negotiated by a committee of landlords and tenants in 1985, the Rent Review Advisory Committee, known as RRAC. In presentations made to you, you may hear a number of comments on RRAC and the deliberations of RRAC and recommendations of RRAC and why certain features went into the RRRA or did not because of those deliberations at RRAC.

The RRRA, although there are a few exemptions, covers virtually all private rental units in the province. The previous legislation only covered properties rented before 1976. For a time, units renting for more than $750 a month were also exempt. Because post-1975 units were brought under rent regulation for the first time in the RRRA, there were different provisions applied to them, so you may hear references from people making presentations to the pre-1976 and post-1975 buildings and the different way in which they are treated. This is the basis of it.

I mentioned, in commenting on the cost pass-through principle, that government establishes, in some way or other, a guideline. Under the RRRA the guideline increase formerly known as the residential complex cost index, or RCCI, is calculated annually. I am going to give you the whole formula, but I will explain later what it is in principle. It is based on a formula of 2% plus two thirds of the percentage increase in the three-year moving average of a typical landlord's cost of operating a building. This typical landlord's cost of operating a building is a formula called BOCI, or building operating cost index. So when you hear landlords in particular talk about RCCI and BOCI, this is what they are talking about. RCCI is what the general public thinks of as the guideline increase in rents every year. BOCI is part of the formula on which it is based and that part of the formula that addresses the cost of operating a building.

The 2%, in addition to that part of the formula, is based 1% on an allowance for profit and 1% on an allowance for minor capital expenditures. Again, you may hear landlords indicate that in a year in which they go for approval of major capital expenditures above the guideline, go for a rent review order, they lose the 1%. They have argued that this has encouraged the bunching up of capital expenditures in one year so that they only lose the 1% once rather than over a series of years.

What you really need to understand about the guideline increase though is that it is based on the costs of operating a building and that it does include an allowance for maintenance and for minor capital expenditure. It is based on inflation, but what it does is to smooth out inflation by using a moving average. So if there is a year in which there are very high increases in inflation which could lead in that year to very significant increases in rent, that is smoothed out by the operation of the formula and that has been seen in most of our discussions with both tenants and landlords as a plus.

The 1991 guideline is 5.4%. We list as well, at the bottom of page 4, the factors on which you can justify increases above guideline. I am not going to explain what all of these are. You will find, in the glossary in the blue pages at the back, the first couple of pages of the glossary, an indication of what these are, but you will see there is a range of areas in which a landlord can apply for increases above guideline.

The decision-making system: Under the Residential Rent Regulation Act the initial decision is an administrative decision made by a rent review administrator who is a member of the ministry staff. That decision is based upon written representations and responses from landlords and tenants. It is possible for either party to appeal the decision to the Rent Review Hearings Board, an independent board, and a hearing is then held before one member or three members on request.

Another new feature of the RRRA is the rent registry. The 1985 rent of all units is to be registered and verified in the registry as a means of checking on illegal rents. Registration is mandatory only for buildings with six or more units, and the rents of more than 650,000 units have been registered in the registry to date.

Finally, the Residential Rental Standards Board was established to help address concerns about adequate maintenance. That board has established a standard for maintenance which has been published in the Ontario Gazette and it reviews work orders sent to it by municipalities and can recommend to the minister that he impose rent penalties for poor maintenance.

Finally, let's take a look at some of the effects of the RRRA. On page 6 we list some key statistics. In any one year, an average of 17% of all rental units in the province come before rent review for an increase above guideline. In the four years in which the system has been operating, the average rent increase awarded has been 11.1%, although as the minister indicated in his remarks, that average does not always give the true picture. Averages, of course, can always disguise the very low end and the very high end. Page 4 of the blue pages shows the range of increases awarded and you will note that almost 50% of the increases awarded are above 10% and 2.06% of them are above 30%.

The average -- and bear in mind my warning about averages -- current maximum rent in the province is $508, that has, on average, increased to $564. The major reason for increases in orders issued by the ministry, an operating cost allowance -- in essence, that is the equivalent of the guideline increase. It is adjusted and I will not go into details about how it is adjusted, but that is taking out the 1%, among other things. So the operating cost allowance is the equivalent of the guideline. Above that, the major reasons for an increase above guideline are capital expenditures and financial loss.

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In the last four years, we have issued over 16,500 orders of rent increase. Tenants can also apply for rebates under the Residential Rent Regulation Act, and we have issued over 8,500 orders for rebates, with an average rebate of $1,063 or 13.1% of the rent.

You asked a question yesterday on luxury renovations. Again, last night we distributed some material which starts -- it is four pages; the first one is numbered page 4 because it comes out of the report -- with extent of the problem. This is based on material we prepared a year ago when we were looking at the issue of necessary and unnecessary capital, an examination which resulted in some regulatory changes in April.

As part of that examination we took a look at some key buildings which were referenced in the media and in the House and from other sources. We also did a random sample of buildings. We did not go out and look at the buildings. It was based on the material the ministry had at hand, and we made some assumptions based on that material about what was necessary and what was unnecessary. Because we did not go out and look at the buildings I should alert you that some of what we had assumed was unnecessary may in fact have been needed in the particular case. But you will see that the things we had included under unnecessary included things like bathroom renovations, dishwashers, intercom upgrades, lobby renovations, microwaves, etc.

In looking at those numbers, I will take you to the bottom of the second page of this, numbered page 5, under "Random Survey." We looked at 92 orders from pre-1976 buildings with capital expenditures. This showed that on these, the average of the total rent increase ordered was 12.62%; 7.49% was due to capital and, of that, what would seem to be due to unnecessary was 2.43%. We indicate again over the page that 58% of the pre-1976 orders include capital expenditures. There is a summary on the last page of this from the survey.

Finally, the backlog. I included this information because I assumed we would be asked about backlog. We currently have on hand 5,461 applications to be resolved, representing over 200,000 units. This is a very major reduction from the backlog, which at its height was 27,000. So that is being handled.

The minister indicated yesterday in his remarks that the current system is very widely criticized as being too complex, and tenants have been very critical of the high rent increases awarded and have advocated a system of rent control that would protect them from economic eviction. It is in response to these concerns that the government has proposed a partial moratorium effective I October until there has been full public consultation on the new system of rent control to replace the RRRA.

Dana Richardson will now speak to you on the features of Bill 4.

Ms Richardson: My material starts at page 8 in the large handout, and I am going to be discussing an overview of what is in Bill 4.

The major feature of Bill 4 is that it is going to limit rent increases as of 1 October 1990. Most rent increases will be limited to the guideline. There will be some above-guideline rent increase permitted under Bill 4.

Bill 4 is an amendment to the Residential Rent Regulation Act, and it focuses in on the rent increase features of the Residential Rent Regulation Act. As such, all the other features of the act remain intact. That means that a tenant can continue to challenge a guideline increase; a tenant can make an application for a rebate for an illegal rent increase. The Residential Rental Standards Board continues to operate. The Rent Review Hearings Board continues to operate, as does the Rent Registry. So the other features of the rent review programs do continue.

Bill 4 is an interim measure, and there is a sunset date in the bill of 1 January 1993.

On the next page, I would like to describe how Bill 4 limits the maximum rent increases. As I stated, most increases will be limited to the rent review guideline. In 1990 that is 4.6%, and in 1991 that is 5.4%. Above-guideline rent increases will be permitted for two factors: extraordinary operating costs and interest rate changes for mortgage renewals. I will be describing in more detail both of those features.

Rent increases will not be permitted to exceed the amount that a landlord requests on an application. That is a change from the current system, and it was referenced by one of the witnesses yesterday.

Bill 4 does not pass through financial loss, economic loss, hardship relief, equalization, capital expenditures and the list that Anne Beaumont indicated to you.

Extraordinary operating costs: These are the kinds of costs that are genuinely beyond a landlord's control. They are the kinds of costs often shared by home owners. If there are significant cost changes in six categories -- and the six categories are municipal taxes, heating, hydro, water, cablevision and insurance -- the cost changes must be significant, and in order to test whether they are a significant amount, there is a formula that is set out in the legislation. The costs must increase by more than 50% of the amount recognized in the building operating cost index, which is the basis on which the guideline is calculated, or by an amount that is equal to at least 1%.

I would like to give you an example of how that actually works. In 1991 the building operating cost index has calculated that the average of municipal taxes in the past three years has been 7.76%. In order to be eligible for an extraordinary operating cost pass-through, an individual municipality's tax increase would have to be at least 50% higher than 7.76%, and that would be about 11.5%. So if a municipality had a 12% increase in 1991, this would be considered to be an extraordinary operating cost and the difference between what the guideline would recognize, which is 7.76%, and the actual cost of 12% could be passed through.

Decreased costs as well as increased costs in these six categories can also be recognized. If landlords make an application for any one of these six categories, they must provide the information in all six categories so that if there is an increase in one category, it may be offset by a decrease in another category.

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The second feature in which a rent increase can be justified is an interest rate change, but only in certain circumstances; the interest rate change on a mortgage renewal or refinancing, only if the renewal is at arm's length and to the extent that the principal amount recognized is 75% of the acquisition or construction cost, and it must be calculated using a 25-year amortization. Under the current system, the Residential Rent Regulation Act, principal could have been recognized up to 85% and there could have been different amortization periods recognized. These two features are changes.

What the legislation will recognize is the general trend in interest rates. It may not actually recognize the landlord's actual cost experienced, but if there has been a change in the general trend of interest rates, this will be picked up in this cost pass-through. It will not pass through a landlord's financial loss due to increased financing related to a purchase.

Because Bill 4 is an amendment to an existing act, there are a number of transitional rules in order to make it work together with the current act. I am going to deal with four categories: how Bill 4 affects certain applications, certain orders, phase-ins, and how in certain circumstances there may be some refunds owing to tenants.

Under rent review, if a landlord wants to increase the rent by more than guideline, the landlord must make an application at least 90 days before the first intended rent increase. In the next 12 months after that first intended rent increase, as the anniversary date of each rental unit's rent comes up, it will be subject to the same percentage rent increase as that first rent increase. So "first effective date" is a code word or jargon word in rent review and it is the trigger date that will cover the rent increases in that building for the next 12 months. Undoubtedly, you will be hearing people making reference to "first effective date" of rent increase, and it is used in the context of an application or an order or a phase-in.

If the first date of the rent increase, the first effective date on an application, is on or after 1 October, it will be decided under the Bill 4 rules. If the first effective date of an application is before 1 October, Bill 4 will not affect that application. We estimate that approximately 130,000 rental units will not be affected by the Bill 4 rules. There are rental units that are covered by applications currently under review in the rent review system.

As you know, the bill was introduced on 28 November. Some rent review orders had been issued for rent increases on and after 1 October prior to that date. There are some offices in the province that are absolutely current and they are issuing rent review orders before the first effective date of rent increase. So there are approximately 194 orders that were issued that had a first effective date of rent increase on or after 1 October.

Under Bill 4, some of these orders will be voided and some of these orders will be replaced. A replacement order will happen if the same criteria that are available under Bill 4 were found in that particular application; that is, that they have extraordinary operating costs or they have financing cost changes. If an order is not being replaced and it is voided, then the landlord will only be able to collect the guideline amount, which is 4.6% for the increases in 1990 and 5.4% in 1991.

There are also some conditional orders that have been issued. A conditional order under the RRRA occurs when a landlord makes an application and the essence of the application is, "If I do this capital expenditure, how much could be passed through?" A determination is made on the basis of the cost presented at the time of the proposed capital expenditure, and then the landlord must actually come back to rent review and make a whole-building review application to have that passed through into rent. But it is a conditional order that will look at what could be allowed if the work is done.

There will be a number of conditional orders that have not been followed up by a subsequent rent review application for increases before 1 October. There are approximately 37 of these orders, covering 3,739 rental units.

Phase-ins are a mechanism by which a financial loss, economic loss or equalization is calculated on a rent review order. The rent increase is spread out over a period of years, and without making another application the landlord can collect that rent increase through a phase-in. The Ministry of Housing sends out a notice of phase-in which indicates the amount that can be collected in the following years. Phase-ins operate like an order. They have a first effective date of rent increase that covers the increases in the whole building for the next 12 months.

There also were a number of phase-ins that had been issued by the time the bill was introduced, and if they had a first effective date on or after 1 October, they also will be voided. Approximately 2,800 notices of phase-in fall into this category. If the first effective date of rent increase for the building occurred before 1 October, it will not be affected by Bill 4.

There are some circumstances in which tenants will be eligible to receive a refund because the orders have been voided or the phase-ins have been voided. In those circumstances, the landlord who owes the tenant money must repay that money within 60 days of Bill 4 receiving royal assent. If the landlord does not pay then the tenant may deduct the amount owing from future rent or make a rent review application for a rebate. The potential effect would be that there are approximately 194 orders that this might be occurring in and approximately 2,800 phase-ins that this might be occurring in.

On page 14, I have set out some examples on how in a particular case Bill 4 would affect an application. I have set out five examples and I will just go over a few of them.

If an application for a whole-building review increase was made in July, after 1 July, for financial loss, the first effective date of rent increase would be 1 November 1990, in this example, to cover all rent increases up to 31 October 1991. So the increase is occurring in the next 12 months. The result under Bill 4 will be that the rent increases that come up for their annual increase in 1990 will be limited to 4.6% and in 1991 to 5.4%. The reason is that the first effective date of increase occurs after 1 October 1990.

Examples 2 and 3 are very similar. They are examples where an application for an above-guideline rent increase is made somewhat earlier. In example 2, it is made on 1 April 1990 and there may not yet be a rent review decision or an appeal decision issued for that. The result under Bill 4 is that because the first rent increase in this example was 1 July 1990, it will be decided under the rent review rules in place at the time the application was made. It will not be affected by Bill 4, and that is the same effect in example 3.

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In example 4, an order was made for an above-guideline increase commencing 1 November 1988 based on financial loss. The financial loss was going to be phased in at 5% per year until it was eliminated in about four years. The result under Bill 4 is that the notice of phase-in with the first effective date of 1 November 1990 will be void. The landlord will not be able to collect the above-guideline increase.

Example 5 is an indication that a feature under the RRRA will continue to operate. It is called maximum rent. In the example, a landlord did not charge a rent increase in 1990, but decides to charge the full permitted increase in 1991. Under Bill 4, as under the RRRA, that landlord can actually charge a 10% rent increase without coming to rent review, which picks up the increase he did not take in 1990 as well as the 1991 rent increase. But that is a permitted rent increase, because it is just going up to the level of the maximum rent permitted.

Very quickly, there are the final three features of Bill 4 that I would like to mention: The first is tenant payments of retroactive orders. As Anne Beaumont indicated to you, there are still approximately 5,000 rent review orders in our system and some of these may result in quite high rent increases being awarded. Some tenants will have to pay a significant amount of money retroactively for these orders. Bill 4 provides that where rent review orders have been delayed by at least three months after their first effective date of increase, such orders can permit a tenant to pay the money owing to the landlord either in a lump sum or in 12 equal monthly instalments. The instalments can continue to be paid after the tenant moves out. It does not absolve the tenant from having to pay, but it stretches out the period over which those payments would be made. This will affect all rent review orders as of 29 November.

Additionally, there is a clarification in Bill 4 that rent review covers rented sites in a mobile home park and land-lease communities, even if the living accommodation is owned by the tenant. The current wording of the RRRA has been the subject of some court proceedings and this is a clarification of the rent review coverage.

Finally, we intend to simplify the information requirements on a notice of rent increase, which is the notice that all tenants receive each year, even for a guideline rent increase.

There will be a number of regulations that will support Bill 4 and they will set out a number of forms and the calculations needed to calculate extraordinary operating costs and interest rate changes. It is our intention to bring forward to this committee at the time of clause-by-clause review a draft of those regulations so that you can see what they will be when they come into effect at the same time Bill 4 is passed.

That completes my part of the presentation and now Christina Sokulsky would like to just go over the outline of Bill 4 and how it legally interacts with the RRRA.

Ms Sokulsky: As Dana Richardson has mentioned, I would like to discuss how Bill 4 is organized and how it relates to the Residential Rent Regulation Act which it seeks to amend.

First, I would like to discuss how the Residential Rent Regulation Act is organized. The act is divided into various parts which deal with a number of matters. Sections 1 to 4 of the act contain definitions and provisions dealing with the application of the act and exemptions from the act. These provisions are following by parts I to IX.

Briefly, part I contains notice of rent increase provisions. Part II deals with general matters and includes provisions relating to the Residential Rental Standards Board. Part III deals with procedure. Part IV deals with the Rent Review Hearings Board. Part V deals with the rent registry. Part VII deals with appeals. Part VIII contains licensing provisions. Part IX contains miscellaneous provisions. Part VI of the act deals with rent regulation and includes provisions relating to the amount and frequency of increases permitted, and applications by landlords for above-guideline increases and by tenants for rent reductions and rebates.

I am now going to discuss how Bill 4 relates to the Residential Rent Regulation Act. As I mentioned, it seeks to amend that act. Sections I to 7 of the bill contain the following provisions: They contain an amendment to the definition section, in particular to the definition of "rental unit," to clarify coverage under the Residential Rent Regulation Act of rented sites for mobile homes or single-family dwellings, even if the mobile home or single-family dwelling is owned by the tenant of the site.

Those sections also contain an amendment to the notice-of-rent-increase provisions discussed by Dana Richardson. The sections also contain an amendment to the section of the Residential Rent Regulation Act dealing with whole-building review orders to allow those orders to provide for instalment payments of amounts owing by tenants.

The sections also contain incidental amendments to the Residential Rent Regulation Act required by the establishment of a new part, part VI-A, and also contain provisions for repeal of those amendments.

I would like to move to section 8 of the bill which amends the Residential Rent Regulation Act by adding part VI-A, which establishes a complete code for regulation of rent increases taking effect on or after 1 October 1990, with certain exceptions. Those have been discussed by Dana Richardson and I will briefly outline them again.

Part VI-A does not apply to rent increases in applications, notices of phase-in or orders if the first effective date for the residential complex in the application, notice of phase-in or order is before 1 October 1990.

I would like to briefly deal with features of part VI-A. Part VI of the Residential Rent Regulation Act, dealing with rent regulation, as I mentioned, does not apply where part VI-A applies, unless otherwise indicated. Part VI of the Residential Rent Regulation Act contains section 70 to section 100. Part VI-A commences with section 100a and ends with section 100u. Part VI-A is repealed on 1 January 1993.

Some of the matters dealt with in part VI-A include the amount and frequency of rent increases, circumstances under which a landlord may apply for above-guideline increases and the criteria to be considered on such an application, and I refer to sections 100d and 100e.

Another feature is tenant applications to dispute rent increases and request rebates, sections 100g and 100j.

There are also provisions voiding certain orders and notices of phase-in, section 100n.

I will now move to the final sections of the bill, which are sections 9 to 13. They contain the following: amendments to the Residential Rent Regulation Act, 1986 relating to the following: regulation-making powers to give effect to the provisions of the bill and provisions to repeal those powers; further incidental amendments required by the establishment of part VI-A; and provisions for repeal of those amendments.

Sections 9 to 13 also contain provisions dealing with the coming into force of various sections of the amending act, with two exceptions. The provisions of the amending act are to come into force on royal assent. The two exceptions are as follows.

The first is the amendment to the definition of "rental unit" in the Residential Rent Regulation Act. That shall be deemed to have come into force on 1 January 1987, but no rights acquired by a person from a court order of judgement before 29 November 1990 are affected.

The second exception is the amendment to the Residential Rent Regulation Act allowing whole-building review orders to provide for instalment payments by tenants of amounts owing. That provision shall be deemed to have come into force on 29 November 1990.

Finally, the last section of the bill provides that the short title of the act is the Residential Rent Regulation Amendment Act, 1990. That concludes my remarks.

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Mrs Beaumont: That concludes our presentation. I recognize that we are out of our allotted time, but I would indicate to the committee that the ministry would be available to the committee to come back at another time, if you want the opportunity to ask questions of us.

The Vice-Chair: Thank you. We appreciate your very informative presentation. I do, however, know it has evoked some questions. May I make a suggestion, that perhaps you could come back following the morning sitting, at approximately 12 noon? The committee at that time could ask the questions that it needs clarification on. We would have lunch brought in, if that suits both the presenters and the committee. That may be a suggestion that we find useful.

Mrs Y. O'Neill: I think that is a very admirable suggestion. I feel that the sooner we get back to our questions the better. It is usually helpful. I certainly feel the presentation has clarified a very complex issue greatly, but there are certainly still questions we have from our party. So I would really like to encourage this arrangement.

Ms Poole: The only problem I do have is my conflict at 12:30 with the cable taping. I am trying to get it changed, but I do not know if it is possible. If it is impossible, perhaps I could have the liberty of starting the questioning off at 12 o'clock, if that would be agreeable to committee members.

The Vice-Chair: I would think we could accommodate that. Is that the pleasure of the committee?

Mr Abel: I have one request, if I may. If we could get together again at 12:15, I would like to have some discussion with some of the colleagues here for 15 minutes between 12 and 12:15. I do not know if that would conflict with Ms Poole's timetable.

Mrs Y. O'Neill: I thought, Mr Chairman, we had just agreed to your suggestion to have the ministry people come at 12.

The Vice-Chair: I am not exactly clear what is going on here. Are you just saying that we want to start with the ministry at 1:15?

Mr Abel: At 12:15, if we could.

The Vice-Chair: Rather than 12. That would cause Ms Poole some difficulty.

Ms Poole: I could probably delay it at least 15 minutes.

Mr Abel: I do think some discussion has to take place with the other people here.

Mrs Y. O'Neill: Mr Chairman, may I please get a clarification? Is Mr Abel asking for a 15-minute discussion period with this committee in closed session?

Mr Abel: No, I am not.

Mrs Y. O'Neill: What is he asking for?

Mr Abel: That we reconvene at 12:15.

Mr Drainville: A 15-minute recess, from 12 noon.

Mrs Y. O'Neill: That would have been a much clearer way to express it, but that is fine, a 15-minute recess.

Mr Abel: My apologies.

The Vice-Chair: I think we have a consensus that at 12:15 the committee will reconvene to hear the Ministry of Housing continue its presentation.

Mr Tilson: My question, Mr Chairman, to perhaps you and the clerk, is that before we get into this again. obviously we are getting into the start of time problems. We have, as a result of yesterday's proceedings, expanded certain times, specifically Mondays. These are going to be recurring problems and hopefully we will be put more on notice that something is going to happen between 12 and 2 or between 5 and 6 or some evening, well in advance. As I indicated last night, I have no problems sitting these extra times, but quite frankly I want notice of that, if the clerk and the Chair are contemplating specific times. When I say "notice," hopefully more than 24 hours notice.

Clerk of the Committee: Could I just respond to that briefly? I will have this morning a revised agenda for today and tomorrow. You can appreciate that I had a time problem too, since the committee only agreed yesterday to increase its time until 6 o'clock, so I only finished scheduling yesterday at about 5. That revised agenda is being typed up now and will be to the committee later this morning.

Mr Tilson: Mr Chairman and Madam Clerk. I certainly do not mean this as a criticism of you. I am just trying to organize our days, as we all are, and she is too. of course.

The Vice-Chair: I think all members have the same difficulties and we appreciate that. I think we all have to understand that this is only the second day and hopefully things will run a little more smoothly as we continue. Thank you for your presentation. We will see you again at 12:15.

METRO TENANTS LEGAL SERVICES

The Vice-Chair: The next presentation will be from the Metro Tenants Legal Services. We have Anne Keating with us. Would the people at the table identify themselves to the committee? We have scheduled 40 minutes for your presentation: 20 minutes for your actual presentation and 20 minutes for a discussion with the committee to follow from the issues you raise. You may begin.

Ms Keating: Good morning. My name is Anne Keating. I am staff lawyer and director of case work at Metro Tenants Legal Services. Susanne Bregman is a tenant at 11 Shallmar Boulevard, and Sonia Gruson is also a tenant at 11 Shallmar Boulevard.

Metro Tenants Legal Services is a legal aid clinic which serves low-income tenants in Metropolitan Toronto. We practise principally in the areas of landlord-tenant law, rent review, and other areas of the law which affect tenants and low-income tenants.

Metro Tenants basically supports Bill 4. We strongly urge the committee to pass Bill 4 quickly. We support it as an interim measure that is necessary to protect tenants from rent increases that are too high while the government prepares permanent legislation. I wish to stress to the committee that we support Bill 4 principally for two main reasons:

The first is that tenants must be protected, because most tenants are poor people. I have cited some statistics in the brief that has been distributed to you from the 1981 census in Canada, which shows that 28% of Ontario's population is tenants. In 1980 the average income of a renter household was $15,000, while the average income of an Ontario household was $22,600 in 1980 figures. Furthermore, 21% of family renter households in 1980 had incomes of less than $10,000. I am saying most tenants are poor people and we have to support this bill because it protects poor people.

Why are tenant households of lower income? One of the reasons is that most of them are headed by women, 57% in 1980, and more tenant households are headed by people under the age of 25. At Metro Tenants, we see the human side of these statistics day after day. I remember very vividly meeting with a woman, a tenant in northwest Toronto who was in her mid-fifties, a single parent raising a teenaged daughter, who was driving a bus for a small bus company and working as a dispatcher. I went to her home to help her calculate what her retroactive rent increase would be, and she wept in the living room as she said to me she did not know where she was going to find $300 to pay a retroactive rent increase. She showed to me the books she kept, which meticulously accounted for every penny of her income and every penny she had to spend on her bills. She did not know where she was going to find $300 to pay this retroactive rent increase which, under the present legislation, is due and payable as soon as an order is issued by rent review. This bill is designed to help tenants who are the poorer people of Ontario.

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The second major reason Metro Tenants supports this bill is that the existing rent review legislation allows landlords to pass through unlimited rent increases due to capital expenditures. I am going to focus my remarks at this point principally to the issue of capital expenditures. There is no mechanism in the existing legislation to prevent landlords from spending whatever they want whenever they want; it is the tenants who pay. Under the existing legislation, tenants in effect are credit cards for the landlord.

Some of you may be fairly unfamiliar with the existing rent review legislation. Essentially, it is called cost pass-through. This means that the landlord may decide one day, "I'm going to renovate the lobby." The landlord can go downtown, order the furniture, order the wallpaper, order the floor tiles and change the lobby. He presents the invoices to rent review, which adds them up and then issues an order to the tenants to pay for those renovations.

That is essentially how rent review now works with respect to capital expenditures. There is no ceiling on the amount of capital expenditures a landlord can incur. A landlord today does not even have to show that a capital expenditure is necessary. If he wants to hire a designer to design the lobby, he can do so. The allowances are generous. Landlords get not only costs but the value of their labour, they get interest and they also get an automatic 10% management and administration fee. Allowances for capital expenditures are built into the base rents. Once they are there, they are there for ever, so long after the landlord has paid off the renovations, the tenants are still paying those allowances for those renovations.

There are some examples from our practice at Metro Tenants. For example, at 50 Stephanie Street here in Toronto, in 1984 tenants paid a 10.8% rent increase. At that time the landlord put in new carpets for about $50,000 and about $300,000 in garage repairs. The carpets were supposed to last seven years; the garage repairs were allocated over a useful life of 15 years. That means that over 15 years the tenants are paying for those garage repairs and over seven years they are paying for the carpets. They are still paying for those today.

In 1990 the landlord got another 20.5% rent increase. This time the landlord bought another $75,000 worth of carpets and another $300,000 went into garage repairs. The tenants are in the position of having to pay again for carpeting, again for garage repairs. It seems to the tenants that they should not be paying for these again, but there is no mechanism in place at present to require the landlord to justify an expense or to ensure that the landlord maintains the building in an ongoing way so that capital repairs do not become necessary because of a landlord's ongoing deliberate neglect.

At this point, I would like to ask Susanne and Sonia to speak to their experience at 11 Shallmar Boulevard. This is another example of tenants who are facing huge rent increases both because of capital expenditures and because of the purchase of a building, a financial loss. First, I will ask Susanne.

Ms Bregman: I would like to just speak to the orders we have received in our building. The first order in 1987 was 10.31%, and that was basically financial loss. To be honest, I wish just to put this into a human context. I do not understand how a landlord can come along and put 15% down on a building and pass the rest of the costs on to the tenants. This would amount to a phase-in over about six to seven years where the tenants would see a 5% increase per year. Most of the tenants in our building do not understand this phase-in. They are shocked by it every year when it comes up. They have no understanding of what it really means.

In 1988 we received an order of 23.98%. That was basically capital expenditures. Although many of the capital expenditures we received were considered necessary, such as the boiler and the parking problems we have had, much of it was unnecessary. We did not need a new lobby; we did not ask for it. We did not need new carpeting. We did not need new tiling on certain floors. We did not need new wallpapering. With respect to the capital expenditures that were considered necessary, I believe there was much neglect of the building by previous landlords and I believe there was no preventive maintenance in the building whatsoever. Again, why should tenants be forced to pay for no preventive maintenance? -- and we are still paying for it.

In 1989, we received another order, 18.41%, and that was actually continued capital expenditures for the garage and the boiler. Much of our building is seniors, women who live alone, who are on fixed incomes; I think Sonia will be addressing that. I have to leave the building. I cannot afford it. I am going into graduate school. I cannot afford a rent increase of over $300 since I arrived at the building. I am angry and I feel that this will not help our building: we are too late. The landlord passed everything he could in a very short time. He bought the building and within just over a year he succeeded in increasing the rents. I would say that 20% or more of the building is now changed. If tenants can move, if they are physically able and financially able, they will move. It used to be that no one could get into this building because everyone had been staying there for 25 years. That is no longer the case.

Ms Gruson: I am one of those older women. I am not on a fixed income. I am still working even though I am past retirement age, and it is fortunate that I am, because my Canada pension and my old age security would pay the rent but would leave me $200 a month to live on. I do not think I could manage it, so therefore I am still working, but there are many people in my building who are not. Women over 80 cannot make their pensions meet their rent and are being supported either by years of savings or children.

Susanne talks about people moving out. There is indeed more rental accommodation in Toronto than there was, but not rental accommodation that I can afford. There are apartments for $1,000 and $1,200 a month. I have been widowed for 11 years. I have only been working for 11 years, so my personal pension is not going to do much to my government pension to help me stay at 11 Shallmar, which has been my home since 1972.

I do not see why a person who has paid taxes and educated children should be forced to think of moving at my age because the economy does not allow me to live in what I consider my home and my neighbourhood. When I moved in in 1972, my husband and I were young people in the building. Now I am one of the old ladies in the building, and there are getting to be far fewer of us because we cannot afford to stay there.

Ms Keating: One of the things Susanne said raised another issue I wanted to speak to, simply that landlords cannot complain now and scream they are not getting paid for capital expenditures. They wait 25 years and do nothing, and then when, all of a sudden, capital and major repairs are necessary to the building they are passing through all of these costs to the present tenants. Why should present tenants have to pay for these kinds of capital repairs? In addition, when landlords scream that guideline rent increases are not going to be enough, just remember that a guideline rent increase, the formula that determines the allowance, is based on enough money to cover operating costs plus 1% for small capital expenditures plus 1% gravy. Guideline increase is not just to cover costs. It covers much more than costs.

There are lots of other stories besides the tenants at 11 Shallmar Boulevard. We do not have time to present all of them to you, obviously.

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There is one other issue I wanted to mention, that is, the issue of financial loss. Susanne mentioned that their building was purchased by their landlord in 1987, I think it was. By the way, it was Susanne's landlord who got money from rent review to have an interior decorator design their lobby. Tenants are paying for an interior decorator who designed the colour scheme in their lobby. Susanne's landlord could sell this building and the tenants could again pay a rent increase based on the new landlord's financing costs. Nothing in the present legislation prevents financing costs as a result of multiple sales being passed through to tenants.

Bill 4 does address these issues, and Bill 4 would have helped these tenants. We urge the committee to pass Bill 4 and to get on to the program of designing permanent legislation to protect tenants in Metro Toronto and in Ontario.

In summary, there are simply too many landlords who are using rent review as an easy opportunity to raise the rent. Whether it is necessary or not, they are going to spend the money and get it passed on to tenants. Too many landlords are of the view that they have a right to profit, that tenants have to pay for everything, that the landlord should not bear any of the costs of this investment. It is time that we begin to recognize that housing is a basic necessity and a fundamental right. Landlords who have ignored ongoing maintenance for years and continued to collect guideline increases cannot now complain that their capital expenditures are restricted. In future, landlords should be required to maintain reserve funds, for example, to pay for capital repairs so that tenants 25 years from now are not suffering from rent increases such as those Sonia and Susanne have to pay today.

The Vice-Chair: Thank you for your presentation. It has been excellent. I have some questions from the committee. In rotation, we will start with the official opposition today. Ms Poole, you have seven minutes.

Ms Poole: Thank you for coming to present to us today. I would like to talk to Susanne about 11 Shallmar. You have described a situation which is of concern to me, where the same landlord year after year goes back to rent review for yet another order, so it is not a matter of a one-time expenditure. It is a matter that the tenants are consistently being asked to pay.

However, at the same time I am concerned, particularly with our older buildings, that we do need money put in in certain areas. The roofs do give out. You mentioned the underground parking, which was corroding.

I had proposed some suggestions for Bill 4 back in the late fall that, instead of having a blanket moratorium where there would be no capital expenditures whatsoever, there be a cap on it so the landlord could not go for something like a 23% increase. The cap could be something like 10%; that is just a ballpark figure, it does not need to be that. But when a landlord was going for capital expenditure, they would have to be deemed necessary repairs and by a fairly strict interpretation, so the lobby scenario could not happen, Jacuzzis could not happen, and many of the things that I think tenants find offensive.

Third, to protect against the ongoing neglect we see in some buildings -- not all, but some -- the landlord would not even be entitled to the guideline amount unless he or she received a building certificate which certified that the building was in a good state of day-to-day repair. In that scenario, you have protection of the tenants against a landlord letting things build up year after year and not giving you a decent place to stay on a day-to-day basis, at the same time recognizing that our housing stock is deteriorating and we really do need to address it somehow even in the interim legislation.

How do you see something like that working? Could you envisage that that would work as interim legislation until we decide how to deal with it?

Ms Bregman: Perhaps as interim legislation, but I wonder if landlords are going to be satisfied. We asked our landlord to increase our rent just 10% a year, put a cap on it. He was very angry about that: we had no right to ask that and he was going to go forward with it. We were more than willing to negotiate. I think you are going to find disgruntled landlords who feel capped.

I still believe in a reserve fund. I think that would best meet the needs of tenants. I also wonder what is going to happen to all the buildings, such as ours, that already have the increases. My rent is now close to $800 for a one-bedroom apartment. When I moved in it was $400. How does any future legislation help us right now? It does not.

Ms Poole: Yes, even Bill 4 cannot address the problem of what may have happened in some buildings in the past. I guess the problem is that there are some landlords who do abuse the system and have abused the system and we have to find out how to deal with those and at the same time look at other landlords who have been fair to their tenants and who have kept rent increases low when they have gone to rent review at all. So I am trying to find that kind of balance.

How do you see this reserve fund working? Perhaps Anne might like to comment.

Ms Keating: It could work along some of the same lines that it works now for the co-op sector. I do not have the expertise really to speak to the specifics of it. I think the committee could hear from the Co-operative Housing Association of Ontario or some of the co-op housing groups on the specifics of how that could work, but I would like to speak a bit to the question that you raise with respect to the cap on capital expenditures.

First of all, the question in my mind is, what are tenants paying for now? I mean, they are paying rent today and that is supposed to be to provide them housing that is fit to live in. Do landlords not also have to recognize that they have to pay for this investment? On a sale, they walk away with a capital gain and they do not account to anyone for that capital gain. That is not taken into consideration whatsoever in rent review.

So it seems to me when we are talking about the poor landlords and the money they have to have to keep their buildings up, number one, they are getting lots of money already in rent, so what are they doing with that? Second, do they not recognize that they have to pay for this investment too, not just the tenants? Third, with respect to ensuring that buildings are kept up to standard, yes, we have property standards bylaws, but they are a minimum standard. An inspector will go in and issue a work order if the plaster is falling off your ceiling and your appliances are not working and you do not have any heat, but he will not ensure that your carpets get vacuumed every week. They will not ensure that your light fixtures get changed regularly. I mean, yes, we need to have building standards enforced. Right now the building standards are pretty minimum and I would say if we are going to adopt that approach, then we have to have mechanisms to ensure that a building is kept up to a good standard, not just a minimum standard of care.

Ms Poole: I certainly agree with you on that point. Do I have time for one more quick one?

With regard to the capital gains, this has been a concern of a number of people for many years, that landlords could have a double benefit, that they could put the renovations through rent review and get the rent increase, and then that would mean at the time they sold the building, the building would be worth more and the sale price would be increased because the rents would be higher. So Mr Sweeney, the former Minister of Housing, about seven or eight months ago did put through regulations which would put a stop to that. If a landlord did go to rent review and get money for capital expenditures and rent increases because of that, then the landlord could not realize that same capital gain if he sold the building within a five-year period. That was designed to stop the flipping.

I suppose that in your experience it is just too early to see whether that would have been effective, that you really did not have any cases where that had time to go into effect yet.

Ms Keating: The other thing, too, is that many landlords who purchased their buildings waited for a year to put in a lot of capital expenditures, so they are kind of gaining at both ends in the sense that they get a lower price for a building because it needs a lot of work and then do not really have to account for that later on.

The Vice-Chair: Do we have some questions from the third party?

Mr Turnbull: Ladies, thank you for coming here today. You are probably aware I am a Conservative and I do not want you to consider that in any way I am asking you questions in an adversarial way. I have a tremendous amount of sympathy for the needs of poor people and I want to agree with the statement made by Ms Keating that housing is a fundamental right of people and we have got to protect that.

The first of the questions I am going to ask you is really going to revolve around how we get to that ideal goal of ensuring housing at an affordable rate. Ms Gruson, how do you feel Bill 4 will help you to make this affordable?

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Ms Gruson: As I explained, it is still now, for me, affordable, but I feel that Bill 4 will help contain my rent so that I will be able to remain in my building. Before I came here, I looked at my account book. I am paying $200 a month more than I was in January 1990. That is the $200 I was telling you I have after my pension income. If that is absorbed over the next few years, if it continues to go at $200 a month a year, where does that leave me?

Mr Turnbull: Is your pension fixed?

Ms Gruson: As long as I am working, I am still adding to my pension. As I said, it is 11 years of work. The other pension is old age security and CPP. That is fixed according to how it is indexed by the government.

Mr Turnbull: What percentage of your income do you spend on rent at the moment?

Ms Gruson: At the moment, I spend about 25%. I know that 30% is considered average. I know that. I have said I am not entirely representative of the women who live in my building. But that shortfall is made up by the fact that I am still working.

Mr Turnbull: At the time the various claims were made by your landlord for increases above the guidelines, did you examine some of the details?

Ms Gruson: I participated in our tenant organization that helped frame responses to the request for rent review.

Mr Turnbull: Do you happen to know of the renovations that were done in your building? I believe I noted down boiler, parking, tile, lobby, carpeting and wallpaper. Do you know what percentage of the total amount of money that was spent on the renovations actually went to the boiler and the parking?

Ms Gruson: I do not know that.

Ms Keating: I can answer that.

Ms Gruson: I was dependent on the professional help that we were able to get.

Ms Keating: I do not have the exact percentages, but certainly they were a major part of the rent increase, yes.

Ms Bregman: They were the majority, definitely.

Ms Keating: They were the more costly items.

Mr Turnbull: Was the parking in need of repair? I have to assume it would be.

Ms Keating: Yes.

Ms Bregman: Most underground parking nowadays is in need of repair. Our building is about 25 to 30 years old and the corrosion is extreme. I might add, though, that there is still leakage in our underground parking lot. I question how the work was done.

Mr Turnbull: Unfortunately, it is a fact that it is almost impossible to totally repair an underground parking garage. The fact that we have a lot of salt put down on our roads, corrosion sets in on the re-bar, it starts faulting and that is why we have to repair it. Have you any idea approximately what the dollar amount of the parking repair was?

Ms Bregman: It was about $150,000.

Mr Turnbull: And that was the biggest item.

Ms Bregman: Yes, next to the boiler.

Ms Keating: With respect to items such as underground parking garages, and of course many buildings have to face that kind of expense in an ongoing way, number one, all of that expense is getting passed through to tenants at a particular point in time. That is one of the points we are trying to make, that that cost should not be borne just by tenants.

Mr Turnbull: Ms Keating, I presume you have read the present Landlord and Tenant Act many times.

Ms Keating: Yes.

Mr Turnbull: Is it clear from your reading of it that the pass-through was quite legal?

Ms Keating: Oh, yes. I am not suggesting it was not legal, but I am also suggesting, in addition to the fact that reserves have to be kept to bear these kinds of major expenses as they come up --

Mr Turnbull: Can I ask you where the reserve would come from?

Ms Keating: It has to come from the landlord, from the income of the landlord, which includes the rents.

Mr Turnbull: What happens if the landlord has a negative cash flow?

Ms Keating: I am not sure. I do not have the answer for that.

