Transcription du comité 1991-août-21 | Assemblée législative de l'Ontario

The Vice-Chair: This morning our first presentation will be from MCI Properties Inc, Ray McNally, president. You have been allocated 15 minutes by the committee. It is necessary for the Chairman to keep very strict control over the time today. We have a great number of presentations, so 15 minutes will be exactly what you get. If you wish to reserve some of your 15 minutes for discussion of your brief with the committee, that is always appreciated. You may begin by identifying yourself and your company.

Mr McNally: Thank you, Mr Chair, and thank you to the members of the committee. My name is Ray McNally. I am the president of MCI Properties. I own and operate a 25-year-old, 115-unit apartment building in London. I have owned it for over six years. I have been told countless times by tradespeople, tenants and guests that this old building is the cleanest and best-maintained apartment building in the city. Some of my tenants have been there since the building was first occupied in 1966. My staff is the best there is.

I appreciate the opportunity to make a presentation before you today. Although I am a small landlord, I have taken the time to make this presentation to the government with the hope of responsible consideration. In preparation for this presentation, I have been hopeful as to the outcome, but I have been unsure what to say when so much needs to be said.

I would like to illustrate to you what kind of building, tenants and landlord my circumstances encompass. A few months ago we celebrated the 25th anniversary of the construction of our building. We invited all the tenants, a representative of the company that built the building, some tradespeople who had helped restore the building and the local TV and newspaper media. We had a poolside barbecue. Two of our oldest tenants had been honoured as king and queen for the day. They held everyone's attention as they described the building when it was new 25 years ago. Although we cooked dinner, many of the residents brought salads, appetizers and desserts.

We honoured our other long-term tenants with gift certificates at a local restaurant and provided flowers for each of the ladies. We took pictures throughout the day and posted them for all to see. We also displayed a series of articles and photos of the early days and of our renovation days. Many residents had forgotten how much work had been done to the building and what it looked like before the renovations. It was quite refreshing to hear all the positive comments. Many residents told us that even though they were considering moving out to a more modern building prior to the renovations, and in spite of a 25% rent review order -- and we offered a 10% discount to all existing residents -- they ultimately decided to stay. We did not lose one tenant to so-called economic eviction because of the order. In fact, instead of trucks moving tenants out, we had trucks almost every day moving furniture in.

Today, our residents enjoy the benefits of a fine old building with good neighbours and a great support staff. Our building superintendent frequently drives residents to their shopping -- on her days off, at that -- and has made trips as far away as Orillia to drive elderly residents to important family events, such as funerals. We have several residents who spend a great deal of volunteered time working around the building, repairing screens, vacuuming the pool and cleaning the halls, just to help everyone out. Our staff and helping-hand residents are well fed with the cookies and other baked goods that are continuously sent to us from other residents.

Although I still have more to cover in my written presentation, I would like to take a few minutes of my allotted time to circulate some mounted photographs for your review. This is pertinent to what I have to say later. Please feel free to ask questions about this material. In light of the time frames, I think I have about three minutes to do this. If I can just start this one page at a time and work it around, have a look at it briefly. This is the celebration of the 25th anniversary of our building with some indication as to where a fair amount of money went in restoration of our old building. As I say, I would be pleased to answer any questions during this time.

Mr Tilson: Mr Chair, I think he is asking whether there are any questions. It would seem to me more appropriate that he finish his presentation.

The Vice-Chair: I think you should continue through your presentation and we will take the questions at the end.

Mr McNally: All right. I am sure you have already heard from other home providers and landlords about how they cannot make ends meet under the new Rent Control Act. The reality and understanding of income and expenses speak for themselves. I am going to talk about the concept as simply as I can. The rest of my plea will be for empathy and understanding.

The single most important thing a landlord can do for a tenant is to provide shelter. Although this is a simplistic approach to an important and complex situation, we must not lose sight of that purpose. The new Rent Control Act, as it stands, is grossly unfair, short-sighted and one-sided. I will provide a few illustrations.

The act applies the same financial restrictions on newer buildings as it does for older buildings. This is important. The guideline amount is much too low, especially for the older, larger buildings. If the new Rent Control Act were enforced for 1991, then the guideline amount would have been 4.6%. Since 2% of this figure has been arbitrarily deducted for capital costs, that then leaves an allowable increase of 2.6% in 1991 to cover increases in operating costs. Let's not fool ourselves into thinking that either a landlord or the provincial government would not be ecstatic to be able to meet an operating budget increase of only 2.6%. The following operating cost increases -- that is, 1991 over 1990 -- are a reality for my building and most buildings like it in Ontario.

Gas went up 10.7%; hydro up 14.4%; water up 9%; municipal taxes up 13%; supplies up 24%; repairs and maintenance up 67%; wages up 5.4%; mortgages up 39.4%. That is the same principal amount, just with a new interest rate. Utilities and taxes are uncontrollable and will, in all likelihood, continue to climb far faster than a guideline amount. Supplies and repairs and maintenance are somewhat controllable and are frequently influenced by the landlord's ability to pay and by market pressures. London's vacancy rate is officially 4.1%. Many of us know it is much higher than that.

It is interesting to note that rent control restricts the amount of money left over from the first four items to pay for upkeep, while market pressures dictate that the landlord be prudent, through good maintenance, in order to keep the tenants and fill the vacancies. The 2% of the guideline amount set aside for capital expenditures is very onerous on older buildings. I might add, if you have homes of your own, how could you operate your building under these circumstances, your own home?

0910

After paying the bills previously mentioned, then there is 2%, allowed only once a year without an application above the guideline amount, going to cover the cost of the usual capital expenditures. Note the following capital expenditures and their related costs on a percentage of income basis: a roof replacement would represent 11.2%; parking garage restoration 126.5%; boiler replacement 9.5%; balcony and brick repairs 21.1%; appliance replacement 18.2%; riser replacement -- essential plumbing infrastructure -- 10.3%; and window replacement 11.5%. Some of these items can be done on a partial basis to spread the cost over several years; others have to be done all at once. However, this is just a sample of the reality facing owners of older buildings. The new fire, building and health codes are going to place even greater strains on capital dollars. Trying to get by on 2% per year is both impractical and mathematically impossible. Things just pile up and get worse.

The only outlet for building owners operating under rent controls is to apply for an increase greater than the guideline amount. This can be expensive for the landlord, and therefore the tenant, because of legal costs, etc, and can severely harm landlord-tenant relations. This avenue of resolve typically perpetuates itself for years and becomes more expensive and more annoying. The philosophy of applications for rent increases aside, the Rent Control Act prohibits reasonable recovery of costs because of its 3% cap and one-year carry-forward conditions on capital expenditures. Building owners will be unable to cover even non-capital operating cost increases with the full guideline amount, 4.6%, used in the earlier example. As a result, any and all anticipated capital spending will have to be done so as not to generate an allowance of more than 10% over two years for large buildings and will generate only 60 cents of income for every dollar required to service a mortgage. Who would borrow money under those circumstances? Who would lend money under those circumstances?

The next issue I would like to address is inadequate maintenance and maintenance enforcement. There appears to be a tremendous potential for tenant abuse with the new maintenance rules. Most landlords in our industry try very hard to keep our customers -- our tenants -- happy. However, some tenants just love to hate their landlord. Ill feelings have developed long before the current relationship. This is a relationship I am sure many politicians can identify with as they try to please their constituents. Under the new Rent Control Act a tenant will be able to file nuisance complaints with local authorities about things like cracked refrigerator crisper drawers which the tenant could damage intentionally and which ultimately have the ability to prevent legitimate rent increases necessary to carry the building. Unwarranted complaints like this may or may not result in a rent freeze. Valuable time and money that could be spent on managing the building for the benefit of all the tenants could well be lost.

The last issue of significant concern to me is real estate values. I left a good-paying job years ago and decided to change from part-time property owner/manager to full-time. With that job went a good income and a good benefits package, including an excellent pension plan. The idea was to hold on long enough so that sooner or later a small yearly profit could be realized and my equity position would increase gradually to ensure a self-directed retirement fund. I have yet to receive one penny of income from this investment which has consumed my time and energies over six years and has jeopardized my family home and savings. This legislation not only eliminates the possibility of earning a yearly income for many hardworking landlords but also strips our retirement savings plans.

Finally, I would like you to reflect on what kind of building our residents -- that means the ones in the pictures I have been sending around -- would be living in today if the new Rent Control Act were in place just before the renovations. We could not have made our major expenditures, such as balcony restoration, which could become a safety hazard and in fact was; roof replacement -- we had too many leaks, too many patches; boiler repairs -- we needed a dependable heat supply in winter; brick and concrete repairs -- again a safety hazard, and riser replacement, which entails leaky pipes within the walls and too little water pressure.

As a philosophical point here, a 4.6% or a 2.6% operating increase, depending on how you look at it, allowance with the double-digit cost increases and a 3% or 5% per year capital expenditure cap would not provide tenants a decent place to live.

Mr Tilson: It really is a wonderful display you have given to us this morning of showing the relationship with your clients and the maintenance you have performed and the work you have done on your buildings. There is no question that it is regrettable that it probably will not happen again for a number of years, and the relationship with your tenants may be destroyed for many years to come because of this bill.

I guess the question I have is the same question I asked the last time I was in London of people who came to this committee. My view was that many of the housing problems that we have in this province are emphasized mainly in the city of Toronto. The types of problems that occur around the province just are not the same. We were told at that time that this was the case, that the problems in London are not the same as the problems in Toronto. Can you comment on that, as to whether that position has changed?

Mr McNally: Certainly not. We have a very high vacancy rate. By and large we have a very close relationship between landlord and tenant. We do not have a high degree of tenant problems or landlord problems. As we all know, there are bad landlords and there are bad tenants. This legislation is designed to reduce the effect of the bad landlords, I am sure, but I agree, it is a Toronto-area problem. We have very few problems we have to solve in London.

Ms Harrington: First of all I want to say to you that I met with our new minister about a week ago and she said her priority was to ensure the health and safety of our between 20- and-30-year-old buildings, so you are one of our priorities. You fit into that. So we will be very carefully looking at the situation. We know, from months ago, all the different systems that have to be replaced at the this age of building.

At the bottom of page 3 you make a statement: "It's expensive for the landlord and the tenant because of legal costs, etc. This avenue to resolve typically perpetuates itself for years and becomes more expensive and annoying." That is the pass-through costs if that is what you are talking about here. I am asking you, what would you suggest then? Would you suggest a building reserve fund, the buildup of capital over many years held with that building in order to do these large replacement of things after 20 years?

Mr McNally: I foresee a reserve fund, yes, whether legislated or just common sense but definitely a reserve fund taken out of cash flow, but that is impractical. Where are you going to get a reserve fund? So failing that, borrow the money and hope to have the increased debt load serviced by increased rents. That is the way I did it.

The Vice-Chair: I apologize, Mr McNally, but we are on a very tight time frame. So thank you very much for your presentation.

0920

TWIN ELM ESTATES

The Vice-Chair: The next presentation will be from Twin Elm Estates, Jim Brothers. As you know, we are on a very tight time frame, so you have 15 minutes for your presentation.

Mr Brothers: Right. I am Jim Brothers. I am with Twin Elm Estates. It is difficult to put the comments of our complex in a nice, capsulated form in 15 minutes. The whole problem is so complex with our type of development, which has never really been recognized and has only been put in as somewhat of an afterthought. I will ask this question to the standing committee: What information do you have and input do you want to give to the government on this bill as it relates to land-lease communities?

This piece of legislation is totally unworkable and unsatisfactory to both landlords and tenants in this province. This piece of legislation had absolutely no input or representation from either landlords or tenants.

You are questioning the statement. Well, I am talking about landlords and tenants of vacant land. These are not tenants in the ordinary sense but are home owners. Because of this legislation and the previous legislation, they are being denied certain rights and privileges other home owners in this province have. For example, you have denied the people the right to pay their own taxes. At present these home owners have to pay to the landlords and the landlords then pay to the municipality. Again, it is very unsuitable for ourselves and unsatisfactory to the tenants. It is treating them like second-class citizens.

In the summer of 1989 I was approached by Ivy France, chair of the interministerial liaison committee for mobile home parks and land-lease communities, to speak to her committee. I arranged with three other parks and had a meeting that lasted the whole day back in the summer of 1990. We explored many of the problems with her and the committee and we felt we were working towards a workable solution and arrangement. A lot of the tenants' concerns she brought to the meeting were our concerns as well, and we agreed with her concerns.

This legislation proposes to stop landlords from profiting from flips and increases in financing costs. Let me submit to this committee that mobile home parks do not get flipped. Most parks are in the second and third generation of ownership and any financing that is placed on the properties is extremely difficult to obtain.

Second, the lenders rate these properties at a higher interest rate than a conventional single-family home. Regarding the five-year interest rate from CMHC which the previous legislation talked about, because they are lending on vacant land, CMHC is unwilling to advance or unwilling to insure mortgages of mobile home parks and 25-year financing is not available. So when people who know nothing about land-lease communities start imposing rules and regulations without first understanding the problems that we have to live with and arbitrarily imposing solutions that do not fit, this is very wrong.

For example, in 1987 we realized our income was not sufficient to support the maintenance expenses. We had a 1987 income of $230,000, which was approximately $115 a month per lot. We had expenses of $363,000 or $183 a month, which gave us an operating loss of $140,000, or we are losing approximately $70 per month per rental unit. We were paying people to live here in their homes.

We are not providing any form of shelter, any form of accommodation. We are providing vacant land for people to place their homes on. The legislation was supposed to protect living accommodations and not vacant land.

Rent review rendered a decision of 8.4%, an increase we appealed to the hearings board. They gave us an increase of 12.32%. That percentage on $115 is only $14 a month, which gave us an average lot rental of $129, still not even to a break-even position.

So the costs we experienced on vacant land in land-lease communities are not recognized by rent review. Our 38 dusk-to-dawn night lights were disallowed by rent review, our office staff wages were disallowed, our telephone was disallowed, three sewage pumping electrical charges were disallowed, the workers' compensation levies were disallowed, and $50,000 of our mortgage payments was disallowed because it could not fit within the nice square box of 25-year amortization at current interest rates.

Is this a fair and equitable system? I question that. This was all under the so-called previous and more generous rent regulation act. Bill 121 does not speak to the issue and the problems we experience. How are they going to impose a two-tiered annual percentage increase to landlords of land-lease communities? To quote Mr Cooke in a statement to the Legislature on June 6, on page 6 of his presentation, "We will calculate two guidelines each year -- one for large buildings and another for small buildings."

Well, where is the guideline for land-lease communities? The guideline for small buildings having six units or less will be higher. Do we get to have it higher because our costs are higher? We have the responsibility of a municipality to supply all the services and no vehicle to increase them.

We have over a mile and a half of paved asphalt roads to fix, repair and maintain and replace with no chance to recover any of these costs. We have six full-time employees and no allowance for maintenance cost wages in Bill 121. We have no way to recoup the employer health tax that was imposed on us. Our hydro costs increased 17% over last year to this and hydro is talking about another 44% increase. Is this a fair and equitable system?

This piece of legislation punishes landlords who have been fair to the tenants in the past. We have artificially suppressed low rents, with no vehicle whatsoever other than a small increase on a low base rent. One hundred per cent of nothing is still nothing and that is what exactly is happening in land-lease communities.

On the other hand, in an apartment building that has rents of $600, $800 or $1,000 a month, a guideline increase of 5% would give landlords another $40 a month. In our case, at $70 a month, the base of some of our rents in 1987, it would give us a whopping increase of $3.50. It probably costs us more to ask for the increase than what we receive.

I recently contacted my local MPP, Irene Mathyssen, to no avail. I contacted her office eight times, left messages of my concerns about Bill 121 and difficulties that we are experiencing. Finally, we had a visit from her assistant, Pat Nunn. Pat Nunn sat in front of my wife and one of our other employees to tell us our park was far too well maintained over the government standards, that we would have to reduce our standards down to the minimum level in order to survive, because if we did not do that the annual increase is going to be so low that it would force us economically to do that. She told us that our tenants would have to realize they would have to wait a time to get a water line repaired, a sewer line unplugged or a pothole filled and snow removed from the roadway. They cannot demand instant service any more.

"You will have to get rid of all your snow removal equipment and contract it out to a local person just to plow a path when needed." She advised me that the farmers had to leave the farms to supplement their income to keep their farms, and landlords were going to have to do the same. In most cases landlords of apartment buildings do not live on site, but in almost all cases landlords of mobile home parks or land-lease communities live on site because they cannot afford to pay a reasonable wage to somebody to help them out, and if they did, that would be disallowed.

Further in Mr Cooke's statement, in the middle of page 7, the third paragraph: "Ontario tenants will have the best protection in Canada." Does that mean the landlords of this province will have no protection? Does this further mean that landlords' rights have been completely taken away as guaranteed?

One landlord challenged this legislation, the former Residential Rent Regulation Act, in the court decision of Cartwright v Jutasi. The definition of rental unit was never intended to include vacant land, so what did this government do? They kept issuing decisions on mobile home parks, changed the definition in Bill 4 to capture sites for mobile homes and made that section, and that section only, retroactive to January 1, 1987.

In the fourth paragraph of the next page of Mr Cooke's presentation: "Rents will be allowed to rise above the guideline for the following reasons: significant increases in municipal taxes" -- because landlords of mobile home parks pay so little municipal taxes where the tenants pick up the majority, we were never to qualify for an increase -- "and the costs of heating," -- we have no heating for vacant land -- "hydro and water." We have no hydro for vacant land since the residents heat their own homes and we only supply the vacant land. Water is supplied in most cases by the park operators and is an allowable increase for expenses in our water system only if you have municipal rate increases.