Mr Turnbull: Do you think the money arrives out of heaven like manna?

Ms Keating: Landlords may have negative cash flows but they often have equity they can use.

Mr Turnbull: You have said yourself that maybe they are going in with 15% or 20% equity.

Ms Keating: I am talking about the rise over a period of time in the value of the apartment building.

Mr Turnbull: Yes, okay. You have mentioned the fact that it was a capital gain. Are you aware that landlords who have more than one building would be considered to be in the business of owning apartments and therefore it would not be considered a capital gain if they disposed of the building? Are you aware of that?

Ms Keating: Yes.

Mr Turnbull: Do you know what the tax rate would be if that business has been in business for any length of time, on disposition?

Ms Keating: No, tax is not my area.

Mr Turnbull: So you are not aware that 50% of that will actually go to the government on disposition?

Ms Keating: I am well aware that the government takes a great share of everybody's taxes.

Mr Turnbull: From the thrust of your submission, I read out of that that you feel it is landlords' responsibility to bear all costs, as opposed to government bearing some of the need for -- we certainly believe in shelter allowances to help people where affordability is a problem. Do you not think that governments have a responsibility in this?

Ms Keating: To bear some of the costs?

Mr Turnbull: The cost of making housing affordable to people.

Ms Keating: Certainly.

Mr Turnbull: Governments are profiting from the tax.

Ms Keating: I think the entire government platform should include measures to make sure that affordable housing is available to low-income people, including passing through, making funds available for co-operative housing and non-profit housing. I think it has to be part of an entire program. Obviously, rent control is not going to be the only measure.

But there is one other issue I wanted to speak to with respect to the reserve.

Mr Turnbull: No, no, Ms Keating. I want just to ask a question specifically with respect to that. Are you aware of an apartment building on Eglinton Avenue close to Bathurst where a rearguard action was fought by the city of Toronto to stop the demolition of the building? Finally, the city bought it in the interest of keeping affordable housing. Are you aware that in fact the rents after the city had renovated it more than doubled under the aegis of the city's ownership?

Ms Keating: I am not sure what your point is, Mr Turnbull.

Mr Turnbull: My point is that government does not provide affordable housing. It does not operate efficiently. The private sector, if allowed to operate in a reasonable way with reasonable controls, could in fact provide more affordable housing. I do agree with reasonable controls.

The Vice-Chair: Thank you, Mr Turnbull. This is interesting, but it is now time for --

Ms Keating: Could I simply say one other thing? That is with respect to this ongoing garage repair. The fact that the landlords can pass through moneys in an ongoing way to tenants, in my mind, is a disincentive to ongoing maintenance in the sense that they can simply get the garage repaired and re-repaired and re-repaired. There is no way tenants have of knowing whether the same thing is being repaired again and there is no incentive to ensure that landlords keep the buildings maintained so that capital repairs are not required again and again.

Mr Turnbull: Mr Chairman, in view of the fact that you have allowed that extra time for the statement, I must make the comment that I have never heard of any landlord re-repairing the garage before --

Mr Mammoliti: Mr Chairman, on a point of order: Seven minutes have gone by seven minutes ago.

An hon member: No, that is not true.

The Vice-Chair: Thirty seconds ago, actually.

Mr Mammoliti: Do I have the floor, Mr Chairman?

The Vice-Chair: You have the floor.

Mr Mammoliti: Let's go back to the garage again. There were some points raised about salt and how salt deteriorates the asphalt, which in turn allows seepage through and the underground of course starts to leak. Has your landlord ever used calcium to melt snow?

Ms Bregman: No. There was no preventive maintenance whatsoever.

Mr Mammoliti: So there was no patchwork done to the asphalt on a regular basis.

Ms Bregman: No.

Mr Mammoliti: There was no refacing of the driveway.

Ms Bregman: It was one large endeavour that took a month.

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Mr Mammoliti: But on a regular basis there was nothing?

Ms Bregman: No.

Mr Mammoliti: One other question: You said that you had to move out because of these increases.

Ms Bregman: I am now trying to find another apartment, yes.

Mr Mammoliti: Okay. So you still have not found anything. What does that do to you personally?

Ms Bregman: It gets me down here.

Mr Mammoliti: Thank you.

Mr Duignan: I am pleased to know where the third party stands on the question of affordable housing. They do not believe in it. I hope that the tenants and the people who are expecting affordable housing in this province take note of that and keep noting it when the next election rolls around.

The Chair: It has started already.

Mr Duignan: Right. My question to you has to do with the reserve. As you know, most co-operatives and non-profits are required under provincial programs to have a capital replacement fund, somewhere around 0.075% of the capital cost. Would you like to see something like that built into a budget? I am a firm believer that if an apartment building is run as a business, it should be run properly. There is a budget done. Part of that budget includes costs for maintenance and for capital reserve. I just want to explore that possibility with you right now. Would you like to see something like that?

Ms Keating: Yes, I think I would. I think that is precisely the kind of thing we are interested in. I do not have any of the specifics in my mind at this point with respect to how it would work, but definitely something that could be built in in an ongoing way.

Mr Duignan: And to keep that constant, that capital reserve every year would be increased by the rate of inflation to keep the dollar constant.

Ms Keating: Yes.

Mr Duignan: Thank you.

Ms Harrington: I wanted to thank the three of you for coming, especially Sonia, I believe, who probably had to take time off work today. I know it is not easy to be here, but it is very important that we hear from you, who are the actual tenants and who have gone through this experience.

I was thinking along the lines of my comrade next door here with regard to the problems and how we address these problems in the long run and trying to find adequate solutions. The first that you have raised very clearly is the ongoing maintenance, that this has to happen and that no landlord who comes for rent increases should be allowed these kinds of things without the commonsense approach to ongoing maintenance that we all take in our own homes and within our apartments. Somehow we have got to make sure that this message gets across. I will personally try to get that to the Ministry of Housing.

The second point that was raised was the capital expenditures. We know that these large capital expenditures come up from time to time. The suggestion that has been raised, that there be a fund for these things that are not every year, is something that I will also take back to the Ministry of Housing and try to incorporate in our long-term legislation, that the ongoing maintenance has to be done. We know that there are going to be large capital expenditures, but there is no sense wrapping them both up together into a huge package, because the increases, of 5.4% for instance in this year, have to include that maintenance, which will then stop those huge increases to some extent for the big capital things, which are only aggravated by this lack of maintenance.

I was going to ask you if I have stated those two concerns clearly. Is there anything you would like to add on that score?

Ms Keating: Those were our concerns.

Ms Harrington: Okay, thank you.

The Chair: I thank the organization for joining us this morning.

AFFORDABLE HOUSING ACTION GROUP

The Chair: The Affordable Housing Action Group is next on our agenda. If presenters could just please come forward and take your seats, make yourselves comfortable, I would ask you to introduce yourselves for the record, the organization which you represent and whatever positions you hold within that particular organization.

My schedule shows that we have set aside 40 minutes for this organization, which will give the presenters 20 minutes to make a formal or informal presentation to the committee, and the committee will then divide up the remaining 20 minutes. The floor is yours.

Ms Robinson: My name is Leslie Robinson. I am here on behalf of the Affordable Housing Action Group, which is a coalition of organizations that address housing issues. The group has a steering committee of representatives from the sectors of tenant, labour, non-profit housing, social services and academic, and I am one of the tenant representatives on the steering committee.

Ms Stewart: I am Fiona Stewart. I am the co-ordinator of the Affordable Housing Action Group.

Ms Robinson: The Affordable Housing Action Group was formed in 1986. We are a province-wide coalition. We have one staff person, who is Fiona, and the work that we do is both advocacy and policy development in relation to housing and public education. We are particularly focusing on making contact with groups that are addressing housing concerns outside of Metropolitan Toronto, particularly in the ring around Metro Toronto and greater Toronto area but focusing on the province as a whole.

We are all advocating for housing, although we are not all housing advocates. Affordable Housing Action Group is an opportunity for groups and labour, for churches and synagogues and faith groups and for other social service agencies that are addressing a broad range of concerns to come together around housing issues. But many of us who participate in Affordable Housing Action Group, which gets called AHAG -- we love the name -- also work with individuals who have housing problems. We help tenants assert their rights with landlords. We help people create and move into non-profit and co-operative housing. We assist homeless people who are finding shelter. We help people who are looking for money to get the rent and who are looking to get access to food banks when the rent has eaten up all of their incomes.

Those people are not here today. I think it is important for you to realize that those people are not going to be here today, that people who are looking for a bed to sleep in tonight are not going to take the time out to come to a legislative committee hearing and tell you their story. They are not aware that the legislative committee hearing is meeting here, and if they were aware, it would not be a priority in their life.

The primary needs of their own -- they are needing to get themselves fed, to get themselves warm and to get somewhere to sleep tonight -- come first and they are far, far removed from the legislative committee process. We do not have the money to buy newspaper ads to put their photo in and tell their story on their behalf as well as their advocates. So all we can do is come here and speak on their behalf.

I am here as a person who is housed. I am adequately housed. My housing does not cost a huge portion of my income. So I am not speaking on my own behalf. I am speaking on behalf of the people who are not here. But those people are real. When we go back to our offices and meet the people who do come in our doors, who are looking for help for their problems, we have to face them as well. I want to give you just two examples that have stayed with me over the years of the frustration that we deal with in trying to help people.

I was working at the Federation of Metro Toronto Tenants' Associations and a woman came into my office. You never know what people are going to ask you about. She wanted to fight the rent increase in her building. The rent increase had already gone through. There was a retroactive order and she had been evicted for non-payment of rent. This woman, who was about 50 or 55 years old, told me that the building was the Maples, which is near Yonge Street and College, a fairly respectable building which was fairly affordable about four or five years ago. She told me that she and her mother were living in their car -- this was the summertime -- and that they were looking for a place to live. Her mother was too embarrassed to come up to my office with her because she had not been able to have a shower and she thought she smelled and so she was staying in the car.

I tried the best I could. I told this woman: "There is nothing you can do now about a rent increase. The appeal period is passed. You have been forced to pay the retroactive, you have not had the money and you have been evicted. There is nothing I can do to help you to get back into your apartment." She thought she was going to come and I was going to help her get back into her apartment.

I did the best that I could and sent her off to look for a place to stay. She was too proud to go to a hostel and her mother was too proud to go into a hostel. They wanted housing. This woman had a job, she worked, she lived with and supported her mother. I still do not know where they went. I still do not know if they had a place to sleep that night other than their car, and that memory has stayed with me.

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The other experience I want to relate to you is working with a group of tenants who live in a private-sector high-rise building in the middle of St James Town. This building was built under the federal CMHC limited dividend program, and so it houses low-income people. The tenants have been receiving rent increases and were involved in a series of rent review applications by the landlord in 1985, 1986 and 1987: 1986 resulted in a 26% rent increase.

Then the tenants started complaining that they had no hot water and they started complaining that the elevator took so long to come pick them up. Those are two indicators that, we started realizing, had very little to do with what was happening with the hot water heater and very little to do with what was happening to the elevator. People were living two and three families in an apartment because they could not afford the rent one family per apartment.

What we are seeing all across the city is people doubling up. The people who are living two and three families per apartment were under the threat of the superintendent that they would be evicted for overcrowding so they had better not get involved with the tenants' association and assert their rights. Last election, those people did not even get themselves on the voters' list because their landlord had access to the voters' list and, if you put your name on the voters' list and you have got four or five or six adults in one apartment, the landlord comes knocking on your door and says, "Who lives here anyway?"

Homeless people are not just people who are living in their cars and people who are in hostels and people who are on benches. They are people who are living doubled up. I know a couple of years ago the Metropolitan Toronto Housing Authority estimated that there were 13,000 doubled up families in housing authority housing in Toronto alone. In many municipalities there are overcrowding bylaws, and those people are living there illegally and are subject to eviction.

In the Affordable Housing Action Group dealing with housing we deal with a wide variety and a range of housing policies, and rent control forms one part of a collection of housing policies which together we hope can ensure that decent housing is available and accessible to those who need it, at a cost that they can afford.

A good housing policy must address the supply of new housing, the access that people have to housing and the cost of housing. We have come here today to support Bill 4 as one measure to address the cost of housing. We understand that Bill 4 is interim legislation and we encourage this committee to pass the bill quickly and pave the road for development of sensible rent controls in Ontario.

We are concerned that much of the public focus and debate on Bill 4 has been from the perspective that housing is a commodity and that construction and repair of housing is an economic or labour issue rather than the perspective of addressing the need for housing and that housing is a right.

I do not know if any of you know this, but Canada is a signatory to the International Covenant on Economic, Cultural and Social Rights. This is a covenant developed by the United Nations that we signed in 1979. We agreed, not to the people who live in Canada but to the other countries in the world who signed this covenant -- "we" being Canada that signed the covenant, but each of the provinces and the territories agreed to this covenant before it was signed -- that housing was a basic human right. This covenant goes beyond the basic political rights and freedoms that we are accustomed to thinking of as human rights and says that housing, health care and food are basic human rights that people cannot exist without.

So Canada has at least obligated itself in the international arena to provide housing for our people, and I think that is the perspective that you have to take when you look at Bill 4, that what we are doing is ensuring that people have access to housing, housing at a price that they can afford. Rent controls are a measure to ensure that people's housing rights are met. Rent controls are not a policy to ensure business rights or even labour rights, as seems to be much of the focus around this bill.

This government must address housing need and ensure that all people who live in Ontario have access to housing in the same way that we ensure that people have adequate access to health care and education. Housing is a basic human need, not unlike health care or education. There is a place in the private sector for the provision of health care and education, but in those two realms we have a highly regulated system which recognizes that regulations are necessary to ensure that people receive adequate and quality services.

This committee must not let the organized landlord interests in the province use threats and scare tactics to attack the integrity of Bill 4, in the same way that the previous government would not let doctors undermine the right to health care. You would not think of letting teachers demand that education standards be reduced so that teaching is more profitable.

We believe that the rent control system established by Bill 4 sets rules which govern the way landlords can deliver housing. When the ground rules are set, the landlords can decide if this regulated market is an area in which they wish to participate, just the same way as doctors and teachers decide whether they wish to doctor and teach in Ontario.

We are not going to go into the details of Bill 4. We could recommend improvements, we could get into sort of clause-by-clause scrutiny of Bill 4, but we are quite happy to participate in a process that passes Bill 4 as interim legislation and we do offer our expertise and the people we represent to participate in further discussion of more permanent legislation, which we understand it is the intent of the minister to come forward with after Bill 4 is passed as an interim measure.

I would like to speak to some of the experience that we have seen with the Residential Rent Regulation Act. That act and the rent review legislation previous to it have done something to warp the rents and the costs and the valuation, the value that we give to apartment buildings. It is quite conceivable, and in fact there were a couple of landlords who made a charter challenge on the basis that you could have two buildings side by side that are very much the same, built the same year, have the same number of apartments, the same amenities, and the rents are grossly different.

The reason for the difference in those rents is that one building had three or four or five landlords over a series of years who went to rent review and, based on their new mortgage costs, got applications and awards for financial loss and the other building was just owned by one landlord throughout. The usual case is that the building that was owned by one landlord throughout in fact has had better maintenance. You would think that would be a reason for the higher rents, but the one that has had these flips of different landlords one after the other has got the higher rents instead.

Tenants who have been experiencing this see absolutely no sense in why their rent should go up because some new landlord came in, bought the building and put a new mortgage on the building. They see sense in rents going up, in rents that match in some way the amenities that they have, the quality of the housing that they live in, but not rents that reflect the financial considerations of the landlord.

So what we have across the province now is a real variety of rents. For every example of rents that are extremely low for nice housing, you can find rents that are extremely high for really substandard housing, and it has been this warp that I think we have to get away from. I think that warp has been reinforced by the RRRA, which has encouraged large rent increases on two fronts: One is financial and economic losses and the other is capital expenditures without any consideration as to whether the capital expenditure is appropriate or necessary.

I would like to ask this question: Why, in a housing unit that does not get any better -- and in fact the situation is that housing deteriorates over time, and you would say it gets worse -- could you ever defend an increase greater than inflation? Why should a unit that was built in 1956 at a certain proportion of the average annual income be any greater proportion today when in fact the unit has deteriorated and gotten worse? How can 10% and 20% and 30% rent increases ever be defended unless new amenities, improvements over and above what came with the building in the first place, came out?

I have a hard time accepting that and I see that over time more and more increases greater than inflation can only contribute to a general inflation in rental housing so that generally average rental housing prices become more and more a portion of average people's incomes. We tell people today, "You have to pay more for housing, a higher proportion of your income for housing, than you had to 10 or 20 years ago." No wonder people cannot afford to buy houses and no wonder people are lined up at food banks like we have never seen before, at least in my lifetime.

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We would like to speak to the long term. We would like to address today what we would like to see you look at, you as a legislative body or representative of a legislative body, and the Ministry of Housing look at in long-term legislation. We, as well as the previous speakers, support the introduction of capital replacement reserves in private rental housing. We see this as a sensible way of ensuring that long-term costs are planned for in a building, that costs are spread over the lifetime of the building and that landlords who sell a building do not take with them the money that should have been put back into the building in the form of capital expenditures.

The residential complex cost index. RCCI, the annual guideline, has in it 1% every year that is supposed to be attributed to capital expenditures, but that money stays with the landlord and, when the landlord sells the building and goes away and has not spent that money on capital improvements, then the money has to come again from the tenants to pay over again. We would like to see reserves that are attached to the building, not to the landlord.

In the long term, we also support a system which gives a role to tenants in the consideration of expenditures that relate to their homes. We find it utterly ridiculous that people live in places -- the woman who was sitting here earlier today said that she had lived at 11 Shallmar since 1972. She has a long-term interest. That is her home. She has a longer-term interest than the current landlord of the building or the previous landlord of the building. There has to be a way for tenants to feel that in their homes they have some access to some control over how their money is spent, where the priorities are.

But we have to be very careful in looking at that because we do not want to create a system where tenants merely vote on whether they want an expenditure or not, which gives an incentive to landlords to only rent to people who have high incomes and are going to vote for those expenditures. We do not want to create a system where low-income people who are moving in, just able to afford the rent, are going to be discriminated against because they will not vote for a rent increase.

I think we have to tread very carefully around the idea of tenant participation, but I think certainly there is a role for tenants to play at least in prioritizing capital expenditures, in saying: "Fix the parking garage before you bring in an interior decorator to decide what colours the lobby should be because that lobby is not a priority tor us. As long as you keep it vacuumed and we do not slip on it in the winter, it is fine."

In the long term we support a system which relates problems of disrepair and substandard housing to the rents. Tenants, particularly those with less negotiating power -- we find that women with children, people of visible minorities and people with low incomes or on public assistance are often in a situation where they are paying too much rent and that they have had to move into the place they are moving into, which often is something like a basement apartment that is leaky and damp and cold, but because there is little negotiating power they have been forced to take that housing.

We hope that in the long term the legislation will address not only rent increases, not take the rent that is sitting there now as a given, but also rents that people are paying that are far too high, the kind of things you see like basement apartments at $900 and $1,000 a month where the heat is not up and there is mould and the children are sick. More often than not, it is an illegal basement apartment, meaning it is contrary to zoning provisions, so you cannot advise tenants to go and complain to the housing authority or to the local bylaw authorities because the first thing that will happen is they will get an order to get out because they are living there illegally.

The Chair: You have about two minutes left.

Ms Robinson: Okay. We want to urge this committee to pass Bill 4 without delay. We hope that we can participate soon in the development of rent control legislation which will protect tenants, protect Ontario's rental housing stock and set the ground rules for landlords who wish to participate in the market by providing rental housing at a fair cost.

I would like to take two more minutes to introduce myself in another context, and that is that I was one of the tenant representatives on the Rent Review Advisory Committee that advised former Housing minister Alvin Curling on the previous legislation, the Residential Rent Regulation Act. I want to say that that was seen by us as a very generous package to landlords.

It was generous for a couple of reasons. From the tenants' perspective, it was generous because it was part of a package which included a commitment for the Rental Housing Protection Act, which included a commitment for more non-profit housing and a commitment to include rooming- and boarding-house tenants in rent regulation.

But the commitment that was made to us by the previous government was that from its perspective the legislation was generous to landlords in order to get landlords back into the business of providing housing. The plan that was made at the time was that we would look at it again after three years. If after three years this generous legislation -- and the guideline was considered generous, not just the legislation which allowed increases over and above the guideline -- if after three years in fact it had not done what it was supposed to do, which was bring the landlords back into building more rental housing, then the government would have to re-examine the strategy of using rent control legislation as a lure for landlords.

The Chair: I would like to thank the presenter. We will start with our rotation. I believe the PCs are first and then the government members and then the Liberals; seven minutes.

Mr Tilson: Thank you for coming and expressing your thoughts on Bill 4. You have made quite clear your support for Bill 4. From the owner of the building's point of view, the landlord's point of view, do you believe that a land owner or a landlord should be entitled to a profit?

Ms Robinson: I do not think that profits should be disallowed or ruled out. Certainly profit is the reason landlords are in the business.

Mr Tilson: So you agree that they should be allowed a profit.

Ms Robinson: It depends at what expense. I do not think profit should be ruled out.

Mr Tilson: I am just asking you a simple question. Should they be allowed a profit?

Ms Robinson: In some circumstances, yes.

Mr Tilson: In what circumstances should they not be allowed a profit?

Ms Robinson: In circumstances where they have stretched their financing so far that the profit has to come out of rent increases that are over and above what the tenants can afford to pay, for instance.

Mr Tilson: I guess the difficulty I have in listening to your comments is how do we ensure -- I think our party's particular point of view is one of fairness. There are horror stories coming out continually in the last number of years. The past legislation did not work. Our belief is that this is perpetuating the problem. I suppose that one looks at the issue of poverty, the great poverty -- you have described people living in cars, for heaven's sakes. That is terrible. A woman was here yesterday talking about literally the creation of a slum, and the slums are starting in this province. I guess the question that I have for you is, how is Bill 4 going to stop that?

Ms Robinson: If Bill 4 had been in existence at the time the woman I described who was living in the car was evicted for non-payment of rent, she would not have had such a big rent increase. She would not have had such a big retroactive bill to pay and she would not have been evicted. When you look at homeless people, you have to realize that most people, and hopefully not too many, are not born homeless. They had homes at some time and lost them for some reason and often those reasons are increases in rent. Bill 4 will stabilize housing for people who have it now.

Mr Tilson: You talk about the rate of inflation. There is no question that there are examples of incidents where increases of rent have been substantial and far over the rate of inflation. The government has projected that the rate of inflation in the coming year will be slightly over 6%. The rates that have been allowed by Bill 4 do not match that. Is that fair?

Ms Robinson: Next year's guideline is projected at 5.4% and what Bill 4 in conjunction with the RRRA does is take the inflation rate over three years so that sharp highs and sharp lows are rounded out a bit more.

Mr Tilson: Bill 4 does not say that. Bill 4 sets forth specific increases for this year and next year which will not match the rate of inflation. That is from the government's own figures. I am simply asking, is that fair?

Ms Robinson: Can you tell me what section of Bill 4 that is.

Mr Tilson: Bill 4 talks about an increase of -- what? -- 4.8% this year and 5.4% next year.

Ms Robinson: Bill 4 is an amendment act. It is an act to amend the Residential Rent Regulation Act --

Mr Tilson: That is right.

Ms Robinson: -- and that act sets up the residential complex cost index which does set rent increases. It applies an inflationary rate to operating costs and then adds 2% over and above that.

Mr Tilson: It allows certain increases for maintenance, but it certainly does not allow for other things. The rates of increases are quite specific and quite clear as to what they allow and they do not allow for the rate of inflation.

Ms Robinson: I differ with you. I think that if you look at it closely, you will find that not only do they allow for inflation, but Bill 4 specifically allows for extraordinary operating costs in cases where inflation has hit items such as taxes, insurance, heat, etc.

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Mr Tilson: Yes, but that is not the total cost of inflation, as you know. Yes, it does allow for certain increases in taxes and increases -- it is quite specific, although it does not allow the increases that the previous legislation had.

Dealing more specifically, how will Bill 4 improve the quality of life of the tenants, knowing full well that it would be folly for landlords to get into making major capital expenditures, such as the repair of roofs and new roofs and parking garages, which are the major increases? They are not allowed for. Landlords, it has been quite clear from the communications that this committee is receiving, will simply not have the money to make those capital expenditures. I guess my question to you is, acknowledging that, how will Bill 4 improve the quality of life for the tenants when in fact it will go the other way?

Ms Robinson: Bill 4 is interim legislation. Bill 4 will improve the quality of life for tenants because it will disallow landlords from making applications to cause rent increases tenants cannot afford.

Mr Tilson: The government has called it interim legislation, but we do not know for how long. Now I guess that you are supporting Bill 4 and at the outset that seems -- again, our concern is for the economic wellbeing of Ontario, the concern of job losses, the concern of fairness, the concern of all the issues with respect to the economic wellbeing of this province. Yes, there are individual incidents of landlords who have taken advantage of the situation, but the bulk of the landlords have not done that, and you know that. The bulk of them have not done that.

Ms Robinson: That is right.

Mr Tilson: I guess the question is, is that fair to the landlord community?

Ms Robinson: I think it is fair. It says to them. "You are providing housing, which is a basic human right, and so we have to regulate the world in which you operate, the business in which you operate, and here are the rules."

Mr Tilson: But you have acknowledged that the bulk of the landlords have not done the things that you are doing.

Ms Robinson: So it should not affect them anyway.

Mr Tilson: But it does and you know it does.

Ms Robinson: How?

Mr Tilson: How it does? Because, for example, they are not going to be allowed to make capital expenditures because they simply will not have the money for it.

Ms Robinson: But you are speaking to the landlords who do not apply to rent review.

Mr Tilson: That is exactly what I am talking about.

The Vice-Chair: Mr Tilson, thank you. Your time has expired.

Mr Duignan: Thank you very much for coming along and making an excellent presentation to the committee this morning. I just have a couple of questions, a couple of areas I would like to explore.

The third party talked about fairness to landlords. I am wondering about fairness to tenants. We look at figures supplied to us by the ministry this morning, where fully 82% of the rent increases were greater than 4.9%. Do you believe that is fair?

Ms Robinson: Of course I do not believe it is fair. I would like to have access to that material as well. I have not seen it myself.

Mr Duignan: I want to explore the whole area of a maintenance reserve or capital replacement reserve and what form that should take. You made a suggestion this morning that the 1%, or whatever the figure is, should apply to that building, and should stay with that building for that particular capital reserve and should not move if the owner of the building sells it. It should not move with the owner but stay with that building. Would you like to see some sort of system put in place to deal with that?

Ms Robinson: I would like to see it developed. I know that you can get experience from CMHC. In fact they require that the co-operatives and the non-profit housing projects use a replacement reserve fund. So what we see in non-profit housing is that the year the roof has to be replaced there is money in a reserve to pay for the roof replacement, or if it does not completely cover the costs, money is borrowed, but the whole cost is not whacked on to one rent increase that year to those tenants who happen to be there the year the roof got replaced.

I think it is much more sensible and I know that the RCCI formula provides for a portion of the rent to go towards capital costs every year. But our problem is that in some cases that money is going to capital costs and those are the landlords who are not applying to rent review, but in many cases the money just is not going where it is supposed to go.

Mr Duignan: As you know, when co-operatives and non-profits are formed and built they are required to have a capital placement reserve. You would like, again, to see something like that for the private landlords established.

Ms Robinson: It would make a lot of sense. I worked for a year or two on a proposal to convert private sector rental buildings to co-operative buildings and that program started a year ago. That program has instituted replacement reserves for existing housing that already has existing problems that have to be addressed immediately. You might want to take a look at how that program has actually worked out, how those replacement reserves have worked in buildings that have been converted partway through their lifetime.

Ms Harrington: This is only our second day of hearings and I think it is becoming clear what has been happening in this province. Pass-throughs have created a dislocation in the market system, an unfairness and using of the system. As you just mentioned, money is being diverted from where it was hopefully going to go. It is not being utilized the way the government had envisaged when the RRRA started. They had hoped, I believe in all good faith, that the system would work.

This unfair system, I think, clearly is progressively getting worse and that is why, as a new government, we had to put this breathing space in to look at the whole future of legislation in this area. I wanted to ask you about a very interesting comment you have in your brief which I had not thought of in this way before. What you mentioned is that according to the United Nations, housing is a right. If we really take that seriously, what it leads to is these thoughts that you have put down, that it should be as important, you are saying, as health care or the teaching profession. Of course, going back many years, even teaching was a private enterprise and was subject to the whims of making profits.

If housing is really a right, then we have to look at it in that context and say that those people involved in it should be, let's say, professional landlords with a degree and know how to manage it and therefore earn a good living at that type of business.

Anyway, I had not thought of it like that before and I think the way you put it is interesting and it is worth considering how important really is housing as a right. Thank you very much. I just wondered if you had anything else to say on that particular aspect.

Ms Robinson: No, thank you.

Mr Mammoliti: Mr Tilson asked you earlier whether landlords should make a profit. I would like to ask you whether landlords should make a profit if they abandon their responsibility as a landlord?

Ms Robinson: I think we have to look at what happens when landlords abandon their responsibilities as landlords and start wondering whether anybody has the right to come along and be somebody else's landlord, whether anybody who has the money or the down payment or the ability to acquire a building has a right to then be the landlord and not provide maintenance, not provide capital expenses or not within the realm of this legislation. We look at outright abuses of tenants by landlords.

I think we have to look at some kind of licensing or accreditation that says you can be a landlord, but if you are not responsible, if you either are not responsible in meeting the obligations you have or if you are abusive to tenants, then you lose that right to be this person's landlord, that ability to have the keys to their apartment, that ability to make crucial decisions about the housing they live in.

Ms Poole: Thank you, Ms Robinson, for your presentation today. I would just like to start by saying that when you quote the United Nations convention covenant as saying that adequate housing is a basic human right. I do not believe there is any member of this committee, nor should there be, who does not agree with that. I think where we probably do not quite see eye to eye is on how this is to be achieved. Some of us on the committee believe in free enterprise, but that when people need assistance and need help, it is the job of government to provide that, not the job of the free enterprise market, that there is this partnership that exists in one form or the other.

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You served as a member of the landlord-tenant group that actually made recommendations which ended up as the RRRA. That act had improvements for tenants in some areas and then areas in which landlords felt they had improved their lot. Tenants achieved things such as virtually all rental units in the province were brought under rent control, and things such as the 1% penalty to any landlord who went to rent review to make up for the fact that he got this as part of the guideline amount. There were a number of other areas of protection for tenants.

In that process you had an opportunity to work with the private sector and you signed the agreement, so I assume that there was a certain degree of co-operation. The question I have for you is, do you think there is a place for private enterprise in the housing market today?

Ms Robinson: I think we cannot get away from the fact that there is a place. The vast majority of the rental housing is owned by the private sector and I do not think this government has either the political backing or the funds to go in and buy them out, so we have to take as a given that the private sector owns the buildings. But I think, to just extend an analogy, that you said you support private enterprise with a role for government to support individuals and I would like to make an analogy with the health care system.

When your party was the government it basically said to the doctors: "There's a role for you. You can make so much money. You can make a profit, but you can't charge over and above this," and the public purse was paying the cost. A housing subsidy system without rent controls would just get too expensive for a government to afford. If you said, "We're going to pay rent supplements to people who can't afford their rent, but on the other hand, we're not going to control the rents," then you would just be writing a blank cheque to the landlords every month. We can support rent supplements but only in a system where that is not taken advantage of, where it is not an unending opportunity for rent increases.

Ms Poole: Quite frankly, I have a great deal of difficulty comparing health care and education, which are 100% government subsidized and government paid for, with housing where that is not the case. What you are doing is saying on the one hand, "Yes, we want the landlords of this province to have a role because we don't see any way around it, but we're going to put restrictions on you so that you cannot function."

My fear is that if we tighten the restrictions to such an extent that landlords cannot operate, they will not maintain their buildings, even to a minimum standard and that there will be no capital improvements made to the buildings. Whether or not the law allows it, they will walk away from their buildings and that is the economic reality. If an individual is losing money, he will not continue to sustain those losses.

I would put to you that if this scenario occurs, it will be the tenants who will be the long-time losers. I am very much uncomfortable with having a measure that brings short-term gain and long-term pain for tenants. I am very much afraid if we take a one-sided approach to say: "Capital improvements don't matter. Corroded underground garages don't matter. None of this matters. We'll let the landlord pay."

I have no problem with curing the abuse. I support you 100% in the examples you have shown, but I have a real problem in saying, right across the board, "We will punish all landlords and make it so restrictive that they will not be able to operate."

Ms Robinson: If I could respond to that, I have been coming to committee hearings on rent review legislation through three different political parties and three different governments, and every time we come we hear the same thing from the landlords: "This rent review legislation is the rent review legislation that's going to make us walk away from our buildings. This is the legislation that's going to make us stop doing maintenance." They are threats and I hope this committee is not going to feel blackmailed into giving the tenants' money to the landlords so that the landlords will not follow through with their threats to walk away.

I would urge you as well to take a look at the example of the province of British Columbia where rent controls were wiped out entirely in 1983. The private market did not do what the economists dictate would happen. In Vancouver today we see the same housing situation as in Toronto today -- shortages, high vacancy rates, high rents -- and we do not see the construction of rental housing in the private sector. Construction has gone down considerably. It is less than 30% of what it was in 1983, when rent controls were removed in order to encourage construction. So I think you have to take a very hard look at what the threats are and what the realities are.

Ms Poole: I have one final very quick point. Mr Duignan, in his comments, had quoted a statistic which I think inadvertently was not correct. He had stated that in 82% of the units, rent increases were over 4.6%, but it is in fact the opposite, that in 82% of the units the rent increases were 4.6% or below, so it is a fairly significant statistic.

The Chair: Can we get clarification from the ministry? Are there ministry staff here who could please give us clarification on that point? What is the exact figure and what does it mean, please?

Ms Richardson: Approximately 17% of the rental units in the province come to rent review in any particular year for above-guideline increase. For the ones that do not come to rent review, they may be subject to the guideline, they may be experiencing no rent increase at all, they may be subject to a phase-in from a previous rent review order or indeed, there may be some illegal rent increases. So the 17% do come to rent review for an above-guideline increase in a particular year, according to our statistics.

The Chair: Do you have a supplementary question on that point, Mr Duignan? I know we are diverting from our regular rules, but these statistics are important.

Mr Duignan: I am just reading from the stats here. In fact, it is more than that. I was only talking in the range of 5% to 15%. It says units with increase in maximum rent, 5% to 10% and 10% to 14%.

Ms Richardson: Those particular statistics relate to the rent review orders, so those are the 17% of rental units that do come to rent review and they relate only to those particular --

The Chair: I can capsulize this for our listeners and our viewers. This is very important information for them. Out of the 100% of units in the province, less than 20%, give or take a point or two, actually go to the system for greater than the increase allowed by the government in any particular year.

Ms Richardson: Those are our statistics, yes.

The Chair: So the almost 80% that do not go, we are assuming that they are either under a previous order or they are going by the guidelines. What was the third point you mentioned?

Ms Poole: No rent increase.

The Chair: Are there any other supplementary questions on this point by anyone? Thank you. Our time has expired. I appreciate your presentation and, as you said, you have been to many committee hearings before and we are glad you decided to come back.

We are approximately 10 minutes behind schedule. Considering our workload, that is not bad.

FLEMINGDON COMMUNITY LEGAL SERVICES

The Chair: The Flemingdon Community Legal Services is the next presenter. Make yourselves comfortable. Please identify yourselves for the record. Please state your names and your organization and the positions that you may or may not hold within that organization. The schedule shows that we have set aside 40 minutes for your organization, which will allow you 20 minutes to make your presentation and you will be able to dialogue personally with the committee for another 20 minutes. The floor is yours.

Mr Physick: My name is Brook Physick. I am a community legal worker with Flemingdon Community Legal Services.

Mr Jefferies: I am Ron Jefferies. I am staff lawyer at Flemingdon Legal Services.

Mr Physick: And just coming up here is Freda Krol, who is a tenant association head in North York at 22 Elkhorn Drive.

We appreciate the opportunity to present a deputation to the standing committee on general government on the proposed moratorium bill, a bill which we fully endorse. We are pleased to see the government acting on its campaign promises in a way which is both, in our view, responsible and necessary. We hope that this consultation process will demonstrate clearly the need to expedite the implementation of this bill so that the government can continue the process of consultation on the much larger issue of the rent control system.

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Four years ago the previous government of this province passed a law that has proven to be, generally speaking, a very unjust piece of legislation, unjust because it works largely against the tenants who it was supposed to protect. The fact that this law has impacted so greatly on the lives of hundreds of thousands of tenants in this province since its inception is disturbing, particularly since the impact has been, more often than not, negative. This law, of course, is the Residential Rent Regulation Act, and while this legislation does have some redeeming value, the substantive part of this act dealing with whole-building reviews has little, if any, redeeming factors.

This is not a profound revelation. This has been known almost since the day the law came into existence. The Minister of Housing has countless submissions from tenants in which the frustrations with this legislation and, in particular, with the whole-building review provisions have been expressed. Time after time successive ministers of Housing have heard from tenants and tenant advocates about the gross injustices inherent in the Residential Rent Regulation Act, but apart from a rather dubious effort in April of last year to change the regulations relating to capital expenditures, not a great deal of substance has been accomplished or even attempted.

Tenants are constantly asking how is it that landlords can apply for rent increases of 15%, 25%, 40%, 60% and in the odd instance, nearly 200%, when there is seldom adequate maintenance being done in the common areas or the individual apartments themselves. The disturbing reality is that landlords are constantly being granted excessive rent increases when it is clear that their maintenance obligation is being neglected. Why? Because the Residential Rent Regulation Act not only allows for this kind of nonsense but encourages it and it continues to allow this abuse to happen year after year.

We have for too long had to contend with apartment buildings in which landlords have asked for excessive rent increases resulting from whole-building review applications for capital expenditures. Such applications demonstrated consistently one of the many absurd aspects of the current rent review legislation: These applications appear to be based on little else but an opportunity to take advantage of a law which enables landlords to get large increases without having to do anything which has a direct positive impact on tenants. While little is done for the tenants directly, such capital improvements do enable the real estate asset to be appraised at a higher value, which makes the building much more attractive from an investment perspective. One becomes hard pressed to understand how this would in any way benefit the tenants, though we know that this has a distinct advantage for landlords, particularly in a hot housing market. Let us not forget that at no time is the value of the landlord's assets ever considered in a whole-building review application.

The problem becomes compounded for tenants when the tenants have to pay for massive capital expenditures in a building which then sometimes gets sold to a new landlord who then requests a further excessive increase from the tenants so they will then pay for his financing costs. While it is true that financing costs are phased in, tenants can be paying double the legislated maximum rents over several successive years simply as a result of a landlord's financing costs. What does the tenant get out of it? Nothing -- no improved maintenance, often no maintenance at all and in fact frequently a deterioration in the condition of the building. Is it any wonder that tenants are disgusted with this legislation?

This disastrous law has had serious repercussions for tenants, particularly, though not exclusively, for those on lower, fixed incomes. As the population ages, unemployment increases and the recession persists, more and more of our tenants are going to be faced with the potential for economic eviction with few, if any, stable housing options available to them. Such abuses have led to the need for a massive overhaul, not only of the current Residential Rent Regulation Act but also the entire rent review system, thus the need for the moratorium bill recently proposed by our current government.

Any government which contemplates a major restructuring of its regulation of private sector activities must protect the interests of vulnerable parties who rely on the existing system. Otherwise those who can will engage in profit-taking at the expense of the vulnerable. It is for this reason that the proposed moratorium is necessary. Tenants are vulnerable. They are vulnerable when the government announces that the existing rent review system will be changed to a rent control system in two years' time. It is the two-year period that creates this vulnerability, not the proposition of rent control itself. People dislike uncertainty in the marketplace, let alone speculation and uncontrolled profit-taking. Uncertainty concerning the rent review system started the day the present government was elected with a majority. Dissatisfaction started the day the Residential Rent Regulation Act became law.

The stated position of the NDP with regard to the current rent review system was that it would implement a system of rent controls. With that prospect, many landlords undoubtedly decided to reap whatever benefits the existing system would give them. Knowing that it would take some time to draft new legislation, this certainly was a window of opportunity for these landlords.

To prevent the flood of applications to rent review, to preserve the affordability of tenancies and to prevent a rash of unnecessary capital expenditures, the government had only one option after the election -- that is, to announce its future intentions and to retroactively freeze applications for increases relating to capital expenditures and new financing. Not to do so would have been fatal to the housing policy it espoused.

With the expected rash of capital expenditures and refinancing, at the end of two years residential rents could be so high that very few could afford them and consequently the exercise of controlling these rents would be almost meaningless.

The moratorium also corrects one of the patent injustices in the present legislation. Letting rents rise exponentially by not implementing the cost-no-longer-borne provisions will no longer take place. It has been obvious for years that tenants should not have to continue to pay for capital expenditures that have been paid off. Tenants, as well, will no longer pay for endless cycles of refinancing by successive landlords.

With any proposed radical change in government regulation, it is the government's responsibility to attempt to stabilize the marketplace. A moratorium, as proposed, will do this with the minimum of harm. Some landlords in other segments of the economy may be adversely affected, but in balancing the interests of all concerned, it is our opinion that the route being followed is proper and necessary.

That constitutes our submission, and Freda was going to say a few words from her perspective as a tenant head in a building in North York.

Ms Krol: I am a tenant at 22 Elkhorn in North York. I moved in there almost five years ago and have received four applications. The first three applications amounted to 42%-plus. So far, the only order that has come down is for 11.6% for the first one, 1987, and that is under appeal by the landlord.

After three years, the landlord sold the building. It was all capital expenditures -- marble lobbies, new carpeting. He built a new floor of 22 units and they are all luxury apartments. In the process he updated the whole building and we all got stuck for it, this most unfair, and then he sold the building, so we now have another application. I think that if everything goes through I will be paying about $300 more, which I cannot afford. It is not just me, it is the whole building.

I would like to know where the fairness is in all of this and why tenants are being asked to pay for someone else's investment. If they cannot afford it in the first place, why go into it? That is all.

The Chair: Do you have anything to add?

Mr Jefferies: As a lawyer at a community legal clinic, we deal with this every day, and especially in East York it is a tremendous problem. I think that a lot of the horror stories we are hearing are from the city of Toronto, Metropolitan Toronto. That is what our focus is at the clinic.

As far as our presence here today is concerned, I understand that we are talking about Bill 4 and whether or not there should be a moratorium. We did not come down to discuss whether or not rent controls are going to be implemented, although that is the way we lean. I think it is quite clear that a moratorium is necessary. If you look over our submission, I think the reasoning is sound and we will answer questions that you have with respect to that.

Ms M. Ward: Mrs Krol, I was interested in your comment about being asked to pay for someone else's investment and that they should not get into it in the first place. That more or less mirrors the way I have always felt about this passing on of financing costs. Essentially, with what the tenants are being asked to pay for that, the tenants should have an equity in that building. There was much discussion earlier, a previous presenter being asked whether or not he believed a landlord should be allowed to make a profit, and there was discussion about the private sector owning buildings and so on. I think that is basically what you were saying also. Maybe you could expand on it. If you are paying the financing costs, if they are passed on to you, essentially you morally have an equity in that building. Would you agree with that? Do you have anything further you would like to say?

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Ms Krol: All the tenants and myself can feel is the extra burden. The building is 30 years old. The carpeting had not been changed in 30 years, the individual apartments had not been maintained in 30 years, and suddenly, because he wanted rent from luxury apartments, all of that was improved. The rental office got new furniture, new walls, new floors. None of this would have happened had he not been looking at a further investment.

It would have benefited us had he maintained it in the first place. It is very nice to live in a place with marble floors, but it is quite unnecessary. I agree that anyone who goes into business is entitled to a profit, but not to the point where it is exploiting others, and we are being held hostage. I do not think that is correct.

Ms M. Ward: You are saying that the capital expenditures to turn it into a more luxurious place were really made for the purpose of increasing the sale price of it.

Ms Krol: That is right.

Ms M. Ward: And the subsequent landlord, who paid more, had to pay more for it because it had been made more luxurious, then was able to pass those financing costs on to you.

Ms Krol: That is right.

Ms M. Ward: And you are essentially then paying the mortgage of the apartment building.

Ms Krol: That is correct.

Mr Jefferies: If I could just add to that, not only is the tenant paying the mortgage of the landlord, but when that mortgage is paid off, the rents do not go down, they stay up, and the same with capital expenditures. When they are paid off, the rents do not go down. Why?

Ms M. Ward: That is something that has been often pointed out to me. I am perfectly aware of it, but when I meet with tenants they say: "We don't mind paying for this, but why do we have to pay for it for ever? If we need improvements, okay, we'll be reasonable and pay for them, but that cost isn't going to disappear and the next increase will be on top of that and build up and never be taken off."

I enjoyed your presentation and thank you.

Ms Harrington: I would like to ask Mrs Krol what her rent actually is at this time and what it was a few years ago.

Ms Krol: As I say, the ministry has not come down with orders yet on number 3. The first one was for 14% and they were allowed 11.6%. I went to rent review. They appealed it, and I went to the appeal hearings. Of course the response I got was, "You now have the advantage of these marble floors" that were placed in the direct area where the new apartments were built. I did not need those marble floors.

When I moved in there five years ago, I was paying $450. At the moment I am paying $620. Were I paying everything that they have applied for, I would be at $750. With the last one, because of our new landlord who asked for 10.5%, it will be about $800. It is a one-bedroom apartment.

Ms Harrington: I wanted to comment to Mr Physick that you gave a very wonderful presentation on justifying the moratorium, or Bill 4. I really think you should be in the House giving this kind of presentation. I wish we had someone to do this in the House.

Ms Poole: Thank you for coming before us today. One area which really concerns me is the state of our aging housing stock. You, as tenant advocates and as tenants, I suspect, can feel quite strongly on the issue as well. How do you propose we deal with it -- with the capital provisions, with the fact that we do have roofs that need replacing, and windows and underground parking garages? Because we not only have to deal with it in the interim legislation, in what to do, but we also have to deal with it on a long-term basis. Do you have any suggestions as to how you see these should be taken care of? I do not think we deny it has to be done. What we are talking about is how we pay for it. What would you suggest?

Mr Physick: Before Ron pipes in here, if I could just make a statement to that, one of the areas that we service is East York and you are probably quite aware that East York has quite old housing stock. It has been a problem. The way we have chosen to try to address this, because it is abundantly clear to us that the landlords are not addressing it themselves, is to try to convince the local municipal council that it needs to beef up its property standards inspections department, not just to react to problems of maintenance deterioration, but rather to try to prevent it from happening in the future by ensuring that landlords will do general maintenance as required and as they are obligated to do under the Landlord and Tenant Act.

We do not find that a lot of the capital expenditure items that we see being spent, even in those buildings that are 25 and 30 and 35 years old, are necessarily first and foremost in the minds of the landlords, that is, they would not necessarily have done them unless there was an advantage to them to do them. So the question is whether or not those kinds of massive expenditures are necessary to begin with. Our view is that if we can convince our local council to hire enough people to ensure that there are on-spot inspections, periodic inspections on a preventive basis -- and North York has been attempting to do this -- then at least we may be able to solve part of that problem.

The other aspect with respect to capital expenditures -- and I think Ron mentioned earlier that we are not here to provide an extensive proposition vis-à-vis rent controls, but this is, in our understanding, an interim piece of legislation and we felt that, given the current situation, it is necessary. Whether or not the capital expenditure problem will continue in the future is unclear. One of the areas that we have looked at, of course, is the issue of the capital fund, the trust. The federation has presented that proposition. Condominiums have this, other organizations have it. I am not quite sure how that would be done, quite frankly, but it is an area that I think does need to be looked at. Obviously, we cannot let old housing stock deteriorate entirely. It just cannot be done.

Ms Poole: Surely your comments about the day-today maintenance are quite valid as far as increasing the municipal surveillance and ensuring that the standards are met. I can certainly appreciate that point of view, but I also know that no matter how good the maintenance, even if you have the most superb landlord on God's earth, even if the landlord is a co-operative where the tenants themselves are their own landlords, there are items that do have to be replaced and they are very expensive.

When one of our members talked earlier -- and I use "our" meaning committee, not party -- and asked the question about underground parking garages and said, "Had the landlord taken proper maintenance?" I can tell you, anybody familiar with the problem knows that it is massive, it is right across the major urban cities.

It has to do with the fact that the municipalities have used salt on the roads, that the corrosion, the coldness of the winter and the heat of the building all react, and the buildings will fall down if the work is not done. It has nothing to do with maintenance; it has to do with the effects of the weather, the salt and all these things. It has not got to do with what the landlord is using on his driveway; it has to do with the fact that cars drive through all these conditions. So if you have to have that underground parking garage retrofitted and repaired, I think that is something that you and I would probably agree is necessary.

Mr Jefferies: If I could --

Ms Poole: Just one sentence and then I would like hear your response. My question is, how do we deal with the things that you and I would agree 100% are necessary and are not caused by neglect? How do you see that fitting in?

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Mr Jefferies: I think the analogy has to be made to the normal home owner. What does a home owner do when the basement, after 60 years, begins to rot out? Has that home owner saved, put away money over the years as a contingency fund for that, or has the home owner not done that and has to go to the bank and borrow that money and pay it off bit by bit in the future?

I think if you think of these apartment buildings as homes with the owner being the landlord and figure out what you would do in that situation, you would see that over time the situation would rectify itself inasmuch as there would be contingency plans for these types of situations. The fact that there are not any contingency plans for most landlords now is probably a reflection on how the system has been set up to pamper these landlords into getting whatever they want immediately.

Ms Poole: You mentioned the reserve fund but you also mentioned that you were not familiar with a lot of the terms of the condominium reserve fund. Certainly my understanding from talking to experts in the area is that it is virtually unknown for these reserve funds not to have special assessments time after time after time. In other words, the amount in the fund, even though it is really substantial, is usually not enough when they have a major occurrence.

Do you see a reserve fund as being funded solely by a landlord, where the landlord is the only one who would put in money, or do you see this as a shared responsibility, where the tenants would put in a certain percentage and the landlords would be responsible for a certain percentage? You probably have three seconds to answer that, I think.

Mr Jefferies: I think that any money the landlord gets comes from the tenants in any event. Whether they take it out of the rent or you have tenants put it in by themselves, I think that it is all tenants' money in any event.

Ms Poole: To be more specific, should it come through rent increases to the tenants plus the landlord, or all landlord?

Mr Jefferies: I am not sure right now.

Mr Tilson: Continuing on with that, just so I am clear as to what your position is, because obviously you are getting into areas that are perhaps beyond Bill 4, which we appreciate, are you saying to us -- a question to any of you -- that the tenants should not be responsible for contributing to any of the renovations of an apartment building?

Mr Physick: I think the assumption is that the tenants do, and they do that by providing a certain percentage towards that in their rent.

Mr Tilson: I did not ask you whether they do. I asked whether they should. If we are contemplating legislation in the future, should tenants be obliged to contribute or should they not be obliged to contribute towards renovations of an apartment building?

Ms Krol: Mr Tilson, what happens when the tenant leaves a building or the landlord the following year sells the building and the new landlord decides to improve something else? When a landlord sells the building, is he then going to give part of his equity back to the tenants?

Mr Tilson: I am trying to clarify your statement when you said that applications were made to rent review with respect to renovations that were done to the building that you did not approve of. I am trying to clarify specifically your statement. My question is specifically to you because of your statement. Should tenants be obliged to contribute to any renovations whatsoever?

Ms Krol: In the matter of the extraordinary renovations that were done in my particular building, a new floor being built on with luxury apartments that were being charged twice as much as we are being charged, I think that the people moving in are being charged in their rent for those renovations, for the marble floor and the new hallways and everything else. If their rent is $1,500 and they are paying that $1,500, it seems to me that the renovations are being paid for in that rent.

No, I am not getting any benefit out of it.

Mr Tilson: I am not trying to ask you a trick question, I am just trying to ask you philosophically, should the tenants contribute in any way whatsoever towards renovations contemplated by a landlord? Either yes or no.

Ms Krol: It really depends on what kind of renovations you are talking about. If my fridge is no longer ever going to work again but it has been there for 25 years and he has allocated certain moneys towards that type of appliance, then why should I be paying for it? I have been paying it in my rent all that time.

Mr Tilson: Let me rephrase my question: If a landlord came to a tenant such as yourself or the tenants of the building, presumably by vote -- I am just trying to create something; I am trying to find out where you stand -- and the tenants all agree that certain renovations should be made to a building -- let's say the refrigerators are all falling apart so they are not working, or the roof is leaking or the garage needs repair work and the tenants all agree to that. They all agree to those specific renovations. Who should pay for them? Should the landlord pay for them all?

Ms Krol: We are already paying for it.

Mr Tilson: I am not asking the present, I am trying to contemplate future legislation. Philosophically, should the tenants pay for them or contribute towards paying for them?

Ms Krol: But we are.

Mr Tilson: Okay. Do you agree with that?

Ms Krol: But it is in our rents. Every time they raise it there are the extra moneys that go towards the reserve fund to pay for the extraordinary expenses.

Mr Tilson: Do you agree that new renovations should be paid for by the tenants or contributed to by the tenants?

Ms Krol: We are contributing. We are giving our money to the landlord in our rent.

Mr Tilson: So you agree with that.

Ms Krol: I want to know what actually happened years ago when a garage needed redoing. I have been renting almost all of my life, but for 12 years before I moved into this apartment, I was living in a town house. I was not paying rent. I had never had increases like that before. Maintenance was always looked after. This was before rent review

Mr Tilson: I will tell you why I am asking my question. It is a response to your statement that certain renovations were done to your building which you did not approve of. Do I assume therefore that if you had approved of them, you would have no problem with those renovations?

Ms Krol: I see. That is a different way of asking that. Yes, if I wanted new carpeting, I would not mind paying extra rent for the period of time that the carpeting was paid off. That would be for that particular thing. Not for ever, however, because once it was paid off, I would expect my rent to be brought back to what it was before that.

Mr Tilson: Okay, so you would agree to the fact that for necessary renovations, in the interpretation of the tenants as a group, you would agree that your rent should be increased.

Ms Krol: For a certain reason and for a certain period.

Mr Tilson: What would be the period?

Ms Krol: The period would be until it was paid off.

Mr Tilson: And then presumably if more renovations were required, say, in five years' time, you would concur with those.

Ms Krol: Maybe yes or maybe no, but if we had agreed that we do not want any further renovations for the next two years, I would expect my rent to revert to what it was.

Mr Tilson: So I guess the question is, how are we as legislators going to encourage landlords to make renovations to their buildings, to make capital expenditures that would improve the quality of your life or at least maintain the quality of your life?

Ms Krol: Maintaining is another thing. Yes, if they maintained things -- I am not talking about --

Mr Tilson: But how are we going to do that?

Ms Krol: But the money is already there in our rent to maintain them. When I tell them that I need a new washer and that particular invoice goes in to rent review for a 20-cent washer --

Mr Tilson: What rent do you pay now?

Ms Krol: I pay $650.

Mr Tilson: All right, $650, and let's say the building needs a new roof.

Ms Krol: The building just had a new roof.

Mr Tilson: All right. Let's say -- we are creating a hypothetical situation -- the building needs something, a new parking garage. Where is the landlord going to get the money?

Ms Krol: You see, I am not sure why it was not there in the first, second and third place.

Mr Tilson: But it is not there. So where is the landlord going to get the money?

Ms Krol: He is going to the bank obviously.

Mr Tilson: But the bank will say, "You don't have the revenue coming in to pay for that increased mortgage or that increased loan that you are going to get." Where is the landlord going to get the money, from the sky?

Ms Krol: The revenue is there.

Mr Tilson: Where is the revenue? Where is it?

Mr Jefferies: I think this landlord is a bad businessman.

Ms Krol: Thank you.

Mr Tilson: Let's try you, Mr Jefferies.

Mr Jefferies: Certainly.

Mr Tilson: We will pick on you for a minute. You are a lawyer and you have obviously studied this legislation and you have studied other legislation. What legislation could be implemented by this government, or any government, which would encourage the construction of new housing stock in this province?

Mr Jefferies: I would love to answer that question but, to be perfectly honest, I did not come to discuss that today.

Mr Tilson: I am asking your assistance because you are advising us on what the landlords should not be doing and what we should not be doing. What should we be doing to improve the housing stock in this province? If you start listening to all the examples that you are giving, why should landlords even be in the business of maintaining buildings? They are not going to have a profit; they are not going to be allowed to improve their place because they will not have the money to do it; the banks will not give them loans. So how are we going to encourage landlords to do all the things that you want to maintain the quality of life that your tenants have, and more important, how are we going to create new housing stock for all of the new people who are coming into our cities?

Mr Jefferies: First of all, I think we need a new generation of landlords who are not going to rely on the government to give them everything they want and to have their profits guaranteed by the government. In what other business is the profit guaranteed? That produces lazy landlords and lazy businessmen. Now, we are going to have a transition period. Whatever the new legislation is, this legislation is going to encourage good management, good business practices and financial management. There could be a period of 10 years where there is a turnover in the type of landlord that we have now.

I do not have the answers to all those questions. I know that we have a lazy system now, and any system that guarantees profits to businessmen produces bad decision-making.

Mr Tilson: Over the next 10 years in this province, should the private land owners get out of the business of --

The Chair: Mr Tilson, please. Order.

Mr Jefferies: No.

The Chair: Order. Thank you. I want to thank the delegation for coming before us. We appreciated your brief and we acknowledge that you have probably provided us with information that you had probably not planned for. We also appreciate that. It was a pleasure for the committee to have you, and I am sure you will be following our deliberations.

By previous agreement, the committee has decided to adjourn for 15 minutes. I would ask all committee members to be back by 12:20 because I understand we wish to discuss further matters with ministry officials for approximately one hour. I want to let committee members know that lunch has been ordered and lunch is here. So, please be back at 12:20 or your lunch will be cold.

The committee recessed at 1205.

1221

MINISTRY OF HOUSING (CONTINUED)

The Chair: Maybe we can get started. My understanding from this morning's agreement is that the committee members believe that another hour is necessary for discussion with Ministry of Housing staff. I am not sure what procedure you adopted this morning for questioning, but certainly whatever was done this morning, I am sure we --

Mr Brown: There has been no questioning.

The Chair: There has been no questioning and answering? Do you have a comment, Ms Poole?

Ms Poole: Yes. I just wondered whether one hour was going to be sufficient time. That is 20 minutes per caucus. I know that the ministry has given us a lot of food for thought, a lot of data-statistics background. I personally would be more comfortable with half an hour each if that would be agreeable.

The Chair: I have no problems with getting a consensus from the committee.

Mr Turnbull: I think that is the minimum we are going to need.

The Chair: We can always try this again on another day. We do not have to accomplish all of this today. The hearings are going to proceed for a number of weeks. So we have an hour and a half, which would in effect give each caucus half an hour today. If there is consensus on that, we can proceed on that basis. Is there consensus for that, 30 minutes for each caucus today? I do not know what order you want to proceed in. Is there a consensus on a particular order?

Mr Tilson: I guess, Mr Chairman, as long as we do have the right -- obviously we are restricted on the time -- at perhaps another time, at your discretion perhaps --

The Chair: Ms Poole had asked to go first. Can we go? Okay? I just want to tell the committee members that if we need more time we will schedule more time. That is not a problem as far as I am concerned.

Mr Turnbull: While we are going on rotation I think there might be questions that are asked by members of the other parties where we want some clarification. I think we should be able to step in.

The Chair: You want supplementaries. Okay. We can do that, but I am going to ask all committee members to use their own best judgement, and if there are objections, for example, if you object to your train of questioning being interrupted, then I am not going to allow it to be interrupted. So it is going to have to be the committee members working this out among themselves. It is not going to be possible for me to keep track of every particular second. If the process looks like it is going to bog down and cause trouble, then I will not allow the supplementaries.

We can try it. I would ask everyone to show each colleague the courtesy that you would expect, and like I said, we will try it, but if it does not work we are going to strictly adhere to every caucus getting 30 minutes without interruption. Is that fair? Thank you. Ms Poole, you asked to go first, then we will have 30 minutes from the PC caucus and 30 minutes from the government caucus. Please commence.

Ms Poole: I just want to say I have cancelled my cable show. I am not going, so there is no longer a need for me to specifically go first if anybody else --

The Chair: No, I think it has already been agreed to. Let's get started.

Ms Poole: Mr Chair, if I could ask you for a favour, perhaps after 15 minutes you could let me know because I would like to be able to give opportunities to my colleagues to participate too.

I would like to start with this documentation, Background: Available Data on the Condition of Ontario's Rental Stock. The first few questions are on this particular paper. The first one relates to, on page 1, the material you have provided from Statistics Canada that 29% of Ontario's rental units were identified by occupants as being in need of major or minor repairs. There is no breakdown of major and minor given in this document, although I understand that it was in the Statscan survey. Do you happen to have those figures? Of the 29%, what proportion was considered by tenants to be major and what was minor?

Mrs Beaumont: I do not have them with me, but I believe we have those back at the office and we can provide them.

Ms Poole: Thank you. I would appreciate that. The second question again relates to this backgrounder. On page 4, I believe, it talks about "the proportion of tenants perceiving `deterioration in maintenance' has, on average, increased over the 1977-1987 period for the six CMAs for which the data is available." Do you have any personal opinions why tenants' perceptions are increasing? Is it because our housing stock has aged 10 more years so that major repairs are more necessary? Is it because tenants are more activist? Is it because the buildings are not being cared for in the same way they were in the pre-1977 period?

Mrs Beaumont: Without having those housing surveys before me, and let me put that caveat on my response first, I can only give you my impressions based on my knowledge of rental housing stock. We are talking of a 10-year period. I would say that a substantial proportion of that would be due to aging of the stock, that 10 years is a significant period of time. In that 10-year period, bear in mind that includes one period of extremely high interest rates and certainly during that period there were reductions in maintenance in some situations. That has also, as you indicated, been a period in which tenant activism has increased substantially and people's awareness of problems has increased substantially.

Municipalities, as well, during that time period have become active in making people aware of what could be seen as appropriate standards of maintenance. You would see during that time period an increase in the number of property standards bylaws around the province and an increase in municipalities' actions to implement those bylaws. So there would have been, and tenants would have become aware of, an increase in work orders. But taking all that into account, I think most of it could be accounted for by aging buildings.

Ms Poole: Thank you. On page 6 you --

Ms Harrington: Question.

The Chair: Ms Poole, Ms Harrington would like a supplementary.

Ms Harrington: No, a new question.

The Chair: A new question: I think we agreed to interruption only for supplementaries. The new questions you will have to hold until your caucus. Is that okay?

Ms Poole: For any members who were busy getting lunch, I am on page 6 of the backgrounder about the data on the condition of Ontario's rental stock. On page 6 it says, "Studies have shown that in the majority of cases, rehabilitation is a more cost-effective way to provide modest housing than new construction."

My concern is that we have before us in Bill 4 legislation that will discourage landlords from putting a penny into major repairs or capital expenditures, and my fear is that it may discourage them from even the day-to-day repairs they are obligated to provide. What effect do you feel Bill 4 is going to have on rehabilitation of buildings? Do you anticipate there will be any rehabilitation of buildings done in the two-year period or in the period of the moratorium, however long it lasts?

Mrs Beaumont: I am probably repeating what has been said previously by other people. I have not been here all the time so I am not aware of what may have been said, but I would ask you to bear in mind that Bill 4 is temporary legislation. It is not intended as the permanent legislation. The minister gave an indication yesterday of his anticipated timetable for moving to the permanent legislation, which was at a significantly faster pace than the provision in Bill 4 for it to have a life of two years.

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If you look as well at some of the statistics that were provided, there is the indication there that in any one year 83% of the rental stock does not come forward for rent review, which means that the landlords either feel they can do what is necessary in their buildings with the guideline amount, or they already have provision through increases already awarded through phase-ins or through the level of that maximum rent to be able to do what they feel is necessary.

I think you would see that the bulk of the rental property in Ontario would not be affected by Bill 4 during the time of its operation. There certainly will be situations in those that would have come forward, as part of the 17% that would come forward, where there are landlords who would have anticipated carrying out some major capital construction that they have indicated to us and in the media that they have put on hold, but in my judgement that would be a very small proportion of the total rental stock.

Mr Turnbull: Do I understand you correctly, that you do not anticipate that major capital expenditures will be entered into by landlords during the period of the moratorium?

Mrs Beaumont: What I would say is that 83% of the rental stock in Ontario does not come forward to rent review for increases above guideline in a year for a variety of reasons. They would not be affected by Bill 4. That is 83%, the bulk of the stock.

Mr Turnbull: But that does not answer my question.

Mrs Beaumont: But what I am saying is that in that stock that would not be affected, and the plans of those landlords, some of them may feel they can undertake work without coming to rent review. Landlords indicate to us that some of them are able to undertake work within the guideline or within the frames of past increases that they have been awarded.

Of the 17% that do come forward every year, a portion of those units, the landlords would have come forward for major capital expenditures. For major capital expenditures most landlords would be looking for an increase above guideline. They would not be able to get an increase above guideline for capital expenditures during the life of Bill 4.

Mr Turnbull: Let me just reiterate my question. A major capital expenditure you do not anticipate would be done?

The Chair: I believe Ms Poole would like the floor back.

Mrs Beaumont: Landlords have indicated they would prefer that.

Ms Poole: I would like to take your comments one step farther, and now I am going into your major presentation document, on page 4 of the blue papers, which quotes whole-building review for all buildings, the number of units in various ranges of increase in maximum rent from 1985 to 1990.

According to these statistics which have been provided by rent review for whole building review increases above 19.9%, 6.84% of the units have had increases above the 19.9%. I was wondering if you could perhaps tell me whether you feel there has been widespread abuse of the rent review system by landlords, and if you do believe there has been widespread abuse, what background statistics did you have which led you to introduce legislation which is basically going to affect all landlords and not simply those who have been abusing the system? Perhaps you could explain what sources you drew on to come to the conclusion that something as serious as Bill 4 was necessary to cure the problem as an interim measure.

Mrs Beaumont: I am a little uneasy about the use of the term "abuse of the system," because that implies some illegal activity. All forms of legislation can be applied and used in different ways and the nature of legislation, the way in which legislation is written, can in itself lead to certain actions.

Ms Poole: Perhaps I could rephrase that: landlords who have taken excess advantage of the system. I think you know what we mean. We are talking about the ones who had very, very high rent increases, that while legally they could be justified, perhaps morally we had more problems with them.

The Chair: Maybe I could help the staff. Maybe the answer to that was that it was a political decision. Does that help the staff?

Mrs Beaumont: That helps, yes.

Ms Poole: Can you justify this political decision? I am going to get you yet.

Mrs Beaumont: The minister, in making his decision, as he indicated in his statement yesterday, was very much aware of the number of units that are affected. He quoted you the number of units which had had high increases in his statement yesterday. You will see the numbers of units indicated in this table. But as your Chair said so helpfully, it was indeed a political decision.

Ms Poole: Just for anybody who is unique enough to be watching television and the Legislative Assembly committee at this particular day and time, would you like to just give us what those figures are?

Mrs Beaumont: If you were commenting on the figures where increases above 19.9% have been granted and if we look at the across-Ontario figures, in the range of an increase of 20% to 24.9%, we have 13,488 units; 25% to 29.9%, 5,527 units; and above 30%, 8,193 units. That above-30% figure would include some that would extend considerably above 30% and the minister made reference to a number of those in his statement.

Ms Poole: The statistics I have for rent review for the 22-month period 1 January 1989 to 31 October 1990 showed, I believe it was, 12/1000 of 1% as the number of units which obtained rent increases of 100% or more. Would you happen to have that information?

Mrs Beaumont: I do not know. Do you know, Dana?

Ms Richardson: I do not have that data down here today.

Ms Poole: Perhaps I could provide you with this afterwards and you could confirm whether that is indeed true.

The minister has said on a number of occasions that it would be silly for long-term legislation not to have provisions for capital expenditures. Why was there no provision for capital expenditures in the interim legislation?

Mrs Beaumont: Purely because it is interim legislation and the government has indicated that one of the major issues on which it seeks to consult in the development of the permanent legislation is a way in which to address capital. Recognizing that there is a need for repair, a need for major repair in a significant number of buildings, there are a variety of ways in which that can be addressed. I think in your committee deliberations to date there have been a number of suggestions as to how that could be addressed and the government has indicated that as one of the key things on which it wishes to consult. It did not want to move forward immediately in this legislation to come to a conclusion, and at the same time not wishing to continue with the system that had been in place.

Ms Poole: I have one final question before my colleagues ask theirs, and it relates to a number the minister has used in a variety of different ways in the House, in the media and in this committee. I would like to find what the number actually means. He has used the number 330,000. He has used it to indicate the number of tenant families which faced increases above the guideline.

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The minister has used the same figure as representing tenant families who experience rent increases above the average of 11%, and the minister has also used it in another way, 330,000 tenant families who face huge rent increases due to luxury renovations. So this is multiple choice: Which of the figures for the 330,000 are actually correct and over what time period would we be talking?

Mrs Beaumont: I am a public servant and I am sure my minister was correct in the context in which he used those numbers.

Ms Poole: All three times. You are not a civil servant, you are a diplomat.

Mrs Beaumont: If we look at the numbers on the page, the table we were looking at before in the blue pages, you would see an indication there of 397,000-plus units that have gone through rent review. Are you doing some instant arithmetic there for me, Dana?

Ms Richardson: It is not very good, though.

Mrs Beaumont: If we extract from that those that have had increases which have been of an amount below the guideline in place at the time, I think that is where you would get the 330,000, that being a rounded-off number.

Ms Poole: Below the guideline?

Mrs Beaumont: Yes.

The Chair: Ms Poole, you asked me to inform you about your 15 minutes and I believe you have reached that point.

Ms Poole: Perhaps Mrs Beaumont could just finish her answer and then my colleague can speak.

Mrs Beaumont: Bear in mind that what we have indicated on this table are the increases that were granted. You will see that some of them in fact were below 4.9%. There is a distinction between what a landlord may request and what is granted, so some of the increases granted could be significantly below what is requested.

Ms Poole: One last final one: Do these figures include the 4.6% statutory guideline, or the guideline at the time, or are these increases above the statutory?

Mrs Beaumont: These increases would include the guideline in the way in which the guideline is applied to orders, because when you apply the guideline to orders, if we take for example the guideline this year, which is at 5.4%, 1% of that is for minor capital. If the RRRA was fully operational and you received an increase in an order which included capital expenditures, in determining the increase, 1% would be deducted so as not to double count what is included in the guideline and what is granted you in your order. So they include the modified guideline amount. That was the figure I referred to as the operating loss.

Ms Poole: Thank you for clarifying that.

Mrs Y. O'Neill: If I may just continue then with our time, the 330,000, could you give me a percentage of that in the total rental market in Ontario? I presume that is an Ontario figure, 330,000. Has anybody got what percentage that is of the total rental units in the province? Maybe you do not have that right now. I could get it later.

Mrs Beaumont: No, but the total number of privately owned rented units, which is what we are talking about here, is 1,050,000. So that is about a third.

Mrs Y. O'Neill: Okay, thank you. The background paper you provided, as I did say earlier in the morning, I am very impressed with both your written and verbal presentations. This is not an easy subject to explain to other people, and certainly in a short time frame.

You have used one acronym I am not familiar with on page 1 there, CMA.

Mrs Beaumont: Census metropolitan area.

Mrs Y. O'Neill: So that is Toronto versus --

Mrs Beaumont: Yes. That would be bigger than Metropolitan Toronto. This is the basis on which Statistics Canada provides all of its information. The census metropolitan area for Toronto extends significantly out. It includes Oshawa, Mississauga --

Mrs Y. O'Neill: Hamilton?

Mrs Beaumont: No, not Hamilton. Hamilton is a separate CMA.

Mrs Y. O'Neill: Okay, that gives me some idea.

Now, I would like to go to page 12 of your major presentation, if I may, the transitional rules. Before I do that, I just remembered that there was a presenter this morning who stated that the pass-through costs -- and if I heard correctly, there were no criteria for a pass-through cost nor was there a ceiling, and I wondered what your comments were. That was my understanding of the presentation. Maybe you could help me by explaining pass-through costs and if there are criteria or a ceiling or how the ministry is involved in helping a person determine.

Mrs Beaumont: Can I clarify if you are talking about pass-through costs in the RRRA or specifically under Bill 4?

Mrs Y. O'Neill: The RRRA.

Mrs Beaumont: Do you want to explain, Dana?

Ms Richardson: Yes. There is a range of costs that can be passed through. Some of them are capital expenditures, financial loss and other items.

Mrs Y. O'Neill: Yes, I understand that. The criteria -- maybe you were not here for the presentation -- were similar to what several people said: "We have had a whole lot of renovations. We had nothing to say about them and the building is just becoming a higher quality investment. We are not really benefiting." This is the context.

Ms Richardson: Under the RRRA, for a capital expenditure there is not a ceiling that limits the amount that can be passed through. There is a ceiling for a financial loss and economic loss. Under some regulations that were passed in April, there were some further limitations placed on the pass-throughs of capital expenditures, for example.

Mrs Y. O'Neill: So they were in effect from April to October?

Ms Richardson: Yes. Those limitations also addressed when a building comes to rent review, obtains a rent increase based on capital expenditures and then the building is sold at a higher value. If the capital expenditures have contributed to that value, an adjustment is made. So there are some limitations in the current system.

Mrs Y. O'Neill: So there are limitations. What about criteria?

Ms Richardson: There are no criteria in the current act on whether a capital expenditure is necessary or unnecessary.

Mrs Y. O'Neill: You tried to explain that, I guess, in one of the other papers that you presented to us.

Ms Richardson: That is right.

Mrs Y. O'Neill: Okay, page 12. I am trying to understand what is actually happening at the present time with the people who are involved in rent review administration. Now, I understand you have some figures here about backlogs. I know that some parts of the province, as you said I think in your presentation, are up to date almost. Anything that is happening now I would like you to tell me about. Are there any applications? What is happening to the appeals? Where are we right now with these people? In other words, I would like to know what the rent review administrators in this province are doing right now, if they are not doing backlogs.

Ms Richardson: A number of them are indeed taking care of the 130,000 units that would be before 1 October first effective dates. Throughout the province, we have a system of sharing the workload, so some people who may be caught up in Thunder Bay may be dealing with some applications in the Toronto area to help out in its backlog situation.

Another very major thing that our staff is doing has to do with the rent registry, to make sure the units that have been registered on the rent registry are verified. That is a very major project being undertaken right now.

Mrs Y. O'Neill: So right now you are not receiving any new applications.

Ms Richardson: Yes, we are still receiving new applications that will be decided under Bill 4.

Mrs Y. O'Neill: So they would only be these new justification factors.

Ms Richardson: Yes. There are applications being made right now for whole-building reviews and there are tenant applications for rebates and for challenges to the rent review guideline.

Mrs Y. O'Neill: A very quick question. Could you tell me a little bit about tenant rebates? Under what conditions are they given? Is that as the result of an appeal? Is that the only condition?

Ms Richardson: No. A tenant rebate is based on an illegal rent increase that was taken some time in the past. It could have been that more than one rent increase was taken in a 12-month period. For instance, it often happens on tenant turnover. When a tenant moves out, the landlord may increase the rent by guideline but it may be two increases in one year -- that would be an illegal increase -- or indeed charge more than the guideline.

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Mrs Y. O'Neill: Thank you for your succinct answers.

The Chair: The Liberals have a little time left.

Mr Brown: I am interested in some definitions. I wonder if you could provide me with what the ministry considers the definition of flipping.

Mrs Beaumont: The current minister and the previous minister have both referred on numerous occasions to the flipping of buildings, the previous minister in the context of the discussions that went on a year ago on luxury renovations. What has been referred to by both ministers -- two things, one being where a building would be turned over from one ownership to another ownership within a very short period of time. You may have sales of buildings taking place just within a couple of years. You buy it, you resell it 18 months from now. That is one situation.

The other situation is where a landlord would go for and obtain significant increases in his rents, often based on financial losses, perhaps on capital expenditures, but often as well on some of the other financial provisions in the legislation, and then sell the building, which may not necessarily be within a very short period of time.

The concern has been with the turnover in ownership of buildings after there have been significant increases of rents in the building and a new landlord then going to rent review again for significant increases based on his new financing of the building. It is that activity, as opposed to a landlord holding a building for a long period of time.

Mr Brown: What you are saying is that the price of the building is a function to some extent, or probably a large extent, of how much rent the building can bring in and you can almost double the amount of increase by selling the building.

Mrs Beaumont: Very much so.

Mr Brown: You have not given me a time line. When we are just talking about straight turnover, are we talking about 18 months, are we talking about 2 years, are we talking about 5 years, are we talking about 10 years? My difficulty is when we start talking about flipping, as a member, I want to have some understanding of whether it is increasing or decreasing, and if in fact it is becoming a greater problem or a lesser problem.

Unless we have a very, very precise definition of what we are talking about, it is impossible for anyone to tell me what the statistics are. Is it increasing? Is it not? We have to know exactly what those kinds of time frames are or it is impossible for me, or anyone else for that matter, to make a judgement about whether flipping is increasing or decreasing, or whatever. We do not have a precise definition is what you are telling me.

Mrs Beaumont: I cannot give you a precise definition. There is a whole variety of people in the tenant and landlord community, municipalities, media, among others, who use the term "flipping." Each has his own definition.

Mr Brown: I know that and I think I did know what flipping was in that sense, but I was wondering if we have a technical definition.

Mrs Beaumont: No, we do not.

Mr Brown: Can you tell me then if there are more units being sold today or this year, in 1990, than there were in 1989, in 1988? Can you tell me year over year if there has been an increase in the sales of apartment units?

Mrs Beaumont: I cannot give you those numbers off the top of my head. We do not track sales of units. We would not have information on those unless they come forward to rent review with information on new ownership. The city of Toronto did a study a couple of years ago on that. I would only say to you that with the current state of the real estate market generally, and I talk about the market generally, not the rental sector specifically, this would not be a good year for anyone to choose to sell a building.

Mr Brown: Yes, not for market reasons.

The Chair: You have time for one very short question.

Mr Brown: I do not know whether that information exists, but if it does, if someone could provide that information, that would be helpful.

Mrs Beaumont: We will see what we can get for you.

Mr Brown: Yes. The other one is, could you tell me what the average and median length of stay for a tenant in a particular apartment unit is?

Mrs Beaumont: I believe it is two years, but let me check on that.

Mr Brown: The average or the median? Which one is two years?

Mrs Beaumont: Let me check and get back to you.

Ms Poole: I would just like to thank our Ministry of Housing witnesses for their considerable expertise they have shared with us today. I am sure they are gratified to know I am just as much a thorn in their side as an opposition member as I was as a government member. Some things do not change.

The Chair: Mr Tilson, your party has until almost 1:30; 1:28, 1:29.

Mr Tilson: To members of the Housing staff: I would like you to clarify a question that I asked the minister yesterday on which I am really not too clear what his position is. That has to do with the economic impact analysis. I know he was in a hurry to get away and we really did not get into it thoroughly.

You recall that in the House on 28 November I asked the Premier a question which was subsequently referred to Mr Cooke, which was, "I would like to ask the Premier if his government has done an economic impact analysis of his decision to proceed with rent controls." Then Mr Rae referred it to Mr Cooke. Mr Cooke's answer was, "I guess how I would like to respond to that is that we did." Further on I asked if that could be produced in the supplementary and Mr Cooke stated, "I am certainly prepared, and we will as we go through this process, to share every bit of information we have that helped us make this decision."

I believe for me to better understand the process, and I think the members of the committee as well, I would like to see this economic impact analysis that Mr Cooke indicated was available. I had written him and asked him again in the House, and on both occasions it has not been produced to me. Do you have this economic impact analysis?

Mrs Beaumont: I think it may have been in the atmosphere of the House that you and the minister perhaps were talking at cross-purposes as to what was meant by an economic impact analysis. What we do have, and you have part of that material in the blue pages, are indications of the numbers of units, the numbers of landlords, that we would anticipate would be affected in one way or another by Bill 4. Because of the numbers that go through rent review, we have historical information on how much money has been requested through the rent review system by landlords for capital expenditures.

We have information on what factors lead to rent increases. We have this kind of information, but we do not have a report entitled Economic Impact Analysis and a detailed analysis that you might find if you went out to an economic consulting firm.

Mr Tilson: Before this bill is passed, does the government plan to do one?

Mrs Beaumont: I cannot speak for the government's plans. At this point in time the ministry staff have not anticipated undertaking that. This is interim legislation and we look at the variety of factors on which rent increases have been granted, expenditures historically, number of units and number of landlords anticipated to be affected. The conclusion that had been arrived at was that for a moratorium period, the bill would not have cataclysmic consequences that some are claiming for it.

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Mr Tilson: Are you prepared to recommend to this committee that we perhaps suggest to the Legislature that the minister do an economic impact analysis either for Bill 4 or for the green paper that he has indicated he would be presenting to us?

Mrs Beaumont: I think the committee must recommend to the Legislature what it chooses to.

Mr Tilson: Oh, I can assure you it will. But notwithstanding what I as an individual of this committee does, are you as staff of the Minister of Housing prepared to make comments to this committee as to whether or not an economic impact analysis should or should not be completed prior to the passing of Bill 4?

Mrs Beaumont: We have not seen the need for such an impact analysis. If we had, we would have recommended to the minister that one be undertaken.

Mr Tilson: We have heard specific comments with respect to capital expenditures, the main and the largest of which seems to be garage repairs. As I understand it, the main capital applications that have come before you for rent review are garage repairs, exterior concrete and brick repairs, roofing, plumbing risers, rewiring and balcony railing replacement for safety reasons. From the information that has been given to you through these applications, can you tell us what percentage of the applications for rent review are for those items?