0930

The fifth and final reason for an increase is capital expenditure. "Under the new system, an increase for major capital repairs will be allowed only if they are for the following: To maintain the structural soundness of the building" -- since mobile home parks do not have any building, we cannot qualify -- "to meet health, safety and environmental standards" -- this is a question mark whether we can even apply, and what health and safety standards are required for vacant land? -- "to maintain plumbing, heating, mechanical, electrical, ventilation and air-conditioning systems" -- again, we have no plumbing, no heating, no mechanical, no electrical, no ventilation, no air conditioning systems on vacant land. The fourth reason is "to provide access for people with disabilities, or to increase energy conservation." We rent only vacant land and probably would not be able to quality for access because it is all vacant, level land. As for energy conservation, they already disallowed our night lighting, so we could not be more efficient.

Further, Mr Cooke's paragraph on page 9: "This means tenants will no longer be required to finance luxury renovations such as new marble lobbies like they had under the old rent review system." Well, there are no marble lobbies in mobile home parks. There are no luxury renovations. There is only the basic capital required such as road replacement, water line replacement, sewer replacement, lighting; but then again, these items will not qualify.

Under the previous legislation, landlords were supposed to be allowed to break even plus 2%. This was another lie. We did not even come close to breaking even under the previous legislation. We are not even allowed to recover any of our losses because we did not meet the regulations for a typical building.

Another issue that the legislation does not speak to and is totally unworkable is the fact that the annual increase that deals with typical operating expenses of a building does not deal with the unique nature of mobile home or land-lease communities.

Further, it has no component in dealing with the age of the complex. As we heard earlier in the previous presentation, a building that is two years old will be a lot easier to maintain than a building that is 25 or 50 years old. But again, do we get an allowance for vacant land? I doubt it.

Because of the majority of landlords, land-lease communities have been very fair to the residents over the years. This legislation traps them in an artificially low rent for ever. The reduced annual guideline is questionable. How will this be applied to mobile home parks? There is no recovery for higher maintenance, higher wages, higher electrical. What about the insurance rate increases? Can we get reimbursed the extra cost, no longer grounds for an increase at all?

You know, this certainly sounds like a fair and simple piece of legislation. We were promised to be treated fairly in the outgoing Residential Rent Regulation Act and the coming in of this new bill. Now it appears that we can only get a maximum of 3% if we can qualify and jump through all the hoops. Well, chalk it up to another broken promise.

With landlords who are having difficulties now, this new legislation will put the increased burden on them. Failure to have money is a landlord's problem, and if he does not maintain, he gets a maintenance work order against him. If he does not comply with the work order, he cannot get the statutory increase, and then finally the municipality will have to take steps to take the building back. The municipality cannot sell it, so they keep it and run it. You know, I do not think buildings administered by a municipality are under rent control. Maybe this is a secret plan or a policy to take away more.

It is a vicious circle of lose, lose, lose -- lose for the government without any taxes or income tax to support the system from landlords, lose for the tenant of depressed and lowered maintenance standards and lose for the landlord in every way.

With the regulations not yet produced for the proposed annual control index, or the capital expenditure rules formalized, we have to comment on unknown regulations and how they apply to our business. So you have an unworkable piece of legislation based on some rules that still have not come out and that landlords or tenants have not yet had an opportunity to review.

The Vice-Chair: You have less than one minute.

Mr Brothers: Okay, I will speed it up here. This new bill takes away the landlord's right to justify an increase for chronically depressed rents. Because we were fair in the past, we have no way of ever getting our rents up. This is wrong and unfair. This bill will force landlords to be unpaid custodians in an aging rental housing stock and certainly will not make Ontario a very attractive place to work, live, or for anyone to invest.

I guess this is already evidenced by the downrating of the Ontario government's borrowing power, the highest unemployment rate in years and the most people on welfare. It sounds a good time to increase and further impose unfair and unjust rules on landlords, lenders and tradespeople of this province.

We should take care of the people who cannot afford to pay the rent by a subsidy program. Let the landlords' rents go to a market rent and help the people who need a subsidy, but not people who are there in the buildings who have oodles of income.

The Vice-Chair: We appreciate your presentation. Unfortunately, there is no time for questions. I am sure some of the members may have some opportunity to speak with you informally. Thank you.

Mr Abel: This issue will certainly be discussed in the House.

Interjections.

Mr Tilson: Mr Chair, what is going on here? Are we going to have a debate?

The Vice-Chair: Certainly we are not going to have a debate.

Mr Tilson: I would probably have a few words too about the comments made by --

The Vice-Chair: I would like to tell the people who are here that this committee is an extention of the Legislature and it is not possible for any intervention from the people in the committee room other than the members of the committee.

Mr Brothers: Since I have to return to my property to look after it, I will not have any time later to deal with this. I would certainly take a few minutes and answer any questions.

The Vice-Chair: Mr Brothers, I understand that, but we have to move on to the next presentation.

Mr Brothers: Fine, it sounds like a good listening system.

TENANTS PROTECTIVE ASSOCIATION

The Vice-Chair: The next presentation will be made from the Tenants Protective Association of London, Mr Bill Armstrong, president.

Mr Armstrong: Good morning. I will keep my comments brief. I have read over this proposed legislation and I highly endorse it. I find little fault in it. I highly support it. I realize that the regulations are not available yet for us to --

Interjection: With this noise in the background, it is quite difficult to hear.

The Vice-Chair: If people wish to have conversations, would they take them to the hall, please? I am sorry, Mr Armstrong.

Mr Armstrong: Again, I have read over this legislation and I find little fault in it and I highly support it. There are a few areas of concern that I have, minor areas of concern such as contingency fees for agents who act on behalf of tenants and also the interest that is given to tenants where they are found to have been overcharged on rents. I would like to address those two areas to begin with.

The last government set contingency fees for agents who act on behalf of the tenants at 10%. Again, that was without any consultation with agents. I think that perhaps before the regulations are set down, there should be some consultation with agents so that we can arrive at a reasonable percentage for those agents who do charge contingency fees.

The other area I am concerned with is the interest given to tenants where they are found to have been overcharged on rents. Again, I think perhaps it should be more clearly illustrated as to the amount of interest that is given. Apparently there has been some issue in the courts as to whether interest should be given from the day the tenant is found to have started to be overcharged or from the day the claim is submitted. So I would like to see something in this legislation that illustrates exactly when it is to occur and when it is to start.

I do not have any other comments. I am more interested if there are any questions that I could answer.

The Vice-Chair: I am certain the members will have some questions. Perhaps you could describe the organization you represent for the committee before we go to the government for questions.

Mr Armstrong: I am the agent for tenants and have been acting on behalf of tenants since 1984, both in front of the Residential Tenancy Commission and the prevailing legislation. I have represented approximately 2,000 or 3,000 rent review claims. I have also been involved with and I am also representing tenants to do with old-building reviews. Myself or staff have made presentations to a number of government committees in the past.

0940

Mr Winninger: Bill, I am aware of your work over the past six years or so and your success in recovering hundreds of thousands of dollars worth of unlawful rent increases from landlords through the tribunal system.

My question to you is a process or procedural one. You know that under the old system there was first of all a decision granted by rent review services which could be appealed to the board. Now there is a one-tier system under the proposed legislation whereby, unless either the landlord or tenant requests a hearing, the decision will be taken without a hearing under rent review services. I just wonder whether that system is one that you find appealing, and if not, why?

Mr Armstrong: I find it more appealing than the present system. The only thing I might caution on is that obviously, I think, when claims are brought for overcharging on rent, many landlords will opt for the hearing process. If the government is not prepared for that sort of situation, where a large percentage are going to opt for the hearing process, we could end up in the situation where thousands of claims are going to be backlogged for literally years before they are heard. So I think a mechanism needs to be set in place or we should be prepared to deal with that eventuality right off the bat, that there could be quite a large number of hearings.

Mr Winninger: Some critics of the legislation are saying there should be a hearing unless one or both parties request that there not be a hearing. That would certainly cause an even greater backlog, would it not?

Mr Armstrong: Again, I see a situation where most tenants would prefer the administrative process and not to have a hearing, but I also see a potential problem where many landlords, once a claim is brought against them, will ask for a hearing. I am sure that when setting up this system they will probably be taking into consideration a ratio of so many being settled without hearings taking place to a percentage with hearings. I think it would be wise to keep in mind that a large number of them will probably go to hearing. That could create a backlog and problems.

Mr Winninger: The only other thing I wanted to ask is this: Under the Residential Rent Regulation Act, any party could request that there be a hearing by three commissioners rather than just one, and under the proposed legislation the hearing would be with one commissioner. Is that something you agree with?

Mr Armstrong: I see no problem with having one person versus three. Again, in the proposed legislation -- on a question of law, of course -- if there is a major problem with the decision of the one member administrator, then obviously the option is still open to appeal to the courts.

Ms Harrington: I wanted just to reinforce what Mr Winninger says, that the hearing process is something we are concerned about. In the legislation we have tried to make it so that decisions are not delayed for years, as has happened in the past, with many problems resulting from that. And yet the simpler you try to make it, the more fair you have to be concerned about making it as well. So we are looking at that.

Is the group you represent a tenants' organization?

Mr Armstrong: No, I am an agent for tenants, which is allowed for under the current legislation and the proposed legislation. Some might refer to us as paralegal, but again, I only work in the residential tenancy area, no other area. I am specialized.

Ms Harrington: You are not president of a tenants' organization?

Mr Armstrong: Association, no, not as such.

Ms Harrington: We have heard a comment that the problem of excessive rents and economic evictions is only a Toronto problem. Would you care to comment on that? How would you see it from your perspective in London?

Mr Armstrong: I can only look at the last act and how it functioned. Again, the way things were going, had things not changed, people were being economically evicted. It was a piece of legislation that was not working, and again, there were numerous examples of people getting 30% to 60% rent increases and they were in fact being economically evicted. They were moving because they could not afford the proposed rent increases. Obviously, with the new legislation, I do not think that is going to be a problem.

Ms Harrington: The problem, of course, is that tenants are telling us that 8% is over what they get per year. But you feel this is okay?

Mr Tilson: I guess the real point, sir, is that these people are saying they cannot afford any increases, and yet the government continues to allow increases to this particular group of people. It is a no-win situation for them. It is a question I have been asking different people who have been coming before the hearings. Is that a social problem as opposed to a housing problem, the people who cannot afford any increases?

Mr Armstrong: I think this proposed legislation allows for a reasonable increase, and the problem we have faced in the past is that --

Mr Tilson: But the people you are talking about cannot afford any increases. So there is no such thing as a reasonable increase.

Mr Armstrong: I do not remember speaking about a specific group of people. Again, I think I was talking an overview. I am sure there are people out there who cannot afford any increase at all. We all know that.

Mr Tilson: Of course.

Mr Armstrong: I do not think there is a piece of legislation that is going to address each and every group and solve every problem, but I think this piece of legislation is a far cry better than what we just dealt with and I think it is a step in the right direction.

Mr Tilson: Let me talk about the issue of bureaucracy, sir. You seem to be pleased with the system that is being put forward by Bill 121, generally speaking. But I would like you to comment about the quantum of bureaucrats that will be increased as a result of this legislation, with rent review, the whole computer system, the inspectors, the increase in property taxes as a result of property bylaw enforcement officers who are going to be required around this province. The bureaucracy provincially and the bureaucracy municipally as a result of this legislation will be simply devastating to the taxpayer. I would like you to comment on that.

Mr Armstrong: I understood that in fact there would be less bureaucrats once this legislation is in place and up and running.

Mr Tilson: Just you wait and see.

Mr Armstrong: I am hopeful that the government will keep its promise of less bureaucrats.

Mr Tilson: The issue of contingency fees that you refer to; that is the first time that has been raised. I would like you to elaborate more on your thoughts on that.

Mr Armstrong: Again, the last government never raised it either. It just basically --

Mr Tilson: I was not part of the last government.

Mr Armstrong: I realize that.

Mr Tilson: I am simply asking you to elaborate on your point, because it is a worthy point.

Mr Armstrong: Simply put, I think the last government set in --

Mr Mahoney: We are not discussing the last government. Let's talk about this legislation.

Mr Armstrong: Okay, the last legislation set contingency by regulation at 10%.

Mr Mahoney: Talk about this legislation.

Mr Abel: It is your mess.

Mr Armstrong: Again, I am not here today to comment on the precise percentage it should be set at, but I think --

Mr Tilson: Mr Chair, I am having trouble overhearing the battle between the Liberals and the NDP.

The Vice-Chair: So am I.

Mr Mahoney: It is not a battle.

Mr Tilson: This is an important point, which I would like to hear.

The Vice-Chair: I agree with you, Mr Tilson, and I would urge the members to control their tongues.

Mr Armstrong: I think the thing is that when the regulations are being formulated, perhaps there could be more consultation on that particular area with people who work in that area, rather than just a figure being set that people feel is appropriate.

Mr Tilson: What sort of amendment would you recommend to this legislation dealing with that subject, if any? Have you thought about that at all?

Mr Armstrong: No amendment. I am happy with it the way it is, except that when the time comes for development of the regulations, perhaps there could be more consultation between the Legislature, the people who put together the regulations and make the regulation decisions and the people who work in that area. In other words, you have a process taking place here specifically to address the issues of the landlords and the tenants, but again, there is a very small group of people out there who are affected by that particular area and I think there should be some input before that percentage is set.

0950

Mr Mahoney: I just wonder if you have any concern that the government did not live up to its promise to the people in its Agenda for People that was put forward. Do you accept this as a reasonable compromise, or do you think they have kind of walked away from what they said? You know what I am talking about, of course. I assume you are very familiar with NDP philosophy and policies and promises. I am talking about their "one increase based on inflation." They have simply not lived up to that. Does that concern you at all?

Mr Armstrong: Obviously, policies change, and again, as far as I am concerned, the policy that is being proposed here I can live with.

Mr Mahoney: But does it not concern you? That is what I am trying to get at.

Mr Armstrong: That was another alternative, setting a precise percentage. Again, that was an alternative. No, it does not concern me, because, quite simply --

Mr Mahoney: Thank you.

Mr Armstrong: If I might comment further, the last government, as far as I am concerned, did not live up to its promises either.

Mr Mahoney: Mr Chair, I do not want to be overly defensive, but this gentleman continually refers to the last government, and that is fine. I was not terribly enamoured with a lot of the aspects of that legislation. I am here talking about this legislation and this government. I think the election is over, sir, and your party won.

Mr Armstrong: Obviously.

Mr Mahoney: Act appropriately. Thanks, Mr Chair.

The Vice-Chair: Thank you, Mr Mahoney, and thank you, Mr Armstrong. The 15 minutes has expired.

1095 JALNA TENANTS ASSOCIATION INC

The Vice-Chair: The next presenter is 1095 Jalna Tenants Association. Good morning, sir. You have 15 minutes to make your presentation. If you would allot some of that time to the committee, that would be appreciated, but that is totally up to you. If you would introduce yourself for the purposes of Hansard, it would be appreciated.

Mr Rupple: I certainly hope so. I am Bert Rupple, president of 1095 Jalna Tenants Association Inc. I would like to thank the committee for being able to be here this morning.

We seem to have found another loophole that landlords are using to harass tenants, and one that was touched on earlier at a previous committee appearance, that has not been answered in Bill 121.

Key money should include the cost of money orders, certified cheques and other banking transactions, as well as repairs charged to the tenants as a result of normal wear and tear or damage to the landlord's property by those other than a tenant. An example of this is where a landlord or property management demands the payment of rent by cheque or money order and will not accept Canada's only legal tender, the Canadian dollar -- in other words, cash transactions.

This is currently the policy of Highmark Properties of Toronto, which has recently assumed property formerly managed by Good Property Management in London. This company is currently demanding tenants pay rent by cheque or money order and would not accept cash until this association was willing to take them to court. Now the policy has changed slightly in the fact that the property manager will accept cash, but will not give a receipt for the same, and if one is needed at year's end or for whatever purpose, then it will cost the tenant $20.

Would you, Mr Chairman, give me cash without receiving a receipt? I doubt it. This is why this association has now accepted cash rent payments, giving the tenant a receipt for the same and turning the money over to our lawyer to keep in trust until the property management either comes to its senses or takes us to court.

When a particular landlord was threatened with legal action on this matter, he agreed to accept cash, but ordered his superintendents not to issue receipts for the rent. A receipt is required as proof of payment for rent rebates by the province at income tax time. Women on mother's allowance require a monthly receipt as proof of rent payment in order to receive their monthly allowances. Cancelled cheques are not acceptable as proof of payment by either Revenue Canada or the Ministry of Community and Social Services. When a tenant requires the receipts, he is forced to go to the landlord and pay $20 for these receipts. When the rent is paid by the tenant, he should receive this free of charge. They contend that $20 is not key money but an administrative fee and that they are entitled to such by the legislation. This practice is nothing more than blatant harassment.

On the question of damages by others to a tenant's rental unit, property managers are attempting and in many cases are getting away with making tenants pay for glass and screen damage from neighbourhood children's toys or throwing stones or whatever. The landlord contends that the tenant should carry insurance on such, but a check with the insurance companies indicates that tenant insurance does not cover such damage to the property of a landlord unless it is the neglect of the tenant, and rightly so.

It is these harassments, initiated by either senior management or overzealous property managers to gain brownie points with their superiors, for whatever reason, that mean tenants' associations must be on guard against such landlords and property managers in today's rental markets.