Mrs Beaumont: Do you want to comment, Dana, on some of the work you did previously on that?

Ms Richardson: We do not track each individual capital expenditure in our statistics, but I would point out to you the studies that Mrs Beaumont referred to earlier this morning about some of the work we did last year on an analysis of necessary and unnecessary capital expenditures. The caveat around that is that it was a random sample of rent review orders that had been issued up until that time and that it is only 92 rent review orders that we used.

The other caveat is, we did look at each of those orders and we looked at what were the capital expenditures that were allowed in those particular orders. We used a very rough division of what is necessary and what is unnecessary. All of those caveats aside, our conclusion was that in those particular orders it was a 12.62% rent increase on average in total.

Of that, 7.5% approximately was due to capital expenditures, and further breaking that down, 5% approximately was due to necessary and 2.43% was due to unnecessary. The necessary kinds of expenditures would probably include the ones that you have indicated. The unnecessary ones were things like bathroom renovations, microwaves --

Mr Tilson: Okay. I am interested in the necessary ones or what I conclude are the necessary ones, and the ones that I have listed I think are necessary ones. Is this information not in a computer? Can this not be obtained?

Ms Richardson: We do not track each individual expenditure.

Mr Tilson: Is it difficult to do that?

Ms Richardson: We would have to review all of the rent review orders that have been issued in order to do that breakdown.

The Vice-Chair: Mr Jackson has a question.

Mr Jackson: My understanding is that a landlord can approach the rent review commission to get prior authorization for certain capital expenditures under certain conditions. Are you suggesting that you do not track that, that you do not record that, nor do you take note of it?

Ms Richardson: Of course we take note of the conditional orders. They list on each individual order what the capital expenditures requests are.

Mr Jackson: These are generally substantive ones. They are not done for 2% or 3%. They are to make sure that if I put half a million bucks into a basement --

Ms Richardson: We can certainly pull out individual orders, Mr Jackson.

Mr Jackson: I just want to suggest that this kind of information is available. I have seen it.

Ms Richardson: On an individual order, yes, but we do not gather it together and add up all of the garage repairs. That is not our usual statistical research.

Mr Jackson: No, I did not suggest that. I just said that you have easy access to it because all your conditional orders are filed and can be pulled forward and analysed at any one time. I have seen the work orders.

Ms Richardson: Yes, we can look at individual orders.

Mr Tilson: If I could continue, this would be useful, certainly from my perspective, because these things are really not going to be allowed unless landlords have a capital supply somewhere or unless they get a loan somewhere. It would be useful for me to know so that we can determine how this is going to be undertaken. I would hope that in the weeks ahead you do reconsider your position to make that available.

That leads me to my next question. We are dealing with that fact that capital expenditures are not being allowed as such to be included in the calculations for rent increases. At least in Bill 4 they are not. I am sure you have received dozens and dozens of letters and telephone calls from various groups, whether they be people who are being laid off from work, whether they be landlords or whether they be suppliers, who really have serious concerns. Jobs are being lost, contracts are being cancelled. You have received these letters. I have received probably a fraction of the letters that you have received.

One of the big concerns, of course, is that work that was done under the rules, the existing legislation, work that was approved even by tenants, work that was done -- and, of course, if it was done and it does not match this legislation, it is essentially being void. That is the result of the legislation, which is creating serious economic hardships to a great number of people. The phase-ins which have been approved under the existing legislation, depending when they fall, as was given in your testimony this morning, now are being cancelled, even though they have been approved under the previous legislation. That too is creating hardships.

These land owners, having played by the rules -- and we heard a sad, sad story of a man in Hamilton, was it?

Mrs Y. O'Neill: Yes, he moved to Toronto, but the building was in Hamilton.

Mr Tilson: We heard a very sad story and I do not know whether any of you were present here today, but that is a typical example of some person who has played by the rules. They played by the rules of the previous legislation to a tee, they did everything they were supposed to do, and all of a sudden the rules are changed in midstream.

These people then presumably go to banks or they go to institutions because they need money to pay for these things, because they are not going to be able to ask the tenants to share for these things, even though in many cases the tenants have approved it.

So I guess my question is, knowing that, does the government have any plans to assist people who are -- if you are not, and I am not saying you, but if the government is not prepared to amend that legislation, does your ministry have any plans or do other ministries in the government have any plans to provide assistance to people who are caught in this situation, who are literally going to go bankrupt, who go to the banks and the banks say: "Sorry, you don't have the income to increase your mortgages. The rules have changed. We are not going to give you those loans"? Does the government, that you know of, have any plans to assist the people who are caught in this terrible, terrible situation?

Mrs Beaumont: If I may, I think that question could perhaps better be directed at my minister. The ministry does not currently have any programs in existence that would provide assistance of that kind. There was reference already to the low-rise rehabilitation program which provides funding.

Mr Tilson: I understand that you do have your legal counsel present with you to assist you. Has any correspondence been sent to you? Because these people, as a result of the government's actions, are being put in very serious positions. Have there been any indications or any actual lawsuits implemented against the government as a result of the government's proposed Bill 4?

Mrs Beaumont: I have not yet seen any indication of any lawsuits based on Bill 4. Of course, the minister receives a large volume of correspondence both from landlords expressing concerns with Bill 4 and from tenants expressing their concerns with the current legislation.

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Mr Tilson: Have you asked your counsel or have you sought any independent legal counsel as to whether or not the government by this retroactive legislation -- and I am speaking specifically to the retroactive part of the bill -- is breaking the law.

Mrs Beaumont: Christina, would you like to comment?

Ms Sokulsky: Could you perhaps clarify the question? What do you mean by "breaking the law"?

Mr Tilson: I am asking you. I guess I am following through with the question as to whether any specific people, specific landlords or their solicitor or counsel or legal representatives, have contacted the government to say that because of the retroactive provisions, whether it be a charter argument or whether it be some other form of legal argument, the government is breaking the law. Have you sought out counsel before you implement this legislation to determine whether or not the government is breaking the law?

Ms Sokulsky: Certainly the proposed legislation has passed through the normal channel, which is review by legislative committee, and these are certainly considerations that go into review of the legislation.

Mr Tilson: I hope for the sake of this province that it was not the process that was followed with the Sunday shopping legislation.

The next question has to do with the GST. Is that one of the items that can be passed on to tenants? I am speaking specifically of goods and services, purchases that are being made by the landlords on behalf of the building for the benefit of the tenants in which GST is charged. Is the landlord fully responsible for that or will the tenant share in that tax?

Ms Richardson: Perhaps I can respond to that. The GST as it is incurred by a landlord will be reflected in the three-year moving average of the guideline because as that is reflected in landlords' inflationary costs, it then gets reflected in the annual guideline.

Mr Tilson: How is it reflected in the inflationary costs?

Ms Richardson: In determining what a landlord's annual costs are -- a landlord may have additional costs because of GST. Some will go up and some will go down.

Mr Tilson: Are you saying then specifically that the GST is allowed for in this legislation?

Ms Richardson: In the calculation of the guideline which tracks inflationary changes and to the extent that GST will contribute to inflation, there will be a reflection of GST in rent increases.

Mr Tilson: Can you give me the specific section in the bill for that so I could look at it?

Ms Richardson: With reference to the section that talks about the calculation of the rent review guideline and the building operating cost index --

Mr Tilson: What section is that?

Ms Richardson: The section that adopts from the RRRA the calculation of the guideline. I am afraid I just do not have that at my fingertips.

Mr Tilson: Could you get that for me?

Ms Richardson: Yes.

Mr Tilson: I do not have the bill memorized either, but in due course could you get that for me, please.

Ms Richardson: I would like to just add one other point. If a landlord is experiencing additional costs that might result in extraordinary operating costs in those six cost categories, that also could be the subject of a rent increase.

Mr Tilson: Mr Turnbull will continue on with our party's questioning.

Mr Turnbull: Just following that line of questioning with respect to GST, could you tell me what the percentage component in the 1991 guideline number is for that inflationary factor?

Ms Richardson: There is not any in the 1991 guideline because it is based on a three-year moving average of the past three years of inflation, so it will only be showing up in the next calculation of the guideline.

Mr Turnbull: Let me start out by saying that I recognize what a tightrope civil servants walk in coming to give testimony before these committees. You have my sympathy. Can I specifically address, first of all, Mrs Beaumont. How long have you been with the Ministry of Housing?

Mrs Beaumont: I have been with the Ministry of Housing for a considerable period of time. I returned to the Ministry of Housing in 1989, but prior to that I was with the ministry for 14 years.

Mr Turnbull: Have you been associated with rent review for most of that time?

Mrs Beaumont: No, I have not. I have been associated with rent review from the spring of 1989.

Mr Turnbull: But you have an acquaintanceship with the history of how rent review was introduced and the guiding principles at that time.

Mrs Beaumont: I was in the ministry when it was first introduced in 1975.

Mr Turnbull: We have heard that capital costs, according to the minister, will have to be allowed or some provision has to be allowed in the permanent legislation. To the extent that capital costs which have already been expended by landlords -- I am specifically addressing the retroactive aspect of this legislation at the moment -- to the extent that landlords went ahead and went into capital development, they were completely within the law, were they not?

Mrs Beaumont: Yes, they were.

Mr Turnbull: Was it not contemplated in the existing legislation, both Bill 51 and the legislation that that in fact replaced, that major capital costs were always considered to be something that you would charge back to tenants after the fact because there was no pool of money available to pay for capital costs?

Mrs Beaumont: That was the premise in both pieces of legislation, yes.

Mr Turnbull: So we have had essentially a little over 14 years of no ability to generate enough money to provide this magical pool for capital costs.

Mrs Beaumont: The legislation that has been in place in the last 15 years has been based on pass-through of costs after expenditure, rather than building up a fund.

Mr Turnbull: Is it the fact that Metro housing and other public housing commissions do not in fact have a pool of money, a capital pool that they keep on contributing to to build up for capital expenditures?

Mrs Beaumont: The funding for public housing is very different, of course.

Mr Turnbull: I am just talking about capital.

Mrs Beaumont: Yes, but if you use the example of Metro housing, that would be public housing and the money for that comes from government allocations at the federal and provincial levels from year to year, so it is a very different situation.

Mr Turnbull: But the same considerations were extended to private landlords that it would be raised after the fact.

Mrs Beaumont: Yes, but if I could just go back for one moment, I made a comment on public housing, but non-profit housing is in fact required to build up a capital reserve.

Mr Turnbull: That is condos, is it not?

Mr Jackson: Similar to condos.

Mrs Beaumont: No, condos would be private sector. Condos are required to have a capital reserve, but nonprofit housing that is going ahead now under federal and provincial programs is also required to build up a reserve, similar to condos.

Mr Turnbull: Were the landlords who purchased properties and incurred financial losses due to the financing arrangements which were allowed under Bill 51 acting legally when they went for rent review and asked to pass costs through with respect to financial loss?

Mrs Beaumont: Yes, which is why I was questioning the comment earlier.

Mr Turnbull: Precisely. Your comment that they were not abusing the system, and I think it was quite correct.

Mrs Beaumont: They were using the system.

Mr Turnbull: Yes. Can I ask you, have you any thoughts on the ability of landlords who have purchased a building in the last four or five years -- let's say within the last three years -- and have not got all of their costs passed through for financial losses, and landlords who have entered into major capital expenditures and may have actually got a provisional order from the ministry? Is it not a fact that they may incur considerable problems in refinancing their buildings?

Mrs Beaumont: You are talking two very different situations when you talk financial loss and capital expenditures. I will ask Dana to speak on the financial loss situations, because she is more of an expert than I on the financing of buildings and the relationship between the financing and the rent and how this all ties into value.

Mr Turnbull: Let's just stick with capital expenditures at the moment.

Mrs Beaumont: If we stick with capital expenditures, some landlords, as they have indicated to us in correspondence and to you, no doubt, in correspondence and will indicate before this committee, will have borrowed money to spend on buildings anticipating that that would be returned in increased rents, which will not proceed under Bill 4. The minister, however, has indicated to this committee and elsewhere that Bill 4 is contemplated as temporary legislation. The whole question of capital expenditures is one that he wants to review thoroughly.

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Mr Turnbull: We are focusing on Bill 4 in these discussions at the moment because I would like to call you again when we get to the green paper. With respect to Bill 4, those expenditures that have been made, is it pretty standard practice that a landlord will go and finance those at a bank?

Mrs Beaumont: For large expenditures, large landlords would normally finance those expenditures. In small buildings, especially in the very small buildings, duplexes, if you have an apartment in your house, you may own a small building, a four-unit, often in those situations the landlords would not obtain financing. There are many situations in which landlords in fact do maintenance, do repair, do minor capital work themselves.

Mr Turnbull: However, a large landlord would normally raise the funds from the bank.

Mrs Beaumont: From some financial sources, yes.

Mr Turnbull: If a landlord has a loss and he has incurred capital expenditures in the expectation, under law, of regaining that money, would it not be reasonable to expect that the banks may be somewhat distressed when they do not get paid if the landlord has a loss and has no ability to flow back the capital costs to the tenant?

Mrs Beaumont: I will ask my colleague to comment on some of the financing aspects, but let me just say that it is standard business practice, as financial circumstances change, that a business person would enter into renegotiations with his source of lending money.

Mr Turnbull: What do you think the ability --

The Vice-Chair: Just to be helpful, you have about two minutes left.

Mr Turnbull: I show five minutes, actually.

Mrs Beaumont: As well, the discussions that would take place with the bankers would be on the basis of anticipated rental income from the building because the rental income is a major determinant of the value of the building.

Mr Turnbull: But surely if the existing legislation allows you to go and borrow the money for capital costs, and if you had a negative cash flow in the building, that determinant is not correct. Is it not reasonable to say that the bank would say: "You do not now, due to this legislation, have the ability to recapture that money. We are calling our loan."

Mrs Beaumont: Normally, it is in quite extreme circumstances that a bank would recall its loan. They will go to considerable length to renegotiate.

Mr Turnbull: In the interest of time, would it be reasonable to say that if the bank called its loan now, many buildings are worth 20% to 25% less than they were before Bill 4 was brought in?

Mrs Beaumont: I have seen that number quoted in material put forward by the Fair Rental Policy Organization of Ontario. I would comment on that that we are currently in a time when all real estate is going through a re-evaluation, given the current market and also given interest levels and what has happened to interest levels over the last little while. It is hard to predict what impact any particular action of any government or any action in the marketplace may have on the value of buildings.

Mr Turnbull: A last quick question: What in your personal opinion, with the expert knowledge that you have, is the prime problem for affordable housing in Ontario? Is it the lack of housing? Or the low incomes of some tenants?

Mrs Beaumont: The current problem is a supply of housing at rent levels or at levels for purchase that relate to income levels of people. People are not making enough money to buy or to rent what is being provided in the market.

Mr Turnbull: Is Bill 4 going to address that? Yes or no?

Mrs Beaumont: The long-term solution is designed to address that.

Mr Turnbull: But Bill 4, will it address that problem?

Mrs Beaumont: Bill 4 has not been seen as a way to address or to answer the long-standing problems that exist in Ontario's rental market. Bill 4 was brought in in order to allow for time to address those long-standing problems.

Ms Harrington: I just have a few brief clarifications which I am sure you will be pleased to get to.

This morning you were discussing what a phase-in is. Normally from my understanding, it has been 5% in most cases. Is that always 5%?

Ms Richardson: The usual phase-in is 5% per year but there is a formula for economic loss which might result in a different amount than 5% per year. There could be some circumstances where financial loss is phased in at 6% per year, but on average it is 5% per year.

Ms Harrington: You would never get the 6% and the 5% together, would you? Is that possible?

Ms Richardson: Not for the same financial loss situation, no.

Perhaps I should also mention, though, that there could be an equalization phase-in and that could be added to financial loss. The combination could add up to 10% in some circumstances.

Ms Harrington: That 10% then would be on top of the 5.4% of this year.

Ms Richardson: Yes.

Ms Harrington: The other thing I wanted to briefly discuss was on page 5 about the standards board. Coming from municipal government, I know that primarily the municipalities have the authority to deal with violations of minimum upkeep and across the province I believe that this is a problem in maintaining the buildings at a certain level. Could you clarify briefly for me how the provincial standards board interacts with the municipal level and maybe you could suggest how the role could be clarified or what you would hope to see in the future to make the situation better.

Ms Richardson: I feel most comfortable addressing what is the situation right now. That is that if a municipality has a maintenance and property standards bylaw, the provincial standard usually does not apply in that municipality. The municipality would then do an inspection and send a copy of its work order to the Residential Rental Standards Board. The standards board would review the order and determine if the violation was substantial and if it was subsisting. If those were the cases, it would recommend to the ministry that a rent penalty be awarded in that circumstance.

There are municipalities that do not have municipal standards, there are the unorganized territories that do not have municipal standards and there are some circumstances where municipalities may not be enforcing their standards. In those circumstances, the provincial standard that has been reviewed by the standards board and adopted and set out in the Ontario Gazette would be applied.

Ms Harrington: So you do take authority in the cases where there is no municipal standards board.

Ms Richardson: Yes.

Ms Harrington: And you deal with the people directly.

Ms Richardson: Yes.

Ms Harrington: Just going back briefly to where there is a municipal standards board, what you are saying is that if the order is not complied with, it goes to you.

Ms Richardson: Yes. Usually the municipality has a time period in which an order is to be complied with. At the expiration of that time period, it is forwarded to the Residential Rental Standards Board and it determines if there has been compliance.

Ms Harrington: So the local legal people at the municipality do not handle it. It comes to the province for enforcement.

Ms Richardson: No. The municipality will continue on with its enforcement as well. The rent penalty is an additional enforcement mechanism.

Ms Harrington: I see. So they would possibly take the people to court locally as well as having the province involved.

Ms Richardson: Yes.

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Ms Harrington: To get some action at the provincial level -- that is, a penalty enforced -- how long would you say that would take from the first date of complaint? You are saying there is a time lag at the municipal level of maybe a couple of years or something.

Ms Richardson: Well, at the initial complaint stage, a municipal inspector would respond. There may be some negotiation about when the complaint stage would happen, so it would probably vary quite substantially from situation to situation. Then when it is sent on to the standards board, that would be after the compliance period had expired as well, so it is difficult to say what the typical case would be in those circumstances.

Ms Harrington: Then once it gets to the ministry, there would be obviously a time involved there. Would you like to give me an idea of how long that might be? A six-month period for you to handle that?

Ms Richardson: I am afraid I do not have those statistics with me right now, but I could provide you with those statistics.

Ms Harrington: Okay. In the long term, I feel that this maintenance problem, which is one of the primary things that we have been hearing this morning, does have to be dealt with very firmly and clearly so that everyone in the province knows what the standards are and how they are enforced and what workable time lines are in place. That involves the ministry then working with the municipalities. I am looking forward to trying to do that, because I think it is an essential part of the process. I am just going to ask my colleagues if they have any questions.

Ms M. Ward: I have a couple of different areas here following up on what Margaret was talking about. Does that cover lack of services also, the standards such as lack of hot water for three or four hours a day on a frequent basis?

Ms Richardson: Minimum health and safety standards are the subject of the provincial standard.

Ms M. Ward: Okay. I have three areas. The chart that we were discussing earlier which showed the percentage increases, with the heading "Whole Building Review: Units -- Increase in Maximum Rent," the column of the 0 to 4.9, would those increases come about because of a reduction in rent because of the rental standards in cases where they were below the guideline?

Ms Richardson: Yes, it could come about as a result of that. It also could be that there had been a withdrawal of a service; for example, that hydro had been transferred from the responsibility of the landlord to the tenant. That would result in a rent reduction as well.

Ms M. Ward: Withdrawal of service, and you quote hydro. What about things like a recreation room that was no longer available?

Ms Richardson: Yes, that is considered a withdrawal of a service and facility.

Ms M. Ward: A withdrawal of service also, okay.

My other question is about demographics. I am a Toronto person and very much aware of the problem here in Toronto. I wonder if you could give me some information about the rest of the province. We will hear this likely as we travel about and we have briefs, but whether or not the percentage increases that we have seen here in Toronto -- 39% or 40% is fairly common and we hear of 100% and 160%. Is that as common in other parts of the province or is it particular pockets, mostly the larger centres?

Ms Richardson: On the chart that you are looking at, it does give a breakdown of where those particular rent increases are occurring.

Ms M. Ward: They are there by numbers. I could work it out by percentage.

Mr Turnbull: Can I supplement it, because I can answer what you are asking.

Ms M. Ward: I think we should ask the Chairman that.

The Vice-Chair: It is up to you.

Ms M. Ward: Okay. We will listen to it.

Mr Turnbull: Well, I have done the calculations. You are saying that in Metro it is very typical. It is not typical.

Ms M. Ward: That is not my question. Is it typical? You are making a statement rather than answering my question.

Mr Turnbull: The Metro area accounts for 54% of the rent review orders on this chart. In fact, there was in Metro 56% of those of 30% or more. So that indicates that in fact Metro is only very marginally higher than the average for the province.

Ms Richardson: Perhaps I could also add something. In smaller municipalities, where they may have smaller buildings, a large increase can result from doing a roof repair. The cost of spreading that roof repair over two units is very different from spreading that roof repair over 50 units or 100 units, so there can be very large rent increases for small buildings as a result of some capital expenditures.

Ms M. Ward: One of the reasons I am interested in this is, considering how much the lack of freely available land in Toronto has on just how much new housing can be built, which certainly has an effect on the cost of it, and the continuing increase in the population of Toronto. I would expect the larger population centres to follow a similar trend as in Toronto.

Mrs Beaumont: Certainly land costs are higher in the Toronto area than elsewhere in the province, but in looking at the impact of that translated into what could be rent levels, you have to look first of all at how many new apartment units are going in anywhere in the province, and the answer is not very many at all. The statistics I presented to you show that it is generally less than 12,000 a year, which is not very many province-wide. If you look at the factors leading to the price of a rental unit, if you are putting up a new rental building, purely rental building, land value would be one factor. The cost of construction and the cost of materials are other factors leading to a very high cost for new buildings, whether they be rental, public or private sector or condominiums.

Ms M. Ward: General throughout? There is no exact ordering of the higher costs?

Mrs Beaumont: No.

Ms M. Ward: I think that answers my questions. Thank you.

Mrs Y. O'Neill: Mr Chairman, on a point of information, I asked a question about an acronym, CMA, and I was given an answer. The research staff have very quickly provided me with much more than I expected and I did not realize how significant my question was. These maps are available, which do show for the larger cities -- apparently for most of the cities we are going to visit -- the outline of the areas we are actually talking about. For instance, in the Ottawa area, much to my surprise, the bordering communities in the province of Quebec are included in the statistics. So when we talk about vacancy rates, we are not talking exclusively about Ontario, because these are federal statistics and sometimes provincial studies themselves, and certainly federal studies, are based on federal figures. The research staff have suggested to me that anyone who would like to have a copy of these documents -- they are rather large and cumbersome; I have only got them for three cities -- are available to everyone who requests them.

Mr Turnbull: Mr Chairman, on a point of information, since we have the staff from the ministry here, I would make a request at this point to have the background information with respect to page 2 of the minister's presentation to us here yesterday. I would like to know what the base rents are for the examples he quoted, five different buildings in various parts of the province with very large percentage increases. I would like to know what the base rent was and what the rent now is and how many units within the building, particularly with respect to such comments as, "If you are amortizing a roof over two units, it has a profound effect." So we would like to understand what those selected buildings were and the circumstances which led to those high increases.

Mr Drainville: I just wonder -- since it does not look like anybody on this side wants to ask any more questions -- if we might break until 2 o'clock.

The Vice-Chair: I think that is a capital suggestion, but I am at the will of the committee.

Ms Poole: Just one suggestion: I know that we are due to go back on at 2 o'clock, but I also understand that the steering committee has made some suggestions about travel and I wondered if we could just take five minutes now to confirm those, so that the clerk can go ahead and schedule.

The Vice-Chair: I would be more comfortable if the Chairman were here to do that. I think he would probably be part of the discussions. I think, in the interests of our sanity, that perhaps a 15-minute break would be in order for the committee.

Mrs Y. O'Neill: Mr Chairman, just so everybody will know, Mr Abel requested a meeting with Mr Turnbull and myself very informally. The clerk was present, I do not know whether at the beginning of the meeting -- the clerk will be prepared to tell us -- but we gave her some suggestions. I do not know whether she has been able to react to those suggestions yet, but I think we should all know where we are at as much as we can. They were very informal discussions we had.

Clerk of the Committee: Can I make a suggestion that the steering committee meet during the break?

Mr Drainville: I am willing to do whatever.

The Vice-Chair: The suggestion here is that the steering committee have a little chat with the clerk during the break and we can come back at 2 o'clock and deal with the presenters for this afternoon.

Mrs Y. O'Neill: The difficulty I have with this, if it is a certainty, is that the Chair is part of the steering committee. I am willing to have one little informal meeting, but to have two, I do not like this. I mean, if we are just talking informally, which I think we did and it was very helpful, but if it is going to be a formal meeting, then the Chair has to be part of it, I think.

The Vice-Chair: I think at the moment we are trying to be helpful because as you know, the Chair is indisposed. He is at another meeting.

Mrs Y. O'Neill: Do you want to take his place. Mr Chairman?

The Vice-Chair: I can.

Mrs Y. O'Neill: Okay.

The committee recessed at 1344.

AFTERNOON SITTING.

The committee resumed at 1405 in room 151

The Chair: I call the standing committee on general government to order. The first delegation this afternoon will be led by Graydon Hall -- I am sorry, John Linnell. That is the first time it has happened since the committee has started hearings.

Mrs Y. O'Neill: It may not be the last one.

The Chair: It may not be the last one. It is John Linnell of the Graydon Hall Manor Tenants. Sir, I believe you are accompanied by a colleague. For the record, introduce yourself and who you are representing, and your colleague and the position of your colleague.

Do I see a point of order?

Mr Tilson: Mr Chairman, just one quick question of information before we leave the questions to the staff -- I apologize, just for a brief moment -- so we can be clear to the committee. Each party was allowed half an hour of questioning. I know that our party has some more questions. I do not know how other members of the committee feel about that, but our party specifically would like the members of the staff to come back, perhaps at the discretion of the clerk and the Chair. I would like it on the record that they will be coming back.

The Chair: It is my view that members of this committee should have as much access to staff as is necessary or as is requested, and we can repeat what was done today over the lunch hour on any number of occasions until we are all satisfied that we have our questions answered.

Mr Tilson: Mr Chair, I realize that one of the nightmares of the clerk and perhaps yourself is the scheduling of things, if you could just add that to your list.

The Chair: We are going to work this committee until they earn their $70 a day.

Mr Tilson: Until you have driven somebody crazy and it is probably us.

The Chair: You are going to earn your $70 a day on this committee.

Mrs Y. O'Neill: We will support the request, Mr Chair. The official opposition will be supporting that request for a further time allocation from the ministry officials.

The Chair: If the committee members are willing to leave it up to the clerk and I to give you advance notice as to when this further information --

Mrs Y. O'Neill: I do not think we would need any more time than what we have had today at this moment. In other words, I am saying, if you can fit an hour and a half in, or even an hour, I think we could live with that, whatever is acceptable.

Ms Harrington: I would just like to offer to the committee the fact that because scheduling, as you mentioned, is very difficult at this point, I am sure the staff are here during the sessions and are available to you to answer any questions privately, as well, if you need points of clarification.

Mrs Y. O'Neill: We know that.

Mr Tilson: The staff has co-operated with me already. I have asked them several questions privately, but I would like to share some of the information with the rest of the committee.

The Chair: Do you want another hour and a half session tomorrow during lunch?

Mr Tilson: It is at your discretion, Mr Chair.

The Chair: I feel very comfortable doing that.

Mrs Y. O'Neill: Tomorrow at lunch.

The Chair: From 12 to 1:30.

Ms Harrington: Mr Chairman, it may not require half an hour for each party. I mean, basically, if there is just one set of questions it may take half an hour or so.

Mr Mammoliti: Could Mr Tilson tell us how long he would need for his questions, and perhaps the opposition as well? Give us an indication as to how long we have to stay.

Mr Tilson: I appreciate that. The difficulty with answering that question is that there are obviously supplemental questions that I could have, even from this morning, where I asked one question. I think following that I asked two or three other questions, and it may only require one question. For me personally, I could see our side using up at least half an hour.

Mrs Y. O'Neill: We would likely be able to fill 20 minutes.

Ms Harrington: Maybe schedule an hour, then, Mr Chair.

The Chair: You want to schedule an hour. Do you want to have lunch brought in again, like I did today?

Mrs Y. O'Neill: That is fine.

The Chair: It is fine with me.

Mrs Y. O'Neill: Could we have a little change of sandwich tomorrow? Since we will be on a sandwich diet, maybe we could just have a little change.

The Chair: You did not like what I had for you today? All right; we will change.

Mrs Y. O'Neill: I like variety.

Mr Turnbull: While I am really keen to get them back, I would really ideally like a little more time to address the information they have given us so far and develop the questions probably in a little bit more focus so that perhaps it does not take as long.

The Chair: We are also going to be travelling in the days ahead, so we will work it out. If you feel tomorrow is too soon, I will present an alternative day for committee members to consider.

GRAYDON HALL MANOR TENANTS 7 ROANOKE ROAD TENANTS ASSOCIATION WINFIELDS PLACE TENANTS ASSOCIATION

The Chair: Mr Linnell, you and your colleagues have 40 minutes, which will give you 20 minutes to make a presentation and then you and the committee can dialogue for a further 20 minutes. The floor is yours.

Mr Linnell: Mr Chairman, committee members, ladies and gentlemen, my name is John Linnell. I am the president of the Graydon Hall Manor Tenants. It is a recently incorporated non-profit association of tenants. My presentation this afternoon is a combined co-operative submission being made by the following associations, with the permission and approval of their respective presidents. Ours is Graydon Hall Manor at 50 and 100 and 150 Graydon Hall Drive in Don Mills. Also, Mr Loftus is the president of 7 Roanoke Road Tenants Association, 7 and 9 Roanoke Road, city of North York. Not present is Bruce Stewart, the president of the Winfields Place Tenants Association at 745 and 755 York Mills Road, North York.

As you know, the Conservative government brought in rental legislation approximately 15 years ago. We then had a change of government which in 1986 brought in the current Residential Rent Regulation Act. We now have the present NDP government, which finally seems to have put its fingers on one of the main problems, that of the capitalized cost allowances. We could have come to you with a litany of complaints. However, we have chosen to go the route of dealing with specific sections of the rent regulation act, making suggestions for changes.

The subject of rent controls engenders some very strong emotions in many people. However, we realize that to be effective we must be as fair and objective as possible. With this in mind, and the motto of my association, "Without fear, favour, affection, malice or ill will," I wish to present the committee with a series of recommendations supported by facts.

In all fairness, though we appreciate the intent of the legislation brought in to halt abuses in the rental industry by a relatively few landlords, unfortunately its retroactive provisions have caused real hardship for quite a number of honest, hardworking and decent landlords. We do not consider it at all fair or ethical to change the rules after work has been done, except in very exceptional circumstances and we consider it to be a well-intentioned but unfortunate error of judgement.

While it is appreciated that there are a large number of landlords who are responsible and honest businessmen running their buildings at reasonable profit level, while never going to rent review, the unfortunate reality is that there are a sufficient number who are anything but and who give the rest a bad name, cause tenants untold trouble and costs and bring down restrictive legislation on the innocent.

It is hoped that the following proposals, based on normal businesslike practices, can be incorporated into the new legislation without causing overly much interruption and inconvenience to the honest people. We realize that the basic purpose of any business is to make a reasonable profit, but there is a vast difference between what is going on in the residential rent field and normally accepted business practices.

Where possible, the specific section of the Landlord and Tenant Act and the Residential Rent Regulation Act will be referred to, followed by the problem and thereafter our recommendations.

Dealing with the Residential Rent Regulation Act, subsection 74(4) on page 78, when a landlord desires to file an application for a rent increase greater than that allowed under section 71, he must file at the time of application a cost-revenue statement, together with all documents that he relies on in support of his application.

Problem 1: The current practice of allowing landlords to submit photocopies of invoices and supposedly both sides of cancelled cheques is so wide open and poorly enforced as to invite abuse, errors and outright fraud. Admittedly, there is considerable difficulty in requiring the production of original documents with a rent review application.

Solution 1: We see no reason why the original documents should not be made available for examination, both by the commission members and tenants and their representatives at rent review hearings. The hearings board should be empowered to impound for further investigation the original of any document that appears to have been altered or is suspect in any other manner.

Problem 2: The landlord is only required to file copies of these documents with rent review services. The tenants must pay 20 cents per page to obtain copies of the documentation to make any sensible assessment. Frequently the pages submitted are almost unreadable or are copies of estimates and contracts, not invoices and cancelled cheques in support.

Solution 2: Where a tenants' association exists, representing all or part of the tenants in the affected buildings, the landlord should be required to supply without charge one legible copy of each document to the tenants' association on the same date as he files it with rent review services, together with a sworn affidavit that the package is a full, complete and truthful copy of that filed with rent review. A similar statement should also be filed with his rent review submission certifying that the applicable association or tenant representative body has been so supplied.

Problem 3: Invoices frequently do not specify which building or buildings, suite or suites are involved, making it extremely difficult to ascertain whether work was actually done or redone in less than amortized periods, or where. Cancelled cheques frequently do not bear any reference to the invoices they are paying and invoices do not show what cheques they are paid by.

Solution 3: We submit that to be allowed for consideration, all invoices should clearly state the address of the property to which they refer, where work was performed or materials supplied, where the actual work was performed, such as hallways, garages and, in the case of apartments, specifically which apartments by number. This will help to identify where the same work is carried out repeatedly or in less than the amortized period, such as floor sanding amortized over five years but charged for two or three times within the five-year period for the same apartments. Similarly with painting, which is frequently done over and over in suites with high turnover, but the long-term tenants never get their suites painted.

Further, all invoices and cheques must show the number of the corresponding document on the face of them, clearly identifying whether the payment is in full or in part. No quotations should be allowed to be submitted, though at present they frequently are. They have no place as they are not evidence of an expenditure but only a proposal to expend which may never occur.

Residential Rent Regulation Act, subsection 74(6) on page 78: The minister is allowed to grant extension of time for the landlord's filing of required documents.

The problem with this is that it is totally abused on a regular basis. Landlords are making actually a career out of it every time they go to rent review. Times are extended and extended, resulting in longer and longer delays for hearings to start. The present system encourages the manufacture of evidence and deliberate or inadvertent fraud. It also puts tenants at a severe disadvantage in filing appeals and objections, as they have to repeatedly go to rent review files to ascertain what changes have occurred, and frequently pay for duplicated copies of documents, thus straining their limited financial resources while paying for every single cost incurred by the landlord.

The solution to this would be that there should be only one submission of documents allowed, with no time extensions. If the necessary documentation cannot be submitted in a single package by the required date, then it should not be allowed. The Department of National Revenue does not allow extensions of time to file tax returns. Why should this situation be any different?

Financial statements: All landlords should be required to supply a full and complete financial statement showing the profits, losses and where in fact the money is going. Maybe he has a Swiss bank account. They are required to have these statements for Revenue Canada, banks and financial institutions that they approach for financing. Therefore, the supply of one additional copy when asking tenants to underwrite their operations should be considered normal procedure.

Rent regulation act, section 81, page 80: Costs no longer borne. This section is a total disgrace. It merely requires the minister to consider a cost no longer borne only to the extent of the amount that was previously allowed in respect of that financing cost. The costs no longer borne provisions of the rent regulation act are virtually unenforceable due to the impossibility of calculating the actual figure by which the rents should be reduced at the end of the amortization period.

The problem is that the inclusion of amortized costs within the actual rent causes unnecessary escalation of rents and makes tenants unwitting and unwilling piggy banks for landlords. We will show, by using a hypothetical basic apartment rent and actual rent review award figures for a single award, over a five-year amortized period, the unnecessary escalation of rents and the spectacular windfall for the landlord.

The solution: First it is necessary to define what is meant by "rent," "amortized costs" and "other costs."

Definitions: "Basic space rent" is defined as being the rental of living space plus parking and shall include no other costs whatever. Since appliances are frequently amortized, they cannot therefore be included. Inclusion of utility charges constitutes paying the landlord a compounded commission for providing such services and unnecessarily escalates rents. For our illustration, we have used $1,000 as the initial monthly basic space rent.

"Amortized cost" is defined as an amortized cost awarded by rent review. We propose that the landlord should only be permitted to charge the actual amounts paid off principle plus interest actually paid in the year, proven by adequate documentation and not be permitted to make obscene profits on the debt due to compounding, which is tantamount to paying him a very healthy commission for getting business for the lender. This is supposed to be a cost, not a free lunch.

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"Other costs" are such items as utilities, cable TV and other services, routine maintenance, etc, fully supported by invoices and cancelled cheques. This will allow the tenants fuller access to information about what they are paying for and how much.

All leases, lease renewals and rent increase notices must show the basic space rent, list all other charges separately, and, where amortized amounts are charged for, the starting and completion dates. Without this type of control, tenants cannot possibly know or keep track of these costs and rents will escalate out of sight in a matter of three to five years.

A brief description of the system we are proposing: Rather than going into complex detail, briefly the main points are as follows -- if you wish a detailed analysis, I would refer you to page 8 and tables 1 to 3 of the documentation supplied to you:

We propose that basically only space rent be subjected to annual percentage increases, with all other costs being added in afterwards. This has the benefit of reducing the escalation of rents due to the compounding effect caused by the inclusion of amortized and other costs and, at the same time, prevents the windfall profits as shown in the detailed analysis on table 3.

The present system allows the inclusion of amortized and other costs into rent, which is subsequently compounded by annual increases. In our example of just one five-year amortization being included, rents escalated an additional 10.98% over our proposed system and netted the landlord a windfall profit of 94.1%, or $693,892.80 on an originally amortized cost of $737,607.33. I would refer you again to table 3.

Ontario regulation 440/87, sections 64(d) and 65(4): frivolous amortizations. The landlord should be barred from obtaining frivolous amortizations, such as the amortization of his rent review consultant's fees over a five-year period. In the last rent review order for our building, the landlord was permitted to amortize a charge of $22,200 based on $25 per suite over five years for his rent review consultant at 12.16%. Surely, if he cannot pay this relatively small cost in one cheque, then he should not be allowed to saddle tenants with the unnecessary amortization costs. It is bad enough that we have to pay for all the landlord's costs as well as finance all our own costs to fight him. Possibly this financed amount is paid to the consultant, who thereby is actually gaining an increased fee, which could be construed to be a percentage of the award, contrary to the Residential Rent Regulation Act section 121 which prohibits him from taking part in any percentages.

Major repair fund: Condominium corporations are required by law to allocate a portion of income to a contingency fund for use in case of major repairs such as new roof, boiler replacement, etc. There is no reason why landlords should not be required to do the same. Many in fact do, as a normal, sensible business practice.

All routine building repairs should come out of the normal income from the rents. A percentage of 5% or 10% should be set aside as a trust fund which would go with the land, that is, were the building to be sold the fund goes with the building and not with the landlord. Additionally, the landlord should not have free and unlimited access to the fund but only for purposes of demonstrable major repairs such as new roofing and only then with the approval of some body such as the rent review commission or, where there is one, the tenants' association.

However, approval may not be arbitrarily withheld and disputes could be readily resolved by application to district court or pre-agreed arbitrator. Preferably, the use of the courts should be discouraged as they are already overburdened and predictably idiotic arguments put forward would be a total waste of the courts' time and an abuse of the process. Possibly the head of the city bylaw enforcement office could have the power to arbitrate and give final and binding approval, as it is essentially a municipal area problem and nothing to do with the province.

Building maintenance costs: In no other business I know of can a business charge its maintenance costs to the client after the fact, yet landlords are permitted to use tenants as a bottomless piggy bank by going to rent review for their costs rather than taking them out of the revenue from rents. This is like buying a car from General Motors and having GM come back a year later saying, "You owe us an additional $1,000 or so because it cost us that to maintain our plants." It is time to stop the financial raping of tenants by unscrupulous landlords.

Residential Rent Regulation Act, subsections 75(d) and 78(c), and Ontario regulation 440/87: These sections all relate to the fees the landlord can receive for his own labour and management and administration with no requirement to prove that any supervision was ever done or work performed. We submit that should the landlord wish to receive these fees, he should have to prove by way of time sheets specifying the employee or employees by name, dates and time and places as to where this so-called work was performed.

On one item alone on our last rent review, the landlord was awarded $60,908.93 in management and administration fee allowances for repairs to the underground parking. On the one rent review order, he received a total of $207,222.29 in management and administration fees for 18 items. I would refer you to rent review application L-2003-NY which will document that occurrence. Frequently, the work done is substandard and has to be redone due to the lack of supervision and control.

Major projects and capitalized expenditures: We propose that before any capital expenditures are made it be made mandatory to call for competitive bids, and that before such costs can be considered the landlord be required to furnish proof of such bids and the reason or reasons for selecting the particular bid.

Tenants' legal costs: Nowhere in any of the acts is there any provision for tenants to recover all or part of their costs to defend their financial virginity against the landlord. Either the government must arrange some form of legal fund to assist all tenants regardless of the majority income level of the tenants or the whole system must be changed. At present, tenants bear all the costs without recourse, and many times cannot mount a successful challenge as the law is only for the wealthy who can afford it. This is not justice in any sense of the word but law imposed by weight of the chequebook.

Vacancy losses: We constantly hear of the low vacancy rate being caused by rent controls and rent review. This may be true to a certain extent; however, there are glaring exceptions. Currently in our three buildings, with a total of 888 suites, we have approximately 40 suites per building, an approximately 13.5% vacancy rate, due primarily to the high rents, with tenants moving out through the front doors at 3 am, from my own personal observations. We are waiting for the results of our appeal to the last rent review order and still have to fight another application for 1989-90 for 12.6%. Ours are not luxury buildings by any means. However, we currently have, for example, apartments without parking renting as follows: one bedroom for $933.75, two bedrooms for $1,079.92 and three bedrooms for $1,211.07. If the landlord wins his 12.6% increase, that will increase a one bedroom to $1,098.58, two bedrooms to $1,215.99 and three bedrooms to $1,363.66. It would appear that the vacancies are primarily induced by greed.

Claims for vacancy loses should be scrutinized extremely carefully. Possibly they are caused by the landlord and his attitude. We in Graydon Hall have the same landlord as the tenants in the now famous Balliol Street complex where the landlord is now appealing a 29% rent review order on the grounds that it is not enough -- I would refer you to the Toronto Star story of 2 January 1991 -- this, after making unnecessary improvements which were the subject of an expensive and abortive, for the tenants, legal battle and considerable press coverage last year.

Bad debts: Where a landlord claims for relief due to bad debts after tenants leave owing rent or where a rent review order is received after the tenant has left, there must be provision in law requiring him to report all subsequently recovered funds and to refund any amounts collected for alleged bad debts which were claimed in prior rent review orders. Our landlord is currently pursuing tenants who left over five years ago and appears to be employing tactics that a licensed collection agency might well be barred from using.

This concludes our presentation. Of necessity, it has been brief due to time constraints. There are many other points, such as taxes and the structure thereof, which can and should be brought forward. We trust that others will do so during these hearings. Obviously, we cannot cover it all.

It is hoped that these suggestions will be taken as given, in the spirit of ensuring equitable legislation for all parties. Our objective in this association is to deal with all matters in as businesslike and as fair a manner as possible, considering the rights of all parties. Any business proposition should ensure that the win-win philosophy is completely adhered to, both parties gaining and no one losing. That may be idealistic, but it is most certainly achievable.

Every reasonable effort has been made to verify the accuracy of any information contained herein, and this report is based on information and sources which the author believes to be accurate and reliable.

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The Chair: Thank you very much. The rotation for questioning would start with the Liberals, then Progressive Conservatives, then government members, if my memory is correct -- seven minutes each.

Ms Poole: I would like to thank you, Mr Linnell, for your presentation today. I feel a certain kinship with you, and I suspect it is because we share some experiences with Mr Pieckenhagen, as I represent the Balliol buildings. That is in my particular area, so my sympathy to you for your landlord; with the one you have, it cannot have been easy.

Your presentation has been very helpful, because I think you have tried to take a very unbiased look at what is wrong with the system and how you see it can be improved.

First, you mentioned in your opening remarks your difficulty with the retroactive nature. I gather from this that the provisions of Bill 4 which say that landlords who have put capital expenditures into their buildings should be able to recoup their loss under the current rent review provisions as amended by any --

Mr Linnell: Let me be honest with you. I have not read Bill 4. However, just on basic business premises, I do not see that it is fair legislation to go back and change the rules six months or a year after things have been happening. You have landlords who have legitimately gone ahead, quite frequently with the blessing of various ministries, made repairs which they can now not claim back, and they are in financial trouble. Let's face it, we have some landlords who are anything but plaster saints. We also have other kinds of businessmen, not just landlords. But the thing is, if you are going to stop it, then put a stop date right then. Do not go retroactively. That is not fair to anybody.

Ms Poole: I wanted to ask you a question about the major repair fund. I was uncertain whether this was to replace a landlord being able to go to rent review for capital expenditures and major repairs or whether it is something that would work side by side.

Mr Linnell: It would certainly reduce very considerably what he would go to rent review for. The object of that would be, say, for major repairs such as replacement of roofs, boiler rooms, if the electrical system of the building had to be replaced -- I believe Hydro handles transformers -- major things like that. In our building, for example, on the last rent review orders we had $161,000 for painting apartments, which is capitalized and then amortized. You cannot capitalize painting of an apartment for income tax purposes; that is a maintenance function. What the devil is it doing being amortized? That is totally wrong. The same thing for floor sanding. Mr Pieckenhagen charges, I believe, $650 to sand an apartment floor. I looked at an invoice recently and the same two apartments appeared in a four-line paragraph listing apartment numbers, duplicated. If the same apartments were charged twice in the same paragraph. obviously somebody did not read the invoice. I did, and I just caught it by a quick glance through.

Ms Poole: I must say that I agree with virtually every single change you have proposed here. I think they are all very helpful amendments. For the major repair fund, just so I am perfectly clear, you see that the landlord would put in a proportion of the rents, 5% to 10%, and this would take care of many of the major repairs, but if there was something substantial beyond this the landlord could still go to rent review?

Mr Linnell: That is correct, the routine maintenance, such as painting of apartments, that type of thing. I mean, if you are running, say, a factory and you want to paint your building, you do not go out and charge your clients for it. You take it out of the profits of your business.

The whole rental industry is a complete bastardization of business practices. They use tenants as a bottomless piggy bank. Recently, for example, it came to my attention that we had managed to have the offices supplied with new furniture. Tenants could not get window repair work done because the carpenter was busy changing the colour of the furniture because the landlord's daughter did not particularly like the colour. We are paying for it. That is going to appear in rent review whether we like it or not, only it is not going to show as that.

Ms Poole: Would you consider these to be provisions that could be brought in as interim legislation or did you have this in mind for long-term or both?

Mr Linnell: Both.

Ms Poole: You see this as a much fairer way of dealing with the current system while the government looks for ways to make the rent review system less complex and to deal with some of the abuses we have seen.

Mr Linnell: Yes. My main objection is that the tenants are used as a piggy bank with no recourse whatever. Not only that, but we have to foot the bill for all the costs to fight these applications.

Ms Poole: I have made a few suggestions in the past about interim legislation, including that there be a cap on the total amount of increase a landlord could go to rent review for, including that the repairs and capital expenditures passed on to tenants is necessary, that there be a provision to deal with deliberate neglect so that a landlord would have to get a municipal building certificate stating that the building is in a good state of day-to-day repair and maintenance in order to even get whatever the statutory guideline is in any year.

Mr Linnell: I think that is an excellent idea.

Ms Poole: The final question I had is something that might work well with what you said. I had a lot of problems with Mr Pieckenhagen, but one in particular was that not only were the rent increases extremely large but I did not feel the tenants got value for money, not only in the type of work done but in the quality of work done; it was very shoddy and in my opinion the result was far worse than what it was before he began. Would you support a provision also in rent review that there be value for money for tenants, that tenants could use this as an argument, that if a landlord such as one we both know and love dearly pays $65 per metre for carpeting that is wearing out within a year, the tenants could use this as an argument that the landlord should have to pay?

Mr Linnell: Yes, I think so. I think I would like to have a discussion with you and some others off the air on a few points that might be of some help too. We have a common problem, obviously, and I have a solution for part of it.

Ms Poole: Thank you for the solutions you have presented to us today.

Mr Turnbull: This is a very thoughtful presentation you have brought to us today, with some interesting solutions. If I understand your proposal correctly, you would separate out the base rent and then all of the capital expenditures, and any increases in the base rent would be something which was very open and understandable by the tenants. Then, any capital expenditure would be amortized and after that time the rent would revert back to the level before.

Mr Linnell: Yes, basically the problem we have is that when you put an amortized cost into rent, say, in year one, it is now indexed by the rent review increase. You already have an amortized cost. You are now adding another percentage increase on to that, and at the end of the five-year period you cannot sort it out. But if you have your basic space rent, then you add in the amortized cost, as set. At the end of that five-year period you remove that amortized cost. It is very simple and aboveboard. The other way, ad infinitum the landlord is picking up ever-increasing percentages on something that should have been taken off long ago. It is a total free lunch.

Mr Turnbull: So you handle it as two separate calculations.

Mr Linnell: Totally separate. You have space rent, which is strictly the rent of the space you are occupying plus the parking. Do not include appliances or anything else. Appliances, as I said, are frequently amortized. You have that rent, which is then indexed by whatever percentage the ministry decides in its wisdom, and then you add in your other costs. Any tenant coming in trying to get a lease can see these amortized costs and say, "Oh, great, in two years' time my rent will go down by $200 a month," or whatever it is. He will know. Not only that, the landlords are not going to be able to get away with the murder they are getting away with now.

Mr Turnbull: I take it from your suggestion that you would allow a reasonable but not excessive profit to the landlord with respect to his base rent and then there would be no profit from any of the capital expenditures.

Mr Linnell: That is quite correct. Why should he benefit from an amortized cost? In other words, you are paying him a commission for going down to the Bank of Nova Scotia to get a loan. Give him a profit on his space. That is what his building is for.

Mr Turnbull: With respect to the cost of borrowing for major capital costs. I think you mentioned that roofs, boilers and garages would be handled in a separate way.

Mr Linnell: Yes, that is the idea of the fund sitting by itself which goes with the land, so if a landlord decides to sell his building, the fund is still there. It is the same as you have with the condominium corporations. If they sell them, that fund cannot go off to Swiss bank accounts or whatever.

Mr Turnbull: Is there some sort of safety mechanism? Possibly the municipal bylaw enforcement authorities would monitor that the use of those funds was appropriate?

Mr Linnell: Yes, he would have to make application to some body that had a definite piece of control, not just his friendly banker. Possibly you could even allow input from tenants' associations, saying if he was going to try for carpet, that is hardly something that would come under that classification. This would be major things. If you have to replace a roof on a high-rise, that is not chicken feed, but do not try putting shingles on a high-rise roof, as we had on our building at one point.

Mr Turnbull: To the extent that if you had major capital costs in year one or year two of such a system being in place, presumably in order to get that amount of money the landlord may have to go out and borrow that money and that would be considered part of this fund.

Mr Linnell: Initially there would be a problem with setting up that fund. It has to start somewhere. No chicken was ever born without an egg. There would have to be a sort of a phase-in period, possibly through legislation, allowing time for this fund to build up. But after that time, then the landlord would have to finance it out of his own funds, if he has not get enough in there. Let's face it, my basic occupation is computer consulting. I am not a lawyer. Sometimes I wonder who makes the laws.

Mr Turnbull: Essentially those items which you consider would be appropriate from the fund would be, as we have said, the major items such as roof, underground garage, boiler and balconies.

Mr Linnell: Yes.

Mr Turnbull: Okay, good.

Mr Linnell: I do not think we can avoid the underground garage because it is an environmental problem. It is a bone of contention for a lot of people. But let's face it, if we did not use salt on the highway, we would not have the problem.

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Mr Turnbull: Absolutely. Let me change the line of questioning completely. You also mentioned, for high-turn-over units that may be painted two and three times within the period that any other tenants' units are painted, that you would handle it in some way, that those high-turnover tenants would probably pay for it, as opposed to the long-term tenants having to pay.

Mr Linnell: The problem I have is that the painting of apartments is allowed under capital cost allowances and it is given an amortization period of five years. We have tenants going out of our buildings at a rather accelerated rate recently. It has got to the point, I believe, where one instruction was suggested of washing the walls instead of painting them. I have not had this put to me as a total fact. It is hearsay. So very possibly I should not even be mentioning it at this point.

However, you have tenants who are very destructive to property. Unfortunately, probably roughly 20% of the tenants will almost totally destroy an apartment. Obviously, it has to be painted. But this thing is now amortized over a five-year period. Let's say you have a tenant moved in and he is gone in a year. You repaint that apartment. Now the landlord takes this to capitalized cost again, in less than the five years. It is a justified expense. He has to paint it, but it should not be capitalized and it should not be amortized. There is a serious problem. You have other tenants, 8 or 10 years in the building, who never get their apartments painted.

The Chair: You have time for one more short question, Mr Turnbull.

Mr Turnbull: At the beginning of your presentation, you said that you felt it was unfair to landlords that the retroactive aspects of Bill 4 should be brought in. Is that correct?

Mr Linnell: That is correct.

Mr Turnbull: What would your advice, as a tenants' activist, be to the Minister of Housing with respect to this bill on that retroactive clause?

Mr Linnell: Let me clarify one thing. I did not expect to be called an activist at any time, but I am not a pacifist. My suggestion to the minister would have been to make it effective as of the date that it was announced, not retroactive. That is not fair.

Mr Mammoliti: Mr Linnell, first of all, excellent report. I see that you have done a lot of work and I appreciate your taking the time to come out here today. Can I ask you to turn to page 6, where you refer to RRRA subsections 75(d), 78(c) and Ont Reg 440/87?

Mr Linnell: Right.

Mr Mammoliti: You go into -- I am not going to read the whole thing -- "own labour" and you touch on "management and administration" fees. Then you go on to say in the third paragraph, "Frequently, the work done is substandard...." It "has to be redone due to the lack of supervision and control." Are you telling this committee that money is given to landlords and they do not have to necessarily supervise the staff that is doing that work?

Mr Linnell: That is quite correct. If you read the act, the act allows a landlord, I forget exactly the percentage, but it automatically allows him a percentage of the actual cost.

Mr Mammoliti: What does that do to the work? When that sort of thing happens, what does that do to the quality of the work and to the individual who is actually doing the work as well?

Mr Linnell: For a start, one has to question whether the landlord has the technical expertise to really supervise a lot of the work, and 9 times out of 10 he does not. He is usually a bean counter or something like that or an accountant. He is not a technical man in most instances and certainly not in every field of running a building; it is impossible. But when the act allows -- I believe the figure was 7.5%; maybe the ministry people can advise us, but there is a specific percentage allowed of the invoice cost to the landlord of the job. He does not, to my knowledge, have to prove that he has actually supervised the work; he does not have to do anything about it. I think it comes about in item 3 on the rent review order listings. You have the basic costs, management and administrative cost on all the labour, and he does not have to do a thing.

The Chair: Excuse me. Could we have ministry clarification on that? I think this is an important point. We will add one minute to the time.

Mr Linnell: The quickest place you will probably find is under 440/87.

The Chair: I think that might answer Mr Mammoliti's question to this point.

Mr Harcourt: Okay, a management and supervision allowance is allowed under the act. However, it is only on construction and renovation. An amount of between 2% and about 15% will be allowed, depending on the circumstances of whether it is done by the landlord or his staff. Also, there must be evidence of supervision.

The Chair: What kind of evidence are we speaking of?

Mr Harcourt: He would have to in some cases show evidence of supervision, that he in fact went around and viewed the construction site, that type of thing.

The Chair: Are these proposals to prove it?

Mr Harcourt: It is subjective. It would be up to the individual decision of the administrator based on evidence by the landlord.

Mr Linnell: It is wide open to fraud.

Mr Mammoliti: I guess that brings me on to my next question, and that is estimates. Somebody is estimating a cost of some sort. What happens there? With no supervision, with nobody going out and measuring and whatever, having to make sure that this person actually measured it properly, what can that do to, say, the final price of an estimate?

Mr Linnell: It can make a pretty high estimate and in a lot of cases, there are not competitive bids called. They have their own pet contractors that they use. Quite frequently, these are not necessarily arm's-length transactions; it is a cousin or relative or somebody very cosy. You will find landlords repeatedly using the same contractors over and over and over again.

Mr Mammoliti: Who bears the costs?

Mr Linnell: The tenant. Nobody else is the piggy bank in this deal.

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Ms Harrington: Mr Linnell, thank you very much for coming. I would like to say that the people in your association or in your buildings are very lucky to have you as a leader, because you put forward the paper very articulately and you certainly have some colourful phrases in there which I wish I had thought of. You are very knowledgeable and in fact what you are saying makes perfect sense. I would like to sort of encapsulate some of the points you made to make sure I have them clear.

First of all, with this document, I think we probably owe you a consulting fee here.

Mr Linnell: I will be glad to accept it.

Ms Harrington: I thank you for all the figures that you have provided here. They will get into the ministry people's hands so they can look at these figures and know what we are dealing with.

You made the point that the costs have been already paid and should no longer be involved in that escalation of prices year over year. That is the point that I hope our staff will certainly take into consideration, your idea of a major repair fund or trust to stay with the building. That is something that I would like our staff to look into.

Then there is the fact that maintenance costs are part of rent. We have to keep repeating that over and over. At least when I grew up, it was common knowledge that that was what you were paying for.

Your concern with fraud is something that I have not been familiar with or dealt with, but I think that is worth looking into.

There is one other point that you mentioned in your report here that I just wanted to dialogue with you about. You say that our government was certainly well intentioned and some unfortunate error is what you term our retroactivity.

I know that this is very difficult to deal with and we spent hours and days upon days dealing with that question at the ministry level. I just want to point out to you that no matter what date we choose, it would be unsatisfactory. If we went back too far, it would be hurting people. If we went ahead too far, it would be hurting people. I want to let you know that as of the date of 1 October, we are still allowing 130,000 cases to go through under the old rent regulation act. That is the dilemma and it was a very difficult choice.

Mr Linnell: I think I know probably a couple of buildings that I am wishing you would not.

Ms Harrington: I see. I just wondered if you wanted to comment on any of my four points. Have I got them straight from you?

Mr Linnell: Yes, you have. My point about the retroactivity is that I have to look at it as if it was my business that I was running too and as if I were dealing with, say, the government. I have been a consultant to your ministry on various particular subjects for several years, and 24 of your high-rise buildings are using the control system that I designed and developed which reduced the building costs and heating costs over $20,000 per annum per building. I do not know what they are doing with them now, but still a little plug. Pardon me.

Ms Harrington: Oh, very good.

Mr Linnell: Anyway, the thing is that if I had done the job and you came to me after I had done it and said, "Sorry but no thanks" -- you know, changed the rules --

Ms Harrington: That is unfortunate.

Mr Linnell: That is dirty pool.

The Chair: The time has expired. Thank you for your presentation.

Mr Tilson: Mr Chairman, a point of -- I guess it is a question I have of you. I see the clerk is momentarily away. Bill 4 has received second reading and. of course, it has gone to public hearings, which is why we are here. These hearings are designed to assist us in debating or making some sort of report to the Legislature with respect to Bill 4.

Somehow the Minister of Housing in his comments here yesterday has indicated that on or before 18 February he will introduce a green paper, hopefully on the overall housing policy. The last speaker had an excellent paper. Some of the things I agree with and some of the things I disagree with, but that is irrelevant for all purposes because very little of it had to deal specifically with Bill 4.

There are very serious housing problems in this province from all points of view, not only from the landlords' point of view, but also from the tenants' point of view. We have heard tenants' associations come to us and talk about very specific problems of the housing industry. I think we have an obligation to hear people talk about things, about the housing problem. The minister has also indicated that when he has introduced the green paper there may be more hearings.

I guess I am looking for some sort of thought from you as the Chair on where we are going to go on this thing. Is this a waste of time? Are we really going to have two hearings dealing with the overall housing problems of this province or are you going to be directing speakers, all speakers, to direct their remarks specifically to their submissions on the introduction of Bill 4?

The Chair: I guess I will have more committee members enter this point of order before I comment.

Mr Drainville: I would like to speak very, very briefly on a couple of points. Today there were a number of times when I personally objected to a number of lines of questioning that were taken on the part of other members of the committee. I was a very good boy today.

Mr Tilson: So far.

Mr Drainville: That is right. Believe me, that may change. The reality is that some of the questions, particularly in terms of ministry officials, were questions that went beyond their role to give a response on. I did not say anything at the time because I thought: "Well, we have to be here. We have to ask questions. Let's try to get as many questions and as much information out as possible." The reality is that no matter which members come here -- in fact, I would like to draw attention to Mr Tilson. Some of the questions that he asked today specifically went beyond Bill 4. You, sir, asked many questions beyond Bill 4 today.

Mr Tilson: I do not agree with that at all. My questions --

The Chair: Order, please.

Mr Tilson: But he cannot make statements about --

Mr Drainville: I can, because you indicated so yourself.

The Chair: Order, please. Members are allowed their opinions. We have a lot of work to do today and this week and next week. I understand what members are saying. We want to get through this in the most businesslike fashion that we possibly can. I am going to try to help the committee do that. I believe that we need some latitude from our witnesses and we need latitude from the members.

I do not think that I as Chair could do the job appropriately by being arbitrary in cutting off questions and/or presenters when I think they are crossing some kind of magical line. I appreciate the fact that members realize that and they are going to allow me to continue to do that.

Mrs Y. O'Neill: I would just remind the committee that I asked this very question yesterday. Unfortunately, the minister had left, but I think the parliamentary assistant has indicated that I will get the information. Will the minister provide us with a response to my question? What use or effect or input will these hearings we are now having on Bill 4 have on the green paper that we are going to have?

I want to try to determine in my own mind, as I presume other members of the committee do, the relationship between what I now consider are really two sets of hearings which no doubt are going to overlap, which no doubt are overlapping in the public's mind in the province of Ontario. I guess what I really hope is that the minister in forming the green paper is really actually doing a daily review of what we are doing in this committee since one is so back on back on the other. Anyway, I leave that for his decision.

The parliamentary assistant, Ms Harrington, has told me that she thinks that this is possible. Perhaps then if that answer coming back to this committee is not satisfactory, we could re-examine this issue at that time.

Mr Mammoliti: In response to Mr Tilson, yes, we are dealing with Bill 4, and yes, the discussion has gone a little bit beyond at some times, even from the committee members. I think that is pretty healthy to a degree. I think if we had a speaker talk solely on the long-term goals, the long-term solutions, then we could perhaps say something about that. But if somebody has some input that he would like to give to this committee, certainly it is pretty healthy. I would say to continue that leeway, Mr Chairman.

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Mr Tilson: Mr Chairman, on that point, I am not averse to going, as you have obviously allowed, beyond that area of Bill 4. But I do just remind the members of this committee as to why we are here. We are here to have a public hearing with respect to legislation that is before this Legislature, namely, Bill 4. There may or may not be another time -- so far I have not even seen this green paper. The minister has said one is coming, and obviously one must come, with all of the problems that this housing industry has.

The last speaker, for example, has not even read Bill 4. I am not saying to take away from the very useful remarks that he made, but I think it is evident that the perception the public has is that they are coming to us to talk about the housing problems in this province, and there are many. I would hope that the people who are coming to speak to us will deal specifically with Bill 4. To do that, they will have to go beyond that.

We are concerned with time factors. The government people have put very strong restrictions on how much time can be spent in these hearings. They say we must get into the green paper, which does not even exist. I simply ask, Mr Chairman, that the members of the committee remember that why we are here is to listen to recommendations on Bill 4, and hopefully you are right. Not only members of the committee but people who are coming to address us will remember that as well, because we may be back at it in the summer, if I listen to the minister.

Ms M. Ward: I would agree that what we are hearing in a lot of the presentations and in our questions are topics that we, or another group of people on the same committee, may well be dealing with later on in the hearings on the rewrite of the legislation. You have a point that we are not restricting it to Bill 4, but I think it is background information that we need to consider in order to help us understand why we are now looking at Bill 4. It is leading up to the necessity for Bill 4. Some of the presenters this morning, that was the approach they were taking. They were saying, "Yes, we support Bill 4," and they were going into the reasons why they supported it, the problems that they saw in the rental industry that necessitated Bill 4.

I agree you do have a point, but I think we are going to have to accept duplication in order for the public to present its views and for us to understand the necessity.

Ms Poole: I feel somewhat uncomfortable in continuing this debate, simply because we have nine presenters waiting for us, and not to take away from any validity to the points being made, I would suggest that if members have substantive things to bring up, perhaps we can advise the Chair so that the Chair can ask us to meet 10 minutes before the next set of presenters so that we are not holding up the people who are waiting.

Mr Tilson: Having heard the government's comment to my remarks that it does acknowledge that we are getting into the green paper area, hopefully this committee will expand the time being spent on these hearings to allow for questions dealing specifically with Bill 4. There are a lot of people who wish to speak to this hearing who are not being heard. Having heard your admission that we are getting into the green paper discussion which has yet to be introduced, I hope the government will reconsider its position and extend these hearings.

Mr Turnbull: My position is exactly the same, in the sense that we argued long and hard to have these hearings lengthened, and to the extent that yes, Bill 4 and the proposed subsequent legislation interlock, then I understand that a lot of the presenters want to be speaking essentially to both pieces of legislation at the same time. However, since we are allowing them to do that, then let us at least encroach into the time that has been for the green paper to allow a full and open discussion.

The Chair: I do not think that the extent of the questioning or the information we have received from the presenters strayed enough from the main text of Bill 4 to cause an intervention by the Chair. I believe that the questions from the committee members, while maybe at a point or two could have been challenged by myself, the result would have been points of order and challenges to the Chair, which would have eaten far more time than the quest for information made by the members. I believe that if I had interrupted the presenters arbitrarily because I believed they may have overstepped the contents of their presentation, it would have been extremely rude of the Chair to do so and would have given the wrong impression to the public. I believe that from the experience I have had sitting in committees, watching committees and participating in committees, we pretty well have been on track.

I know what the pressures are on this committee. This committee, by vote, has decided to take on the most onerous schedule that I have seen in the last 16 years. That is one of the problems in this committee. You, ladies and gentlemen, have decided to do that and we must proceed.

Thank you for listening and let's proceed. Unless there is a further point of order on a new matter, we are going to proceed.

FAIR RENTAL POLICY ORGANIZATION OF ONTARIO

The Chair: Julius Melnitzer, you are representing the Fair Rental Policy Organization of Ontario. You have 20 minutes to make a formal presentation to the committee and then we will divide up 20 minutes among the committee members for questions and answers. Please proceed.

Mr Melnitzer: I thank members of the committee for allowing us to proceed. I am Julius Melnitzer and I am the chairman of the Fair Rental Policy Organization. Fair Rental is an organization of people who build, own, manage and finance rental apartment buildings. As we represent 1,000 members and 200,000 units, almost 20% of the province's rental stock, we feel uniquely qualified to put forward the views of the landlords.

I feel a particular responsibility in looking through the agenda for this committee because I note that although the landlords are the people whose rights are being affected by this legislation, this committee is only going to hear from eight landlords or landlords' organizations.

The organizations this committee has left out include perhaps the most influential representative of small landlords besides Fair Rental, the Multiple Dwelling Standards Association.

The Chair: Order. With all due respect, I do not believe we have left anybody out yet. We are continuing to work on an extensive schedule. I spoke with the clerk this morning on two separate occasions and we are expanding our schedule. We have expanded hours on Mondays. We have expanded hours on Tuesdays, Wednesdays and Thursdays. We are going to have evening sessions to accommodate people who cannot come in during the day, so I do not think anyone should say to this committee at this point that we have left anyone out. I just want to have that on record.

Mr Melnitzer: Perhaps I should have put it that in revealing the agenda at the point in time I noticed that, to date the organizations that are not on the agenda include the Multiple Dwelling Standards Association, which has been in existence since 1970 and represents 52,000 units in Ontario, and the Hamilton and District Apartment Association, which represents 40,000 units in southwestern Ontario.

You have our brief. I am here to highlight it in 20 minutes and to answer your questions about it.

It really aims at three things: first of all, to state the facts as they are and to dispel some widely held myths; second, to demonstrate that Bill 4 is an over-reaction by the government and is indeed destructive of the goals the government claims to advance and, third of all, to offer some reasonable alternatives which will address the legitimate concerns of all Ontarians, and tenants in particular, without the devastating effects of Bill 4.

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What are the myths? First of all, that very large increases of 100% and greater are a common problem in the province. What are the facts? Eighty-six per cent of Ontario's 1.2 million rental units received increases averaging less than 5% over the last two years. Less than 1% of the rental units received increases of 30% or more. Only 7/100 of 1%, 84 apartments out of 1.2 million, are in the 100%-plus category.

It is the last category that gives rise to myth number 2, that large rent increases are invariably the result of greedy landlords ripping off the system. The reality is that most large rent increases are a combination of two out of three factors: first of all, extremely low base rents, in some cases rents as low as starting at $40 a month -- if it goes to $80, it is a 100% increase -- second, structural deterioration due to aging and, third, small building size, which makes economies of scale impossible when you do capital improvements.

If you turn to page 8 of our brief you will see an example of this myth. Page 8 tells us about Mrs Carpenter. She has a 14-unit building in Sudbury that is 75 years old. It is desperately in need of major improvements, including a roof, plumbing and flooring to replace wood so rotten the ground showed through in several places. Mrs Carpenter borrowed the money to complete the work and got the increase to which she was entitled, which was 150%. Some people would say that is an economic eviction; others would say that takes the rent to $400 a month, which is $100 below market level. But the optics of the thing are 150% and it is the optics, not the reality, that give rise to the myth.

Myth 3: Capital improvements are just luxury renovations carried out to justify higher rents. Again, ladies and gentlemen, I say to you that this is a situation where a few isolated examples have created widespread misconceptions. The vast majority of capital improvements are necessary and far from luxurious. These improvements are the most expensive type of improvements and account for most of the capital-related rent increases. They are such things as concrete repairs to balconies and garages, replacement of plumbing risers, exterior cladding, roof replacement, electric lighting upgrading, replacement of single-paned windows. These are the capital expenditures that constitute the vast bulk of applications under the Residential Rent Regulation Act. They are not luxury at all.

Myth 4: Capital improvements would not be required if landlords performed regular maintenance. That makes no sense, ladies and gentlemen. Can you keep your car for ever if you maintain it on a regular basis? You can no more keep a building in that way. Normal day-to-day maintenance cannot stop the effects of aging and weather. The public housing stock has exactly the same problem of capital expenditures as private housing, so to characterize capital expenditures as some insidious landlord plot to raise rents is ridiculous.

Let me, if I might, turn you to exhibit 6 in our brief, page 9. It is the Preserve or Perish study done by the city of Toronto, hardly a landlord organization. On page 9 of that exhibit, in the middle column of the page you will see the following, and it is quoted in our brief:

"Though conservation may, in due course, cost hundreds of millions of dollars, it still appears to be the most economic method of maintaining the existing supply of affordable rental housing. The cost of conservation of existing buildings will be several times lower than the cost of replacing them by new ones, despite rent increases that may be required to offset the amortized costs of rehabilitation. Post-conservation rents in existing buildings will most likely still be substantially lower and more affordable than rents in new buildings."

That is from the city of Toronto, ladies and gentlemen.

Myth 5: Landlords do not need extra rent increases to do major repairs and renovations because this is provided for in the rents already. Would you turn with me to exhibit 8. Exhibit 8 is the cost index. It is those elements that comprise the annual statutory guideline. Take a quick look. There is nothing there for capital improvements. That is why both landlord and tenant representatives endorse the idea of a justification system for major capital improvements. That makes common sense. Let me explain why.

If a landlord upgraded all the balcony railings in a building, which is hardly a luxury, a yearly rent increase of 5.1% would be required just to get the cost of the balcony railings back. In the previous year, with a guideline of under 5%, how could he possibly pay for that one capital expenditure out of the allowable rent increase? Mathematically, economically, as a matter of common sense and as a matter of reality, that myth is unsupportable.

Myth 6: The flipping of apartment buildings has been a common occurrence which has been fuelling large increases. Where are those numbers? Has the government put them before you? The only objective source is the city of Toronto study, which you will find referred to on page 18, exhibit 1 of our brief. It found no evidence to support the contention that multiple sales are widespread. Rather, they are isolated instances. Only 172 of some 1,500 sales represent buildings sold more than once during the period of the study.

The same study by the city of Toronto pointed out that limitations on the resale of buildings would have unintended harmful effects on small mom and pop landlords by preventing them from selling their property at retirement.

Myth 7: Apartment owners do not need rent increases for capital or financing costs because those can be absorbed out of their excessive profits. This is not true. A large percentage of landlords are small businessmen who own a few rental units as a long-term investment. Many of these buildings would show losses if the sweat equity of the people who own them was treated as an expense. Even in larger buildings, the myth of excessive profits does not bear out.

I ask you to look at the minister's own study done in 1989. You will find that at exhibit 9, page 70. At the top of the page, "Return on equity similarly declined from 7% to 8% in the 1970s to 3% to 4% in the late 1980s, and inflation adjusted or real return on equity indicates a significant decline from 4.5% in the early 1970s to 2% in the late 1980s." Those returns of 7% to 8% are less than the 11% that the NDP complained was an insufficient return on government-managed pension funds, if you want a point of reference.

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Those are the myths. I would like to say something about the government's response.

First of all, Bill 4 does nothing in the short, the medium or the long term to address the issues of affordability or rental supply. It aggravates them, because the housing stock will deteriorate. The government's Bill 4 is not reasonable. It is not fair. It is not properly targeted.

One of the greatest elements of unfairness in this bill is the retroactivity. This retroactivity punishes the people who have lived by the law and believed in the law. People who have done work, paid for it, borrowed for it, mortgaged their homes, are now being told they cannot recover the cost and repay the loan, as the law of this province as it existed at the time they did the work promised them they could. These people have no place to go to pay back their lenders or to replenish their savings.

This is not just unfair; it is offensive to anyone with a basic belief in the rule of law and the democratic process and should be anathema to a government with a long history of support for civil liberties. The myth here is that only landlords doing work after 1 October 1990 are affected. That is the optics. That is the public perception. Nothing could be farther from the truth.

As far as capital goes, any work done no matter how long ago it was undertaken is affected if the landlord did not apply by July 1990. So if he started his work in June 1989, finished it in August 1990 and applied, he is too late for the money he spent in June 1989. The rules have changed on him that far back.

To make matters worse, a landlord who received an order as far back as 1987 which included future phase-in cannot have those phase-ins implemented after 1 October 1990 even if the phase-in had already been approved by as high a body as a court. So this legislation is in fact potentially retroactive to 1987 and can affect virtually any order issued under the old legislation.

The numbers we got from the Ministry of Housing are that this affects 1,570 applications, representing 91,000 units. In 275 of those cases the landlord already had an order. This legislation does not go back four months; it goes back four years. It is the most draconian bit of legislation ever introduced in the province of Ontario so far as retroactivity goes. These are not just numbers; this affects real people.

I would ask you to look at our brief, pages 20 to 22. In that brief you will see a number of real-life examples of people who are affected by this legislation.

First of all, Mr Herman, who started work on a 70-year-old building with the encouragement of the city of Toronto and the Ontario government. The work was completed in the fall of 1990. He cannot get his money back.

Mr Pemberton, who is a carpenter, relied on a conditional order, which this legislation voids, and went ahead and did some work with his partners in a 75-year-old building. He got assistance from the government under low-rise rehabilitation. He cannot get his money back. On page 22 you will see that this man mortgaged his house. I am running a little short of time, so I am going to skip the other examples.

In fairness to the people of this province and out of respect for the Charter of Rights of this country, we are asking this government to refer the bill to the Court of Appeal -- under the Courts of Justice Act only the government can do this -- so that a non-political court can tell us once and for all just how wrong this legislation is.

If not, the government will be facing a constitutional attack brought by a private citizen over this bill. The government will also be facing an attack based on the instructions it has sent out not to proceed with applications under the old law while this law is being discussed, thereby usurping the function of this committee and the Legislature. It is an arrogant appropriation of power and a subversion of the democratic process. This legislation is not targeted. It has no sense of proportion. It uses a neutron bomb to swat a gnat.

I would ask you to consider alternatives which control the real damage here. Those alternatives include a cap on the size of rent increases attributable to capital expenditures and simple regulatory changes, like the multi-year plan implemented in 1990 by the Liberal government to spread the cost of capital expenditures. Regulatory rules could also be used to restrict those selling on a short-term basis.

Bill 4 will impact on every Ontarian in its present form. Tenants suffer with landlords from restrictive controls. Their homes will be affected. They will be inconvenienced and this bill will ultimately result in higher costs as improvements are delayed and become more costly. As a result of Bill 4, jobs have been lost and will continue to be lost. When Mr Cooke says that no jobs have been lost as a result of this legislation, he is questioning the integrity of every worker who protested at Queen's Park on 10 December. Fair Rental's own survey indicates that $500 million in work has been suspended, putting 16,000 jobs at risk.

Bill 4 is the new regime's first piece of business legislation. It is a message to all who listened to the Premier and waited to see if his actions corresponded with his words. This legislation is a betrayal of the promise of consultation, partnership and co-operation with the private sector. The investment community is watching and listening and the passage of this legislation in its present form will colour the relationship of the province with the financial community from year to year. The retroactivity, in particular, is abhorrent, because it means that there are no rules and where business finds no rules, there will be no faith.

We would ask you to implement the following five recommendations which are all at the back of the brief:

1. That the government should seek a reference in the courts to determine the constitutional status of this new law.

2. Reject Bill 4 in favour of a public consultation process to develop new long-term rent regulation by January 1992.

3. Address concerns over large increases by placing a 5% cap on rent increases above the annual guideline for capital improvements.

4. If luxury renovations remain a concern, address them with regulations defining types of work for which prior rent review approval is required.

5. If multiple sales remain a concern, institute a prohibition on qualifying for financial loss where a building has been sold within the previous five years.

6. Reject retroactivity in all its forms. Any new restriction on capital improvements and financial loss should apply to work commenced or legally contracted after 28 November 1990.

Thank you for your indulgence.

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The Chair: I believe we are starting with the Progressive Conservatives. First, Mr Tilson.

Mr Tilson: The percentage increases allowed by Bill 4 are specifically 4.6% and 5.4% for the two-year suggested moratorium. Would you comment on what your organization feels about those percentages they are allowed.

Mr Melnitzer: Those percentages leave absolutely no leeway to do anything but minor capital improvements. They are going to constitute a severe impediment to any conservation, capital work, repair. In one year it is going to create a significant deterioration in the housing stock in this province.

Mr Tilson: I guess that leads to my next question. Obviously your organization deals with a large number of landlord organizations and you obviously talk to financial institutions, people dealing with that subject, not only landlords seeking loans, I suppose, but general investment from within and without the province of Ontario for the purpose of creating new housing stock, which you have referred to, and you indicated there will be none. With the conversations you have had from within and without the province, what will be the effect on investment in the province of Ontario, dealing specifically with the retroactive cost?

Mr Melnitzer: In my view, Mr Tilson, and I base this on conversations with investors both within the province and outside the province, any capital aimed at this industry will completely dry up.

Mr Tilson: What sort of long-term estimate is that? I guess we are talking about general confidence in the province of Ontario.

Mr Melnitzer: Mr Tilson, this is the first piece of business legislation in this province. If you sat through, as I did, the hearings of the Thom commission, which is probably the most objective study of rental housing in this province, and if you read the brief you will see that this kind of legislation will hurt investor confidence throughout the industries, the manufacturing here in Ontario, throughout, because it is a signal of the way the government wishes to proceed.

Let me put it this simply. If someone were to come to me, I would tell him Ontario is a wonderful place. I would want him to invest here because I live here and so does my entire organization and we want it to get better and we want it to remain strong. But if they ask me, "What's the government doing?" I would say to them: "We were promised consultation. We had one meeting with David Cooke and it was a sham."

Mr Tilson: Could you elaborate on that.

Mr Melnitzer: There has been no continuing consultation whatsoever. There has been no sign of any true appreciation of the facts. There has been no sign of compromise. I have read Bill 4. I read it as a chairman and I also read it as a lawyer and there is no evenhandedness, no attempt at fairness, no concern for the long term in it.

Let me give you an example. Tenants can spread out what they have owed the landlord for years. They have now got 12 months to spread it out. But a landlord hit up with a rebate application has to pay the money back in 60 days. Now that is a relatively smaller part of the bill. It is not very public. But to me sometimes when you do not look at the -- you know, what everybody is talking about -- but look behind it, sometimes you see the thinking behind it. That is a perfect example to me of the lack of consultation.

Mr Tilson: It would appear that this legislation goes far beyond the restrictive control legislation of such places as New York, where there have been vast slums created -- statistics show that -- where landlords literally walk away from their buildings because of many of the things that you have spoken of. Do you have any additional information to share with us on that subject?

Mr Melnitzer: I do indeed. This legislation is indeed more restrictive than virtually anywhere in the world, this piece of so-called interim legislation. The city of New York is the largest landlord in North America, and a substantial percentage of what it owns is buildings that it has taken over as a result of landlords walking away. Let me say that the fact that this is interim legislation is of little comfort, because the history both in this province and throughout the world with this type of regulation is that nothing is interim. It tends to ossify, to become hard and to become permanent, and that is perhaps because of the political realities.

Mr Tilson: Mr Turnbull has a question, but I will just comment on that. There is no question that when rent control legislation was first implemented it was supposed to be interim. Mr Turnbull has some questions too.

Mr Turnbull: Mr Melnitzer, could you comment on how many of your owners have a single building.