The best alternative to solve many of these problems would be to outlaw property management firms from managing properties unless they are sole owners of a complex. This would also lower rents by as much as 15% if the middlemen were to be taken from the picture. If I had a $3-million property in my possession, why would I allow a management firm to deplete a property by cutting corners, supposedly to make money, when I could do this myself? On the other hand, I would have 15% more to improve my investment and make a healthy profit. It is this 10% to 15% deficiency that is making landlords poor, not low rents.

In addition, property management treats tenants as chattels to show value of property, rather than tenants as customers who make them money by repeat sales of purchases of service, namely, rent. Members of Parliament from both houses here in London can attest to this first hand. They were asked to intervene to solve issues with a property management firm and received verbal abuse from the property management firm.

Since October of last year, landlords are currently denying tenants services provided in the past, with no recourse other than lengthy court battles about appliance repairs and other such things. We currently have a property manager in our complex who must sit up nights thinking of ways and means of getting the ire of tenants.

An example of this is a unit which is heavily moulded and smells very musty from a cracked, leaky basement in which the drywall, insulation and wood is badly deteriorated. More than one estimate has quoted a cost of $1,000 or more to repair. The property manager has come up with a solution that the repair can be made cosmetically for $600 and has ordered this route to be taken. The repairmen state that the condition will reappear in two to six months' time again or the next extremely heavy rainfall, and at a greater cost than the original $1000. In the meantime, the tenants have to put up with the initial tramping of repair people through their homes and look forward to further hassle when the repairmen have to return later.

With regard to maintenance standards as set out in Bill 121, there is ambiguity on what is the standard. Is it the standard of the building when it was built some 10 years or more ago, or is it the standard of building code today or the standard the building is itself in at the time the bill is enacted? Building inspectors contend it is the standard as set out when the building was built, and so no upgrading to current standards are necessary for improvements to bring the building up to today's building code. An example of this is roof, window and eavestroughing conditions, whether they exist or not to meet today's code. This then too brings the question of the problem of house wiring standards. Some properties using electric heat were built 10 years ago and wired with both aluminum and copper wire on the same circuit. This would not be acceptable today, but only needs to be corrected if a circuit is touched by an electrician. So you can understand the problem remains as to the maintenance and building code standards.

1000

In order for this new legislation to be as strong as the promises made by the current government prior to its election last fall, it must guard against further watering down of Bill 121. It is therefore expected that the elimination of the landlord pass-through for capital expenditures be disallowed and a capital reserve fund legislated on land owners, no matter the number of units, who are currently depleting the value of their properties by taking out capital while doing only light maintenance on buildings and only in emergency cases.

The money put aside for such capital projects would be no more than the current requirement of a non-profit organization of a rent-subsidized housing unit, a co-operative or tenant association-run venture, and can show that such a venture is profitable for a land owner who does not have to pay a 15% service fee to a management firm. There certainly is not a requirement for more than a once-a-year increase based on inflation. Of this, 2% or 3% of the rent should be set aside for capital expenditures.

I realize that I have covered a lot of ground here, but there are a lot more items to be covered yet. I have run out of time and must step aside in order that property managers can wail their woes about how hard done by they are. I reiterate that doing away with property management firms would allow land owners to do their own administering. They would make a lot of money and probably not show the losses they currently contend they have. Thank you.

The Vice-Chair: We have some time for questions from the official opposition.

Ms Poole: Thank you for your presentation today. I was looking at your comments at the beginning of your presentation when you talked about the difficulty in getting the landlord or his representative to accept anything but a cheque or money order. Would this not entail a problem from a business point of view? If a person is insistent on tendering cash, then that superintendent would be liable for the loss of that money. It is one thing if you misplace a cheque; it is very difficult for somebody else to cash it. But if a superintendent loses money, is that not a personal liability which it might be somewhat unreasonable to expect him or her to take on?

Mr Rupple: No. I have had superintendents tell me they have no problems with that. They have to take extra precautions and therefore do not lose the money. There are a lot of cheques that are lost and a lot of forms for eviction notices given out because of those cheques lost by landlords or superintendents.

Mr Tilson: The Progressive Conservatives, of course, have raised the concern that we do not know what a lot of the words mean in the act. We have been told that regulations will not be presented until after the bill has passed, which is very difficult, so we share the same concerns you have as to what much of the terminology means in the legislation.

I guess my question to you is specifically on the issue of reserve funds, which is not in the bill, but which you are advocating. Landlords are telling us they just do not have the money and that money just does not grow on trees. They think it would be preposterous for the taxpayer to pick up the issue of reserve funds. Tenants say they cannot raise the money for reserve funds. Most of the buildings in this province are 20 years or older and would take an astounding amount of money to pay for, whether it be concrete work or roofs, and that it is just physically impossible. Could you comment on that?

Mr Rupple: The effect of having the last month's rent, say, for 100 units at $600 each, is $60,000. At an invested rate of 10% or more there is $6,000 or more a year, and they are paying out only half of that. They have a good basis of a standard right there if that last month's rent were to be held in trust, as it should be, not used as capital or as an expenditure.

Ms Harrington: I also wanted to mention the reserve fund idea. That needs a lot of work to see how it could actually work. Of course the problem is that, without the reserve fund having a chance to build up over the years, it is very difficult at this point with the older buildings. What increases have you received in your buildings? But also, on the second page here you said that members of Parliament from both Houses received verbal abuse from the property management firm. I would like you to explain that.

Mr Rupple: Yes, we had a problem. We took it to the federal member, who happens to be the critic for Housing in Ottawa and the other two, the Minister of Education and David Winninger, a member of this committee. Both men and the woman have received abuse from a property management firm when they took issue on something that had come up that they were trying to get rectified, mainly this one on cash. I would have to have Mr Winninger here to confirm it, but he did receive some considerable abuse.

The Vice-Chair; Thank you, sir, for appearing.

MARSHALL RESOURCES (ONTARIO) LTD

The Vice-Chair: The next presentation will be from John Schnurr, representing Marshall Resources. Good morning. You have 15 minutes, which you can allocate as you wish.

Mr Schnurr: Good morning. My name is John Schnurr. I am with Marshall Resources. Marshall Resources is an agency which represents landlords and tenants in rent review matters and landlord-tenant disputes as they relate to the Landlord and Tenant Act. I am and have been involved in the last 15 years in administration of rental housing developments and actively pursuing my career as agent in that particular industry.

In February of this year, the Minister of Housing came forth with the green paper offering options with respect to the rental housing situation in Ontario. Along with this document came a plea to the people of the province to make input and assist in the design of a new, simple rent control system for all. Hearings such as this today were held across the province to hear the words of the people.

On March 11, 1991, I met with the minister, Mr Cooke, here in London and offered a fair, democratic means of dealing with the rent controls, which was met with the comment, "The tenants of this province will not negotiate." My submission at that time was subsequently filed on some shelf somewhere to gather dust. I received no response from the minister in that regard. I have contained in my presentation today, and in your blue folders, a copy of that particular proposal to the minister. Lo and behold, I am presented with a new document known as Bill 121 and asked once again to make submissions in response to this dictatorial work designed to exercise the entrepreneurial spirit out of those in the industry.

To put it simply, if this is the NDP's idea of a fair partnership, as it brought forth when it was elected, my reaction to the bill is that I would hate to see their idea of dictatorship. In a free society you furnish your own ladder and the government merely stands by to steady it as you climb. With this bill in Ontario today, the Clampetts at Queen's Park have yanked the ladder after we in the industry have climbed halfway up, broken the ladder into pieces and are currently attempting to beat us to death with it.

1010

Let's discuss for a moment the bill itself; more particularly, the extraordinary operating cost provisions contained in the legislation. Found under section 14, a very limited number of areas are considered for this type of cost. What happened to excessive vacancy? What happened to bad debt? What happened to legal fees to effect evictions in an overworked, backlogged court system? What about damages done by the irresponsible? These are not addressed by extraordinary operating costs. Also, what about financial hardship created by the unexpected? These are issues that must be addressed. The provisions contained in section 14 address very specific costs which are not under controls themselves. The provisions contained in Bill 51 addressed these concerns in a fair and responsible manner, unlike the proposed method of forced subsidy, with no restriction placed on the other sectors affecting the rental community.

Moving on to the so-called capital expense provisions of the legislation, this particular piece of the legislation warrants but a few words like "draconian, unrealistic, without thought" and perhaps "designed by the incompetent." How in God's name can you expect a building to be maintained to proper standards without allowing for replacement? With the introduction of rent controls in 1975, we have seen a significant reduction in maintenance standards across the province. There has been no real incentive to repair or replace. The next generation of landlords has come into the marketplace to deal with worn-out buildings. With this particular document, Bill 121, you have effectively removed any assurances of an inventory beyond this decade.

The Residential Rent Regulation Act dealt with capital expenditures in the only realistic way. If you spend money on your property, you may increase the rent to offset that investment. By taking away those provisions, you are telling the investors of this province to put their money into investment other than rental housing, like one that would perhaps show a return.

Because of the time constraints this committee has set out, I shall fast-forward from capital cost straight into sections 112 through 114 of Bill 121. This particular section gives us a true definition of a fair system in the eyes of any good comrade: the right to enter any place and seize anything that may lead to the conviction of someone contravening this act. What happened to freedom? Perhaps I missed the extension of the Russian invasion. Who the hell do you people think you are? It is our property. The adage, "You will be given a fair trial and then hung," comes to mind. Giving a civil servant the power to enter and seize is not, in my opinion, within your mandate. What about the return of what you have seized? There are no provisions contained in sections 112 through 114 for the return of what has been seized. The issuance of search warrants with nothing more than an affidavit, without the right to speak to it, is an open abuse of your authority. Even the thought of presenting this bill with that type of provision is indicative of a serious abuse of power on the part of this government.

I will once again submit to you the proposal I submitted to Mr Cooke on March 11, 1991, and ask that you reconsider the direction of this legislation. Failure to do so will spell the end of investment by the private sector in a once great industry and a once great province.

Mr Tilson: Your anger and frustration, the types of remarks you are making towards the government, are a common element around this province. The people we are hearing from are almost unanimous.

If it is at all possible, I would like you to comment on a story that came out of the London Free Press this July about the demolition of a number of apartment buildings in the northern section of London. Is there any connection between this and the housing policies of this government with respect to what happened, I believe, at 301 St George Street?

Mr Schnurr: I am not familiar with that particular situation, but I can appreciate anyone wanting to demolish a building that is old and quite possibly worn out. The tenant community that can afford that particular type of accommodation seems to walk hand in hand with demolition on its part without the landlord's help at all. The buildings cannot be maintained if you do not have the dollars to do it, and there is no incentive to spend the money to fix them up.

Mr Tilson: According to the story from the London Free Press, that is exactly what happened. There was a need to repair the balconies and I think there were some problems with asbestos. With the bills that are being passed, they simply could not afford to renovate it, so they tore it down or are going to tear it down.

Mr Schnurr: I would be delighted -- and I offered to the minister in the last round of hearings -- to have someone from his office come into my office and review my files. I have pictures of apartments that have been totally demolished by tenants who, through the failure of the system in general, do not have enough money in their social assistance payments to pay the rent. Subsequently, they get frustrated, take it out on the property and on the landlord, and move on to something better.

Mr Tilson: Have you heard any rumblings in the landlord community at least that are similar to what happened in north London? I am thinking specifically of landlords who literally will not be able to make the capital improvements that are required to the building and will be precluded because of this legislation.

Mr Schnurr: Because of the area that Marshall Resources operates in, we have a client base of some 350 landlords, primarily small landlords. Out of those 350 landlords whom I deal with on a regular basis, it is my opinion that about 85% of them are unable to effect proper repairs to the property because of financial constraints. They cannot get a mortgage right now to do any work because the banks will not lend because of the legislation.

Mr Winninger: Mr Schnurr, we have crossed paths before. You have just referred to us as the Clampetts, the Beverley Hillbillies. If we are the Beverley Hillbillies, you must be Mr Drysdale, the banker, because I know you specialize in economic evictions for landlords. You are a landlords' agent, you go to court and you do evictions. Have you not seen over the past six years, since the Residential Rent Regulation Act came in, a lot of evictions due to tenants who just cannot pay these escalating rent increases?

Mr Schnurr: I have seen a number of evictions over the last six or seven years of people who do not have enough income, as a result of shortfalls in the social system, to pay the rent that is required to maintain a dwelling, yes.

Mr Winninger: You have seen rents go up, in some cases 20% a year, in some cases 30%, in some cases 50% a year, and you think it is fair that the landlord should have passed through speculative financial loss, economic loss, extraordinary operating loss as well as capital loss? How do you expect people on fixed incomes or whose income only goes up by the rate of inflation, say 5% a year, to pay these wildly escalating rents?

Mr Schnurr: In the first place, the problem is not with wildly escalating rents. The problem you are focusing on is with people who do not have adequate means to live in this society. The socialist who designs the social net had best address the source of the problem, not a result of the problem.

Mr Winninger: Is the schoolteacher who makes $50,000 a year and faces a 20% rent increase in one year not going to face the same problem as someone on $10,000 a year facing a 20% increase? People budget. What is a rent review order that increases the rent substantially going to do to that budget? It is going to force them to move, and that is what this government is trying to correct.

Mr Schnurr: If a schoolteacher making $50,000 a year cannot afford the average two-bedroom rent in the city of London, then perhaps he should go back to school and learn how to budget.

Mr Mahoney: You suggest that what this government is attempting to do is to get you or your clients to subsidize that person on a fixed income, rather than addressing the problem which it has identified and trying to come up with some solution. They are simply looking to the owners of the buildings to provide the subsidy, which in essence should be considered perhaps a social subsidy. Do you think they are simply trying to take over your clients' businesses?

1020

Mr Schnurr: In 1989, the Premier, prior to being elected, made his position very well known to the Federation of Metro Tenants' Association when he advised them that if elected, he would change private ownership to co-operative ownership, and he would do that with a very tough form of legislation, forcing the landlord community to submit to his demands. I guess he has got his wish.

Ms Poole: Thank you for your presentation. You did not really have time to go into the proposal that you attached, but one part that really intrigued me was the local bureaus which would not only have the ability to have a local rent registry and look after the maintenance aspect but would also include the licensing of landlords. Could you perhaps elaborate on particularly the licensing of landlords and how that would work?

Mr Schnurr: My submission to the minister on March 11 suggested utilization of section 124 of the Landlord and Tenant Act, which allowed for the establishment of landlord and tenant advisory bureaus in each municipality. Contained in my submission was a recommendation that these bureaus be established and be made up of tenants and landlords of the community, perhaps representatives from tenants associations in various complexes.

The bureau would be headed by a representative from the province, to direct and see that the provisions of Bill 51, with proper amendments, were adhered to. The local bureau would then deal with issues on a local level, such as licensing of landlords. Contained in the submission was a licensing fee that, I believe, worked around 1.5% to 2% of gross revenue. Those funds would then finance the administration of the proposed systems. The bureau itself, digesting input from both landlords and tenants, could then make a decision as to whether or not the economics of the community warranted rent controls.

Currently we have a system that is designed to service the city of Toronto. We do not have a problem in Sarnia; we do not have a problem in London.

The Vice-Chair: Thank you, Mr Schnurr. Unfortunately the time has expired.

FEDERATION OF LONDON TENANTS ASSOCIATIONS

The Vice-Chair: The next presentation is from the Federation of London Tenants Associations, Leo Bouillon. You have 15 minutes to make your presentation. If you wish to reserve some of that time for questions and answers with the members, that would be appreciated.

Mr Bouillon: My name is Leo Bouillon. I am with the Federation of London Tenants Associations. As you will notice, I am not a typist or an English major, but the lady who was supposed to do the typing for me got ill, so please bear with me.

On June 6, I, along with thousands, listened to Mr Cooke deliver to the Legislature his speech on the introduction of the Rent Control Act, 1991. From the onset of the hearings, Susan Eagle had suggested one way of ensuring landlords be made more responsible for repairs would be to license them. This idea seemed more than reasonable to me.

When I was invited, along with others, to meet with Dave Cooke here in London, the licensing idea was mentioned, and I was told that although the idea was good it could not be made possible under this process as it was an issue that was part of the Landlord and Tenant Act.

To my surprise and great delight, on June 6, 1991, the stance the government had taken on the maintenance issue was an incredible breakthrough. Tenants could now have some sense of satisfaction in knowing that landlords would have to comply with their work orders, and the days of tenants living in disgrace because of terrible living conditions now would have a chance of getting back some sense of dignity and justice. Those few landlords who for years would not make those necessary repairs will now be forced to comply. What have these landlords done with the 15%, 30% and 45% rent increase dollars?

Mr Cooke also mentioned the government decided to get tough about maintenance. This statement is good and positive. In order that this government hard line be viable, we ask that you follow through as promised, and that all levels of government and organized tenants groups work together, and that this same Bill 121 be applied immediately upon being made law. Only then will tenants feel this government does have a real concern about tenants.

This next issue I am about to discuss could have some serious implications should it not be made clear. My concern is about carry-forward, which states, "If the major repairs result in an increase that is greater than the guideline plus 3%, some of this can be carried forward into rent increases for the following year." Small buildings can carry forward for two years. However, no rent increase, even with an amount carried forward because of the cost of major repairs, can result in a rent increase which is greater than the guideline, plus 3%. This seems to be quite clear.