Mr Melnitzer: I can tell you that about 80% of them are what you would call small landlords, and we define that as a single building.

Mr Turnbull: Is that very often their life savings, the investment in that building?

Mr Melnitzer: In many cases it is all of their life savings.

Mr Turnbull: And are you at this stage aware as to the posture of financial institutions in terms of replacing mortgages on these buildings as they become due?

Mr Melnitzer: If I can give it to you directly from one banker's mouth -- whose name I do not have permission to repeat, so I will not -- there is not going to be any more money for housing.

Mr Turnbull: What will be the effect of this?

Mr Melnitzer: Well, the effect of this will be that bankers will become the landlords of this province.

Mr Turnbull: To the extent that these have reasonable size of mortgaging on them, will there be sufficient value in the buildings if the financial institutions have to take them back?

Mr Melnitzer: Our documentation includes a study done by Professor Muller of McMaster University. He is the economist who testified at the Thom Commission. He believes that conservatively the loss in value in the buildings will be 26% to 30%, I believe. Perhaps it was 26% to 28%. That will put many institutions in a position where a building with less value is going to have less cash flow, the mortgage will not be able to be paid and the institution is going to have to take it back.

Mr Mammoliti: I would like to just touch on what, and reflect on why, Bill 4 came about. I am sure that you realize and that you care that there is a crisis out there. People are literally being forced out of their units because of rent increases that they cannot afford. Sir, I would like to ask you whether you care about that. Do you as an individual, and as a person who is representing a number of individuals today, care about the fact that people are being forced out on the street?

Mr Melnitzer: Mr Mammoliti, I care very much. Just because I represent landlords, I am not any less a human being, and I am not a criminal.

Mr Mammoliti: I did not say that.

Mr Melnitzer: Mr Mammoliti, I care very much. That is why I suggest that what the government do are the things that will help the tenants of this province who need the help now, in the short term, do the things that will help them in the medium term and help them in the long term. Because, Mr Mammoliti, what we suggest ultimately is that what we have here is an income problem, an affordability problem that you deal with by way of a shelter allowance. We also realize that your government needs to do something now and we have made certain suggestions which will help those tenants who are genuinely in need of help by keeping a cap on the rent increases.

Mr Mammoliti: What have you done as a landlord in the middle of an application? What have you done to communicate with the tenants in your building, to let them know exactly what could happen and the increase that could happen? What have you done to communicate with them? What have you done to let them know? Is there an avenue they can go to at any time to spill their guts per se?

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Mr Melnitzer: Sure. Let me tell you that I think I am uniquely qualified to answer that, because I represent many landlords in application. Let me tell you the process for capital expenditures. I am not saying this happens throughout the province, but I assure you that it happens in the majority of cases where decent advice is given. Generally landlords try to talk to their tenants and tell them what is happening and explain what the situation is, what the rent is going to be, why the increases are necessary. If you ask me why landlords do that, let me tell you. They do it because if they do that, and if tenants, most of whom are reasonable people -- as are landlords, I believe -- understand, generally things go through the process more quickly without confusion and without acrimony. So it is in the landlord's interest to communicate. They do not all do that, but most of them do.

Mr Mammoliti: How many of your tenants have been forced out?

Mr Melnitzer: None, as far as I know, in the building.

Ms Harrington: Thank you for coming. We certainly wish to hear all points of view. Therefore, we are glad you are here. I do wish you could have heard some of the presentations we heard earlier today and yesterday. With regard to the idea of caring, obviously you would not be here and present us with this marvellous document if you did not care. I think that is evident.

We obviously do not agree on many issues, but I do want to put a few things forward that we may be able to dialogue on at a future time. First, the ministry does believe that Bill 4 is a breathing space only. I want to emphasize to you that there is extraordinary effort put forward by the ministry, the Legislature, this committee, to make sure we move from this interim legislation into long-term legislation. As you know, the sunset for this bill was to be January 1993 -- not the sunset, but to get it accomplished by that time. We want to put that back to January 1992, which is most extraordinary, to try to do it all within a year, because we want to consult. I know you have heard that word at least 100 times, but let me just say that I do want to work with you on consultation, with all of your points of view from your organization and the other landlords, because landlords are a part of this whole situation and part of the solution.

Other things you are saying that I am trying to understand, and I do -- I am glad you recognize as a problem the luxury pass-throughs you mentioned and are saying there should be a solution for that. You also mentioned that there could be legislation or regulations to stop flipping. I am glad you recognize that -- we have some common ground -- and the fact that you say business wants the rules; if they do not have rules there is no faith with the government. We recognize that as well, that there has to be a climate of understanding.

The other concerns you had with regard to higher costs in the long run: the longer this moratorium is in place the higher the capital costs coming out of it, when work, as you say, is going to be postponed. We recognize that and the pressure is on. You are also concerned about jobs being lost. These are certainly our concerns, as people and as politicians and people of some position of power in this province.

Other than that, we probably do not share a lot of common ground, but I think we do share some.

The Chair: You have about 30 seconds to respond, if you wish.

Mr Melnitzer: I did not hear the question.

Mr Tilson: Maybe you should ask the Chair to repeat it.

The Chair: The Chair thought he heard the member say there was common ground between herself and the presenter. Maybe the member was waiting for the presenter to say, "Yes, there is some common ground between us."

Mr Melnitzer: Might I just say that the presenter did not say that.

The Chair: You lost your chance. Mrs O'Neill and Ms Poole.

Mrs Y. O'Neill: Thank you very much for what I consider a very complete, accurate and well-presented document. We do know it is on behalf of landlords who, I agree with you, are for the most part reasonable people, people who have a stake in this province and I think a stake in the social wellbeing of the human beings who happen to be lucky enough to live in Ontario.

You made a couple of statistical comments. Maybe I did not move quickly enough through the document to be sure I heard the right thing, so that is what I want to verify with you, and I want to make one other statement. I heard 1,500 applications, 91,000 units.

Mr Melnitzer: Yes.

Mrs Y. O'Neill: Could you put that into context again for me, please?

Mr Melnitzer: Yes. That represents the number of applications on which orders have not been issued and applications on which orders were issued in which either work was done or the transaction completed which could be affected by the retroactivity.

Mrs Y. O'Neill: Another word than "could" might be "likely."

Mr Melnitzer: That "will" be affected.

Mrs Y. O'Neill: They will be for sure. They will not fall into this other category where there are going to be extraordinary allowances. Is that correct?

Mr Melnitzer: That is correct. Might I say that this extraordinary allowances is a bit of a myth. If you look at the government's own tables, an extraordinary operating cost increase is a very rare type of application and is in fact a very small component of the average increase. It is right in the government document.

Mrs Y. O'Neill: Very, very confined to its coverage. The other statement I think you made was that no applications are being accepted at present. Is that your experience?

Mr Melnitzer: A letter has gone out from the Ministry of Housing. I have seen this letter because it has gone to clients of mine and members of the Fair Rental Policy Organization. This letter says: "We're not going to proceed with any applications under the old legislation" -- this went out before Christmas -- "even though the new legislation has been passed. We're putting a hold on everything." In other words, the law is not the law even while it is the law because Bill 4 is going to get passed. It is illegal.

Mrs Y. O'Neill: I am having a great deal of difficulty with this, because I have had people in my constituency office telling me the same thing. I am not sure that is what I heard this morning from the ministry officials. In fact, I am sure I heard the other, that work was proceeding. If you remember, I actually asked that question. What I was told at that time, I think, was that the applications were being received to see if they did fall under the extraordinary. I feel this committee has to have that information. As a member of the committee, I requested of the ministry officials that we have in writing, if possible, what we are doing at present regarding the applications that are being presented or applications requesting to be presented. I think the people of this province have a right to know that.

The Chair: The Chair is going to assume that ministry staff who are here will take note of your request and that the information will be forthcoming in the most reasonable time frame.

Mrs Y. O'Neill: I think a reasonable time frame is tomorrow, because this is happening today and it has been happening since before Christmas. I think it is very pertinent information. I feel I have to be able to give correct answers to my constituents. Is there a procedure going on or is there not?

The Chair: I would ask ministry staff to note the request.

Mrs Y. O'Neill: My second comment is that I, too, have a great deal of difficulty with retroactivity in legislation, temporary legislation also. I happen to look every day at temporary buildings that were put up during the Second World War in Ottawa; they are still there being used by civil servants every day.

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In government, often the legislation has been a case of grand-fathering, when people get warnings and people who have made commitments are protected. Certainly that has been the general way in which legislation that was going to change behaviours and status of people had been presented. I, too, have a great deal of difficulty and I am glad you have explained that effect as well as you have. Thank you very much.

Ms Poole: Thank you for your presentation today. This morning we had statistics from the Ministry of Housing which showed that of 1.2 million rental units in Ontario, one million of them were owned by the private sector: Obviously you are a very important and major player.

The parliamentary assistant just moments ago called Bill 4 "breathing space only." I would like to ask you: If Bill 4 is passed in its present form, will you trust government again?

Mr Melnitzer: No. It is suffocating space, not breathing space. No one will trust government again. How will any investor believe that the next time a newspaper prints a story that someone, perhaps quite legitimately, has had a hard time with his rent, the government will not again introduce legislation that is retroactive? The studies that have been done of investor confidence indicate that this kind of thing -- and it is all in the records of the Thom commission -- are tremendous incentives not only to a lack of investment but to disinvestment. It is not I. I am a spokesperson. It is the people out there, the bankers, the capital markets of the world. Ontario is just one market in the capital markets of the world. They will not have any confidence in this place, because there are too many other places where you can have confidence.

Ms Poole: One of my concerns is that if the government loses credibility in the housing area, then other options for affordable housing will be lost. For instance, last fall FRPO made a proposal to the government to provide subsidized spaces for 20,000 units, I believe it was, which would certainly alleviate a major portion of the waiting list of subsidized housing and would be far more cost-effective. Can you see that type of proposal going on if you do not trust the government?

Mr Melnitzer: Absolutely not.

The Chair: I want to thank the presenter for his information, for taking the time to join us today. We are going to move right along, as we are behind schedule.

BRIAN TIMMONS

The Chair: I believe Brian Timmons is next on the agenda. Would the presenters please identify themselves for the record, the organization, if any, they are representing and the positions they hold within that organization. The presenters have 20 minutes in total, 10 minutes to make a presentation and 10 minutes for questioning.

Mr Timmons: I am going to do you a favour. I am not going to give you nearly as much to read as the previous presenters did nor am I going to give you a lot of statistics. I am simply here representing myself and two other investors who, about two and a half years ago, purchased a 15-unit apartment building in Toronto. I am going to relate to you the experiences we have had with the building and the effect this legislation is likely to have if it is passed in its current form on our situation. We are speaking only for ourselves. I think you will see that there is some repetition from the stories of woe we are going to present to you, but in this particular case I want you to understand that we are not members of any large organization. We are just small, individual investors. We have not consulted with any of the larger investors. In fact, in the previous discussions I was surprised to hear that we were one of eight landlords who had, to this time, been allowed to present our views. I hope you have a copy of my brief. It is not long. It is fairly focused, I hope.

While I could debate the wisdom of rent controls at all or rent controls as applied in this province versus rental subsidies on a need basis, or while I could focus on financing costs associated with the purchase price of buildings being included in the 1986-based formula, or the economic effects of the renovation industry on job creation or job loss, I have decided to limit my discussion to the moral and ethical considerations of the retroactive component of the proposed legislation and to the feature dealing with the return on investment for capital improvements.

Background: Three people, myself and two others -- one person is John Cranfield, who is my partner in this venture -- diverted retirement savings and formed a partnership in June 1988 to purchase a 15-unit apartment building in Cabbagetown. The objective of the purchase was a long-term investment to supplement our retirement income, since two of the three people were essentially self-employed.

The building is 70 years old. It was built in 1920. That was verified by the city of Toronto planning commission. It is structurally sound and has been reasonably well maintained. We knew the building would require upgrading in time, based on a condition report we authorized prior to the purchase. The plumbing and electrical systems were reaching the end of their life expectancy. The roof would require replacement within a few years. Continuous interior plaster repairs were expected, as loose plaster was evident. The heating system was inefficient but reliable. Single-pane, ill-fitting wooden windows would require replacement to provide better energy conservation, freedom from draughts in winter and better ventilation in the summer. Refrigerators and stoves were old, and we expected frequent repairs and anticipated major failures.

We operated the building for approximately 18 months. In December 1989 we summarized our experiences in a newsletter to the residents -- attachment 1. We outlined a proposed course of action and asked for their feedback, including agreement on the proposed repairs as well as help in identifying other items not mentioned in the newsletter; that is also attached. The latter information was incorporated into our capital improvement plans. The stated objective in that letter to our tenants, 29 December: "The capital improvements we anticipate are designed to extend the useful life of the building while maintaining it at mid-range accommodation. At the same time, we expect to reduce the operating costs and improve the liveability of the building." We advised the residents that the rent would increase but that we could not be specific about the amount and explained why we could not, that is, that the number of units which would become available and the category of expenses involved as per the existing legislation prevented us from being specific in terms of the extent to which the rent would increase.

In January 1990, we started redoing the units as they became available. Each completed unit was offered to existing residents if they wanted to upgrade their living accommodations. We did all the fundamental work replacing lead and rusted galvanized plumbing, repairing and upgrading wiring in the bathrooms and kitchens, as well as improving the overall unit lighting. In addition, when kitchen cupboards were replaced, additional storage and counter space was added, along with more energy-efficient, safe and reliable appliances to accommodate today's expectations.

We kept most of the bathroom fixtures, changing only the plumbing, which had deteriorated over time. In addition, along with improving the fire safety system, we also improved the interior and exterior lighting to the building for tenant safety. While the structural integrity of the building was good, we did have to parget the parapet wall around the roof, which had deteriorated badly and was becoming structurally unsafe.

We installed a more reliable and responsive thermostat. We redid the laundry room, including the replacement of an unreliable washer and dryer. We took advantage of "factory second" items, quantity discounts and discontinued items where we could through extensive firsthand shopping. We redid six units by June.

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In November 1989, I contacted the city of Toronto representative for the low-rise rehabilitation program. Acceptance under this program would have allowed us to achieve our objective while at the same time minimizing the cost which would be transferred to the residents. I was advised that if approved, grants had to be spent within three to four months or within a specified time. I explained the right of tenants and that I could not guarantee compliance with this requirement. They discouraged me from applying. In February, I again contacted them and was advised that there was some flexibility and that while they would like the funds spent within a stated time, there was some provision for extension. They inspected the building and agreed that it needed the repairs identified. That is attached in attachment 3. I was instructed to gather three quotes for work agreed to with the group responsible for administering the funds. Before I could compile that information and complete the application process, I was advised that they had committed all of their funds and there was no longer funds available.

In June, we submitted our application to the rent review board as per existing legislation. Total expenditures to that date amounted to approximately $173,000. We identified that work was ongoing as per the April 1990 legislative requirement. Residents were advised of the application and the effect of the increase to their respective units. The residents had until 21 November to submit any objections. None were submitted. The increase was to have been effective 1 October 1990.

Work has continued since June as per our plan. We have completed five additional units. With the Middle East situation, the cost of fuel oil is unacceptable and the cost of hydro is unacceptable. We decided to replace the old, technologically inefficient, oil-fired hot water furnace and electric hot water tanks for gas. We spent approximately an additional $30,000, for a total of $203,000, or $13,500 per unit.

Throughout this project, we have maintained an active communication program with the residents. A total of 12 newsletters have been distributed outlining progress to date, advising people of what to expect in the near future and to solicit feedback on certain items. Frequent face-to-face discussions have occurred on a daily basis as I was there every afternoon and I am there on the weekends working myself, without compensation. For the last year I have been working without this compensation evenings and weekends to reduce the overall cost on this particular project.

Given the downturn in the economy and the increase in the availability of rental stock, the pressure on rents was backing off substantially. Had our requested increase been approved as submitted, we would have been in the unusual situation of having legal rents in excess of market rents. We advised the residents in our newsletter of 8 November that we were aware of this situation and that when the decision from the rent review board was announced, we would be speaking with them to establish a fair market rent for their particular unit.

The Chair: You have 30 seconds.

Mr Timmons: We have terminated future upgrades to the building, and this is my commentary. It is absolutely incredible that any government, especially one which says it represents the people and makes intelligent decisions, could embark on legislation which is retroactive. It is purely punitive in the way it has been implemented. It leaves us financially skewered. We will not be able to meet our financial commitments on the bank refinancing on 15 December.

The Chair: Sorry to cut you off, but your time has expired.

Ms Harrington: I appreciate your coming. It certainly is a well-laid-out account of exactly what has happened to you. From what we can understand, you certainly are responsible people and landlords. What you have done is what we had hoped every landlord would do, to work hard at your building and give an honest accounting to your tenants and do the very best for them.

All I can say is that I am glad that you have put this forward so that we can understand your point of view and see what we can do to help you, because we realize there are several small landlords who are experiencing this kind of difficulty and you happen to be caught in a very close time warp of 1 October. So I can appreciate your situation.

Mr Timmons: We cannot live with the moratorium. We are financially dead with that moratorium. That is just it. And that has nothing to do with the philosophical base on which Bill 4 or any of the rent legislation is based. The moratorium has killed us.

Ms Harrington: I will look forward to reading the rest of this then to get your whole story.

Ms M. Ward: That is basically what I wanted to say too. I do not have any questions. You sound like a model landlord to me. You certainly have communicated very well with your tenants. I realize you did not have time to go through your brief and through your conclusions. I intend to read it over carefully.

Mr Timmons: We have maintained a very extensive communication program with the tenants prior to the legislation that was adopted in April. We started out in a cooperative venture with them, explaining in advance what we were doing, why we were doing it, asking them for their input, factoring their input into our plans, taking advantage of the units when they had other things or something. Our newsletters were two and three pages of single-spaced detail. I am down there every day and every weekend. I know the people on a first-name basis.

Ms M. Ward: There is a lot more information here which I will certainly look through.

Mr Timmons: I did not burden you with all of it. I figure you will be getting big briefs.

Ms M. Ward: I assume there are figures in there also of what your increases were.

Mr Timmons: No. I did not provide that information because it is the principle of the thing. I can. I have extensive documentation but it is the principle on this in terms of, yes, it absolutely ruins us financially in this. We will simply not be able to meet our commitments. We borrowed the money to do the capital renovations. We promised to pay it back with a refinancing which was going to occur when our mortgages come due 15 December. We are not going to be able to do it.

Ms Poole: Thank you for coming today and for your presentation. I think you have highlighted the difficulty that a number of very real people are going to have if the legislation goes through in its current form, particularly with some of the retroactive provisions.

You will have to forgive me, because when you referred to your newsletter, I went over just to glance at it and I got so intrigued that I read the newsletter during your presentation. I was trying to keep an ear to both.

My understanding from what I heard as I was reading your newsletter was that you had the extensive consultation with your tenants, that you sent them the newsletter, you sent them the survey, you offered them the option of having it done in their unit at the time that was convenient to them or not. Is it correct that if there were tenants who said, "No, I do not want it done," then you did not go ahead with the work at that time?

Mr Timmons: We only did the units as they became available. We cannot evict people and did not want to evict people. We had long-term, excellent tenants we inherited when we purchased the building, but people have their own priorities and they move off for other jobs. They get married or whatever else.

In many cases, a number of our tenants were moving to better quality conditions. They could afford it and the building had deteriorated to the point where they no longer wanted to remain there. As those units for whatever reason became available, we would go in and redo that unit. Then we would offer it to any of the existing tenants if they wanted to move into it. It did not mean a major relocation for them and they could live in a completely redone or substantially redone unit at the legal rent for that particular unit. That was the approach.

Ms Poole: There was no economic eviction involved.

Mr Timmons: No. In one particular case, one tenant went on a long-term holiday and authorized us, requested us to go in and redo the unit while he was away, and we did.

Ms Poole: I just want to read for members the first two lines of his newsletter. "Dear resident: Christmas is over. Hope Santa Claus was good to you and that you were able to spend the holidays with family and friends or in some exotic spot." The point I would like to make is that just as all tenants are not either good or bad, not all landlords are either good or bad. You have a lot of good ones and you have some bad apples. I think we have to make sure, whatever legislation we recommend be passed, that it is fair to people, that it does not punish landlords who are good, who are humane, who have played by the rules and who have treated their tenants with fairness.

I very much thank you for coming today.

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Mrs Y. O'Neill: I have one short question. You have repeated twice that you have a crucial date of December 1991. I do not want to ask you personal questions, but obviously this has something to do with the investment you made. Did you take a relatively short-term loan to accommodate these improvements? Why is this date so important to you?

Mr Timmons: The 15 December 1991 date is the date at which the first and second mortgages mature. We negotiated a vendor take back second mortgage when we purchased the building for 7% and we inherited the first mortgage for I think it was 12%. We will have to refinance both of those. The expectation was that the value of the building would be such that we would be able to pay off the bank. I mean, that is what we told the bank when we borrowed the $200,000 in order to make the capital improvements. We will not be able to do that.

Mrs Y. O'Neill: You feel things are not progressing; they are, rather, regressing.

Mr Timmons: Absolutely regressing. Not only have the real estate values in the province of Ontario and in the city decreased substantially -- as an investor, it is a normal part of the risk that I take -- but with the added burden of the pending legislation I cannot even give that building away, I am sure.

Mrs Y. O'Neill: So you really cannot refinance it. That is your expectation.

Mr Timmons: I will not be able to refinance it. The government legislation will not be in place. There will still be unknowns. The bank is going to say, "Sorry, tough luck."

Mrs Y. O'Neill: Thank you for revealing that information to us. I think it is helpful.

Mr Tilson: I think, as these hearings unfold, we are going to hear more and more stories like that which has been given to us today by Mr Timmons -- we heard them yesterday and we are hearing them today -- dealing specifically with the issue of retroactivity, where people have listened to the government, they have followed the rules, based on those representations given by government officials they have expended moneys, and in many cases, such as this one, have got the approval of the tenants.

I can tell you that I know of judicial precedents, specifically with municipalities, where municipal officials have made representations to citizens of their municipalities and those citizens have relied on them, that legal actions have been instituted against those municipalities and they have been clobbered in the courts. I think as we see this unfold, the hint that has been given by applicants today is that there has been clear misrepresentation by the province of Ontario. Provincial officials have made representations to citizens, who have followed the legislation. Those people have relied on those representations and they have sustained and are continuing to sustain substantial damages and there is no question that if there have not been class actions or individual actions instituted against the province of Ontario, the writing is on the wall. I hope that the government listens to these people who are coming here pleading with it to change the legislation, because I am sure they cannot afford to sit back and lose their savings. Legal actions will have to be instituted.

I have no questions of this individual. I think he is typical of many who we have heard and will continue to hear.

The Acting Chair (Mr Duignan): Do you wish to respond?

Mr Timmons: No. In the previous presentations I heard I do not think I said anything differently. I said it from the heart; I said it from the situation that I am faced with. This was not a consultative process that I went to and got advice and guidance from the landlord associations or whatever. I focused on my particular situation, three of us.

The Acting Chair: Thank you, Mr Timmons. Thank you for coming.

JAMES BRIGHT SR JAMES BRIGHT JR

The Acting Chair: The next delegation, Jim Bright and Jim Bright, Jr.

Mr Bright Sr: Good afternoon, ladies and gentlemen of the committee. I am a landlord. Excuse me if I stumble a bit. Making these kinds of presentations is not an everyday thing.

I am an apartment owner who will be caught in a real financial and personal dilemma if retroactive interim legislation is passed which cancels legitimate rulings made by the previous Ministry of Housing on rent review applications.

In October 1989 I purchased a 51-unit building for $2.8 million. This price breaks down as follows -- I will not read that, for time. You can see. You have a copy of my presentation.

In my first year I applied for an increase over the guideline and received an extra 6%. But because of a financial loss balance of $94,000, there were to be phase-ins at the rate of 5% over the next four years, upon application. This would allow me to break even eventually.

Now, if the proposed retroactive legislation is passed abolishing the annual phase-ins which I had been officially allowed by the previous Ministry of Housing, I will be stuck with this annual loss and no way to change it. In addition, I have a $562,000 mortgage, which the vendor took back, coming due in 20 months. With my negative cash flow, raising this money at any reasonable rate will be virtually impossible. The outlook is bleak and bankruptcy looms.

In addition, I have listed $177,000 in repairs or replacement of essential components, some of which should be done very soon. The roof and replacement of galvanized piping, at a total cost of approximately $80,000, is most important. The balance could be delayed a year or two. A new roof amortized over 15 years plus new copper pipe amortized over 20 years would increase rents by $9.19 per month on the average, using a 12.5% interest rate.

Now, somebody is going to ask why I bought the building. It is an obvious question. To answer that, I need to tell you a little personal history. I have worked for 41 years with one company and planned to retire in October of this year at the age of 60. I am still quite energetic and a work-oriented type of person.

The only experience outside my job is in apartment ownership and managing. My wife and I have a 23-unit building which we have owned for 10 years. The idea of another building was for investment purposes and to give me a source of occupation over the next 10 years or so. I am a darned good handyman and can work in the basic skills of plumbing, patch plastering, carpentry, etc. You have to be able to do this type of work to operate economically as a small landlord.

I looked for a year, but this building was by far the best bargain that I could find. It was close to my home which was convenient for frequent visits and in a fine residential area. Yes, I knew there would be a cash flow loss. However, rents were extremely low and could stand increases under the then-current rent review guidelines, spread over a period of years, without becoming exorbitant. In return, tenants would have an owner who would improve the building, with good economy to boot. The fact is I have received compliments from tenants and neighbouring home owners re the improved appearance inside and out. This comes through better supervision and hours of hard work put in by my son and me on Saturdays and evenings, no major cost. A lot remains to be done on this kind of building.

I have done a study to show what I would have to purchase this building for today just to break even on a current cash flow, that is, cost-versus-income basis, with no allowance for payment on principal. In this exercise I am using the average rental on a three-bedroom apartment, which is $639 per month, plus an apportioned share of operating costs for the year 1990. Now, the current annual rent, at $639 for 12 months, is $7,673. The operating cost, which covers all the normal day-to-day electricity, water and so forth, is $3,409, which leaves me $4,263 to apply towards the financing part: $4,263 at 12.5% will carry financing of $34,000, which becomes the limit on a purchase price if a buyer is to break even, if you can follow that.

Can the government construct or buy a three-bedroom apartment for $34,000 in a prime residential area of Mississauga? If by some miracle they can perform this feat, then can they operate it and break even at $639 per month, including all utilities? If they cannot do it without subsidy, they should not expect me to do it.

Indeed, my building at this level of income is only $1.6 million on a cost-equals-income basis. Just think of it, ladies and gentlemen, 51 large units, some with second bathroom off the master bedroom, balconies overlooking the park, for $1.6 million. It is ludicrous. The land alone used for building lots is worth more than that.

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As a further point, I have investigated and found that to build this building today with its 59,000 square feet would cost in the neighbourhood of $5 million exclusive of land. I have another comparison to make. It so happens that the building located next to mine is identical in size: units, design, built by the same contractor at the same time, a carbon copy. It was converted to condominiums 12 to 13 years ago.

The selling price of a three-bedroom unit is $125,000 in today's depressed market and the buyer will pay a condominium fee in excess of $200 per month. The rental price is $950 for the same unit, for those that are rented. This compares with $639 in my building and it can be taken as an example of how rent controls have been successful in suppressing rent levels and property values in regular apartment buildings.

No, the price I paid was reasonable; it was even low. Rents should reasonably be allowed to gradually move upwards so that the building, over four to five years, will become self-supporting, as detailed in the rent review order allowing phase-ins. Otherwise, the legislation under which my investment was carried out becomes an abysmal trap and I am financially ruined. Is it fair, is it legal that this can happen?

Now there is the GST to pay on all utilities, supplies and services yet not collectable from tenants. It will cost $5,000 on this property in 1991, which would require a 1.4% increase in rents to recover. How about some quick legislation on it, allowing a certain percentage increase on all rents? It is easy to come up with the figures for an apartment building. It is extra cost.

We have to account for it somehow.

The impact on my family and me will be devastating. My savings and equity built up over the past 20 years is wrapped up in this building. We stand to lose the building and our lives' work. The road to where I have arrived has not been armchair-style. My knuckles --

The Chair: Sir, just take your time. You might want a glass of water or a cup of coffee. If you wish, we could adjourn for a couple of minutes.

Mr Bright Sr: No, that is all right. My knuckles and palms are calloused from handyman work, plumbing, plastering and painting. My wife has cleaned her share of dirty stoves and floors after tenants have moved out. To think it just might be all for naught keeps me awake at night.

I hope you will understand and agree with my rationale, but even if you do not, I remind you there is still one fact that even transcends the whole argument. That is, the rent review wherein I bared my every financial detail involving purchase, financing and operating costs to the Housing ministry and tenants was in accordance with the rules at the time. A fair and just verdict was rendered in terms of financial awards. Not to allow the order to be carried out effectively turns the law into a trap for an honest citizen.

There are also the moral considerations: Do I deserve to have the results of my life work obliterated just because, by a stroke of bad luck, another political party prematurely comes to power? If so, how can anybody ever have faith in the survival of any undertaking he or she makes when government can change its banner every four years?

Bob Rae's government must show some fair-mindedness and respect the fact that investors made decisions based on the rules legislated by the elected government at the time. Even if he did not agree with those rules totally, he ought to respect the fact that the party in power had the right to govern and citizens of this province had the right to make decisions based on existing laws and not be penalized by the succeeding party. In other words, if his is a fair party, how can he change the rules after the game has been partially played, so to speak?

It would be fair to live with Ministry of Housing orders on rent review involving financial loss phase-ins which took place prior to his election. Make new rules for the future and then investors can make a choice as to whether they want to invest. I sincerely hope that our government will rethink its position on the interim legislation and modify it so as to not plunge many of us into financial ruin. This means that the legislation would not be retroactive and would apply only to purchases made after the NDP came to power.

I did another thing which, if there is time, I would like to read.

The Chair: You have 60 seconds.

Mr Bright Sr: There is an appendix, I guess you could call it, to this which was an after-the-fact thought on what is a fair rent. I would like you to read it.

Mr Bright Jr: I think it is good. I think he should be allowed to read it. Please?

Ms Poole: Mr Chair, he is welcome to take our questioning time, because as far as I know, our caucus does not have questions.

The Chair: Then you have almost four minutes to read it. Can you do it in four minutes?

Mr Bright Sr: Yes, I can do it in less than four minutes. What is a fair rent? It is a subject which I have given a lot of thought to in recent weeks in view of the dilemma the NDP government seems intent on plunging many apartment building owners into.

(A) Is it the amount the very poor can afford to pay?

(B) Is it the amount that the unskilled working person can afford to pay?

(D) Is it the amount that the reasonably well off or the rich can afford to pay?

(E) Is it none of these but rather a function of the actual or reasonable cost to buy and construct a building and operate it responsibly?

I am suggesting that it is the latter because no matter how sympathetic an owner is to a low-income tenant, his enterprise has to make money, at a minimum break even. Therefore, costs cannot be ignored. Our government, from all the communications I see or hear, seems to think that a fair rent is what the poor and lower-income tenant can afford to pay. To ensure that this level of rent or affordability is preserved, they would legislate controls that make this desire their main thrust with no regard for the negative factors that deserve full consideration.

However, in so doing they protect those in the medium- to high-income brackets who should be paying a rent representative of reasonable cost. While the landlord struggles in some situations to make ends meet through low-end rents, he subsidizes tenants whose financial position might be better than his own. It hurts. If this group, and it is large, could be filtered out, it alone would reduce a lot of the financial pressure on landlords and thus reduce political pressure on government. The government must realize that costs have risen in every sector of our lives. Tenants cannot be insulated from higher rents attributable to higher property costs, no more than a low-income home owner is protected.

Food and shelter are the two main requirements to sustain our lives, but do lower-income people pay less for food? The answer, of course, is to allow rents to be a product of reasonable costs, even if it does take some measure of government control to ensure that the reasonable cost factor is observed in setting rents, then give government assistance to those who qualify as not being able to pay the reasonable rent. In this way, through subsidy, all taxpayers share the financial burden, not just landlords.

Frankly, I think it is noble to want to help people in the lower-income sector with their shelter costs. How this is done without injuring private sector housing industry has not yet been figured out, it appears. Certainly punitive retroactive Bill 4 is ruinous to some apartment building owners and is not the answer.

The Chair: Thank you for your presentation. We are going to start with the Progressive Conservatives.

Mr Tilson: I think this speaker is the same as the previous speaker. I have no questions. I think we are going to hear example after example. The government has the votes. It can do as it likes. It has indicated that it will consult, that it will listen to the people, and I hope that the government will listen to people such as Mr Bright and, before him, Mr Timmons.

There is no question, even if the government passes Bill 4, and I hope it does not, that it should at the very least delete the retroactive legislation. To my knowledge this type of retroactive legislation has never been implemented in the province of Ontario before that has such far-reaching, disastrous effects. It is destroying not only the housing industry but also people such as Mr Bright and Mr Timmons and his partners. I only hope that the government honours its undertaking to consult and listen to these terrible stories that are gradually unfolding at these hearings.

Mr Duignan: We too are listening. That is the purpose of these committee hearings. We will be taking all the representations into account when we reach our final decisions. With that, I do not think our particular group has any further questions.

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Ms M. Ward: I just want a clarification. On your page 4 in the middle paragraph it says, "It would be fair to live with Ministry of Housing orders on rent review involving financial loss phase-ins which took place prior to his election." Then you have, "Make new rules for the future and then investors can make a choice as to whether they want to invest." Are you saying just the status quo, the prior legislation?

Mr Bright Sr: No, I am saying that I think the new government may have a right to make new rules from its time on. We had a government which was a responsible government. Maybe the NDP does not want me to say that, but they were and they represented a majority of the people of Ontario at the time. They made rules. People invested. I do not know how familiar you are with rent review legislation up to this, but there is an allowance --

Ms M. Ward: I am not asking you to explain phase-in. Pardon me for interrupting, but what I am really asking is, just what do you mean about the phase-in when you say, "It would be fair to live with Ministry of Housing orders on rent review involving financial loss phase-ins"? What do you mean by "fair to live with"? Do you mean with the current legislation?

Mr Bright Sr: Okay. Yes, in the current legislation I understand -- I have never read it, but I read the papers and keep in touch with the communications -- that phase-ins will be done away with. In other words, if I am in a financial loss position through something that happened -- as the previous gentleman from the Fair Rental group pointed out today, he could affect peoples' lives back four years, where you were in a situation in which the ruling given on the order on your application would allow you to gradually get out --

[Failure of sound system]

They did not have any allowance for profit. They had a 2% hardship allowance if you were breaking even. What I am saying is, by the phase-ins being cancelled, it finds me in a loss position which I cannot overcome.

Ms M. Ward: What you are saying there, you are not just talking about the moratorium. You are saying that phase-in should remain in any future legislation.

Mr Bright Sr: I will not even comment on that because I think they can do what they like in the future. I would make my decision on what I would do in real estate in the future, and it does not look like we are doing much right now, but I would make it on the basis of what the NDP government would come up with because then I would be -- and hopefully the Liberals, if they get elected next time, or the Conservatives would live with what you did. I do not think you can reach back and change the laws and screw up people who have made honest investments. It is just not right.

Ms M. Ward: I think you have clarified what you mean for me. I just was not sure of your wording. I just wanted you to clarify it and I think you have done that. Thank you.

Mr Bright Jr: There is one point I would like to make. As a young man following in my father's footsteps, I have worked 20 years of my life doing this as well.

Mr Bright Sr: He helped me.

Mr Bright Jr: Believe me, this Bill 4 and especially the retroactivity part has sent entirely the wrong message to my generation, and I am the generation that is going to be investing now that my father is going to be retiring soon. How can I trust the laws of this land? Really, how can I trust them if you are going to change them? Are they laws? They are not laws if you can change them retroactively. You have to live by the rules and play by the rules at the time and trust that the government in power is going to be responsible enough to abide by those rules and not reach back and affect people's lives then. That is all I have to say. It is unfair.

The Chair: We wish to thank both of you for appearing before the committee. Thank you for the information. We appreciate it. We are going to move right along as we are behind schedule.

HOWARD BROWN

The Chair: We would like to call Howard Brown, who is next on our agenda today. Sir, could you just identify yourself for the record and state whether or not you are representing any particular organization and, if you are, what position you hold in that organization? Mr Brown, you have a full 10 minutes to make a presentation to the committee and then we will reserve 10 further minutes for questions and answers.

Mr H. Brown: My name is Howard Brown. I am here as a tenant, but I was asked to make a presentation today to relate one tenant's experience with the rent review system on behalf of the Federation of Metro Toronto Tenants' Associations. I am not representing them specifically today, but I am here because they had asked me to bring one tenant's point of view forward.

The purpose of my presentation specifically is to recommend options for enhanced tenant protection and participation. I am a founding member of the United Tenants of Ontario. I am a former vice-chair of the Federation of Metro Toronto Tenants' Associations and I am the founding president of the North Toronto Tenants Network. I had hoped to give some suggestions for ways to involve tenants in a greater way in the consultative process that is planned over the next two years.

Specifically in my work with the United Tenants of Ontario, I had the opportunity of meeting with tenants in such diverse communities as Guelph, North Bay, Ottawa, Kingston, Hamilton and Waterloo, but it is in Toronto, where I have been a tenant activist for 18 years, that I have my most direct experience to relate today.

Having received a 27% rent increase for capital expenditures in my own apartment in the Yonge-Eglinton area last June, I am very familiar with the government's attempt in Bill 4 to limit rent increases. The landlord of the 500-unit building only asked for 25%, but rent review granted 2% more for a total of 27%. Needless to say, tenants were outraged. Despite an active tenants' association and an experienced lawyer, the tenants felt a total lack of fairness in the system.

Many of the expenditures were a result of years of deliberate neglect by a landlord who was considered a leader in property management. Many of you are familiar with Greenwin Property Management, which owns over two dozen large apartment complexes in Metropolitan Toronto alone. Although the tenants got new fridges and stoves, windows, hall carpets and other cosmetic items, the building saw the destruction of a community when many long-time residents were forced to move because of the increased rent costs.

The tenants asked: "If the landlord was taking in over $250,000 a month in rent, wasn't it good business practice to put part of it into a reserve fund to plan for necessary repairs?" They felt: "Home owners and condominium owners do it. Why don't all landlords?" It should be pointed out that with the 27% rent increase, our landlord now takes in about $4.1 million a year from our one building alone.

Interestingly, as part of an extensive survey a group of tenants have been doing in north Toronto in the last couple of months, we have found other buildings managed by the same landlord that have been allowed to deteriorate as well. Tenants at 111 Davisville Avenue, for example, are outraged that they have ripped carpets and broken-down fridges and cannot get them replaced. There are tenants in a building at Bathurst near Eglinton at 2603 Bathurst Street who have walls ready to collapse in their bathrooms.

You may ask, "Why don't these tenants complain to their landlords or to the city?" What we have found is many are private, shy people who do not know who to turn to, who do not want to make a big fuss for fear, in their words, of repercussions or another huge rent increase. They are not sure whether the landlord, the city or the province is responsible.

North Toronto, specifically the area north of St Clair Avenue in the city of Toronto, is often viewed as a wealthy area, an area removed from the harsh realities of urban life. In fact, more than half of the people in our area are tenants, many of them living on fixed incomes. The area has one sixth of the population of the city but one third of the city's population over 65 and half of its population over 75. Thirteen per cent are single-parent families.

The north Toronto community has responded to the affordable housing crisis in the past two years by being an outspoken critic of the former rent review legislation and those landlords that exploited the legislation. We organized several large tenant rallies with 400-plus people at each. We have subsequently set up a non-profit housing company that has just received funding from the Ontario Ministry of Housing and CMHC for a proposed 45-unit apartment building on Eglinton Avenue.

I believe tenants throughout this province salute the government for its initiative in bringing in Bill 4. Although not perfect, it goes some distance in addressing some immediate tenant concerns. However, this initiative does not address many of the other issues tenants are burdened with today. Tenants feel they lack a control over their own homes.

In many ways these hearings have created anxiety for tenants for some of the following reasons:

Uncertainty: There is uncertainty over the current law while Bill 4 is being reviewed. There is uncertainty whether future rent increases will be limited to inflation, as the current minister had announced as opposition critic in May, or allow some cost pass-through, or will allow capital improvements, as the minister, I believe, announced yesterday. Tenants are confused. In speaking with them last night and even today, they are trying to figure out what is the situation. They are also concerned that maintenance is currently being neglected and they are concerned about the lack of consultation that is currently taking place as well.

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The mere fact that these public hearings are supposed to address a new law for rent protection leaves one to wonder why, number one, there are no evening or weekend public hearings, why there are very limited hearings around the province and why there is very little advertising encouraging tenants to come and relate their horror stories.

These problems indicate, we believe, a lack of understanding of what tenants need in this province. They want the ability to control their own lives in their own homes. How can tenants tell their own stories when they work during the day and there are no evening or weekend hearings? It would have been prudent and responsible for this committee to schedule at least one evening of hearings in each city.

The Chair: Order, Mr Brown. Just so that we have the public record correct, this committee is in fact going to make time available for organizations and individuals who cannot come to see us during the day. We will have anywhere from one to three evenings scheduled for that purpose.

As far as the hearing time allotted by this committee is concerned, I would challenge anyone who has been involved in the legislative process, either in the past or at the present time, to find a committee that has scheduled as much work as we have in order to try to meet our obligations as expeditiously as possible.

We are also adding cities that were not originally considered for hearings. At the same time we will probably be doing the government's green paper or consultation paper, and I hope all of us can continue to meet in this friendly public manner to hear the views of yourself and of the citizens. So I wanted to make public today the fact that some of the things that you believe will happen are not in fact going to happen.

Mr H. Brown: Mr Chair, I appreciate that and I can tell you that when I first called to request time and asked for an evening hearing, of course they said there was none. I understand there are evening hearings planned for Ottawa as of yesterday.

The Chair: A flexible guy like you, you can come during the day.

Mr H. Brown: It actually is very difficult. I want you to know that my colleagues and peers who I work with in my own job look and say, "How can this gentleman take off at 3:30 in the afternoon to go and do some personal business?" It reflects negatively, I think, in some way on individuals who have to take time out. I can tell you. Mr Chair, that it is difficult for average citizens to do it. The majority of your spokespeople who are here speaking over the two-day period are with organizations that do this as a full-time job. If an average citizen wants to come, it is very difficult to do. I do not want to get into a debate on it. I just want to encourage the committee and the Legislature to continue to look at other ways to reach out to average citizens, and I appreciate your point of view.

The Chair: Thank you. You have a couple of minutes left.

Mr H. Brown: What I would like to do is move very quickly to what tenants want today. They want safe, affordable, clean and secure homes. Many people think of tenants as transient yuppies living in apartments until they meet someone in the laundry room, get married and buy a nice little house in Whitby. Let me tell committee that this is happening in some cases, but vast majorities of tenants will never be able to afford their own homes.

There are 66% of all people in north Toronto, for example, who are single and earn substantially less than the average income, according to the census data. In one apartment building that I visited last year, of the 52 tenants, the average stay was 17 years. They are people trying to make their apartments real homes.

The issues that we believe it will be important for you to address in this consultation process are ways that tenants can have more opportunities for consultation. I do not want to get into it because we have just discussed it a moment ago, but I think that if tenants are to have equal weight with landlords in the housing debates, then democratically elected and accountable tenants' associations must be funded at the building, neighbourhood, city and provincial levels.

This committee and the Minister of Housing, I hope, would recommend to the Minister of Revenue a checkoff on the annual property assessment form that would allow tenants to direct a certain sum per month or year to various tenants' associations. Increased vehicles of communication for the purposes of sharing knowledge would be considered a priority. This is the only way that tenants will be adequately heard.

The second issue that I wanted to talk about, after advocacy and consultation, was the issue of maintenance. Tenants do not want to live in pigsties. I must say that I am happier now taking people to my home than I was before the 27% rent increase, but tenants should not have to put up with the landlords avoiding all maintenance until they are forced to do capital improvements.

Maintenance has been called the issue of the 1990s. Legislation should be passed forcing landlords to put aside in a reserve a certain percentage of rents collected that must be saved for capital improvements. There would be tax implications if the money was used for other purposes.

In the meantime, tenants continue to fight off mice, cockroaches, pigeons and other causes of poor maintenance.

The third issue I wanted to discuss very briefly was the issue of security. Tenants, particularly women, live in absolute fear in many apartments. I believe municipalities have been slow to move in ensuring proper lighting and safety measures on streets and underground garages and elsewhere to ensure safe neighbourhoods and apartments. Tenants want real security in their neighbourhoods. Innovative and imaginative solutions, such as remote-controlled cameras and mirrors may be expensive, but if it saves lives and helps build safer communities it should be looked at across this province. Since police services are provided by the community, should not apartment security be a bigger part of the process?

I encourage this committee to review the security issue with the Solicitor General.

The fourth issue I wanted to raise was the issue of conversion of private apartments to co-op and non-profit. I believe the only way tenants will ever get true control over their own homes and not have to depend on the whim of the government of the day is to encourage greater conversion of private buildings to co-op and non-profit. Having lived in a co-op for five years and having served on the co-op's board for four of those years. I can tell you it is easier to build a community in a co-op than in a private building.

I hope this committee would encourage the Minister of Housing and the Treasurer to greatly increase the moneys available to the Tenants' Non-Profit Redevelopment Corp, set up by the previous government to provide loans to tenants' associations wanting to buy their buildings and turn them into co-ops and non-profits.

Two days ago the tenants at 102 Tyndall Avenue in the King-Dufferin area of Toronto were served with eviction notices by Cityhome, the Toronto Non-Profit Housing Corp. Cityhome -- what a misnomer that is. It wants to intensify the site and has rejected equally effective counterproposals from the tenants. If this building was run as a co-op, the tenants at the very least would have had access to information that was forcing their eviction and the destruction of their fine homes.

I can tell you in conclusion that I illustrate this story to say that tenants would be better off if they had the choice to decide the type of community they want to live in. These tenants at 102 Tyndall were not allowed the basic protection that even private sector tenants get from the provincial Rental Housing Protection Act.

The fifth and final issue that I wanted to raise was the issue of affordable housing supply.

The Chair: I have given you an extra two minutes because of my interruption, Mr Brown. With no objection from yourself, I would like to proceed to the questioning. The Progressive Conservative members are first, followed by the NDP and then the Liberals.

Mr Tilson: I am simply going to repeat what I have said before. There has been very little submission made by this applicant with respect to Bill 4. I have listened very carefully. I have heard hardly any comments with respect to Bill 4. All of his comments are worth submitting to the government because they are expressing very serious concerns of the tenants. But I submit they do not deal with Bill 4.

In addition this person has raised comments about, and we are trying to deal with that, allowing more time for people to be heard. That is one of his concerns and it is one of my party's concerns, that there are many, many people who are not being heard. Of course, the clerk and yourself will be trying to address that, but, to be fair, this person of course is speaking on behalf of the Federation of Metro Toronto Tenants' Associations.

Mr H. Brown: I am not speaking on behalf of them, sir.

Mr Tilson: That is what your submission says.

Mr H. Brown: I am saying I am here as a tenant.

Mr Tilson: Mr Chairman, they are addressing this committee, of course. They are slotted to address this committee on 12 February at 10:40. I think, to be fair, if we are going to do that, we should allow other people to come. I am not saying we should not hear from you. I think we should hear from you, but to do that I would hope the government would respect your request and my request to expand these hearings. I would suggest the weeks of 25 February and 4 March, which could be used tor further hearings on Bill 4, and the review consultations, the very serious concerns that you have raised, could be started when the House resumes on 18 March.

Those are my comments on procedure. I am not saying that these remarks should not be made, but I would hope that more speakers in the future would deal specifically with Bill 4, and if they are going to be allowed, as this speaker has said, much more time should be allowed for us to hear all representations.

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Mr Mammoliti: Mr Brown, have you been here a while today?

Mr H. Brown: About an hour.

Mr Mammoliti: We have heard from a lot of people today and yesterday, some being landlords and some being tenants. It is quite obvious that some landlords are in distress and certainly have a problem. I can see that. It is obvious from representations that we have heard.

Sir, how do you feel about landlords losing money on a personal note? How do you feel about that?

Mr H. Brown: I believe in a mixed economy. I believe that there are good landlords, that landlords should be able to make money and I think most tenants in this province, the vast majority, believe that there is a need for a private and public role in providing housing, so I am comfortable with them making money, a living, a profit. I think all I am suggesting, and I want to try to address Mr Tilson's comment as well, is that I do not think it is a black and white situation. I do not think, and I have heard it said in the hour I have been here, that all landlords are rotten and all tenants are wonderful. I have met some good landlords and I have met some rotten tenants.

I really believe that the real problem is that tenants do not have the ability to make their own decisions in their homes, and if we could bring the two parties together it would be so much more helpful. When you go to tenants' doors, as we did in the survey that we did in the last two months, they do not see themselves as part of some massive group of tenants in this province. They see themselves as a person living in his apartment and his apartment building. They relate only to their landlord.

Mr Mammoliti: If Bill 4 was passed today, would you trust the government of Ontario?

Mr H. Brown: I personally am here to support Bill 4. Bill 4 was my conclusion and I had hoped, Mr Tilson -- you made the comment -- that I would have had a chance to get to it. I think the whole principle of Bill 4 is to build some time into a consultative process for a long-term plan, because I think tenants were worried that if some kind of freeze was not put in place, landlords would bring in proposals for rent increases higher than they would have been able to get otherwise, or would have put in higher than they would normally put in. I think tenants appreciate that point of view.

I also listened very carefully to the landlords who were presenting before me and I understand that they are just trying to earn a living. They are trying to do their job and I am not here to landlord bash.

Mr Drainville: Very briefly. I just wanted to say that many of the points you brought forward are points that have been raised by other tenants. In fact. I lived in the area you live in, sir, for a number of years, so I have some knowledge of that part of Toronto.

Just to get back to what our Chair was saying, I want to reaffirm the fact that you have to be very clear that it has been the intention of the committee from the beginning to ensure that we put ourselves at the disposal of people, not only here in Toronto but across the province, to the best of our ability, with the limitations we have in terms of the schedules we have as members of Parliament and also in terms of the schedule of the government in trying to ensure passage of a new rent control piece of legislation that we want to bring in as soon as possible.

On your point about our being at the disposal of tenants and other people, I think we have to make our point very clearly that we are very definitely at the disposal of those people and in fact have been sitting here practically without stop all day long, and will until six o'clock this evening. I think enough on that point.

The second point is just in terms of the three points you raised there about the horror stories of tenants, being given an opportunity to air horror stories. We have already had many tenants here speaking about their needs and aspirations as tenants, but the reality of this committee is that we are not just looking at tenants, that we are looking at landlords, that we are looking at the whole area that includes both sides of the issue. If we are to maintain any impartiality, we have to ensure that all people who are involved and interested in this issue come before this committee.

Ms Harrington: The variety and array of people who have come before us today has been most helpful. One of the concerns you mentioned about bringing landlords and tenants together I think is the crux of the matter. I hope the committee is viewing our role in that way and that the government is viewing our role in that way, that somehow in the long term, for the benefit of the tenants as well as the landlords, we have to bring their concerns together.

I am grateful that you mentioned a few other new ideas. You mentioned maintenance, which has been mentioned many times before and is very important. But the idea of your apartment being your home and that feeling of ownership, being a home owner, it is very difficult to try and think of what it would be like trying to live in an apartment with a family and viewing that as your home, and I think we have to do that as part of this committee.

You want security. I think your idea of trying to work with the Ministry of Housing to get conversions into coops and self-ownership and self-reliance for people would be a wonderful idea and I hope we can go in that direction. Your other suggestion of trying to get some money for tenant organizations is an interesting proposal and I will look forward to hearing a bit more about that.

Ms Poole: Thank you, Howard, for your presentation. I certainly agree with you about your points on maintenance and how important it is to tenants to have a home they can be proud of, and a decent place to live. One of the concerns I have with Bill 4 is the fact that there is no provision for capital expenditures and for major repairs. Minor repairs obviously should be carried out under the money provided by the statutory guideline, but there is nothing for major repairs, so for tenants who want windows that are not draughty, or a roof that is not leaking and causing problems for the tenants on the top floor or who are going to have their underground parking garage closed down because it has corroded to the extent that it needs to be retrofitted, the landlord does not have any money and the landlord will not do it.

In these scenarios this work obviously will not get done during the length of the moratorium or two years, whatever comes first. Does this cause you some concern that there will actually be no money put into the apartment buildings in that period of time?

Mr H. Brown: It does concern me and I think the tenants I talked to, who we met with while doing our survey, were concerned that normal maintenance be done. But the tenants, the ones I talked to in the last two months, were very clear in their belief. They felt it was the landlord's responsibility to put aside a certain sum of money to plan for these eventualities and that it should not just be the responsibility of the tenants. So I think the idea that there should be some allowance for it -- nobody is saying there should not be an allowance for it, but I do not think tenants feel it is totally their responsibility. If landlords had been taking the responsible action in preparing for it, possibly this would not have happened.

I know that in my building it was a good 10 years before the landlord had done any kind of ongoing maintenance. It was seven years, I know, for one ripped carpet to get repaired and I think he took the attitude: "I do not have to do it. Why should I do it? I will wait until I can add it up in capital improvements."

I do not think Bill 4 is perfect. I think there are a number of tenants who would say there are problems with it the way it is brought forward, but they also say they do not want to pay for it, so I think there has to be some compromise. The specific suggestion I am making today is one that would encourage landlords, and not only encourage landlords but legislate landlords to make sure they have some process put in place to ensure they have some funds for those purposes.

I do not disagree that is a concern. Tenants do not want to see their buildings fall down. I have visited buildings that had repairs done and those that had not had repairs done. The situation does not change. Does that answer the question?

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Ms Poole: It gives me your answer to it, yes. I guess I have a little difficulty with the idea that enough could be put away out of a landlord's profits to set aside for a rainy day. I agree it might be done if you are talking about a brand new building, where from day one you could build in some sort of emergency fund. It is extremely difficult when you have aging housing stock that is 20 to 30 years old. I am wondering if perhaps Bill 4 could be amended --

The Chair: The time has expired.

Ms Poole: Can I finish the sentence?

The Chair: I have already allowed some latitude. Mr Brown, I want to thank you for appearing before the committee.

Mr H. Brown: I have quite enjoyed this. I want to thank you for allowing an individual tenant like myself to make a presentation. I enjoyed the opportunity to chat with you all and I look forward to working with you in the future. Good luck in your deliberations.

TENANTS OF 1 CLAUDE AVENUE

The Chair: The next organization on our agenda, Tenants of 1 Claude Avenue, please come forward and have a seat. We would ask that you introduce yourselves for the record. Whatever responsibilities you have with your organization we would also like on the record. We have allotted 20 minutes for your presentation, 10 to make a verbal presentation to the committee and a further 10 minutes for questioning. The floor is yours.

Mr Wilson: Good afternoon. My name is Randall Wilson and this is Karen Ohland. We are tenants of 1 Claude Avenue. We are not representing any larger group than the tenants of 1 Claude Avenue. Actually, we have to apologize from the outset for not having any written submission, the main reason being that we spent the majority of today in appeal hearings regarding a landlord application from 1988.

As Mr Brown before me referred to, we are average tenants. From what I have gathered in the short time I have been here, you have heard a lot of stories both from landlords and tenants so I am not going to belabour the points that seemingly have been made. I may seem a bit disjointed; that is because we have been busy all day and this was done on short notice -- we are filling a cancellation.

Overall, even though Mr Tilson is not here at the moment, we will address Bill 4 directly and say that we are happy someone has put the brakes on. We are not saying it is the ultimate solution, that the problem is that cut and dried, but something had to be done. We came out of an appeal hearing today having gone on record in opposition to many things, but also coming out of there realizing that really we did not have a leg to stand on as far as the legislation went and consequently will be facing a 74.1% increase for 1989. Our landlord as well had reapplied in 1990 for an additional 15% increase. This is very difficult to fit into one's life, to budget for a 75% increase in one year and an additional 15% the following year.

Something is amiss when that can happen, yet we seemingly do not have any input even though we have the same complaints you may have heard today regarding long-term negligence of a building until 1986 or until this application was first put forth: incomplete work, at least in our opinion it is still incomplete work, with no verification of actual work done that had been applied for and for which funds were allotted; unnecessary work, in our minds, and really serving no purpose for anyone in the building other than increasing rents.

As well, we have problems with the application process. I really do sympathize with a lot of landlords and I can understand their plight. Retroactivity is an extreme measure, but it also reflects the immediacy of a problem which has to be addressed now, not something that can be bandied about for the next year or two. It has to be addressed now.

The current legislation, by the way, to present a tenant's point of view, often allows for first effective date of rent increases to take effect before actual work has even begun, as well as accounting for 11.76% or whatever the going interest rate is on that money. In effect, we are paying rent increases for work that has not even started yet and may not start for six months after the fact. That is a problem for us. To me it represents perhaps the opposite side of the argument of landlords who are now faced with a retroactive bill.

Our story has a bit of an odd wrinkle, that is, that our property manager not only neglected the physical state of the building but also neglected to manage the property properly. In other words, whether out of disdain or poor management, he did not raise the rent for four years. At first glance, that might seem like a boon to tenants, not having an increase in rent annually. But what has happened with this current legislation is that he has now applied to reinstate the maximum rent he could be collecting as well as capital expenditures. Had he participated in rent control when it was available, capital expenditures could have been partially or in some cases all funded through the rent funds that were available to him.

I do not have a lot more to say, actually. I believe the whole legislation has to be examined a lot closer. There are a lot of injustices to tenants, as far as the legislation goes. Perhaps the moratorium is treating the landlord unfairly, but it is necessary, I think, at this point to bring about a change.

A few suggestions put forth by some of us at the building are that annual increases, no matter what the work, of 74% and 15% -- we have heard of higher figures -- ate not bearable. People cannot accommodate that. They have too drastic an effect on one's life. Something else has to be done, though, as far as monitoring maintenance and upkeep of buildings goes.

I do not have a lot more to say at this point.

The Chair: Thank you. I am sure the committee would enjoy having some discussions with you. Ms Poole of the Liberals will begin.

Ms Poole: Thank you both for coming today. I know it is difficult when you are not used to presenting to formal committees to come into these intimidating circumstances, so we do appreciate your presentation.

A 74% increase followed by a 15% increase is obviously quite hard to swallow, and I can understand your pleasure that someone has put the brakes on, to quote you. I am wondering, though, if this was the fairest way to put the brakes on. I certainly understand your displeasure at those kinds of increases, but could we have got around the problem on an interim basis in a different way?

In early December when I gave a speech in the House I made some suggestions about how we could have had interim legislation that would have protected tenants from situations in which you found yourself and at the same time not cause some of the very real difficulties that landlords and investors have faced because of the retroactivity -- basically that there would be an annual cap on rent increases; second, that any capital expenditures would have to be for necessary repairs; and, third, that unless the landlord kept the building in a good state of day-to-day repair the landlord would not even get the statutory guideline. It would not be a matter of having to go through a government body; if the landlord did not get a building certificate from the municipality stating he kept the building in a good state of day-to-day repair, automatically he would not be able to get the statutory increase. Could you live with that type of proposal as interim legislation while we search for long-term solutions?

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Mr Wilson: I have a little difficulty with interim legislation in that it sounds great now but its implementation in practical terms would be very difficult. I think the reason there is a moratorium is that we do have an immediate problem. For instance, in our building, when our landlord first applied under this act in 1988, there were some 21 of the 30 units rented. I think about seven of those 20 tenants in that year exist now. Many have had to leave because the rent has gone too high, and more are planning to leave. A lot are leaving without even paying rent. They are being forced to do illegal things in order to get by, because they are being asked to pay $2,000 in retroactive rent. It has to be stopped now and then fixed. Interim legislation would still create quite a few more victims as far as tenants are concerned.

Ms Poole: Bill 4, which we are studying today, is being called interim legislation, so it would be a matter of whether we could have different interim legislation.

Mr Wilson: Which does not involve a moratorium?

Ms Poole: That is right. There could still be a moratorium but the limits would not be so stringent: perhaps there could be no capital expenditures, which is what the current legislation says. I have some concern that major repairs are not going to occur.

The Vice-Chair: Mr Turnbull is eager.

Mr Turnbull: I certainly take my hat off to you for the fact that you have been out to rent review hearings today and here you are with little preparation. I know how absolutely intimidating it is to sit before television cameras and have to speak.

First, I would like to have an understanding of the building you are in. What is a typical unit? How many bedrooms, one or two?

Mr Wilson: There are one- and two-bedroom apartments. It is a 30-unit building, approximately 70 years old.

Mr Turnbull: May I call you Randall? What do you rent, the one- or the two-bedroom?

Mr Wilson: A one-bedroom.

Mr Turnbull: How much does it cost?

Mr Wilson: Under the current legislation, $488.

Mr Turnbull: That is after having applied the 74.18% increase?

Mr Wilson: That is correct.

Mr Turnbull: But prior to applying the 15% increase?

Mr Wilson: That is correct. I appreciate the snickers here but, then again, the snickers do not recognize the state of the building we live in, the tacit agreement that had existed for years about maintaining your property yourself, about the vagrants who sleep in the building, about --

Mr Turnbull: I emphasize, do not take any notice of any snickers. It is certainly not coming from the committee here. We take this very seriously.

Can I ask you what $488 represents as a percentage of your income, approximately?

Mr Wilson: Actually, I regard that as personal information and I do not think it is necessarily relevant to what we are discussing.

Mr Turnbull: Could I put it another way? The generally accepted guideline of affordability is 30% of your gross income or less.

Mr Wilson: In my case, it is less than 30%, but in the majority of cases in the building -- and the majority of cases have left the building -- it is a much higher ratio than 30%. Many of them were single mothers, students who were single mothers, many were new people to the country. They have all left.

Mr Turnbull: So when you look at the diversity of tenants in your building or who were in your building, it is fair to say that some of the people fit within the category of affordable housing and other people for whom it becomes very expensive housing.

Mr Wilson: Exactly. For the great majority, it was expensive housing.

Mr Turnbull: So would it be reasonable to suggest that what we need to do is target moneys to the people who find it unaffordable within the definition? Whether the definition needs to be adjusted or not, I do not know, but would it be reasonable to make sure that we get sufficient money in their hands to ensure that these people enjoy the right of decent, safe housing?

Mr Wilson: Ideally that might be the case, but safe housing or good housing is not necessarily the result of this legislation. In our case, it still is not, even though the increases have been applied. It is a bigger problem than that.

Mr Duignan: Thank you for coming here today. We appreciate your comments. Again, I know how difficult it is to make a presentation to a group such as this.

Could you describe some of the work that was done, or was there any work done, for that 74% increase?

Ms Ohland: There was tuck-pointing on the exterior. There was a new roof. There were carpets in the hallways. The old carpets were quite fine. They had been there as long as I had been there and there had been no complaints about them. The building was painted. The first ever fire alarm system was installed. We had door locks for the first time. This building is adjacent to High Park, and in the old days before we had locks, which finally worked last December, vagrants would come in and sleep in our hallways and in our laundry room. People did crack in the laundry room. The rents may seem low, but they are really quite in line for what this building was and continues to be. There is no substantial change for us.

Mr Wilson: A lot of the work that has been done, in our opinion, is still not complete. In the opinion of the Ministry of Housing and according to the rent review legislation it is complete work, but we still have complaints. We feel there has to be some responsibility assumed by the rent review board. If they are to allow increases for capital expenditures, they have to be capital expenditures that are complete and well-done jobs.

Mr Duignan: Regardless of the amount of money you paid prior to the increase, in fact there was never any preventive maintenance done on that building. There were no locks on the doors; they never painted anything. Actually, there was never any sort of money spent on maintenance.

Ms Ohland: No. We could not really prove that. If there were interim legislation that said landlords would have to keep buildings up to standard, for example, I think it would be really difficult for tenants like us to actually prove it. We could not prove it today, facing the landlord and his lawyer saying, "Prove it." I have lost my train of thought.

There was no maintenance, but there was a kind of tacit understanding between tenant and landlord that if we did not complain or if we repaired things ourselves, then our rents would stay the way they were, that they were that low for a reason. Then suddenly a 74.1% increase, and we did not feel that any of the work we had put into our own units was recognized in that order. If the landlord gets paid for improving the exterior of the building, should we not realize something for the improvements we made in our units? It seems to only work one way.

The Vice-Chair: That completes the time allotted to the government party. Thank you very much for your presentation. I think you should be commended for coming here and discussing your viewpoints on this bill with us today.

Mr Drainville: On a point of order, Mr Chair, about some process things: I want to comment on the snickers I heard during part of the presentation of the last brief. I just want to note that certain members of the audience thought it was quite funny. I also want to note that when there were some reasonably inflammatory comments made by certain people who gave other reports to this committee, there was no comment by other people in the audience and no comment by the standing committee. We have been attentive and polite, and I think that kind of politeness needs to be extended to all people who present before this committee. I just think that statement needs to be said to certain people in the audience.

The Vice-Chair: I would remind the people in the audience that this is a committee of the Legislature and that audience participation of any kind is not permitted. Unless you are presenting to us, there can be no participation whatsoever.

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ORTON CORNER TENANTS UNION

The Vice-Chair: At this time I would like to call on the Orton Corner Tenants Union to come forward. If you would identify yourself and the group you are representing for the purposes of Hansard, then you may begin. You have 10 minutes to make a formal presentation and then the committee will have 10 minutes to discuss your presentation with you.

Ms Dean: My name is Heather Dean. I represent approximately l,000 tenants of a two-unit high-rise complex in eastern Scarborough. There are 308 rental units, the majority of which are family units. I think I will be back when we are drafting new legislation, because I can just touch the tip of the iceberg here. I am trying to concentrate on our experience with maintenance and rent review, because I think that is what is relevant to Bill 4. I will put you out of suspense: the tenants at Orton Corner support Bill 4 unequivocally.

Our landlord is Jack Buchman, who is becoming somewhat notorious. Jack Buchman is the landlord you see on television when it is not Phil Wynn. He was fined $40,000 for contempt of court for defiance of rent control legislation. He had to set up a $210,000 trust fund. He continued to do exactly the same things he had done before. He was the person the Ryerson students were demonstrating against. He is the landlord who set up the tax shelter scam down on Jameson Avenue that was in the papers last week.

As he has become famous, I notice a tendency among people to say: "Oh, well, Toronto apartments, right. They are different. They are a fringe group. They are an outlaw element. They are not typical." We do not believe that. Our landlord's lawyers are Robert Doumani and Carol Albert, who are counsel to the Fair Rental Policy Organization of Ontario. His rent review consultant and sometime partner is Harold Sand Associates, which I think is the largest rent review consultant in the province.

I work on the tenant hotline and I hear a lot of things from a lot of tenants which lead me to suggest that our landlord is in fact quite typical. He is pursuing the same goals as every other landlord. He is trying to maximize his profits, and he is using the same tool, which is the legislation that has been in place over the past 15 years.

Our landlord did not go to rent review before 1985. He made an application to rent review in 1982 and then asked that it be withdrawn. He had it withdrawn for two reasons: (l) the commissioner asked him to file materials which, had he filed them, would have pointed to the illegality of the rents he had in place at the time; and (2) while he applied for a 25% increase, he was simultaneously renting out vacant units at a 50% increase. That was going quite well and he thought he could do better without rent review.

He went to rent review in 1985 because those two motives were removed when I began to file applications on behalf of the tenants for a declaration of their legal rents and a refund of the illegal rents that had been collected from them. As soon as I filed the first papers in the office, I went up to my apartment, the phone was ringing, and my landlord wanted to have a meeting with me. We had a meeting at which he raised two major themes, one of which I saw on the television yesterday and heard today being raised with you, and one of which probably will not be.

He told me that I might think they were making a lot of money but really they were not because they had such a heavy mortgage burden. But I knew they had bought the buildings for $3.5 million and their mortgage was carried for $365,000. They had them now mortgaged for more than $10 million, but that is simply using the buildings to raise money for another project. That is not a profit-and-loss element of the building. If it is in Revenue Canada, I think it should be closed.

The next thing he said was: "Look, all I have to do is throw money at these buildings for a couple of months, go to rent review and I can get the rents up higher than they ever were. Is that what you want?" That is from the horse's mouth. This is an outlaw landlord who has taken $3 million in illegal rents from our buildings, did more than that from his other buildings in the city and said he was just eliminating the middleman. Rent review would achieve the same ends for him; he was just saving administrative costs.

We went to rent review. Our landlord applied for a 25% increase. I want to say, because we are hearing a lot about luxury renovations, that none of the elements for which he applied for an increase were not necessary. Every single one of them was something the tenants really believed should be done and really wanted to have done. They were all basic maintenance items: repaving the roof. It rained in the halls on the top floor. It definitely needed the roofs repaved.

I would like to go through a couple of them, though, to show why we felt we were being robbed by having ultimately a 20% rent increase put in to pay for these items. The first one was the brickwork. Our bricks were extensively spalled and we had been deficiency listed by the city of Scarborough for several years for that. Spalling is when water gets in the bricks; they freeze and pop out. In some apartments the rain was coming through the walls sufficiently to wreck the furniture and soak the rugs.

We had a contract filed that called for all necessary brickwork. It was an absolute contract. After the scaffolds were down and the workers went away, the inspector came back and said that less than 50% had been done. Under the contract, all the landlord had to do was pick up the phone, call the contractor and say: "You haven't fulfilled the contract. We've been inspected. There's outstanding work. Get back and finish." He did not do that. He did not really care if the brickwork was done or not. He had the cost to add to the rents and that was his major concern.

A major concern of ours is security. The landlord was awarded $26,800 per annum to pay for security guards. We feel like Cinderella. On the stroke of midnight of the comparison year, they were fired. Since then, we have paid over $100,000 for security guards we do not have.

We were told that our landlord was planning to go back to rent review this fall to put in security cameras. We were going to have a Cadillac security system. Some of the tenants were told that their rents were going to have to go up $200 a month but they could stop complaining about security because it was going to be taken care of in the next rent review application.

Last night we had a tenants' meeting where the tenants said maybe we could prevent this from happening if we hired security guards ourselves and took up a collection to pay for them. The tenants are already paying over $30,000 a year for security guards but they were prepared to pay again. The irony of all this is that we have not had any locks on the front doors for the past six years. We are going to have security cameras, we are going to have security guards, but we cannot have a lock.

We have frequent break-ins and we have a lot of vandalism in the underground. We are not near High Park, we are in outer Scarborough, but we have homeless people sleeping in the stairwells also. I do not have a major problem with this. When I found somebody was sleeping in my car, I took a blanket down. The trouble is that when people do not have a bed, they also do not have a toilet. Most of the tenants are not Canadian-born. Some of the tenants find it very threatening that there may be this stranger down there and do not want to use the stairs. This is a serious problem because of the elevators.

Part of our rent review increase was for a change from a service-only maintenance contract for $100 per elevator per month to a full-service contract for $1,000 per elevator per month, which was going to rebuild the elevators over five years. The contractor would now be replacing the worn parts. That contract also was cancelled on the stroke of midnight of the comparison year, although it was a five-year contract that was filed.

The elevators broke down seriously, very badly. Kids were screaming and fighting their parents not to go on them, kids and dogs, who are a little closer to their instincts. The doors were easing open and then suddenly slamming. We had two broken legs and a broken arm -- broken legs when the elevator did not stop level and a broken arm when somebody was slammed by the door. At this point, we were paying $50,000 a year for elevator maintenance.

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We have come to two conclusions which are relevant to Bill 4. One is that giving money to landlords does not have any effect on the amount of money a landlord spends for maintenance. Our landlord in the years in which the buildings deteriorated was making a profit over operating and over his mortgage payments of well over $500,000 per year. You can throw money at them; that does not make them spend it.

The second lesson we learned was that we were effectively without recourse. Renting residential housing is not a business like any other business. There are checks and balances in most businesses, and I really do not like to see landlords saying this is anti-business legislation, because any other business would not need this legislation. If you raised costs and reduced services to the extent that Ontario landlords have done, you would not have any customers. That is the control that is there and that is what most business people are up against. But in our case we cannot mount any consumer resistance. Our commissioner to another group of tenants said: "The tenants are not without recourse. They can move." We cannot move. Where do we go? How do we know we are not going out of the frying pan into the fire? Some of our tenants moved across the street and were immediately served notice for a 66% rent increase.

The Vice-Chair: We will pursue this during our conversations.

Mr Turnbull: Quite frankly, when I hear stories like yours, my hair stands on end. I am concerned that you have a perception that in some way Bill 4 will solve these problems. I am not suggesting that you are not telling the truth, I am simply saying that it would seem there are several violations of the law. Certainly I encourage you to pursue all courses, and I am sure we would be more than happy to help you in that in giving you advice.

However, I do have to say that I am concerned that you tar all landlords or most landlords with that kind of story, because I think the vast majority of landlords in this province are responsible. In the course of my work in real life before I came into politics, I went into many apartment buildings that were in good repair; certainly there was no suggestion of no locks on the doors or people sleeping in the stairwells. But you have a particular problem. My question to you is: How do you think Bill 4 will solve these problems you have outlined?

Ms Dean: Bill 4 will not put locks on our doors. Bill 4 will prevent our landlord from raising our rents $200 a month to install security cameras while he still does not put locks on our doors. He was coming for us. We were anticipating a rent review application this fall. We did not get notices of rent increase during the summer, the reason for which was to slide people forward so they would be eligible earlier for the large increase. To us, this was a shark fin coming through the water and Bill 4 has stopped that.

I agree that we have legal recourse theoretically. I have written cheques this year for over $300,000 to tenants which are recoveries of illegal rent. Tenants got at least that much again by other methods, but I am burned out. I worked full-time for three years. I am not going to take 300 more cases under section 96 to the district court. It practically cannot be done, and the courts cannot handle a million tenants going in and suing. Theoretically, we could go to district court and say we are not getting what we are paying for and we want an abatement of rent until we get it, but we would have to go individually. There is only about one tenant lawyer per 100,000 tenants around, and practically we just cannot do it.

Mr Turnbull: How many bedrooms are there? How many bedroom units are they?

Ms Dean: There are 97 one-bedrooms. Actually, there is a mix of five: there are one-plus-dens: the majority are two-bedrooms; there are 28 two-plus-den: and 28 threes.

Mr Turnbull: For the two-bedrooms, of which there is a majority, what is the rent at the moment?

Ms Dean: It is all over the place. There is a $200 difference between the top and bottom rent.

Mr Turnbull: What is the lowest and what is the highest?

Ms Dean: I think it runs from about $400 to about $650.

Mr Turnbull: Would you say that the majority of the people are beyond the point where this magic 30% is affordable?

Ms Dean: For the majority of the tenants it is not affordable. The majority of the tenants are refugees.

Mr Turnbull: Is this not a problem of getting funds into their hands?

Ms Dean: You can solve some of the problems of poverty by giving the poor money, but to me that sounds as though you are actually putting the money into the hands of the landlords but letting the poor touch it as it passes by and trying to tell them it is really money you are putting into their hands.

Mr Mammoliti: Rent review legislation is pretty complex, would you not say? It is tough for the average person to understand it.

Ms Dean: It is tough for a paralegal to understand it. When it came in, we had training course after training course after training course, and sometimes when I am on the advice line I still say, "Let me look that up and call you back."

Mr Mammoliti: I notice on your sheet that you mention your landlord's lawyers are Robert Doumani and Carol Albert. I do not know them.

Ms Dean: They are counsel to Fair Rental Policy Organization.

Mr Mammoliti: Pretty expensive lawyers?

Ms Dean: I have never retained them, so I really could not say.

Mr Mammoliti: Do you represent the people when you go down to the hearings yourself?

Ms Dean: Yes. I have legal support, but our commissioner has said there were 40 kilograms of documents filed. I had not weighed them but that is what he said it was. Those were all hand done by me. I did the case work and we had some legal support from the Metro Tenants Legal Services. It was a full-time job. I would never do it again. I am burned out. I am broke. It cost me my life savings to do these cases, but it was right and I do not regret it.

Mr Duignan: Thank you for coming here this evening and presenting an excellent presentation. Again, you have illustrated the need for Bill 4. The purpose of Bill 4 is to correct an imbalance in the present legislation, that is, the total unfairness to the tenants. Just to reiterate, you have firmed up my conviction of why we need Bill 4.

Ms Dean: I would like to say -- you will find it in my brief -- that we voted 95% for David Warner in my two buildings. Having gone through this experience, we finally came to the conclusion that this was the only help we were going to find.

Ms Harrington: You have certainly made a dramatic and forceful presentation of what the system is. I wanted to comment on your statement that the system you were trying to use, the court system, or using the system on behalf of tenants, does not seem to be the right way to go because it is just too much work. It is not functioning. That is the reason we felt this problem has to be addressed in a very dramatic way as well.

Ms Dean: We look forward, when we come back to talk about replacement legislation, to some assistance in doing class action cases, because if each tenant has to go individually the courts cannot handle it and the tenants cannot handle it.

Mrs Y. O'Neill: You have made a reference on your last page to "our commissioner." Would you explain that phrase to me?

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Ms Dean: The commissioner on our case. I read some of his other decisions, and he was the commissioner who said, "If the landlord wants to goldplate the doorknobs, the tenants have to pay for it," and he said: "The tenants are not without recourse. They can always move out." I am saying, you know, that we cannot.

Mrs Y. O'Neill: So this is the person you deal with in the court?

Ms Dean: No, this is the person who heard our rent review case.

Ms Poole: The administrator? Or was it the appeals board?

Ms Dean: We were under the Residential Tenancy Commission. We were the last case heard by the RTC.

Mrs Y. O'Neill: I see. Okay, that is the terminology.

Ms Poole: Yes, the commissioner.

Mrs Y. O'Neill: You obviously are a tenant advocate and have worked on the hotline and I presume almost paralegally worked --

Ms Dean: Actually, I grew into that. I started just as a tenant at the beginning of all of this.

Mrs Y. O'Neill: So have you become a paralegal?

Ms Dean: Yes. My funding was just restored a couple of weeks ago. I do the after-hours service at MTLS, so my rent as of last month was an infinite amount of money on account of I did not have any income at all, and now it is about 60%.

Mrs Y. O'Neill: May I ask you what kind of tenant organization you have in the two buildings you have mentioned, or if you have one.

Ms Dean: I do not know; what kinds are there?

Mrs Y. O'Neill: Do you have a tenant organization or are you just a touch point for tenants? Are there regular meetings?

Ms Dean: We have a tenant organization. Our meeting rooms were turned into commercial space and we have problems with regular meetings. We get the library from time to time. We have one coming up in a month or so. Our core group is small enough to meet in somebody's apartment. But as I think you are realizing, that is separate from the court action which was me as agent, essentially.

Mrs Y. O'Neill: That is what I am trying to find out, if there is an organizational structure that you support or that you liaise for.

Ms Dean: Yes, there is. We have been approached by our landlord to find out if we want to buy the building from him. Not directly; he has approached Tenants' Non-Profit Redevelopment Corp. The first time he approached TNRC he was talking about $80,000 a unit, which was economically not practicable. He bought the buildings 11 or 13 years ago. Now the market has crashed. This is true. The landlords will come and tell you the market has crashed. Thank God for it because we keep hearing that the real estate market in Toronto is what is driving the whole country into a depression. But now he has come back and he has made an offer that is worth discussing. We might possibly be able to manage financially to buy the building. I agree with Howard Brown before me. That is going to be the answer for us.

Mrs Y. O'Neill: So this will be co-operative housing?

Ms Dean: Yes.

The Vice-Chair: Thank you, Ms Dean; a most informative presentation. Before we call the next presenter, I have been asked by one member of the committee to remind people that at the committee all the rules of the Legislature apply; that is, immunity exists for what members of the Legislature say here in this room. It does not, however, apply to any presenters. I would just caution people that the immunity is only for members of the Legislature and that the normal laws of slander and libel apply, so govern yourselves accordingly.

Ms Poole: That has certainly put a damper on the proceedings. We will not be able to say anything now.

WIND-O-MART LTD

The Vice-Chair: The next presenter is Wind-O-Mart Ltd, Martin Cash, owner. Mr Cash, perhaps you would identify yourself for the purposes of Hansard and any organization you may represent. You have 10 minutes to make your presentation and then the committee will discuss the presentation with you for 10 minutes.

Mr Cash: I am representing myself, Martin Cash, I am representing my partner, my father, Tom Cash, and I also am representing -- I have attached to my submission a letter from the Metro Toronto Glass Association of which we have 170 member companies. Saying that, I would like to proceed with what I have here. I was just given this position yesterday at 5 o'clock, so I am going to try to do my best and get this out.

My name is Martin Cash, as I previously said, and I am vice-president of Wind-O-Mart Ltd. My family has been in the window and related glass business for 35 years in this province and I am proud to have been in this business for 12 years myself. I am here representing myself, and as I said previously, the Metro Toronto Glass Association. The association has a membership in Ontario of 170 companies.

Wind-O-Mart produces, distributes and installs aluminum replacement windows and doors to apartment building owners and property managers throughout Ontario. Our products have always been kept up to date and approved by the Central Mortgage and Housing Corp and of late under the new Canadian Standards Association standards. They are environmentally friendly and dramatically reduce the heating and air-conditioning costs in the buildings we install them in.

There are thousands of suites in Ontario that have single-pane windows. These suites must be updated with new windows in order to provide an energy-efficient environment and a comfort level that would be acceptable. These replacement windows are an important structural repair and safety factor as well as a good means of reducing the noise level to these suites.

Landlords must have a reasonable return on their investments so that businesses and jobs are provided in the building and renovation industry.

Wind-O-Mart employs full- and part-time a total of 80 jobs. There is no doubt in my mind that I will have to close my company as a direct result of the proposed legislation by the NDP. The domino effect on our suppliers will result in hundreds of jobs lost and potential fatalities throughout our industry.