After making contact with the Metro Toronto federation, I was told that carry-forward, as it stands, would increase in years one and two; eg, let's assume the guideline is 5% and the landlord was able to have the 3% applied as well. The rent increase for this particular year would now be 8%. In the case of larger buildings, seven units or more, the increase for 1991 is 8%. For the next year, with carry-forward, the said 8% of 1991 would then translate to 16% in 1992. For smaller buildings, the carry-forward would be 16% in 1992, with another year of carry-forward, which would then make the increase for 1993 a total of 24%. This, ladies and gentlemen, is not acceptable.

In disbelief and amazement, I called the Ministry of Housing and spoke with Tom Parkin from Dave Cooke's office. I explained to Tom the discussion I had with Metro, and asked him to please clarify this problem. Tom proceeded to ask if I had received anything in writing, to which I replied, "No." After a few minutes, Tom got back to me and assured me that this was not possible.

I decided to investigate the matter further, and went back to the report that was presented by Mr Cooke on June 6, 1991. The first thing I had seen was a copy of the news release which reads, "This legislation will provide Ontario tenants with the best protection in Canada," and goes on further to say, "Tenants will never again have to fear the 15%, 20% and 50% rent increases of the past." In the speech itself, statements like, "At the heart of this legislation are measures intended to ensure that tenants are protected from high rent increases," "no more than 3% above the guideline in any one year," "the days of 15%, 20% and 50% increases are gone." These statements are evident throughout the speech.

Several days later, I received a package from Metro and noticed that what was mentioned in the telephone conversation about the carry-forward issue was in my hands, and reads as follows: "Tenants could receive, over three years, rent increases of 25% to 30% for buildings of under seven units, and 17% to 20% for buildings with seven units and over. Each year, tenants pay an inflationary increase plus 3% to cover landlords' extra costs." Tenants of buildings with under seven units have a different annual guideline and different rules for extra increases, which allows their rents to go up faster.

I then went to Irene Mathyssen's constituency office and brought this matter up with Irene's staff, and asked if it would be possible to address a letter directly to the Minister of Housing for clarification. This was done on July 31, 1991.

On August 10, I received a call from Bill Wade in Ottawa, introducing himself as a representative of United Tenants of Ontario and mentioning he would be in london for our hearings. He asked if there was anything I needed in preparation for my presentation to this committee and I replied no, but I had a problem and asked if he could maybe help me and began to explain and asked if it were possible for him to get an answer before the London hearings.

On August 13 I faxed the information to Dan McIntyre in Ottawa, who had already made his presentation to the rent control committee and would be able to help resolve the issue. The next day I did get a reply from Dan as promised. Needless to say, Dan backed up Metro's reply. I was not pleased with the reply and remained somewhat confused. I then went back to Irene's constituency office on Friday, August 16, pointing out the reply from Dan McIntyre. Pat Nunn then proceeded to call Toronto to find if they had received our letter and hoped by day's end we would have some kind of reply, but to no avail.

1030

On Saturday afternoon I called Irene at her home and asked if she could possibly get me a reply before the London hearings. I am still not sure what is right. I have time and time again gone over the statements made by Dave Cooke and I had to stop and take inventory of the evidence at hand. Three of the largest tenants' organizations in Ontario are saying that carry-forward is a very real possibility. This is a very serious matter. If these rent increases are possible because of a flaw or misunderstanding, this matter needs your undivided immediate attention. If there is a loophole in this legislation to be had, those few irresponsible landlords will cash in on this matter, and the very people we have worked so hard to protect are again going to be faced with rent increases that will cripple them and their already depleted cash flow.

If this simple issue goes undetected, it definitely would be devastating for all tenants, myself included, who have been assured by people like Dave Cooke that the days of 15%, 20% and 50% rent increases are gone for ever. In closing, I would like to thank you for your time and consideration.

Ms Poole: On a point of order, Mr Chair: Since Mr Bouillon has asked a question and has attempted to ascertain an answer from the ministry, I would suggest the ministry might have a representative come forward right now with an explanation. You are welcome to use our time to do it.

The Vice-Chair: If you want to use Liberal time, that is fine.

Mr Mahoney: Why could the minister not explain it?

The Vice-Chair: Do we have consent for the ministry to explain that particular issue?

Ms Harrington: Sure.

The Vice-Chair: Okay, if someone from the ministry would come forward, introduce yourself.

Mr Irwin: Terry Irwin from the Ministry of Housing. The way the act is worded allows for a 3% increase above the guideline in any one year, period. There is a provision for carry-forward for capital only up to the 3% limit in the following year for larger buildings and up to two years for the smaller buildings, those six and under. Let's just quickly run through an example.Let's say the guideline is 4% in this year. An application for an above-guideline increase, above that amount, of 3% could be allowed, with a carry-forward into the next year, again up to 3%. In the case where the guideline is 4%, it would allow for 7% the first year, 3% on top of the guideline the second year and, for smaller buildings, the same case would apply in the third year.

Mr Bouillon: Excuse me. The reason I spent so much time on this is that it was brought to my attention that other organizations are seeing it in a different way. As I mentioned, if there is some way words can be changed, that is the reason I spent quite a bit of time on this, to make sure that this would be brought to whoever's attention and be cleared up some time.

Mr Winninger: I just want to clarify a point with you and see if your understanding is the same as mine. If the base rent is $500 right now and the landlord gets more than the guideline -- let's say the landlord gets the full 3% and the guideline is 5% -- then the rent would increase in year one by 8% of $500, or $40. So in year two the base rent is now $540. If the landlord feels he wants to pass through the costs the second year, in a large building, he goes to rent review and rent review says, "Fine, you can pass through another 3%," or they may have done it in the first year. Then it is 8% increase on the $540 new base rent. That is not like 16% or 24% that you have put in, as the Ottawa tenants association was telling you. It is just not true at all.

Mr Bouillon: As I mentioned, that was my point. I needed to make sure this was well understood by all and not just a few members.

Mr Winninger: But it is in the legislation.

Mr Bouillon: Yes I know, and that is why I have quoted so much of Mr Cooke's speech. Like I said, the reason I spent so much time is because of the wording. Someone has obviously misinterpreted it, as I mentioned.

Ms Poole: Just to follow up on that point, certainly the impression you had that it would be 8% the first year, 16% the second, then it would keep compounding, is not the way the legislation is worded, so I think that was just a misunderstanding on that particular part. With reference to the maintenance provisions, you have talked about and welcomed the fact that there is more emphasis on maintenance. I think many of us really liked the standards board in existence under Bill 51, but we felt it did not have enough power to implement its decisions. It was a good idea but it did not go far enough. Would you like to see that standards board continued and strengthened, or are you happy with putting the maintenance in with rent review and, if there is a backlog, it may well get caught in that backlog?

Mr Bouillon: No, I would definitely like to see some changes made in that aspect. In order to ensure there is no backlog, if the government is on top of that, then everything should be fine.

Mr Tilson: The licensing issue you raised, sir, are you suggesting that system, which presumably would include enforcement -- in other words, if someone is not complying with certain things, he would lose his licence? I assume that is what you are saying. Is this system to replace a maintenance standard municipally or provincially, or is this over and above that?

Mr Bouillon: The licensing issue, when it did come up, was something I think a lot of us maybe have thought of. As far as that was concerned, when the announcement was made I was quite satisfied the maintenance issue was well covered. I still believe that under the new system there is still going to be need for co-operation between municipal and provincial governments to make sure those rules are applied. They are really going to have to tighten up.

The Vice-Chair: Thank you, Mr Bouillon.

1040

SIFTON PROPERTIES LTD

The Vice-Chair: The next presentation will be made by Sifton Properties, Mr Barry Parker.

Mr Parker: My name is Barry Parker. I am a vice-president of Sifton Properties Ltd and I am responsible for its portfolio of company-owned and -managed residential rental properties of 4,000 units throughout southwestern Ontario. Sifton is headquartered here in London and has been active in the shelter industry for the past 60 years. We develop land, build and sell single-family homes and condominiums as well as develop and manage shopping centres, commercial properties and office buildings. In our company we strive for quality in the production and management of our real estate holdings. We believe that in the long term our success will lie in our ability to identify and satisfy our customers' needs by supplying products, space or accommodations that offer value for what we charge.

In our rental housing division, however, it has become increasingly difficult to balance our desire to supply quality rental housing to our customers with our need to obtain a reasonable return on our investment. We are now subject to the full impact of Ontario's rent control legislation on every single unit we own and manage. If we let ourselves be motivated solely by the rent review legislation in place we would not provide our customers with anything other than basic service. Quite frankly, we completely disagree with rent controls in Ontario and our company has responded by not constructing a single rental unit for our own portfolio since the inception of rent controls in 1975. Prior to that time, however, we were one of the most active builders in the London area, having built 2,700 units in the 1969-76 period which we still own and manage.

In preparing for my talk to you today I reviewed the notes I had prepared for the presentation before the Bill 4 committee which I made in January. At that time we were faced with a disastrous piece of legislation, but we at least had the assurance from the Housing minister that Bill 4 would be temporary and that some of our concerns would be redressed in the permanent legislation we are discussing today.

In the time allotted to me I cannot discuss Bill 121 on a clause-by-clause basis, but in a general sense I can tell you that Bill 121 offers no relief to the problems we outlined during our Bill 4 presentation. Bill 121 is well into the realm of a worst-case scenario for us not only with respect to the specifics of the bill but also, possibly more important, because of the underlying contempt this government has exhibited for those of us in the business of supplying rental housing to the residents of this province. While we are concerned about the legislation itself, we are even more concerned about what will follow in terms of regulations and the bias of the bureaucracy which would be administering this act.

We are very aware that the Ministry of Housing commissioned studies which clearly demonstrated that the returns for apartment buildings, even when taking into account any capital gains which may take place upon the sale of a building, were well below all other forms of real estate, below the stock market, in fact below the returns people could obtain by simply borrowing money from the government.

In spite of an overwhelming amount of evidence to the contrary, however, this government is legislating us as though we routinely enjoyed huge increases and flipped our buildings for large capital gains. This has not been the industry's experience and it certainly has not been the experience of Sifton Properties.

In the last year, as a result of the elimination of the financial and economic loss provisions in Bill 4, we have seen a reduction in the value of our buildings of between 25% and 40%. Bill 121 does nothing to address this confiscation of our capital but instead will further reduce value by reducing the basic statutory increases by the changing of the formula which produces the annual guideline. Furthermore, the reduced guideline will also have to fund items which were previously capital expenditures, such as appliances and carpeting. With the bottom line reduced or eliminated, value will be further eroded.

Our buildings are generally 15 to 23 years of age and although we have properly maintained them over the years, because of their age we are now facing the necessity of major renovations and replacements to ensure they will remain functional and attractive for the next 20 years. Certainly, as long as Bill 121 is in effect, that will be impossible.

Our company had earmarked $13 million to be spent on our properties after the Residential Rent Regulation Act of 1986 was passed. While that act was in place, we spent $2.5 million on capital expenditures and filed conditional applications for another $3.7 million, with plans to continue until the renovations of all our units had been completed. All of these plans were postponed when Bill 4 was introduced, but will be cancelled if Bill 121 is passed. Please understand that this step will be taken with great reluctance, as we take pride in offering our product to our customers, but Bill 121 will give us no choice.

First of all, as stated earlier, the guideline increase has been reduced from the amount which is allowed under the current formula. In 1991, for example, in comparison to the present guideline formula, the amount available for paying operating expenses on minor capital will be reduced in our case by approximately $175,000 when Bill 121 is in place. Furthermore, the 3% cap on capital expenditures, after incurring a 2% penalty, will not allow us to recover our costs, nor will we be able to find a lender to provide funds for this work.

The only time I can envision filing a capital expenditure application is if we absolutely have to do some work, such as a roof replacement, and we may apply for an increase on the basis that half a loaf is better than none. However, if the roof in this example has to be replaced at the same time as we experience an extraordinary operating cost increase, we will just be out of luck because this bill assumes that we can predict when we have to do capital work and when extraordinary increases will take place so that the total increase remains no more than the 3% above guideline amount.

There are other sections of this bill about which we are very concerned. We have thousands of customers, and although we strive to satisfy every one of them, we cannot keep every single person happy at all times. Bill 121 will give every single tenant the opportunity to allege that maintenance standards have been reduced. As a result, depending on the nature of the allegation, all rent increases may be stayed until the issue is decided by the officers of the Ministry of Housing, whose decisions are not subject to any form of appeal. This type of uncertainty will make it impossible for us to make business decisions.

Even if Bill 121 provided a reasonable return for funding capital -- and, as I stated, the 3% formula certainly does not -- how will we be able to obtain financing when not only the increases for capital and guideline are in jeopardy but the base rents themselves are subject to rollbacks? I cannot understand how the government cannot see that this is extremely unfair, prejudicial and completely unworkable.

Of all the sections of Bill 121, probably the most offensive is the right that is going to be given to government officials to search any landlord's premises and seize records and inspect and photograph evidence as they see fit. Again, this section of the bill only serves to further convey the depth of hostility and misunderstanding which this government has created by its thoughtless, misguided and politically motivated approach to the problems of rental housing.

As stated earlier, I cannot deal with all the issues of Bill 121 in the time available. The Fair Rental Policy Organization of Ontario has already submitted a brief to this committee. We support the recommendations they have made. Given the specifics of our situation, however, with respect to the age of our stock of housing, we would like to emphasize the following recommendations.

Guideline increase: The reduction of the guideline, particularly in the context of the other section of Bill 121, is unfair and unworkable. The government promotes this bill by stating that it creates more funds for capital, when the exact opposite is the case. The formula itself will ensure that even less minor capital is performed as we are forced to divert more funds to simply meet increases in operating costs. At the very least, the existing guideline formula should be maintained, plus a 1% provision should be allowed for capital items which have been converted in this bill from capital to expenses.

Capital expenditures: Although we are prepared to continue with the capital expenditure program we had instituted under the Residential Rent Regulation Act, we simply cannot do so under the provisions of Bill 121. We will not have the funds, nor will we be able to borrow the funds. We recommend a system that permits binding pre-approval of the work proposed by the landlord combined with phase-ins to a maximum of three years, with a maximum increase of 5% per year above guideline and a one-time 1% penalty from the guideline increase. Capital expenditure increases should be in addition to other increases for items such as extraordinary cost increases.

Rent rollbacks: I cannot recall that we have ever received a municipal work order on any of our company-owned properties -- not one. Yet Bill 121 will give tenants the ability to eliminate rent increases not only for their own unit but for an entire complex. Bill 121 goes even further and allows ministry officials to roll back rents with no right of appeal on the finding of inadequate maintenance. I understood the maintenance standards board was dealing adequately with the small minority of landlords who required direct government intervention in order to pressure them to perform minimum levels of maintenance. Simply leave that board in place.

Right of appeal: Our experience with first-level Ministry of Housing officials has been, at best, mixed. There must be an appeal system to have a second look at errors of fact, errors in judgement and the inevitable biases which individual administrators may exhibit. It makes no sense to put millions of dollars of income into the control of one civil servant.

Search and seizure: Finally, the unprecedented rights of search and seizure given to the ministry officials is quite bewildering. Where is the evidence that these measures are necessary? Simply because we are in the business of supplying rental housing we are now subject to the sweeping powers usually reserved for the police when dealing with drug lords. We recommend that we be afforded the same basic rights and considerations as given to other businesses.

1050

Although we expect that very little will change in this legislation as a result of these hearings, we will in future years continue to do our utmost to properly maintain our buildings, in spite of the very negative message which is being conveyed to us. In the final analysis, however, we, along with all other people affected by Bill 121, will study it and we will be influenced to act in the manner in which the legislation encourages us to act. That is only natural. Unfortunately, this act does nothing to encourage anyone to properly maintain their buildings and nurture a relationship with their customers based on excellence of service.

I expect Bill 121 will result in a more adversarial, time-wasting and ultimately destructive climate in which to operate our rental housing portfolio and, in the final analysis, will do nothing to help the needy in their quest for decent housing.

Ms Poole: When you were outlining the difficulties you had with the bill, you said one of the problematic features was that the lending institutions were not going to forward money to you when they could not have any assurance that you were going to have the revenues to carry the loan. Have you had personal experience with this type of situation where a financial institution is refusing to renew a mortgage or causing you difficulty?

Mr Parker: Yes, we have a client for whom we manage property who cannot renew his first mortgage.

Ms Poole: What are his options left?

Mr Parker: He is scrambling around trying to get some unusual financing, but he is in a bind. He does not have many options. He may have to sell the building.

Ms Poole: So maybe bankruptcy is his only option.

Mr Parker: Possibly.

Mr Turnbull: Just following on from that line of questioning, what is your estimate as to the reduction in the value of buildings as a result of Bill 4 and now this bill?

Mr Parker: That is hard to say. We do not sell our buildings. We are keepers. We built them and we have kept just about everything we have ever built, so we personally do not have experience.

Mr Turnbull: But this gentleman you were mentioning whom you managed the building for, he is scrambling. Is that as a result of a reduction in the equity value?

Mr Parker: We have someone else who sold a building. They had bought it three years ago. This building was not in London. It was a building about 14 or 15 years old with 330 units. They had bought in on the understanding that they were going to have financial loss phase-ins and they were going to have the ability to address the problems they had inherited with respect to capital expenditures and so forth. The building was at an age where the roof needed repairing, the parking deck and so forth. They ended up getting orders in the last four months from the municipality to fix up the parking deck and roof. They have lost their right to phase-ins for financial and economic loss. The building was running at a substantial loss without doing any capital expenditures and they had no choice. They sold the building and they lost in the millions of dollars on their investment as a result.