To highlight some of the events that have taken place since the announcement by the Minister of Housing of his intentions, the first point I have is that the week of the announcement more than 50% of our work in progress, in excess of $2 million, was cancelled; the second point is that contracts that were about to begin were put on hold representing $5 million.

As a result of these cancellations, we are now in legal proceedings with many of these customers. This situation has never happened before in the history of our company. This is all as a result of the announcement, regrettably, I must add, by the Minister of Housing of a two-year moratorium and the proposed changes to the rent review system.

In planning our business policies, we have always relied on stated government policies and legislation. I feel that retroactive legislation and governing by policy statements is not fair ball.

Businesses cannot govern or plan their affairs without predictability and consistent governing. In other words, we require forewarning and some notice of major policy shifts that are going to impact on our ability to do business. Surprise retroactive announcements do not give us ample time to restructure our affairs so that we can try to remain economically viable.

Some business people might reason that they can survive this upset, but even those people are questioning whether they can survive repeated upsets of this nature without adequate prior notice.

Business people will not take that risk. We need assurance from this government that it will govern predictably, that business people will be given adequate prior notice of policy shifts so that they can plan their affairs. We cannot turn on a dime. Without predictability and confidence in this government, business will leave Ontario. I cannot emphasize that enough.

Landlords are the tip of the iceberg. No business is safe unless all business is safe. Entrepreneurs will not sit back idly and watch their business concerns being wiped out one by one by the stroke of a legislator's pencil.

I am an Ontarian. I was brought up in this province. My family lives in this province and I am proud to be an Ontarian and I will not be forced out of this province as an economic refugee without a fight, but I am also a businessman and my business judgement tells me that the government's conduct is having a freeze-drying effect on business opportunity. I may have to look outside this province to earn my livelihood.

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I urge government to send a message to the business community of this province, loud and clear, that you will not govern by cocktail party announcements, that you will announce your intentions to make major policy shifts well in advance of their implementation, that you will consider retroactive legislation as abhorrent, that even if capital improvements are recognized in some fashion, confidence has already been lost in this government, and owners or investors will be reluctant to jump right in to fund and finance these necessary improvements.

By the time the capital improvement issue has been legislated, the destruction of businesses and jobs will already have had a disastrous effect on the economy. Most importantly, you must recognize that without the predictability business cannot and will not remain in this province.

That is what I have to say. Attached I have a letter from the Metro Toronto Glass Association which I would like to read. It is dated today and addressed to me:

"Dear Mr Cash:

"As discussed with you today, we hereby acknowledge our full support in your effort to convey the effects to our industry of stated government policies before the committee hearing, at the Ontario Legislature today.

"Unquestionably, the ripple effect of the government's policies have already proven to be extremely negative throughout our industry.

"Our views coincide with yours that business in our province should be given ample notice of policy shifts so we can prepare accordingly.

"On behalf of our 170 member companies which employ thousands of workers in all aspects of the glass and metal industry, I remain" -- and it is signed by Steve Wetmore, the secretary of the association.

Furthermore, I have many letters and correspondence not only with some of my customers, but also with Mr Rae and Mr Cooke because I felt so strongly about this issue.

In my short notice of being heard today, I thought it might be prudent to enclose one particular letter from a client of mine. It is from the Lesbury Company Ltd and it is from a chap by the name of Ricky Burton who I consider to be a very reputable and upholding landlord in this province. He writes to me:

"Dear Marty:

"I am sorry that I cannot go ahead with the plans to install new windows and doors in our buildings in Hamilton.

"You have already done two of our buildings in Toronto. The money spent was well worth it. There are energy savings and increased tenant comfort.

"As you know (and you do know very well indeed) because many other customers like me also cancelled new windows, it's Bob Rae's NDP government that plans strict rent control law that makes it impossible for landlords to pass through to tenants the cost of capital works like new windows and doors.

"New windows and doors are not frivolous expenses or `luxury renovation.' The new windows and doors you make are replacing obsolete single glazed windows that are 25 years old.

"You have laid off 20 workers. I got to know some of the men when they were working at Dervock" -- which was a project I had done for him -- "They are good hard workers. The type of worker that Rae keeps saying he will protect. You should tell them that it's Rae's policies that are directly responsible for their job loss."

I thought that that one was a good enclosure.

Ms Harrington: I want to say that you have made your position extremely clear in your presentation, that we as a government have to have a concern with business as well as workers, as you mentioned. I thank you for coming and in the interests of time I think we will keep going here.

Mr Mammoliti: Like my colleague, I am glad you came as well because it is important for us to get everybody's opinion and we are certainly taking it in. I just want to ask you one question, and believe me, your answer will help me.

Mr Cash: Certainly.

Mr Mammoliti: In my riding alone there are hundreds of people who have been forced out of their units because of increases. How can they take advantage of your windows when they are sleeping on the streets?

Mr Cash: This is a question that of course could have many answers. Window repair is necessary and window replacement is necessary in that all products including human beings -- we all have a life expectancy, and given the situation where a lot of these single-pane windows and the comfort level that they provide is very poor -- the Ministry of Health has been in many, many of the suites that I have been asked to come into where they literally cannot raise 65 degrees in the middle of a room. They have their ovens going, their doors open, baseboard heaters, blankets and the whole bit.

I am not saying that every building needs window replacement, but it has been noted by the government that windows are a structural part of the building and that they are in most cases where these situations that I have outlined are apparent.

Mr Mammoliti: What am I supposed to say to the person who sleeps on the street because he cannot afford the rent?

Mr Cash: On my views about the person who sleeps on the street, I do not even know whether I should get into this right now because my view of a person who is --

The Chair: I think the committee asked me this morning to try to keep our comments on Bill 4. Social policy is important, but the standing committee on social development will deal with a lot of that important stuff. Mr Mammoliti, anything else?

Mr Mammoliti: No. I just wanted the answer to that question.

The Chair: We are going to move over to the Liberals.

Mrs Y. O'Neill: I am very pleased that you have come because if my memory serves me correctly, you are the first employer and tradesperson to come before us to explain the exact results of your own personal experience in your own personal small business. I want to ask you a couple of questions. You indicated some of the reasons that people seek your services and one of them, you seem to suggest, is safety, as well as comfort. I wonder if you could tell us about the life expectancy of a window.

Mr Cash: Yes, I do have some information which I could present -- I do not have it with me -- that Canada Mortgage and Housing Corp, upon its acceptance of certain products today, deems a window 25 years and that is with ongoing repair that will have to be done during its life expectancy. That is of the double-glazed product that is manufactured in today's era.

Mrs Y. O'Neill: So this would certainly be something that in most of the buildings -- when we had the building boom in the late 1960s, it would be one of those very solid needs that is very broad.

Mr Cash: Absolutely.

Mrs Y. O'Neill: Energy efficiency is being encouraged and certainly energy conservation is a theme of the government, a very strong theme. Were many of your customers involved with that component or did they all have need?

Mr Cash: Most of my customers. I must say, are all very legitimate operators in this industry. I am fortunate not to have had any of the so-called luxury improvements.

Mrs Y. O'Neill: I do not think that this government -- certainly if I hear what it says in the House -- talks about energy efficiency as being a luxury and I do not think that anybody in Ontario can talk about energy efficiency as being a luxury.

Mr Cash: I agree with you wholeheartedly.

Mrs Y. O'Neill: But were any of your customers going that way?

Mr Cash: They all were. They all considered the fact that the energy-efficient aspect of the installation would cause not only improved costs in energy consumption, but as well increase the comfort level for the tenant in the suite.

Mrs Y. O'Neill: My final question has to do with the legal proceedings. I presume that this is costly for you.

Mr Cash: Extremely.

Mrs Y. O'Neill: You are no doubt, if I may ask, taking on people who you have had good business relationships with before. Is that correct?

Mr Cash: Exactly. I have had an ongoing business relationship for many years with many of these customers, and because of these litigations we are forced as a result right now, of course, to break ties with them. Really we do not have much room to move. We are basically just finishing up what we have. We see no opportunity for much out there at all.

Mrs Y. O'Neill: You are taking proceedings against people whose work you have completed.

Mr Cash: In some cases, we are suing for non-performance of contracts because contracts were signed based on the existing legislation and they are not conditional contracts. They are contracts that are -- what do you call it? -- bona fide contracts. They are not conditional. Therefore, we do not care where they get their money from. We are dealing again with the building owners, and if they are not going to take them we are going to sue them.

Mr Turnbull: Mr Cash, at this moment do you have windows which you have specifically manufactured for buildings?

Mr Cash: Yes, absolutely. I have one particular instance that I can outline. At 440 Winona Drive in Toronto we have two trailer loads. When I say "trailer loads," I mean full 45-foot tractor trailer loads, dollar value at a couple of hundred thousand dollars, sitting for at least a month now and they just will not allow us to begin. They are sitting there. They are padlocked and the owners are saying: "We don't know what the ground rules are. They've changed the law from underneath us."

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Mr Turnbull: How many employees do you have?

Mr Cash: We have 80 full- and part-time.

Mr Turnbull: Is all of your business just putting windows in apartment buildings?

Mr Cash: Yes. We have specialized in this industry for the last 12 years and it has been a growing industry for us. It started off very slowly, but we always felt that energy conservation and the improvement of the single-glaze stock in Ontario is inevitable and it is going to come and we have committed our business careers to changing windows in this province.

Mr Turnbull: In your opinion, if Bill 4 goes through and if there is in subsequent legislation the provision to get capital cost flowing through to the tenants, do you think the confidence will come back immediately from the landlord?

Mr Cash: It is my opinion that it will not come back.

As everybody has asked me to be quiet, I wonder whether I can get the attention of the NDP.

Interjections.

Mr Turnbull: Mr Cash, in fairness I must say we have had a very long day of sittings --

Mr Cash: Okay. I am sorry. I know I am getting the attention of the PCs, but I certainly want to get the attention of the prevailing government.

To answer your question, I do not feel that confidence is going to be here in this business climate as a result of this type of legislation the Minister of Housing has put forth. It is much like a locomotive. Once you stop a locomotive, it is very hard to get it back up to full speed again. Even if the legislation were changed tomorrow, I would venture to say it could take a year for some sort of economic climate to come back.

Mr Turnbull: On a per-suite basis, how much does it typically cost to outfit your windows, let's say, in a hypothetical 40-unit building?

Mr Cash: A 40-unit building would cost about $60,000, about $1,500 per suite.

Mr Turnbull: Do you have any statistics on how that would impact the energy consumption of that building?

Mr Cash: Statistics are a very hard thing to come up with; I could try. Because of the nature of the buildings -- some are walk-up, some are high-rise, some are low-rise, some are long, some are tall, different heating systems, different technologies available at the time of their construction -- it is a variable amount, but I know from my own personal experience, comments I get from superintendents, consulting engineers, the boilers are all cut back in these buildings upon the installation of new product some 20 to 30 heating degrees.

Mr Turnbull: A final question: Of your 80 employees, if this bill goes through, how many will you have?

Mr Cash: Zero.

The Chair: Thank you, Mr Cash, for your presentation before the committee today. We are pleased to have you.

Mr Cash: Thank you for the time.

TANDEM REALTY ADMINISTRATION INC

The Chair: The next witness before the committee is Tandem Realty Administration Inc, Bert Rowdier, I believe. Please come forward. The procedure is the same as I have explained many times today. You have 20 minutes. We would like your name and position for the record.

Mr Rowdier: Thank you very much. My name is Bert Rowdier. I am the president of Tandem Realty Administration. My company manages on behalf of about 25 owners approximately 3,000 apartment units. Personally, I own minor shares in several of the buildings we manage. I have been a property manager since 1967 and have accumulated over these 23 years what I believe to be a keen understanding of the way our industry works. I believe I am qualified to speak to you today.

I would like to take this opportunity to make my comments to you essentially in two parts. First, I would like to examine the proposed Bill 4 in all its implications and, second, I would like to present to you viable alternatives.

Bill 4 proposes two major changes to the existing legislation. First, it intends to discontinue the allowance to eliminate a financial loss and, second, it suggests that there should no longer be given any consideration for capital expenditures incurred by the landlord. Beyond those two changes, this bill proposes a third consideration. It intends to mandate that the above changes be made retroactive, a proposition so totally alien to previously known interactions between any two parties within a civilized society as to stagger the imagination of those of us who wonder what incredible ideas this government will think of next.

Please allow me now, within the limited time at my disposal, to examine in greater detail the three points raised so far.

As I am sure everyone in this room understands, Bill 51 recognizes that often a property is purchased which, given new financing costs, will for the first years operate at a loss. In order to eliminate this financial loss, a landlord receives an entitlement to increase the rents within such a building by 5% per annum or by the total financial loss, whichever number is the smaller.

Properties were bought showing initial losses long before rents were controlled in Ontario in 1975. A purchaser knew that within two or three years he would reach a break-even point and that he could look forward to moderate profits in future years. Rents were charged carefully and in full consideration of the competition provided by the free market system. The seller in such transactions would be able to obtain a fair market value for his property.

Purchase prices and financing which resulted in these initial losses have, in other words, always been with us and have not been created by any rent review legislation. To eliminate such an allowance clearly will reduce the value of all our properties, in some instances to an extent where the reduced value is no longer sufficient to comply with the lending criteria of our financial institutions.

To make matters worse, the value which Mr and Mrs Owner visualized would ensure their retirement will not be available for them. The security for the autumn of their years will have gone up in a puff of smoke, because it is essentially an economic game of smoke and mirrors which our government has embarked upon: the smoke, Bill 4, and the mirrors, the non-profit housing, the government-financed accommodation with which the NDP proposes to replace privately held rental properties. The elimination of the financial loss consideration is sheer folly, as it flies in the face of economic reality.

Let me now examine, please, the proposition to disallow any increase in rents to compensate the landlord for the costs incurred through major or capital expenditures. It has been suggested by certain members of the NDP that surely such a capital expenditure as the replacement of a roof is the cost of doing business. Let me assure you that even a superficial examination of the financial history of an average property in Ontario which has been controlled for the past 15 years would show quickly that there are no funds available for the replacement of a roof, for instance, unless these funds be raised by the ultimate consumer through increases in monthly rents. The collection of such funds which might have formed a reserve fund was made illegal in 1975 and has continued to be illegal since then.

No financial institution would lend money unless it could be reasonably certain that its loan would be paid back. No roofer would undertake the work without the owner's assurance of being paid for the completed task. And, I assure you, no building owner could give such an assurance unless he in turn was certain he could ultimately collect the required funds.

In the final analysis, municipal bylaws, building standards and other rules and regulations notwithstanding, this roof would not be replaced. Lacking the funds, this roof could not be replaced.

A building owner who replaced the roof and, let us say, the plumbing lines and obtained an increase through his application to the minister did not, contrary to popular belief, pocket all this extra money. He simply collected these funds and passed them on to his bank which previously had lent him the required amount so he could pay the roofer and the plumber. For the next 15 years the landlord is simply a channel for the funds required to compensate the tradesmen.

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Why, asked both our Housing minister and Premier, should landlords receive huge rent increases for doing luxury renovations? Please note the clever juxtaposition of the words "huge" in connection with increases and "luxury" in connection with renovations. The question must be asked: Is it a luxury renovation when a building needs major repairs to a salt-damaged concrete garage or balcony slab? Is the replacement of a 15-year-old roof or the exchange of corroded plumbing lines with new copper lines really such an unnecessary luxury? Of course not. They are an absolute necessity if we want to preserve the structural and mechanical integrity of our buildings and if we wish to continue to protect the health and lives of their occupants and provide an environment in which our tenants can feel safe and comfortable. To do less would be negligent.

What, then, are the increases which were passed on to the tenants for such vital, major expenditures? Messrs Rae and Cooke tell us that they are huge, that they are 30%, 40%, 50% and in many cases 100% and 150%. The statistics compiled by their very own ministry clearly put the lie to such statements. Increases granted for capital expenditures averaged 3%. Why, I ask you, would honest gentlemen, and I am certain they think of themselves as honest, publicly make statements and issue claims which are totally and diametrically opposed to the truth?

Maybe they did not know the truth. Maybe they really believed what they said, but then we must consider that the truth is not buried in some inaccessible basements. The truth lies openly in the records of the Ministry of Housing. We can all assume that at least one person has access to these records -- the minister. I had access to these records.

As if eliminating financial loss and capital expenditure allowances were not devastating enough, this government compounds this devastation by proposing that these changes be applied retroactively, cancelling previously issued guarantees made by the government of Ontario, declaring previously issued orders void, and telling its citizens if they trusted their government and made their plans accordingly they did so at their peril. The only true alternative is to abolish all rent controls and to allow the free competitive market to control rents and to encourage the supply of housing more efficiently than any legislation can.

What about those members of our society who truly need our help? With the money this government could save on the administration of this law alone, we could go a long way towards targeting the group and offering better and more meaningful assistance to those in true need. In other words, we target those in need. We must not wastefully sprinkle our subsidies over the entire renting population. There are those who would be hungry; society at large nurtures them not by controlling food prices for everyone but by satisfying the specific need of the truly needy. There are those who are ill and cannot afford to purchase necessary medication. Society satisfies this need not by giving free or price-controlled medication to all and sundry, rich or poor, in good health or ill, but again by giving specific help to those in true need. Clearly there are those who need shelter but have insufficient means to pay. We must, as a caring society, identify those individuals in need and extend our help freely, generously but specifically.

The solutions therefore are as follows: Allow rents to increase where capital expenditures are structural or mechanical, where they affect life and safety issues or, in the case of cosmetic changes, where the majority of tenants have agreed. Cap these increases occasioned by such major expenditures at, say, 7% unless previously demonstrated circumstances make a higher increase absolutely mandatory. Our aging housing stock demands that this work be done. We must not fall into the radical trap which suggests that an aching toe is best cured by the amputation of the leg above the knee.

Permit the elimination of financial losses, but do not recognize secondary sales and additional financing for a five-year period. The government's fear of, as Mr Rae puts it, "flip, flip, flip," would thereby be put to rest. But the economic reality of initial operating losses in this or any other business cannot be simply wished away, cannot be legislated away. It must be dealt with in a rational manner.

Finally, I urge the members of this committee to recommend to their respective parties that this bill, whatever its final form, must under no circumstances be retroactive. A building purchased, considering all existing laws, an application filed with the ministry in good faith, moneys borrowed and spent with the government's encouragement, must never be turned into an economic disaster. If we cannot trust our government to treat us fairly, then in heaven's name, I ask you, who can we trust?

The Chair: Thank you, Mr Rowdier. The Liberals are first in this go-round.

Ms Poole: Thank you for an excellent presentation. I am particularly pleased that you saw fit to put recommendations at the back. As you read them. I was looking through and reading between the lines. It is helpful to us as a committee to have specific recommendations. Particularly, one of the solutions you have suggested is: "Allow rents to increase where capital expenditures are structural or mechanical, where they affect life and safety issues or, in the case of cosmetic changes, where the majority of tenants have agreed." I think that type of thing is very helpful to us and I do appreciate the fact that you took the time to come to us. I have no questions.

Mrs Y. O'Neill: May I just have a little question? I feel that schedule B, although you did not refer to it in your presentation, also deserves note. As has been said by many people here today, retroactivity and the principle of retroactivity is the most unpalatable part of this whole Bill 4, which is the bill we are speaking to. I think you have given some very good comparisons in schedule B of what retroactivity would do in other areas of the community if it was applied. I also feel that your schedule A, which is a repeat of what we know is fact and what are actually ministry figures, is put very clearly and succinctly.

I also appreciate your recommendations, because they are balanced, they realize that there are abuses, and there are systems built into your recommendations that would assist in only granting increases that were based on real expenditures which were part of either the purchase or the necessary improvements.

Mr Rowdier: Actually, due to the limited time -- 10 minutes is, when one thinks of it, a very short time to speak on an issue that is so wide-ranging. It seems to me that the schedules I have attached in my brief, of which I hope all of you have a copy, schedules A through F really tell the story much better than I was able to in, as I said, the 10 minutes granted me. I am nevertheless grateful for the 10 minutes.

Mr Tilson: We have had several examples today of situations where landlords have relied on the existing rules, have undertaken renovations, have proceeded with phase-ins, have received permission to complete phase-ins, have received the approval of tenants to proceed with renovations and now, of course, this legislation has created havoc for them. Many people have been coming and writing to us, writing to the government, making statements to these hearings that they will be bankrupt if that type of retroactive legislation you referred to is proceeded with. In your capacity, sir, how many types of situations are you aware of?

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Mr Rowdier: In the portfolio which I manage and supervise for a variety of small- and medium-sized investors and one larger-sized investor, I know of at least eight buildings which are seriously jeopardized, to the extent that the investors are asking themselves the question: "What do we do? We can't walk away, because of our personal reputation. We can't, ad infinitum, feed those buildings negative cash flow." Of course if Bill 4 is made retroactive in the draconian manner in which it is suggested, the negative cash flows will go on for ever; it will never be eliminated. So a very serious investor who has brought money into this province and created employment thereby is now asking himself: "What do I do? I can't walk away from it, because my reputation is at stake. On the other hand, I can't continue feeding these buildings for ever."

It is a situation which simply must be solved on the legislative front and, again, I implore you to consider the retroactive provisions of this bill most seriously.

Mr Tilson: What are the investors and bankers telling you about this legislation?

Mr Rowdier: I had today a most unfortunate conversation with a banker, who has turned me down when I wanted to refinance a mortgage which up to now was well within the 75% value. The building can barely afford the refinancing. The owner was prepared to give personal guarantees and establish a letter of credit. Everything was practically put to bed except the documents were not signed. I was today turned down because the lender felt that the value had descended to such an extent that he was now going to borrow money up to 90% to 95% of value and he would not do that. So I cannot refinance this mortgage, and I must refinance it somehow.

Mr Turnbull: So the implications of what you have just said is, the lending institution in fact was indicating that there was something between 15% and 25% depreciation in the building as a result of this legislation.

Mr Rowdier: I would go so far as to say that there was in reality 25% to 30% depreciation.

Mr Turnbull: If companies -- you can specifically mention your own or other companies in general -- are unable to arrange refinancing, what will be the implications of this?

Mr Rowdier: Depending on the financial situation of the building, the bank would take the building over for the outstanding debt or the vendor, if it was a recent sale and there is a vendor takeback, would take the building over. The investor would probably go bankrupt or sustain serious losses. I mean, we have heard it today. We have heard it today where people have been pleading with you with tears in their eyes. And I am not using hyperbole; you have all seen it.

Ms Harrington: I certainly thank you for coming. You mentioned just now in your conversation with the other member that the value had gone down a dramatic amount of, what, 15% with regard to your refinancing problem. I think it is clear to say that the market has been in a downswing in Toronto since the beginning of 1990 for the housing market and apartments. So it is not just to do with this particular bill that the market is different now. Would you agree?

Mr Rowdier: I would agree with you when you suggest that in Ontario at the moment we have problems that exceed those of Bill 4, but in the conversation I had today with the lender, he made specific reference to Bill 4. He had done a calculation and he said: "Just a rough calculation: Your building, if Bill 4 gets passed, drops by X% I can't lend you the money until I know what's happening with Bill 4."

But you know, I am not here to cry, "Poor investor." I am here to cry, "Poor tenant, poor landlord, poor Ontario," because it is the tenant who is going to suffer every bit as much, if not more so, because he will have to live in deteriorating housing stock.

Our Housing minister wrote a letter to me and in this letter he said, very, very quietly, "Well, you know, Mr Rowdier, of course, that there is such a thing as the Landlord and Tenant Act and building standards. You still will have to go on doing the things that need to be done." Come on. Nobody needs to tell me that there is a Landlord and Tenant Act and there are building standards. The fact is, if there is no money, no legislation can accomplish it. You cannot take the act and make your roof tight. You need gravel and tar.

Ms Harrington: Okay. I think we can agree certainly that rents have to cover the cost of maintaining the building and you have to have a fair profit on that and you also have to have money to do the capital expenditures when they come along. The government realizes that.

Mr Rowdier: And such a prohibition must not be retroactive.

Ms Harrington: I would like to thank you for some of the suggestions you made here. You were putting some positive aspects to your presentation. Where a building needs structural or mechanical help, we realize that the money has to be there and the only source of it in the end is the tenant. We understand that. I think all tenants understand that too. But I think, from your presence here this afternoon, you probably have heard some of the conditions that exist in Toronto from the tenants' point of view. We have to address this whole province and we are very much trying to do it fairly. Thank you.

Mr Rowdier: The lady from Orton Corner -- a landlord like this is on the periphery. I am not here to defend his action.

Ms Harrington: Okay. Thank you.

The Chair: You have 30 seconds left, if anybody wants to use it. No?

Mr Tilson: Yes. Mr Chairman.

The Chair: No, I meant the NDP had 30 seconds. Mr Rowdier, thank you for coming.

Mr Rowdier: My pleasure. Thank you very much for listening to me.

KANEFF GROUP OF COMPANIES

The Chair: Our last presenter for today is Gabriella Favero. Kaneff Group of Companies. I noted that you were here most of the afternoon, so I think you know what the procedure is. You have been allotted 20 minutes and 10 of those 20 minutes are for your presentation.

Mrs Favero: Thank you. Ladies and gentlemen of the committee, my name is Gabriella Favero. I am a vice-president with Kaneff Properties Ltd in Mississauga.

In the time allotted to me today, I would like to describe for you the disastrous results that will befall Kaneff Properties Ltd if Bill 4, An Act to amend the Residential Rent Regulation Act, 1986, is enacted and proclaimed in its present form, but first I would like to give you a brief history of the development of Kaneff Properties.

Kaneff Properties was started by Ignat Kaneff, who came to Canada and to what is now Mississauga in 1951 as a penniless immigrant from Bulgaria. On coming to Canada in 1951, Mr Kaneff began working for a construction company as a labourer. But he learned quickly, and with hard work he was able to purchase a single building lot. He built a house on this lot in his spare time. This was his start in the construction business in 1952 as a very small housebuilder. That first house was completed and mortgaged, and in 1953, also in his spare time, he built two houses for sale.

By 1954 Mr Kaneff had left the employment of Shipp Corp and began to build single-family houses on his own; 1954, 1955 and 1956 were taken up with building single-family homes, and each of these years Mr Kaneff was able to increase his output. By 1956 Mr Kaneff had incorporated Kaneff Construction and began to build more single-family homes year by year.

By 1958 Kaneff Construction began to venture into the development and construction of rental housing with its first project, a very modest nine-unit rental apartment building located at 15 Paisley Boulevard in Mississauga, what was then known as Toronto township, all the while continuing to build single-family homes in the largely rural municipality. In 1959 Kaneff, having completed the nine-unit building, ventured into a somewhat larger project, 45 rental apartments, and in 1960 the company built another building, also rental apartments. In 1961 the company built a similar rental building in the town of Brampton. This modest activity continued during the early 1960s until 1967, when Kaneff Construction Ltd greatly increased its output in a much larger-scale building containing 242 rental apartments.

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Since that time the company has built literally thousands of apartments in a large number of buildings, both rental and condominium apartments for sale. During the course of this activity, it was necessary for the company to sell off some of the buildings to raise capital to build further rental housing projects. Through this activity of building, renting and some sales over a period of years, Kaneff Properties built up a portfolio of rental apartments of about 2,000 units contained in eight high-rise buildings located in Mississauga and Brampton.

Kaneff Properties presently manages its entire portfolio of over 2,000 apartments with its own management staff, and all of that rental housing portfolio being managed by Kaneff was originally built by the company. The company has never purchased a rental apartment building built by other developers or builders. The eight rental apartment buildings to which I refer range in age from 11 to 22 years and have reached a point in their lives where various components of the buildings had worn out, had reached the end of their useful lives and required some major capital expenditures in order to protect the structural integrity of the buildings and to make management more efficient and effective.

It was at that time, some years ago, that the company arranged for engineering surveys to be made of structural elements in several of the buildings and engineering recommendations by the company's engineering consultants were made to the company. As a result, certain expenditures were made. The company accepted those recommendations and decided to carry out an extensive capital expenditure program to rectify the structural deficiencies indicated and recommended by the consultants, together with items that were other than structural, but none the less necessary.

It should be emphasized very strongly that none of the capital expenditures planned and subsequently carried out could be considered of a luxury nature or frivolous in any way. Capital expenditures made by the company were basic and essential, the structural work verified by engineering surveys and necessary to the structural integrity of the buildings concerned. Failure to carry out the capital expenditures which were in fact made could only result in serious deterioration of these buildings, which could of course result in dangerous conditions and inefficient and ineffective maintenance.

It should also be emphasized that when planning, financing and carrying out the capital expenditures which were in fact made, Kaneff Properties Ltd obtained expert advice with respect to the Residential Rent Regulation Act and the proper procedure to follow, and relied implicitly on that statute and the regulations made pursuant to that statute in carrying out its capital expenditure program on these eight buildings.

As a precaution, and at the insistence of its bankers, who advanced to Kaneff Properties the necessary funds to carry out the expenditures, in each case an application was made to the rent review services branch of the Ministry of Housing pursuant to section 89(1) of the Residential Rent Regulation Act for a conditional order of the minister for the capital expenditures made in each building. In each case a conditional order was received from the minister under section 89(2) of the Residential Rent Regulation Act on which the company and its bankers relied implicity before advancing the funds and before carrying out the capital expenditure in each of the eight buildings.

The first of those conditional orders was dated 1989. The extensive capital expenditure work on each of these buildings was done during 1989 and 1990, and upon completion all of the required work indicated had been done and the buildings restored to their original standard.

In each and every case, Kaneff Properties, in doing this work, relied implicity on the state of the law as it was then and relied on the conditional order of the minister that had been received in each case covering those capital expenditures as actually carried out. This scope of work could not have been accomplished and would not have been undertaken if the law had not provided for the recovery of those capital expenditures from an increase in rental revenue.

The details of the capital expenditures carried out in each of the buildings are set out in the brief that was given to you. Essentially, the work involved was rectification of parking lots and parking garages, roof systems, plumbing repairs, balconies and appliances in the four older buildings which had worn out due to aging.

In total, the capital expenditure made by Kaneff Properties Ltd on these eight buildings was $12.5 million. Of this total expenditure, one building, 2300 Confederation Parkway in Mississauga, was finished prior to some others, and an application for rent review was submitted earlier due to the fact that there was no underground parking garage, merely an outdoor parking lot. That application was in fact processed and an order received. But except for that one relatively small sum of $12.5 million, the capital expenditures made on the eight buildings, if Bill 4 is enacted and proclaimed in its present form, $11.8 million in capital expenditures will be non-recoverable due to the fact that the first effective date of rent increase in each of the remaining seven applications falls after 1 October 1990 rather than prior to 1 October 1990, as Bill 4 as presently constituted will require in order to permit recovery. It is this horrendous, and I do emphasize the word "horrendous," retroactive aspect of Bill 4 that will affect our company in a disastrous way. Bill 4, as presently constituted, would make all of these capital expenditures made by Kaneff Properties Ltd in accordance with the Residential Rent Regulation Act and the regulations made pursuant to that act, and relying upon the conditional order of the Minister of Housing, which was a lawful activity at the time it was carried out, unlawful retroactively, and prevent the landlord, in each case Kaneff Properties Ltd, from recovering those capital expenditures by way of increased revenues.

The entire $12.5 million to which I have referred was borrowed from the company's banker, the Royal Bank, which relied on the conditional orders of the Minister of Housing in making the loans. In fact, the requirement for the conditional order was made by the bank. In making these loans and the advances, the bank relied on the conditional orders and upon the projected revenue of each building based on those conditional orders after the capital expenditures were completed.

Bill 4, as presently constituted, would therefore prevent the recovery of the capital expenditures to which I have referred and will result in a financial situation to the company whereby the cash flow of these buildings will be insufficient to permit the company to carry on normal business operations. The result would be serious financial losses to the company, with no way to recoup those financial losses.

Ladies and gentlemen, it is one thing for a company in this line of business, or any line of business for that matter, to make a decision to proceed with a business activity on the basis of a known and accepted set of rules. That is a business decision for the company to make and for which the company must take responsibility if that decision is incorrect. It is quite another matter, however, for an activity which is lawful at the time it is carried out, and for which activity the company relied implicitly upon the then-existing legislation, to be made unlawful by a stroke of a pen in a retroactive clause in a piece of legislation. That, ladies and gentlemen, is not acceptable. One cannot govern one's activities and stay in business unless one has the security of feeling that the rules of the game are certain and predictable in advance. Retroactive changes can produce disastrous results, as are illustrated by the real example that I have presented to you today. Unless the business community, including the housing community, can feel confident in this regard, there will be no future place for business in the province of Ontario.

If Bill 4 is enacted, then so be it, but let that legislation be prospective in its approach rather than retroactive, and we will then be able to make our business decisions accordingly. It is the retroactive aspect of Bill 4, as presently constituted, that is particularly abhorrent and repugnant to us, and we urge you to reconsider this aspect among all others set out in the bill.

The Chair: Thank you. We will start off with Mr Tilson.

Mr Tilson: Obviously, the retroactive issue is one of the major concerns of many of the applicants who are appearing before us, and as you know, the way the system works, the government has the majority and it can do what it likes. They can pass this bill, they can amend it, they can do anything, and hopefully they will listen to you. Others like you have made similar submissions of the disastrous financial results that will follow from the retroactive legislation. If they do not listen to you, if they do not listen to you and others like you and they pass the retroactive legislation, I understand, obviously you are saying, your firm will lose millions of dollars. Is that what you are saying?

Mrs Favero: Yes.

Mr Tilson: If that result follows, what will your firm do?

Mrs Favero: It is very difficult to say at this point. We would have to look at the position, as the prior gentleman said. If you are a reputable company you do not just walk away from things and you try to resolve the situation as best you can. But I do not know if we can.

Mr Tilson: Are you going to walk away from millions of dollars?

Mrs Favero: We cannot, because as I say, being reputable companies, you do not just walk away. You have responsibilities to people, you have a responsibility to your bankers and everything else, so you would not walk away. But we really do not know at this point what we would do.

Mr Tilson: Who will sustain the loss?

Mrs Favero: Obviously Kaneff Properties.

Mr Tilson: That is my point. I am getting to the other suggestion of the reliance that you and firms like you have placed on the government from the previous legislation, and the rules are changed. I guess my question is, how far are you prepared to go if they do not listen to you?

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Mrs Favero: That is a substantial amount of money that we are going to lose, and we would have to look at what recourses we have, because of the fact that we were very cautious landlords. We went to the rent review and asked for a conditional order so we would know in advance how it was going to be treated. We did not jump in with both feet and say, "Oh, well, we will do it and then see later what happens."

We went very cautiously and proceeded with conditional orders, and on the conditional order all it says is if you do so, you will be given such and such. It is a very straightforward situation, and now with a retroactive situation, because we happen to be in a position where we have to give 90 days' notice to tenants. Had we not had to give 90 days' notice of the increase to tenants, we would have been fine. But because of that 90-day notice, we were caught.

Mr Tilson: What did the government ministry officials or the Ministry of Housing say when you put this to them in the past?

Mrs Favero: They are waiting for decisions. As a matter of fact, I had one of those letters that the gentleman prior was mentioning. We applied for the four latest buildings, and on two of them we received a notice saying, "Because you know that Bill 4 is in the throes of being passed we are not going to process it, we are just going to put it in abeyance." As a matter of fact, we had two buildings with dates of 1 October that were literally ready to be pushed out the door and they were stopped.

Ms Harrington: Thank you very much for coming on behalf of your company. I had a chance to speak with you in the hall and learn about that coincidence of dates again and how unfortunate that is. I do understand you made a very clear presentation, including the whole history of your building and your company.

I was looking back through a presentation we had this morning about why the necessity of the moratorium. I really do not think I can take the time to explain the whole justification for it at this time, but maybe I could let you read this. I felt this particular person put it extremely well. It is very difficult -- I must tell you that -- for us in the ministry and for the government, but I will try to give you a little flavour of it. I know it is difficult for everyone.

"Any government which contemplates a major restructuring of its regulation of private sector activities must protect the interests of vulnerable parties who rely on the existing system. Otherwise, those who can will engage in profit-taking at the expense of the vulnerable. It is for this reason that the proposed moratorium is absolutely necessary. Tenants are vulnerable."

It goes on to describe that "The stated position of the NDP with regard to the current rent review system was that it would implement a system of rent controls." With that knowledge, with that prospect, many landlords undoubtedly decided that they could reap whatever benefits the existing system would give them. Knowing that it would take some time to draft new legislation, this certainly would be "a window of opportunity for these landlords."

Now we are not saying that all landlords are alike; we know from experience they are not. This is what he says would happen:

"To prevent a flood of applications to rent review, to preserve the affordability...of tenancies and to prevent a rash of unnecessary capital expenditures, the government had only one option after the election, that is, to announce its future intentions and to retroactively freeze applications for increases relating to capital expenditures and new financing. Not to do so would have been fatal to the housing policy it espoused."

Now I am not saying that is -- I felt that had very powerful -- it is not exactly what our government said, but I just wanted to show you there were two sides to the question.

Mrs Favero: With all due respect, though, in our situation it is not that we are seizing an opportunity because the government is in power and now that has changed. These policies that we had undertaken were going on since 1988-89. So it was a planned program --

Ms Harrington: Yes, I understand.

Mrs Favero: -- and it was complete. As a matter of fact, all the applications were in before the throne speech. Therefore, we had no knowledge of what the government was going to do as far as rent review was concerned.

Ms Harrington: All I am saying is that if we were saying within the next year or within the next two years we are going to change the whole system of rent control, what this submission is saying is that, in that interim when there was no pressing down or this breathing space, other landlords, who may not be as meticulous and as planning ahead as you, would then take advantage of this whole system. There are very many vulnerable people involved.

Mrs Favero: But then that could probably be curbed, a deadline. As I said before, we have to give 90 days' notice to the tenant. Had we been given 90 days' notice, this company would have been fine. Because of all the conditional orders we were delayed. We wanted to get the conditional orders prior to continuing. Had we just jumped in with both feet, we would have been fine. So it seems doubly unjust in our situation.

Ms Harrington: Yes. I understand.

Ms Poole: I know Ms Harrington was just trying to be sympathetic when she called your situation unfortunate, but I am afraid I would consider that to be a euphemism. I think it would be more bordering on disastrous, particularly when you went the conditional order route, which everybody acknowledges is a very conservative way to go to rent review, that you have your order in hand before commencing the work.

Have you considered a legal challenge because of your circumstances?

Mrs Favero: We are basically wanting to see what Bill 4 -- it is hard to fight phantoms, so to speak. Once we know what the legislation is, then we will have to review it at that time and see what avenues are open to us.

Ms Poole: Have you had any correspondence with the Minister of Housing about the situation regarding conditional orders?

Mrs Favero: No. We have written to the minister and we have not heard back. We have tried to reach his office as well.

Ms Poole: I certainly think the conditional order matter is something that we, as committee members, will have to take a serious look at. Obviously the retroactivity bothers a number of members a great deal, but particularly where you actually have an order in hand that was delivered prior to this government coming into power in fact --

Mrs Favero: Way in advance.

Ms Poole: I was going to say over a year before.

Mrs Favero: Even before the election was called, let's put it that way.

Ms Poole: Yes. I think given the election, if some of us had to do things differently, a lot of us would have made changes. Anyway, thank you very much for coming and apprising us of the concerns you have.

The Chair: You have a minute and a half, if you wish to use it, Mrs O'Neill.

Mrs Y. O'Neill: I just wanted a little bit more clarification about the letters of application that you have made and that you say you have. Could you say just a little bit more about that? It is a subject I am very interested in.

Mrs Favero: The final application to the ministry?

Mrs Y. O'Neill: Yes.

Mrs Favero: Basically we went the conditional route, conditional order. Once we had the conditional orders, then we went ahead and did the work. At the completion of that work we went back for a whole building review, saying, "Here are our bills, we've done the work, therefore -- " Then we get an order. The only one that made it was the one without the underground, because the other buildings had large undergrounds and it took longer to do.

Mrs Y. O'Neill: Yes, but I am talking about the hold situation.

Mrs Favero: The letter with the hold situation?

Mrs Y. O'Neill: Yes.

Mrs Favero: Normally when we put a whole building review application in, we get a form saying the tenants have up to such-and-such to put a presentation and you have such-and-such to reply. Instead of that letter, it was in the same format, but the words were totally different and it simply said, "Because, as you are aware, Bill 4 is being debated, we will not be able to process the application and we will let you know later on what happens." This is a letter addressed to the tenants, carbon copy Kaneff Properties Ltd.

Mrs Y. O'Neill: I am just about on the verge of asking an exhibit of one of these letters.

The Chair: One short question and one short answer.

Mrs Y. O'Neill: I am just putting a warning out that if these letters are floating out there, we need to see them, at least one of them.

Ms Poole: Could you provide us with a copy of the letter?

Mrs Favero: It is a form letter that goes out from the ministry.

The Chair: Thank you, Mrs Favero, for coming and appearing before us today.

Mrs Favero: Thank you for your time.

The Chair: The work of the committee is completed for today. We will resume hearings tomorrow morning in this room at 10 am.

The committee adjourned at 1851