Mr Turnbull: The NDP of course would say they made a bad buy.

Ms Harrington: You certainly are to be commended that you do not have any municipal work orders against you. You sound like you are a very good manager. Of course, you are concerned with your relationship with your clients as well. I would just like to assure you, because I do not have enough time to talk with you in detail, that we are certainly concerned about the condition of the buildings. The second thing we are concerned about is the stability of tenure for your tenants, and I am sure you are as well. What are the increases that your tenants have had? Are you concerned about their security?

Mr Parker: We had increases in the maximum rent anywhere from 15% to 25% when we were doing our capital expenditures. It was our policy, purely voluntary, that we would not increase anybody's rent more than 15% in any given year. We voluntarily phased in our increases. We communicated with our tenants from day one. We had meetings before we even made our conditional application, so they knew what we were doing, why were doing it, how long it would take, how much it would cost and what the resulting rent increase would be. They typically had up to three years by the time the increases were actually ordered to order their affairs if they felt that the ultimate rents were something they could not handle.

Ms Harrington: Three years ahead of time?

Mr Parker: By the time you got your conditional order, then you did the work, got your final order and so forth, that was usually about three years.

The Vice-Chair: Thank you, Mr Parker. We appreciate your presentation. Unfortunately, the time has expired.

PARK TOWERS TENANTS ASSOCIATION

The Vice-Chair: The next presentation will be made by the Park Towers Tenants Association.

Mr O'Grady: My name is Gerry O'Grady. I am president of Park Towers Tenants Association. We have 193 units in our complex.

We have several concerns with the proposed legislation. As you are aware, I made a presentation at the Bill 4 hearings. We were then concerned, and are still concerned, with the notice that many landlords give to tenants with regard to rent increases. We note that as in the previous legislation, section 7 provides for a prescribed form and that is to be prescribed under the regulations. If we have a prescribed form, what we do not understand is why landlords are entitled or add different things to that form which are to the detriment, we think, of the tenant; namely, that they ask for a renewal of your tenancy agreement into a yearly tenancy.

They are protected under the provisions of the bill in that if the tenancy agreement is not renewed, then the tenant is automatically deemed to have accepted it as long as he did not turn it down. Also, a tenant is protected under the Landlord and Tenant Act in that his tenancy agreement is automatically renewed. We see no reason why this prescribed form is not to be followed.

We had a decision of the Rent Review Hearings Board two weeks ago. It said the form of a notice of rent increase is not relevant in the appeal. I thought all rent increases originated with a notice of rent increase, and if that is not pertinent, I do not know what is.

Our next concern is an increase above the guideline. We have had two increases above the guideline since the inception of the RRRA. One was at 20%, the other at 10%. We do not have the regulations under this act or the proposed bill, but we presume they might be similar in that they will be amortized for capital expenditure over various periods of time, the life expectancy of the work done or of the thing bought. These then were incorporated into maximum rent and became subject to the statutory increase in each year, so that instead of getting 14.42% interest on their money on an annualized amount, they were getting an extra increase the next year of 4.5% or 5.4%. That is money in the bank to the landlord, and we think it is unjust.

We suggest that there be retroactive remedial legislation included in Bill 121 to provide that:

1100

A. Any allowance for capital expenditures made under any order under the RRRA is, and was, always to be considered as an item separate and apart from the statutory increase under that act and as a component part of maximum rent and not subject to either statutory increases or further increases granted pursuant to section 74 of that act;

B. All excess sums paid by a tenant to a landlord for capital expenditures above the amortized amount because of statutory increases or increases pursuant to the application under section 74 be repaid to the tenant, together with interest thereon, at the amortized rate of interest;

C. If the tenant cannot be located after a reasonable time, such sums, together with interest thereon as aforesaid, be paid by the landlord into a special account to be established under the act to be used for the financing for the construction of low-cost housing;

D. The rent registry to be maintained under sections 94 and 95 of the bill set out as separate components of maximum rent (1) the annualized allowance for capital expenditures broken down into their amortized periods; (2) the commencement date and expiry date of each amortized period; (3) the amount of basic rent which is subject to a guideline increase, and (4) the total maximum rent.

E. We would further suggest that the notice of rent increase also set out these items.

We have said this remedial legislation can be retroactive. We are of this opinion because the first rent control legislation in Ontario was made retroactive to July 29, 1975, that being the date on which then-Premier Bill Davis first mentioned in an election campaign speech that we might have rent control in Ontario. If we cannot go back, he set the stage for retroactivity.

Our next concern is that we should have a new heading in the act after section 21, "Automatic Reduction in Rent," that when a capitalized amount, an annualized amount, has expired, automatically there would be a reduction of rent for that item, which has now been paid. Why do we have to make an application? In fact, I do not see in the bill any place where we can make an application for it.

Our next submission is that under the application to reduce rent the provision be made for the tenant to obtain from the landlord the information necessary to base an application on the grounds set out in section 24. That is where his hydro rates have gone down, his taxes have gone down, etc. I do not know how else we are going to get it from the landlord.

Our next submission is, subsection 15(2) allows an allowance for a capital expenditure that is necessary for energy conservation. We agree with energy conservation. However, Ontario Hydro advertises, with rebates on the purchase of lamps and fixtures, incentives of up to 50% of conversion costs, plus expert advice. Then why should it be called a capital expenditure?

We submit that the act and the regulations should allow the minister -- I guess I am wrong in using the word "minister" under the new bill -- to make a determination whether the revenue from energy cost savings as a result of a retrofit would reduce the amount of the calculated amortized cost over the useful life of the capital expenditure.

The next one is that under the heading "Compliance with Standards" there is provision for inspection. We notice that mostly the compliance with standards is going to originate with an objection or a complaint by a tenant. But there is no provision in this section that I can see that either a tenant or tenants' representative can attend on the inspection of the property to see that everything was done as what was complained about.

Our next one is that under subsection 59(2), dealing with the request for a hearing, we just think that the time, 15 days to make up your mind, is a little quick when you have to go get copies of all the material from the offices and then look at them and come to a conclusion.

Our next concern is that you cannot interfere with organizing a tenants' association. It is really a question, because I have been asked it at two different appeals. "How many tenants have you, how many tenants belong to your organization, and are you organized?" I would like answers to those questions. What is necessary?

Our last and final one is, in section 124 they talk about complaints or knowingly misinforming the -- I will say minister -- under the old act. Where false information is concerned, who do you complain to and how do you start on an offence?

In the most recent one we had, the landlord applied for energy conservation. They got a one-third grant on the Ontario Hydro and also assistance on their lamps and that. They had claimed the full amount. They had gone to Ontario Hydro. We made a submission that this was wrong. That was deducted. But to me, that was knowingly. They had the invoice there. Why is that not knowingly? Yet nothing was done. We complained that that was an offence.

Also, on redoing, putting rugs in separate units, they file their separate invoices and they mark on the invoices the total amount, "Tenant contributed $500 towards this; tenant contributed $750," and it was a substantial amount in the total. Yet they had claimed the total of the billings. They had not deducted the amount which the tenants had paid towards the carpeting of the units.

Again, we thought those were offences. We mentioned them in our brief to the administrator. Nothing was done about it. That is our conclusion.

The Vice-Chair: Thank you. Mr Turnbull, for a minute.

Mr Turnbull: I am so fortunate.

Energy conservation: I am very keen on this. One of the problems that we see in introducing energy conservation methods is that the way this bill is written, there is a capital cost. Let's say we are talking about replacing the windows where they will be more energy-efficient and the capital cost is larger than the amount you can recover from flowing it through. Not only would you lose money -- so there is no incentive for the landlord to do that -- but in addition to that, after the energy consumption goes down, the tenants can actually ask for a reduction in the rent because of lower costs. It seems to me that is a severe disincentive to the landlord to introduce energy conservation measures and it seems to be in conflict with what the Ministry of Energy wants to do. Could you comment on that?

Mr O'Grady: I only addressed retrofit in electric, I must confess. I had not thought of the windows. In our situation, we had just gone through it in the original hearing before the administrator. They were disallowed. The landlord was disallowed the whole amount. We lost it on the appeal and in fact they allowed them an extra interest rate.

Mr Winninger: Mr O'Grady, you have quite a bit of background in this area, I know, both in connection with the Park Towers Tenants Association and also as an ex-lawyer and teacher at the bar admission course in London. I am just wondering. You mention some of the difficulties you have had with recognition as an organized tenant association before the tribunal. I wonder if you were aware that this government has undertaken to provide some core funding for tenant advocacy.

Mr O'Grady: Yes, I am aware of that. But what I was asked at the first appeal hearing that we had and asked again at the recent one that we had within the last six weeks or two months was, "Are you organized?" I do not know whether they were looking for personal liability or otherwise, but anyway that was just a question that arose. You say you can organize a tenants' association, but you do not define what a tenants' association is.

1110

Ms Poole: With reference to your comments about costs no longer borne, they were very well presented and I do agree with that premise. However, I was quite concerned about your suggestion that they be made retroactive.

I have a number of reasons for this. First, I am strongly opposed to retroactivity in legislation on general principle; it should be prospective. Second, we have had a lot of landlords who have said Bill 121 will create financial difficulties, and then to compound this by going back in time may be the straw. Third, and perhaps most important, is the logistical nightmare of going with the rent registry back in time and trying to separate the components and have new decisions. I see that as creating an enormous backlog which might well break down the system. If you would like to make a comment on that, I would appreciate it.

Mr O'Grady: Yes, I would agree with you in the general principle, but to me, somebody made a mistake and I do not see why in our instance we had an increase of 20% that was retroactive to May 1, 1987, just about the first day that you could have had rent increases. Then the next year, whatever it was -- we will say it was a 5% increase -- and that was on top again of 14% interest that the landlord was getting on this capitalized amount, on the capital expenditures, and so he is getting another 5% on top. The next year he is getting another 4.5% or 5% on top. Then they applied for another increase and they got a 10% increase, so they get another 10% again on those items. That adds up, and if you do not think it hurts my pocket -- I think the landlord's pocket is a lot deeper than mine.

The Vice-Chair: Thank you, Mr O'Grady. We appreciate your presentation this morning.

WATERLOO REGIONAL APARTMENT MANAGEMENT ASSOCIATION

The Vice-Chair: The next presentation will be made by the Waterloo Regional Apartment Management Association, Bob Eby. You have been allocated 15 minutes. Introduce yourself and then you may commence.

Mr Eby: My name is Robert Eby, and I am here today representing the Waterloo Regional Apartment Management Association. I am also here as a small landlord who pays the mortgage on a 15-unit apartment building in Kitchener.

Our concerns are the same concerns that your committee has heard about from Barry Parker at Sifton; Gary Griesdorf of Goldlist Property Mangement; Jonathan Krehm of O'Shanter Development Co Ltd; David Hurst, the historical building owner; Bert Reitter of Tandem Realty Administration Inc, and Allan Every of Highmark Properties. To go over the things that they have said again and again I do not think makes sense.

We sincerely believe there is a way to help tenants who require assistance. This bill does not help anyone who requires help. This bill is without a doubt the most damaging piece of legislation to the future rental accommodation of our children and grandchildren in the province of Ontario. In addition to all the things you heard and read about in these presentations, let me make a few comments about a few parts of the bill.

Section 39 says a landlord cannot collect increases in rent after the effective date of a rent penalty order. Section 42 says the registrar may apply to the chief rent officer for a rent penalty order if the landlord did not file information required under section 96, which deals with registering rents, section 99; which deals with change of registered rents, or section 100, which deals with the registrar wanting new or amended information.

Now let's look at an example that ties section 39 and 42 together. On January 31, 1992, a landlord gives all tenants a 90-day notice of rent increase effective May 1, 1992. The notice is for 8%: the guideline of 5% plus an extraordinary operating cost increase of 3%. On February 2 the landlord leaves the country until June 9, 1992, for whatever purposes. On February 15 the registrar asks for information under section 96. Because the landlord is not here, he does not answer the request. On March 15 the registrar asks the rent officer for a rent penalty order. On April 20 the rent officer grants the rent penalty order. On May 2 no tenants are required to pay the 8% increase in rent. On June 9 the landlord returns and sees the request for information. On June 10 the landlord complies with the rent request. On June 11 the landlord asks that the rent penalty order be rescinded. On June 15 the rent penalty order is rescinded. On June 30 the landlord must now reissue the 90-day notice of rent increase for October 1.

The results: Ten apartments -- we are saying 10 in the building -- all rented at $600 per month, that received proper notification of an 8% increase, do not pay the increase of $48 for the next five months. The landlord loses $2,400 and the tenants keep the $240 each that belongs to the landlord and get a five-month extension of rent increase, all because the landlord had to leave the country. Your reply might be that it will never happen. Mine would be, how can we trust you after what you have already done to us?

Section 125 is neatly tucked away in the back of the act and allows the Lieutenant Governor in Council to make regulations. The regulations can take the act and change the outcome in so many unknown ways that it would be more honest and fair to table those regulations before the bill is passed so that we know what the regulations say.

Look at paragraphs 125(1)3, 4, 5, 6, 7, 9, 11 and 12, just to point out a few. Depending on how the regulation is worded, it could render an application worthless or give a landlord very little, even less than your 3% for his investment on capital expenditures and your watered-down version of the guideline.

Speaking of the guideline, when you look at the 5.4% guideline now in effect and compare it to the proposed 4.6% guideline, we find that you are attempting to stick it to the landlords again. How can 2.6% be equal to inflation? After you take away the 2% for capital and the 1% for profit, 2.6% is what is left over, but you forgot to tell everybody that you are not going to do that, right? How do you suppose the landlord is going to pay the bills? You also talk about 3% over guideline as the most the landlord will ever get, no matter what. You must be joking. I know your response will be, "No, we're not joking." May I suggest that you had better take a much closer look at the consequences of this bill. Look at an example such as what follows.

The landlord is ordered by the municipality to retrofit the fire safety of the building by installing sprinklers, etc. This work would justify a 5% increase, and because he could not get the work done in 30 days he gets a rent penalty. The landlord also experiences an extraordinary operating cost increase in taxes, gas, hydro -- Hydro has announced a 44% increase -- and the increase justifies, let's say, another 5%. Let's say the guideline is 5% and the landlord has a mortgage renewal that would have justified an increase of 4%. Let's say there are seven units in the building. Under your bill he will get the guideline of 5% plus 3% for an 8% increase in the next year if he gets the same. Let me ask you, how does he pay for the mortgage and capital expenses and extraordinary operating cost increases if he justifies a guideline plus 14% and you only give him 6%? What are the inevitable results? Mr Cooke says, "We'll buy you out." I offered Mr Cooke and Mr Rae my building and they have not bought me out.

What will it take to convince you that Bill 121 is wrong? What will it take to convince you that rent control is not the answer? How many tenants must remain homeless? How many future tenants must beg for shelter? How many property owners must lose their homes? How many property owners must lose their life savings? How many property owners must go bankrupt? What will it take before you will be swayed to get rid of this rent control system and really consult with us to find a workable solution to the problem of affordable housing that allows the people of Ontario to help those requiring assistance and allows us to get on with the business of supplying rental accommodation at an affordable price?

1120

Your party lied to the public with Bill 4 and never listened to us and the changes we proposed. You sit here today and pretend to listen to our proposals again on Bill 121. Do you honestly believe anyone can trust your party in the future? Do you have what it takes to tell the Premier he should scrap Bill 121? I bet you do not.

In a statement to the Legislature on June 6, David Cooke, the then Minister of Housing said, "I am going to provide real and permanent rent control for the tenants." He should have said, "I am going to provide a real and permanent housing shortage for the province of Ontario." He said this was the result of broad consultation. Lipservice is not consultation. Landlords did not suggest anything closely resembling Bill 121. He said he sent out a newsletter to nearly one million households explaining what rent options he was considering. He did not mean one million households; he meant one million tenants. Since when are his options consultation? He said 17,000 filled out and returned answers. Give us a breakdown of who those 17,000 were.

Replies from 1.7% is hardly enough to carve his act in stone. He said 1,300 people participated in a discussion. Unfortunately he kept the list of participants secret and we could not contact each other before the meeting. He said, "I personally hosted seven public meetings." He also forgot to say that he refused to answer questions at those public meetings. I was here in London. He refused to answer those questions. He said he spoke to special interests and expertise on rent control with different groups. He never contacted us on mobile home parks even though he promised at the meeting in London to look into this special area. He says, "This shows how we have listened." How can he say it shows he has listened if he did not incorporate any landlords' suggestions?

He says, "We've listened to tenants and we're going to address their fears." That is about all he has done. He says, "We've listened to landlords and the legislation recognizes small buildings." How? He did not do anything for small buildings. He made the guideline less and left it the same for the smaller buildings. He heard about the frustrations of landlords and that he was going to make the system simpler. Bill 121 does not do that. He talked about the importance of capital repairs and maintenance, and all you would want to give back is a mere pittance. He talked about rental accommodation being supplied because it was much needed, and we are not going to get it from Bill 121. He said he would provide a rent control system that can work. Bill 121 will not benefit anyone. It will work if it is dictated as law and it will force us to give up our property. Annual increases will be based on a rent control index. What good is your index if you manipulate the damned thing to give us less?

He talked about 2% for major repairs. How do you lower the guideline and increase the amount for major repairs? He said it was based on inflation. What is your idea of inflation? It certainly is not 2.6%. He said there were two guidelines and as I said before, that is a joke. He said it was fair and innovative. Fair to whom? I guess you can call it innovative because no one has caused landlords more concern about their tenants and property before this bill and Bill 4. He said he would allow for capital expenditures only for the following reasons: "to maintain the structure and soundness of the building; to meet health, safety and environmental standards; to maintain plumbing, heating, mechanical, electrical, ventilation and air-conditioning systems; to provide access to people with disabilities, or to increase energy conservation."

What does all this mean? I see it as a well-worded description of how to disallow almost every capital expense that was ever allowed in the past. He said landlords must demonstrate that they spent that 2% for capital expenditures, but he does not define what he means by capital expenditures. It looks like it will not even be possible for the landlord to prove it because of those regulations he is going to stick in later. He says, "This means that tenants will no longer be required to finance luxury renovations." How can the minister keep on saying this when he has never defined luxury renovations? He says the 2% allowance for capital expenditures included in the annual guideline plus 3% that you can apply for -- if he really gave us 5% for capital expenditures, it would probably satisfy most landlords. What about the few that it will not satisfy?

He says he will allow landlords to claim for substantially completed expenditures that have happened in the past 18 months, but then he says he will limit it to 3%. This is not what the government promised. The government promised fairness. If someone spent the money and justifies 5%, 10% or even 15%, pay him from before. How do you justify the 3%? He says he will not allow most of the reasons to pass through capital expenditures that were there before. What will he allow? Please explain what he means by "flexible" and "responsive." I will go right to the end. He says he expects to hear positive suggestions. We expect to have changes made as a result of the suggestions, but I do not think we should hold our breath if the way he dealt with Bill 4 is the same way he is going to deal with Bill 121.

The Vice-Chair: Thank you, Mr Eby. I have but 20 seconds.

Mr Mahoney: I would like the government to respond.

The Vice-Chair: There is time for one question.

Mr Tilson: We will give our time to the government.

Mr Winninger: I agree, Mr Eby. A lot of people bought into the RRRA under the Liberal government. A lot of people bought highly leveraged buildings. A lot of people passed through their financing and other costs and a lot of people hoped to get a capital gain when they sold the building. On the other hand, there are people here in London like Sam Katz, who came here as a refugee from Europe and has 20,000 tenants in Cherryhill alone. He never charged an illegal penny of rent and never raised the rents more than the statutory increase. He is a multimillionnaire now taking his money and building new housing units in Israel with it. We do not see him here today. He has done quite well, both before and during the RRRA. What is the problem? Why can landlords not make a profit? Is it that they are not making enough? Is that what we are hearing from you?

Mr Eby: You are incredible.

[Applause]

Mr Abel: I think he makes a lot of sense.

The Vice-Chair: Thank you, Mr Eby. I would like to remind people in the room that this is an extension of the Legislature and demonstrations of any sort are not permitted.

1130

FREEDOM PARTY OF ONTARIO

The Vice-Chair: The next presentation will be from Robert Metz. You have 15 minutes allocated for your presentation.

Mr Metz: My name is Robert Metz and I am president and leader of the officially registered Freedom Party of Ontario. Basically, given the limited time and forum offered to discuss the ramifications of Bill 121 and a permanent rent control system in Ontario, it would quite literally be impossible, in a 15-minute time period, to deal appropriately with its content in any meaningful way.

As you will notice by the attached Freedom Party response to former Minister of Housing Dave Cooke's consultation paper on rent control, my position and that of the officially registered Freedom Party of Ontario is that, simply put, rent control as a concept in itself is no option. I think it only fair to tell all the members of this committee and everyone else in this room that if I were to describe my reaction to rent control in a word, it would be that I find rent control offensive.

As an opponent of rent control -- or even if I were a supporter, I do not think it would make any difference -- I do not appear before this committee with any expectation of swaying this government's opinion or direction on the subject of rent controls. Indeed, it has been my repeated experience, in appearing before official committees and commissions over the past 10 years, that the only purpose served by them is to grant the illusion of public input while using that illusion to justify a predetermined government policy with respect to the issue being discussed.

I have yet to discover an exception to this rule regardless of the input into, outcomes or determinations of various commissions and committees. Their effect on financial government policy has been negligible. With these considerations in mind, therefore I feel it much more appropriate that my message be directed not primarily at members of this committee, but to the public, media and of course to the landlords and tenants directly affected by the draconian legislation this government is clearly committed to imposing upon them.

First of all, I think one thing that has to be said is that there is no such thing as permanent legislation in Canada. All legislation is alterable and changeable almost at political whim, particularly in the case of majority governments. But the important element of any legislation is its ultimate intention, and the intentions behind all legislation are ultimately determined by the philosophy and perspectives of the party in power.

Bill 121 therefore, when enacted into law, will become this government's political and legal interpretation of what rent control should be all about. Former Minister of Housing David Cooke's consultation paper on rent control options left no doubt as to this government's intentions: the permanent entrenchment of a universal rent control system in Ontario.

However, despite using terms like "affordable housing" in its justifications for such a rent control system, the Ministry of Housing's consultation paper made a radical shift away from the issue of affordability and went on to state that the main justification for rent controls was "tenant protection against high rent increases." This raises an alarming prospect and forces me to ask why. Why would any responsible government choose not to distinguish between those in need and those with high incomes or accumulated wealth? Why is a responsible government so intent on a universal solution to an isolated problem, which is the affordability of accommodation to the lowest income groups in society?

In a June 1991 constituency letter I received from MPP Marion Boyd, she states that wherever she encountered tenants through public meetings across the province "one important point came through again and again...renters wanted to stop being afraid that they could get hit with huge rent increases."

It is frightening to think that our government is no longer motivated by serving needs, as it constantly tells us, but rather by serving wants. Let's ask ourselves, if home owners want to stop being afraid of getting hit with huge mortgage interest rate increases, does this obligate the government to start regulating interest rates in the banking industry? If consumers want to be protected from huge increases in food and shelter and housing, does this obligate this government to regulate and control these parts of the market? The question I want to know most assuredly is, why is this government not working to protect us all from huge tax increases?

Because of this government's universal and all-encompassing approach to rent controls, it has become painfully clear to me that the real intent behind rent controls has very little to do with the issue of affordable housing and a lot to do with political opportunism. If the objective of rent controls is to provide affordable housing, then legislation to shield all tenants from high rent increases is clearly not consistent with that goal.

Given the dismal economic and social record of rent controls, it borders on unconscionable that any government would even consider strengthening rather than phasing out rent controls. Apart from rent controls being an illogical and counterproductive means of providing affordable housing -- and I will not get into the details here, but they are all included in our attached response to the ministry last March -- it must be stated they are also a violation of some of the most fundamental principles and concepts necessary to the preservation of any free and democratic society.

Rent controls violate private property rights, since landlords are prevented from exercising their right to the fair market value of the service they provide, a right freely available to all their fellow citizens. Rent controls violate the sanctity of private contract, since both landlords and tenants must abide by rent control's predetermined terms and conditions. Rent controls violate freedom of association, since both landlords and tenants are not permitted to negotiate their own terms of contract. Rent controls violate the principle of equality before the law, since federally and provincially financed housing units are exempt, and also because in the event a landlord and tenant negotiate a contract outside the provisions of rent control, only the landlord will be charged. Rent controls are undemocratic because of all the reasons I have just listed.

So in my brief address I will conclude now by saying that I have to repeat my firm conviction that rent controls are nothing but a political invention created to serve political interests and exist for no other reason whatsoever, despite noble-sounding justifications on the part of rent control supporters. Because tenants outnumber landlords, landlord rights have been eroded to the point where the term "ownership," as it pertains to their properties, has almost become a meaningless concept.

To those who clearly see the inherent evils of rent control and who want to do something about it, I am offering a rent control option that no other political party in Ontario will offer them: an officially registered political party that, if elected, would put an end to the devastating and unjust policy of rent controls in this province.

Do rent controls work? If your objective is to buy votes, undoubtedly the answer is yes, at least in the short term. If your objective is to provide affordable housing or to protect the legitimate property rights of landlords and the tenancy rights of tenants, then the answer is clearly no. Let's scrap Bill 121 and direct housing assistance to those who most desperately need it and let's let the rental accommodation industry in this province flourish and thrive, as it once did before the advent of rent controls in Ontario.

Ms Poole: Thank you for your presentation. One of the problems we have with rent regulation in this province is that it treats every area of the province and every situation identically. I think this is something you have pointed out in other words in your brief. In London, for instance, I understand there is a very high vacancy rate; there are a lot of available apartments. At the same time, in some areas such as Toronto there is a considerably tighter vacancy rate, although recently it is improving.

What I would like to ask you is, when you say you would phase out rent controls, how would you do that?

Mr Metz: To begin with, on any new construction there should be no rent controls at all. On existing units it should be phased out over a three- to five-year period, which could be slightly adjusted, depending on how the market may be responding in providing more housing while we are waiting for rent controls to phase out.

Ms Poole: One of the basic problems, though, is that the price of land and other housing costs today make it far more profitable and far more encouraging to build condominiums or office towers than it does to build rental. I know you might say this is because of rent controls, but I am not convinced. I think just looking at the cost of building a new unit today, it is very difficult to build affordable housing.

Mr Metz: I have had a lot of personal experience in that, since I actually built my own home once. I can tell you that one of the major costs I was not expecting was the cost of government licensing, development fees, taxes, property taxes that are far beyond what service the property receives from the municipality or from anyone else for that matter. I think if you are looking at the price of housing in this country in general, rent controls definitely are an aggravation, but I can certainly cite a number of other causes and they all generally relate to some form of legislation or government intrusion into the marketplace.

I think if a government wants to really do something about helping the disadvantaged and the poor in our society, that should be its target. You do not hold landlords responsible to provide welfare accommodation for people who just simply do not want to pay higher rents, even if they have the ability to do so. If you ask anybody about any issue and put it in that perspective -- "Would you like to have lower food prices? Would you like to have lower interest rates? Would you like to have this?" -- of course, everyone would; that is a given. But it is not the function of government to give us all our dreams and desires at the expense of other people. I think we are seeing what is happening in this country today, because this is the philosophy that the major three parties, federally and provincially, all practise.

Ms Poole: I would like to pursue that. I am trying to get away from talking about the philosophy behind it. I understand and appreciate your point of view, but how do you provide those incentives to build? Yes, it will be an incentive if rent controls are lifted, but I am not sure that is going to result in many new units being built. For one thing, you have pointed out that policy changes on the whim of every government. After Bill 4 and after certain things this government has done, how would people even trust government to keep its word if it says it is going to end rent control? What developer is going to put up a building on the premise that this government and future governments will keep to that agenda? I am trying to think of practical ways to get out of that dilemma.

1140

Mr Metz: What you are telling me, which is an alarming thing to hear coming from a committee member, is that you are saying government is completely untrustworthy.

Ms Poole: No. I am saying, how do you restore the trust of the people in it?

Mr Metz: The trust of the people has to be regained by a political party that will honour its commitments to do what it promises to do for them and not to misrepresent and give them policies that they say are going to solve their problems and just aggravate their problems and make it even worse.

Mr Abel: In your document here, or your information package on rent control, you make reference to the doctrine of isonomia, which states that the law must bear equally on all and not favour one citizen over the other, and that is exactly what we are trying to do with Bill 121. We are trying to balance an imbalance that was created by Bill 51 and the Liberal government.

Mr Metz: I understand what you are saying, but it is not rights that are being balanced.

Mr Abel: I have not got to my question yet.

Mr Metz: Oh, sorry.

Mr Abel: You say that you feel this legislation is restrictive. Without getting into a long philosophical discussion on your political views, how would you explain it to tenants who have been economically evicted, who are facing increases that in some cases are twice the increases they are receiving by way of wages? How would you explain that to those people in this province?

Mr Metz: I suppose that is like asking, "How do you explain to home owners massive increases in their mortgage rates," or "How do you explain to the taxpayers the massive increases in their taxes?" These are not things that have to be explained by government. The tenant should have a healthy, vibrant housing market from which to choose. If he does not like the relationship he has with one particular landlord, would it not be nice if he could just pack his bags and leave and get a better deal from another landlord?

Unfortunately, we have lived with rent controls for 15 years now and a lot of people have even forgotten what it could be like without them. I will tell you. I went down to Florida recently and down there landlords are the ones who are screaming. They would like to see something like rent control, because the market controls prices so much better. Tenants are getting a great deal down there. There is no rent control in that state.

Mr Abel: I will tell you, sir, I would not want to be around when you tell the landlords if they do not like it, they can pack up and leave. I will pass to Mrs Harrington.

Mr Metz: You are oversimplifying the reaction there.

Ms Harrington: We do believe in regulation. There are many regulations involved in our society. We feel that is why Ontario is a very good place to live. For instance, environmental regulations, we license automobiles. This is not an anything-goes type of society. Maybe you do not even believe in public education. I am not sure. I would like to tell you that I believe in stability in housing in Ontario. That is the goal that we are working towards and it is a very difficult thing.

Housing is a basic necessity. We cannot do other things in our life and be successful in this life unless we have a place to live. We do not just want to have people packing up their bags and moving any time there is a problem. I am looking for answers. That is why we are here. Some people have told me that a subsidy to people who have low incomes is the answer. Do you believe that is an answer? Some $1.4 billion is what it is going to cost, a financial black hole for the taxpayers of Ontario, to subsidize people. Would you consider that an answer?

Mr Metz: I would consider it a preferable approach to rent control itself, but I do not consider it an answer since it has not been an answer in any jurisdiction in which I have ever seen it tried. However, getting back to your comments on regulations and laws, I think there is a big difference between regulations and laws that protect individuals' rights to freedom of choice, their right to free contract, and those laws which prohibit them from making their own choices. If I as a tenant or I as a landlord made a deal with another tenant or landlord and it was mutually satisfactory to both of us, but because it was outside what you want, why does the government have a right to tell us how to conduct our private affairs? I do not understand what moral premise the government can possibly be operating on to suggest such a thing.

Ms Harrington: Why do we have the right to protect the environment for future generations?

Mr Metz: Then we should protect our housing market --

The Vice-Chair: Thank you, Mr Metz. We appreciate your presentation.

LONDON PROPERTY MANAGEMENT ASSOCIATION

The Vice-Chair: The next presentation will be made by John Gleason of the London Property Management Association. We have 15 minutes allocated for your presentation.

Mr Gleason: My name is John Gleason. I represent the London Property Management Association. We have some 182 members, comprising owners, property managers and service personnel. Through regular monthly meetings we strive to educate our membership in matters relating to the effective and efficient operation of their buildings through legal updates on current and pending legislation, as well as to offer advice and give direction on landlord and tenant relations.

We recently held a special meeting to inform our members of the contents of Bill 121. Predictably, there was both shock and anger at what the government is proposing to legislate. There was abhorrence at the maximum limit of 3% on capital increases and that this same percentage is to cover extraordinary operating cost increases -- such as hydro, water and taxes -- in any given year, astonishment at the recalculation of the guideline formula and extreme displeasure at the elimination of financial loss. But the idea that legal maximum rents could possibly be reduced and that tenants would have the ability to challenge the guideline increase on the vague grounds of yet to be defined inadequate maintenance was absolute horror and disbelief.

They questioned how they could, as owners and property managers, possibly make intelligent business decisions and finance needed work when the guideline and base rents could not be guaranteed. It is this issue I wish to address today. For the first time in Ontario, it could be quite possible that a building may not receive the guideline increase and, worse, could receive a rollback in the maximum rent due to inadequate maintenance, whatever that is. To add to this injustice, officers of the Ministry of Housing, not an arm's-length hearing body, will have the power to stay increases or roll back rents. The bill goes further, to state that if the work order is not completed within 30 days the director may issue a rent penalty. There has obviously been no thought given to the availability of parts or qualified labour, weather conditions or the time of year.

The problem is further compounded by the fact that the order and completion date will apply to every work order, no matter how frivolous it may be. Imagine what will happen when tenants realize they have the ability to freeze or reduce their rents by reporting a maintenance infraction? It will lead to abuse and misuse of the system through deliberate vandalism and trivial claims. If this section must remain as part of the new legislation, a clear definition of the term "inadequate maintenance," as well as other issues, must be reviewed.

Webster's dictionary defines "inadequate" as "inefficient and lacking." "Lacking" is defined as "deficiency," so to relate this to inadequate maintenance, it would be a deficiency in the apartment. We must also address to what length the term "inadequate" be allowed to be used when complaints are filed in order to resolve the issue but avoid abuse.

I certainly do not think all tenants would wilfully damage building components in order to avoid a rent increase. However, just as there are a few bad landlords, there are also a few bad tenants who will abuse the system if allowed. The government has decided to create an entirely new piece of legislation as a result of the abuse of the system by those few bad landlords, so I submit that this area be very clearly and precisely defined to avoid ambiguity and possible misuse by those few bad tenants.

There are standards in place now in most municipalities that address heating and safety requirements. These should be maintained. To avoid the possibility of tenants wilfully causing damage in apartment units, the ministry could possibly rely on the incoming inspection reports that each tenant signs on entering a unit he or she has leased. This report is signed by both the landlord and tenant and notes the unit's condition, room by room. This also notes that all appliances are in working order and that the apartment has been cleaned. This form could be used as proof that any subsequent damage or deficiencies were caused after the tenant entered the unit. Mechanical failure as a result of worn or defective parts would be excepted.

1150

In order to avoid having an inspector run out to review every complaint, the ministry, when it receives a notice from a tenant, should get a copy of the incoming inspection report, if the problem exists in the unit, as well as allow the landlord a minimum of 90 days to address the concerns, to either correct it if he is able to in that time frame or refute the allegations of the tenant to the minister. If it is a complaint about areas outside the unit, again, the landlord should have at least 90 days to correct the problem if he is able to in that time frame or refute the tenant's allegations.

The tenant should also have to provide why he feels the problem he is having be considered under the heading of inadequate maintenance. Certainly, just as the minister has recognized the differences between buildings in setting the guideline increase, so should they be recognized here, only by age, not by the number of units. Inadequacy in new buildings is not the same as in older buildings. Systems and designs differ; for example, incremental heat units versus hot water boilers, Thermopane windows versus single-glazed windows.

The time constraint of 30 days is just too short. Even if the work is completed on time, the landlord has to notify the director, who has to go out and inspect the unit and, if satisfied that the work has been completed, advise the tenant of this fact. This inspection process will take 30 days on its own. A more reasonable time frame would be 90 days or longer, depending on the amount of work to be completed, whether financing will be required to carry out the repairs, as well as give consideration to the availability of parts and labour, weather conditions and the time of year. As well, all maintenance complaints and resulting penalties should only affect the tenant and/or the unit where the complaint arose.

In closing, I ask that you review Bill 121 in its entirety, specifically the area dealing with the unreasonable maintenance enforcement rules and their possible effect on achievable and maximum rents. This area of the new legislation will not only have dire consequences on owners' abilities to achieve financing to do the necessary capital work at buildings, but it will pit landlords against tenants and cause disharmony and mistrust between the two as a result.

Our association has always preached the commonsense rule that if you look after your tenants properly and treat them fairly, the tenants will look after your investment. I am afraid that implementation of Bill 121, and specifically this section, will put landlords and tenants in an adversarial position and could for ever ruin the conciliatory and caring attitudes they once felt for each other, as well as the pride they once had for their buildings and homes.

A news release from the Ministry of Housing, dated June 6, 1991, indicated that "the proposed rent control system is the product of a broad consultation with tenants, landlords, municipal and financial officials and many other people across the province." If this bill represents the product of the supposed broad consultation, then both the multiplier and the multiplicand of the equation have been the ideas received from tenants alone.

It has been suggested on a number of occasions at meetings with the Minister of Housing and at previous committee hearings that representatives of landlords and tenants should sit down face to face to arrive at a new and workable piece of legislation. I still believe, as do many others, that this approach would resolve a lot of the issues each side has with this bill. This process would allow each side to fully explain its concerns.

I ask you, on behalf of the members of the London Property Management Association, to listen to what the landlords of this province are saying about the damaging effects this bill will have on the housing industry and to use their suggestions to arrive at a fair and equitable piece of legislation. We all want fair legislation. Please ensure the fairness extends to landlords.

Mr Tilson: You have obviously described what you anticipate will be the plight of the landlord if this bill is passed. We have certainly heard Minister Cooke's and many of the government's allergic-to-landlords type of speeches, saying that the purpose of Bill 121 is to stop flipping, to stop marble foyers and those types of things. If Bill 121 is passed substantially without amendment, what will be the plight of the tenant? What will be the quality of life of the tenant in the next few years?

Mr Gleason: I think you will find the quality of life from the tenant's standpoint will be reduced substantially. I do not think landlords will have the ability, through the proposed legislation, to allow them to do the necessary repairs, although, as indicated, they will be forced to through this particular section in the act. It is certainly going to cause a lot of animosity between the two parties. I suggest there will be damage, as I have indicated, by tenants to ensure that work is completed or that they do receive new carpeting, possibly new windows and those types of issues. I think there is going to be a definite downturn in the market. I think, again reiterating, landlords and tenants are going to be at each other's throats.

Ms Harrington: It sounds like you have a good organization, that you are encouraging standards. This is what we want in Ontario. It is important -- and let me say this over again; I think I have said it about 100 times -- that we have a viable private rental market in Ontario. It is the only way this province can go forward. We appreciate your concerns and some of the suggestions you brought forward here; for instance, your concern with regard to the 30 days. I can tell you it is not just 30 days. Certainly there needs to be more time ahead of that for the orders to be dealt with. Your idea of an inspection report is certainly something we can consider.

Maintenance enforcement is very important to this government, very important to tenants and, I believe, important to you as landlords as well. We have to make sure our buildings are kept up. This is, as you have pointed out, a major part of this legislation and a major promise we have made. I have to deal with that.

You said landlords and tenants have to work together. We believe the same, that there has to be a healthy relationship there. I want to make just one further comment about consultation. I have been to consultations in many cities around this province. From 6:30 in the evening until 8, we had the tenants; from 8 until 10, we had the landlords. We had the ministry staff there with me and we had other members of the government doing this. We talked to tenants, we talked to landlords and we brought this back. Even in April, when the final decisions were being made with regard to Bill 121, I remember, in a room about this size in Toronto, we had the banking people, we had the tenants, we had the landlords, we had the legal people and we were all sitting around when those final decisions were being made.

Mr Gleason: I think what we are asking is that you listen to what we have to say and the input we are giving the committee hearings. From our standpoint as landlords, both the previous committee meetings and the meetings with the minister seem to have proved unfruitful. You are digging a deeper hole for landlords and you are causing, at this point, an adversarial position between landlords and the government and landlords and their tenants, and we do not even have a piece of legislation in place yet. The proposed legislation is not going to work and there is not going to be harmony as a result of it.

Ms Poole: Thank you very much for your presentation today. I really appreciate your comments on the maintenance and work order provisions. It is something that people have raised as a concern, but they have not offered as many constructive solutions as you have.

For your information, we do share your concern about the lack of definition of words such as "inadequate maintenance" and "neglect." Three weeks ago, on August 1, I asked the ministry to provide this committee with definitions of those two terms. To date, they have not been able to do so. When they do, we will make sure you get them.

Your point about the time frames is absolutely correct. It is 30 days or else and no extenuating circumstances. Whether it be the fact that it is in an underground parking garage, which may take a year and a half to complete, whether it be inclement weather, whether it be exterior wall work, whatever, there is no opportunity to dispute, to appeal or indeed to give any outlines of special circumstances. I would like to ask you if you are familiar with the provision relating to special circumstances under Bill 51.

Mr Gleason: In what regard?

Ms Poole: There was a provision under Bill 51 that the rent review administrator was to take into account whether the work was seasonal, whether, for instance, it was exterior work to be done, whether there were extenuating circumstances. That had to be taken into account in any decision. I just wondered if you were familiar with that.

Mr Gleason: Yes.

Ms Poole: Would you like to see that reinstated? Do you think that would help?

Mr Gleason: Absolutely, and I think that is where I was heading on this whole issue.

The Vice-Chair: Thank you, Mr Gleason. We appreciate your presentation.

1200

MENESET MOBILE PARK INC.

The Vice-Chair: The final presentation this morning will be from Keith Homan. You have 15 minutes to make your presentation.

Mr Homan: Good afternoon. My name is Keith Homan. I am the owner, operator, electrician, plumber, ditch-digger, maintenance man, place man of a land-leased community called Meneset Mobile Park.

This is my third presentation to your government over rent controls, but since there are a few new faces here and since the old ones will not remember me, my wife and I are the owners of a 230-home mobile home park. The park was started in 1967 as a seasonal park and at present is being converted to a permanent mobile home park, the residents being mainly seniors. My rent is $163 per month, with which I provide and maintain all water and sewage systems, hydro lines and paved roads.

The purpose of your new Bill 121 is to provide protection to tenants from high rent increases and to ensure maintenance of existing rental housing and to get the evil landlord. What of the landlords stuck with chronically low rents where a 5.4% increase means $8 or less per month, not $33 per month? What of the chronically low rent that will not provide the income to maintain the existing rental unit?

My wife and I started our park 22 years ago as a seasonal park. Our rents were not high at that time as we had an income from my teaching high school and my wife's nursing. All our income, as well as park income, was put back into the business to develop something for our future. We were subsidizing the tenant at that time and for that we now suffer.

In the mid 1970s I gave up teaching to go into the park business full time, as it was too much for one employee to run. I soon realized my rent would have to be higher to carry the business, but along came rent controls. My rent at that time was $50 per month. Since I am converting a seasonal park that had 15-amp plug-ins and hoses for water to a permanent park with 200-amp service and watermains, it is very difficult with low rents. This should have been looked at as a new development. However, I struggled along under the old system doing a whole billing review each year. I was almost to the survival point when along came the NDP. I now cannot generate enough income for anyone to want to buy my business. My property has devalued by 40% due to rent controls.

This bill has taken away -- excuse me, I get a little upset over these -- all my initiative to keep improving my park. I will just work now to provide the present standards of maintenance and repairs. The services that were installed to run a seasonal park will be maintained instead of upgraded. Until the rent freeze, we did many improvements each year to our park and to our recreation hall, so much that now there are over 100 people at many of the functions. Needless to say, the recreation hall is now too small, and tenants as well as ourselves would like to have seen it expanded and winterized.

When are you going to differentiate between apartments and mobile home parks? In your allowable capital expenditures increases you talk about increases for (1) energy conservation: The tenants own their own homes, so this does not apply to us; (2) access for persons with disabilities: This does not apply to us; (3) maintain ventilation, heat and air-conditioning: We are a land-leased community so ventilation, heat and air-conditioning comes from whatever weather the good Lord sends us; (4) physical integrity of the complex: What does this mean to a park? How does this apply to us? (5) health, safety and environment standards: Well, finally, one that could apply to us. I can now get an increase for the bucket truck I bought to trim dangerous trees blown down in storms. I can pay for the dump truck I bought to pick up weekly garbage, fallen tree limbs and leaves in the fall. Surely, these will fit into that category.

Can I get an increase for an extra man, or do I have to keep on duty 24 hours a day, seven days a week? An employee I had for nine years quit in July when I could not give him an increase because of the rent freeze. He left a $16.50-an-hour job for a $18.50-an-hour government job as a janitor and painter. It takes me three years to train a man to know where all shut-offs are, how to fix and maintain broken water lines, pumps, etc. It is not like an apartment where you can call a plumber or an electrician to do straightforward repairs.

Under extraordinary operating costs, we are allowed increases in four areas: heat, water, hydro and municipal taxes. None of these applies to land-leased communities. Apartment buildings are hooked into city systems. Therefore, when water rates go up due to expenses, the landlord can pass this on to the tenant under the heading "water." In my park, I supply the water with four drilled wells and 20 supply tanks. When I have to upgrade these systems, I cannot pass it on to the tenants as extraordinary operating costs. Municipalities get government grants of up to 70% to upgrade their water and sewer services; I do not and yet I am to upgrade with a 3% rent increase. Is this a joke?

Parks seem to be something you cannot handle and want to shove into a closet. If you would open your eyes, you would see they are an ideal place for starter homes and seniors to retire into. We are just beginning to deal with an exploding senior population. Many seniors who enjoy mobile home living in the south return to Canada to look for a park and cannot understand why there are so few land-leased communities in Ontario when it is such an affordable, community way of life. In our area alone, 250 people are employed in two plants which build these homes. Have you flipped a coin to decide which category you are going to put us into for rent increases? There is one for six units -- apartments, I presume -- which allows for capital expenditures to be carried forward for two years and takes two thirds of rent control index, or one for seven units or more which allows 50% of the index plus 2%, or perhaps none of the above.

Remember, 5.6% of $150 rent in a park is an $8-per-month increase, while 5.6% of $600, which is an average apartment rent, is $33 per month. It costs parks just as much, if not more, to be maintained, especially if they maintain and own all the water, sewer and hydro systems. And as I stated before, we do not get government grants for upgrading these services as municipalities do.

With your 3% cap, I can only replace one sewage pumping station each year. This makes it extremely difficult and expensive, as equipment and men have to be brought in each time to do the job. Also, since I am changing to a more economical pump, some stations will be different, requiring me to carry two types of pumps for standby.

The health department has asked me for three more 5,000 gallon septic tanks since I have changed from a seasonal to a permanent park. This I cannot do because of the cost until after I change my pumps, so we are looking at six years down the road. By that time, my tile beds will be ruined.

Hydro was off for two hours the other day. All my antiquated water systems had to be shut down because I cannot afford a new system with air bags. Therefore, someone has to be in the park 24 hours a day to turn off the water pumps in case the hydro goes off. This, of course, happens to be me.

How nice of you to let me have a 3% increase for my capital expenditures from 1990 to June 1991, since I had over $60,000 worth of capital expenses. However, they probably will not fall under your new criteria. Since your rent freeze, I have had to spend several thousands of dollars to upgrade a tile bed, put a building up to house my equipment, shingle buildings as well as shingle the park recreation hall so the tenants can continue to use it through the winter, rather than wait for the rent freeze to lift. The roof was over 20 years old. I will never be able to recoup this expense.

In summary, I would like to leave you with these questions:

1. Why do you not include extraordinary operating costs which apply to parks?

2. Are we under the classification of six or seven units or more?

3. Under capital expenditure, there is no provision for employees.

4. Why has GST not been taken as an extraordinary operating cost? It will cost me an extra $14,000 this year.

5. Why do you not recognize increases in employee health tax, unemployment insurance, Canada pension plan and workers' compensation?

6. Why are you not looking at chronically low rents?

7. Why do I have to read Toronto, Toronto, Toronto in every landlord-tenant action? Why do low-rent apartments have to suffer so that you can stop high Toronto rent?

8. Why are parks grouped in with apartments?

9. Where is the interministerial committee that is supposed to be looking into mobile home parks and why are small town parks not being consulted?

10. How is 3% per year going to help me rebuild systems over 22 years old?

11. When is a mobile home's life done so that it can be removed from a park without having to buy it and remove it at our expense when they are eyesores, dilapidated, and do not pass hydro standards?

12. What do I do with my park if I get injured or wish to retire? I cannot afford the two men needed to take my place.

Ms Harrington: I thank you for your list of questions there.

Mr Tilson: Any answers?

Ms Harrington: Certainly. I know this legislation does not fit mobile home parks; that is very obvious.

Mr Turnbull: So why is it included?

Ms Harrington: Sir, let me try to finish. As you know, it was included under the RRRA, and at that time in the Legislature, we explained that the report you were speaking about is coming out this fall and it has many, many aspects of trying to deal with the problems of mobile home parks across this province. I am certainly looking forward to trying to get some answers from our experts who have been dealing with this interministerial report for some time now, because I will tell you, it is a problem in my riding.

I was on municipal council and we had to deal with some of these problems. It has been a problem in Mr Duignan's riding and many others across this province.

Mr Homan: Excuse me. I called a Mr Brush in Toronto and told him I would come down and spend a day with him, with this committee, and he said he had all the information he needed from the Toronto area, and he would not talk to me.

Ms Harrington: I am not sure who he is.

Mr Homan: He was the head of the committee.

Ms Poole: Mr Homan, I remember very well when you presented before our committee in Windsor under Bill 4 and the Liberal caucus and the Conservative caucus voted to strike that provision in Bill 4 and to take you out of the legislation so you could have separate legislation.

I would like to use the Liberal time for the government to answer your question why, if they do not fit into this legislation, did it not exclude mobile homes, and then in the fall when it gets its report, have specific legislation to deal with their very unique situations.

Ms Harrington: What I was trying to explain -- thank you very much, Ms Poole -- was that the mobile home parks were very important places for affordable housing for people in this province and there are many problems associated with that; first of all, environmental concerns. It is almost like a small town, having to put sewers and water in, and roads and all the rest of it, and the attitude of many municipal councils with regard to the zoning. We think it should be a viable choice and yours should be a viable operation, but many municipal councils are trying to eliminate these things from their jurisdiction. We, as a province, and as the Ministry of Municipal Affairs, have to deal with these situations.

I would like to just state that the report is coming out in the fall and I am most anxious to get hold of it and work with our whole government to make sure that this type of affordable housing is covered in a regulation, so that it will not get pushed out of the province, and that you will become an operator who has the regulations to be able to operate a good, viable business in Ontario.

Further than that, I cannot comment because I have not seen the report. But what I am saying is, what was in the RRRA has been continued in this legislation because we feel it would be unfair to drop people who had been covered by some protection, not just your particular operation. What are your rents right now?

Mr Homan: It is $163.

Mr Turnbull: It is quite obviously ludicrous that this is included in Bill 121. You made an excellent presentation when you came down to Windsor and spoke to Bill 4. You pointed out the many ways in which housing rent controls were totally inapplicable to your kind of operation. Mrs Harrington said they were studying it, and it should have been quite apparent that this section should have been brought forward as separate legislation. It is inexcusable, given the fact that we were told that because it was temporary legislation, it would be considered later on, and it is not considered. We are going to move immediately to have this struck from any regulation at the clause-by-clause study of this. Your comment when you offered to come down and spend the day with them is typical of the lack of consultation that this government is into. Any comments you want on that?

Mr Abel: It is not true.

Mr Homan: The last I understood, it could be possibly two years before we have anything come out, and we cannot afford to wait two years.

The Vice-Chair: Thank you, Mr Homan. We appreciate your presentation this morning.

Mr Mahoney: Where will you be in two years?

Mr Homan: Teaching high school.

The Vice-Chair: That concludes the committee's hearings this morning.

Mr Abel: Just on a brief point, with the presenter before, Ms Poole made a comment regarding the time constraints on work orders. I am not too sure of the accuracy of her comments. Would it be possible to have somebody from the ministry give us a clarification on that?

Ms Poole: Could I just ask for a clarification of what part of the accuracy he questions?

Mr Abel: The time constraints. You mentioned 30 days.

Ms Poole: Thirty days is what it says in the legislation.

Mr Abel: Okay, could we have a clarification, please?

Mr Turnbull: Why do you not read the act, and then you will know?

Mr Abel: Why do you not listen, Mr Turnbull? You might learn something.

The Vice-Chair: The ministry is here to help.

Mr Turnbull: You come to hear this and you have not read the legislation.

Mr Mahoney: I think it is fair to want to know what 30 days means.

Mr Abel: That is what I asked for.

Ms Poole: Thirty 24-hour days.

Mr Irwin: Terry Irwin of the Ministry of Housing. Section 39 sets out the provisions for the director to issue a rent penalty order against a landlord. The way that section reads is, "The director may issue a rent penalty order" after the expiry of the 30 days' notice given under section 38.

Under section 38, the director, upon receiving either an outstanding work order from the municipality, an outstanding work order from the Residential Rental Standards Board or an outstanding work order from a provincial inspector, "shall issue a notice of possible rent penalty." There then kicks in a 30-day period with a built-in procedure for application by a landlord to have the matter reconsidered.

The rent penalty provision under section 39 cannot go forward unless the landlord's application has been taken care of, the built-in appeal process has been taken care of. So just to be very clear, this 30-day period only kicks in after the expiry of either a municipal work order, a current standards board work order or work orders that will be issued by provincial inspectors once Bill 121 is passed.

Just a further point of clarification: Generally, work orders take into account the length of period required to do the work. For example, I have seen work orders for parking garages that have a two-year time frame on them, taking into account some of the concerns that Ms Poole has raised about seasonal work and things like that.

Ms Poole: Certainly municipalities vary and not every municipality has a flexible time limit on its work orders; some of them go right across the board. If this is the scenario, then it is 30 days, 60 days, whatever. Others have more flexibility, but it is a very major problem, and I have talked to many people about scenarios where the work takes much longer than was originally anticipated. It could be even a construction strike.

Mr Abel: Two years?

1220

Ms Poole: That is right. Normally a work order would not give two years for an underground parking garage; it would be a much more constricted time. It may seem like a reasonable amount at the time, but quite often they are actually in there before they realize the extent of the work, even with all the structural engineering reports. So that is a very major concern that people have presented to us, that this could be interpreted by the rent director in a very arbitrary manner. Yet there is not that opportunity, prior to a rent penalty going into effect, for there to be an appeal, a dispute or even a discussion of extenuating circumstances. That is the problem. After the rent penalty is on, then the landlord can do something about it. The landlord cannot do anything about it before the rent penalty is on, and that is a major difficulty.

Mr Irwin: Again, I would just point out that at section 39, "the director may issue a rent penalty," and there is the process in that 30-day period for the landlord to make an application.

Ms Poole: The way the situation presents itself is there is a work order put on the building with a time limit, say a 60-day time limit. After that 60 days, when there is non-compliance -- it may even be substantial compliance but not complete, not enough that they can lift the work order -- it is then registered with the standards branch under the current one, but under the new one with the rent director. I will not call him or her a rent control director. Then that rent director has a 30-day period. If there is still non-compliance, they can go ahead; they have the discretion to go ahead and issue that rent penalty.

Where in here does it say that after the non-compliance by the landlord with a work order there will be notice given to the landlord that it is then going to be dealt with via a possible rent penalty by the rent control director? What kind of notice, what kind of opportunity is there for that landlord, if he or she cannot comply, for extenuating circumstances, to do something about it?

Mr Irwin: The notice that the director issues under section 38 sets out the time-limited period for applying to the chief rent officer for a review of the work order. For lack of a better term, that is the built-in appeal process for that 30-day period. The notice also sets out the fact that if a landlord does not complete the work within 30 days, the director may issue a rent penalty order under section 39. The two clauses I am referring to are 38(2)(c) and (d). That is what is contained on the notice originally set out by the director.

Ms Poole: Are you then saying that if a landlord, once he is aware that there may be a possible rent penalty, shows extenuating circumstances, that rent director would not issue a rent penalty?

Mr Irwin: The other section we should take into account is section 40, where it provides the opportunity for the landlord who has completed the work to notify the director of that fact, and the director, under subsection 40(2), is required to send out an inspector to verify that circumstance.

Ms Poole: That is only if the work has been completed, though. That is not if there are extenuating circumstances. That is the problem. It is not a problem if the landlord is just being recalcitrant and has not done the work and within 30 days can do it. The real problem is the landlords who are genuinely trying to do the work and are not given that opportunity to talk about the extenuating circumstances.

The Vice-Chair: Mr Abel, did you have something further to clarify?

Mr Abel: Yes. I just found Ms Poole's comments earlier somewhat misleading, and that is why I asked for the clarification from the ministry. I think they have clarified that quite adequately.

The Vice-Chair: Would you like to reconsider the word?

Mr Abel: Which word?

Interjection: "Misleading."

Ms Poole: It is called unparliamentary.

Mr Abel: I found it somewhat inaccurate. Misguiding?

Mr Tilson: That is worse.

Ms Poole: That is attributing motives to another.

Mr Abel: Oh, well, I found it somewhat inaccurate.

The Vice-Chair: That would be acceptable.

Mr Abel: Okay. I would not want to offend.

Ms Poole: I would have thought the member was quite confused.

Mr Abel: I would not want to hurt Ms Poole's feelings or anything like that, of course.

Ms Poole: It hurts my integrity, not my feelings.

Mr Abel: I think the ministry staff has adequately explained the misunderstanding.

Mr Tilson: I have one question. It appears that you cannot appeal a work order. There is no allowance for an event where the work order is appealed, whereas normally you could. So if a work order is made, there is no allowance. There does not appear to be any that I can find, unless I am wrong, in which case you can correct me.

Mr Irwin: Generally, municipal work orders are appealable. Under section 35, "The director shall receive a copy of any order, and any notice of appeal from an order" --

Mr Tilson: That is 35 what? I am sorry.

Mr Irwin: Section 35. That is really when we receive, from the municipality, not only outstanding work orders but we are also receiving notices of appeal of the municipal work order.

Mr Tilson: The difficulty of course is section 38, which talks about the specific work order. Maybe it would be a more appropriate time to deal with that at the clause-by-clause, but thank you.

Mr Tilson: Getting back to the issue that was raised by Ms Poole -- in other words, the issue as to whether or not a landlord has made every effort to comply with the work order, and I am getting back to the discretionary word "may" in section 39 -- does the ministry anticipate preparing any form of regulations on this whole subject? If so, could we have that prior to the clause-by-clause discussions?

Mr Irwin: There will be prescribed regulations around the whole maintenance area, as set out here. I am not sure I can comment on when they will be ready.

Mr Tilson: I am thinking specifically, if the issue of section 39 is discretionary to the director, whether you anticipate any guidelines to the director to enable him or her to make the decision. Obviously no.

Mr Irwin: Well, no, I am supposing -- and this is more or less a personal opinion because we have not got to that stage yet -- there will be guidelines on how we carry out a lot of aspects of this act, including the rent penalty area.

Mr Tilson: Mr Chair, I must say that this is a grave concern that I think both the Liberals and our party have expressed, this whole subject of regulations. I do not know whether we are going to have the time to properly debate that with respective members. It certainly gives me a great deal of concern. It happens every day: We do not know what words mean, we do not know what guidelines mean. I just raised that for you, as Vice-Chair, to raise with the Chair, who in turn would presumably enable us at some time or other to discuss that, to properly debate that subject.

The Vice-Chair: As you are aware, the Chair has no power in this particular situation, but it is rather in the hands of the committee. If the committee decides to discuss this issue, that is something the committee can decide.

At this point, I would indicate to members that the committee will return at 2 o'clock. It is the intention of the Chair to begin immediately at 2, and we would like to see all members here for that. We have a very busy afternoon that requires a great deal of diligence by the Chair in terms of the time given to each person. We will have to work very hard this afternoon. So thank you. I would remind members in the hotel that we must be checked out by 1 o'clock.

The committee recessed at 1232.

AFTERNOON SITTING

The committee resumed at 1400.

The Chair: We have a long list of presenters for this afternoon so we will get right down to business.

JIRA JELINEK

The Chair: The first presenter is Jira Jelinek. You are allocated 15 minutes for your presentation. You can withhold some time if you wish for questions and answers.

Mr Jelinek: My name is Jira Jelinek. My wife and myself are owners of a 12-unit apartment building 30 years old. We purchased this property as some sort of security for our old age. I know this is a typical story of many small rental property owners and I hope you are not bored to hear it again. It cost us 15 years of savings and the last seven years of second shifts, weekends and most of our vacation time spent on maintenance and repairs. We built up an excellent relationship with our tenants by offering them good-quality accommodation and enjoyable living.

Last year, after discussion with our tenants, we started large scale repairs and so-called capital expenditure, nothing luxurious, just maintaining appropriate good standards. For two of us, it was a time- and money-consuming project. For all tenants, it was very inconvenient living during several months but they never complained and we were all looking forward to the end of the work. I thank them for their patience. We got lots of compliments from tenants, neighbours and even from passing citizens. The cost of the whole project was over $76,000 and more than 2,000 hours of our own labour at the rate of zero dollars per hour. So what about human rights? The slaves got at least food for labour; we got nothing.

But who did not appreciate our struggle was the newly elected government. After extensive propaganda against landlords -- and by the way I hate this classification -- we were not only deprived of any compensation but we found ourselves put into the category of dirty criminals exploiting poor, innocent tenants by asking more money for better accommodation.

There is a rather primitive argument that we will recover expenses after selling the property, but we want to keep it. So are we automatically losers? Some tenants just dismissed the situation as tough luck. They are more right but this tough luck will sooner or later affect them as well. The retroactivity of Bill 4 is outrageous. While it benefits more people than it harms, its basic unfairness is shameful.

Now we may get some token compensation under the new legislation, which is nothing more than a little bandage to cover the deep wound from the knife thrust into the back of those of us who take care of our property more than others. Is 3% enough or too much? Will it ruin the life of tenants and get landlords richer? The catch phrase is the protection of tenants from the high rent increase. But did someone take paper and pencil and start to calculate the income and expenses of rental properties, especially those inexpensive ones?

Let's take a repair of the roof on a three-storey building and a six-storey building. The size of the roof is approximately the same, but the expense is covered by double the number of units. The painting of a two-bedroom apartment costs the same regardless of rent. To exchange the carpet in the living room of a $350-per-month unit is a relatively luxury item compared to a $900-per-month unit, but the size and quality of carpet is the same.

Our Minister of Housing said at previous meetings that he is fed up hearing about the creation of slums. Is the ministry aware of the abovementioned examples and facts, that the proposed system will lead to improvements of more expensive units and deterioration of so-called affordable accommodation?

This is some kind of treatment for people with smaller incomes. Should I say to my tenants that the government considers the existing standard good enough for them and they do not deserve anything better than cheap, cheap accommodation?

The proposed legislation does not take into consideration the age of the building or level of rent and simplifies the effect of the size of the building. It is a nice idea to simplify bureaucracy but simplification has its limits. All this shows the lack of personal experience to run an enterprise of any kind. The impact will not be noticeable for some time but it will be hard to repair it in the future.

The government is proposing to use a big stick and enforce the law by any means available. But any oppression has a short life and does more damage than good. To those who do not believe it, I recommend listening to more international news than baseball results.

I miss in the proposed law any mention of protection of owners against irresponsible tenants. This is not fair again. There are very bad tenants and owners have very limited protection. The legal system for political reasons takes sides with a tenant and if the owner tries to sue the tenant for small damages the case will be dismissed. The good tenants will find the best protection in their landlord. They are his bread and butter. The government's law is to protect bad tenants.

The government is arguing that tenants have the right to decide what repairs must be done and what is not necessary. This is based on the opinion that the premises are the tenants' homes. Our record shows that the average length of tenancy is two years. You cannot expect tenants to be considerate in managing a building if they plan to move out in two years. Their interest is only to live cheap. They are not concerned about long-time maintenance. Why should they be? It is not theirs anyway.

There used to be a deposit of money towards damages or extra cleaning of apartments after tenants moved out. It forced tenants to leave an apartment in good order to get this deposit back. One who does not care and leaves a mess behind, so tough luck to them. I do not think this system was abused by landlords. Abolition of it is definitely abused by many tenants. We have a good practice to visit some applicants for our apartments in their homes to see how responsible they are and in what area they are living.

I would throw some landlords into jail for renting horrible holes to people and sometimes for more money than we are allowed to ask for a better class of place. But I realize that this situation is possible only thanks to rent control and its impact on the building industry.

Without rent control, those owners would never ever have a chance to rent such a badly kept-up apartment to anyone. The market would be automatically geared to needs and cost of accommodation would be on a more reasonable level. Simply, if I have lousy apartments for too high a price they will be empty, and this is the last thing any owner wants. But, as it was said by previous politicians, to abolish rent control would be political suicide in the battle for votes, so it will stay. It does not matter how bad it is until some future government has enough guts to say we cannot afford such nonsense, let's get rid of it.

1410

Mr Brown: Unfortunately, you are right. We have heard many presentations saying more or less exactly what you have said: the effect this will have on the small landlord and in particular the retroactivity provisions of Bill 4 that are not being really corrected in Bill 121. My question relates to one interesting thing that you mentioned and we have not discussed it much. This is something new that you brought before the committee, and that is the fact that your tenants on average stay two years. That is, I am told, not very unlike the provincial average. I suppose you do have some tenants who have been there for many years though.

Mr Jelinek: That is the average. I have tenants who have been living there for almost 10 years. Some tenants are moving next year.

Mr Brown: What is the rent in your building?

Mr Jelinek: Approximately $400 a month for a twobedroom apartment.

Mr Brown: And that is a nice low-rise building?

Mr Jelinek: Anybody is welcome to come over and see.

Mr Tilson: You have raised another issue and that is the issue of the irresponsible tenant which we have not spent a great deal of time on. I am interested in the whole concept of lack of maintenance and negligence that is being raised in the act: that if there is improper maintenance or improper conditions exist, that may affect a downward turn in rent charges. Relating that to whether there has been any damage created by tenants, do you find that issue that well spread in your buildings or in other buildings that you know of?

Mr Jelinek: We had a problem this year in March. One tenant, after seven years. I never, ever had a problem like this. I called my MPP. I invited Mrs Boyd, or any of her staff, to come over and witness in what conditions we are giving apartments to tenants. Of course nobody was interested to come and see it, but I have a picture of one apartment, how it was left by the tenant after three months of living in it. This apartment was completely renovated, there were brand new storm windows, we had a brand new parking lot, re-asphalted, brand new.

The Chair: Mr Jelinek, maybe you can pass the pictures around and we can continue with the questions or we are going to run out of time.

Ms Harrington: The system that you have operated under, the RRRA legislation, we feel was not working well at all. The original rent control or rent review was instituted under the Conservative government, and then, under the Liberal government, changes were made. We feel that it seems they did not really want the system to work. Now we have a government that believes that both tenants and landlords should have a system that will work and work well and give a fair profit. We want to have affordable units and we want good units. We want protection for tenants and we are determined to make this work. And we thank you for your affordable units in this city and I am sure many other people appreciate it too. I understand you got a grant from the government as well to maintain your property so we are trying to do our part as well.

I wanted to ask you what you feel is a fair profit.

Mr Jelinek: We are just breaking even. Whatever we get, we spend, so there is basically no profit.

Ms Harrington: For a person like yourself who puts all your efforts into it, what do you think would be a fair profit?

Mr Jelinek: This is a good question. I believe the profit should be, at least as a minimum, the interest you would get on money if you have it invested in the bank.

The Chair: Sir, thank you for your presentation. We will make sure you get your pictures back. The committee is going to look at them.

Ms Poole: On a point of order, Mr Chairman: While we are waiting for the next presenters, Mr Jelinek brought forward a comment about the damage deposit. Could we just ask the Ministry of Housing for clarification as to whether this would be under the Landlord and Tenant Act or if indeed this would be under the jurisdiction of the Rent Control Act?

The Chair: Do you want the answer now?

Ms Poole: If he has a quick answer now, but if not, at a later time.

Mr Irwin: To the best of my understanding, it is a Landlord and Tenant Act matter. There is nothing in here that deals with damage deposits, but I will endeavour to clarify that situation.

The Chair: Maybe you can write us a note.

KEY PROPERTY MANAGEMENT

The Chair: The next presenter is Key Property Management. Trent Krauel, you have 15 minutes and you can withhold some time for questions and answers.

Mr Krauel: I guess I have already been introduced as Trent Krauel. I am a chartered accountant, I am a member of the Financial Executives Institute Canada and first vicepresident of the London Property Management Association. I work for Key Property, together with a local London property developer.

I have not seen a copy of the directive of your committee. I understand you are seeking information to assist in the review of Bill 121. Just backing up for a minute, I would like to suggest that one can look at the disaster in Sweden and New York City and several other examples and the history of rental units since 1975 to speculate what this type of legislation will lead to.

I would love to expand on this point, but the view I received of David Cooke when he was in London -- and I apologize; there are some bitter notes there -- was the false image he was trying to portray: that he was truly looking for independent views in this area. However, in a closeddoor session he made it quite clear. He said, "You have your views and I have mine and I am not interested in discussing anything other than the proposals in my discussion paper." With that in mind, I only wish to stress three general points before directing my attention to the specifics of Bill 121.

The first is that the entire concept of rent controls is tantamount to attempting to prevent a cut with a Band-Aid. You do not prevent cuts with Band-Aids; you merely treat the wound with the same. In Ontario we have been subjected to re-dressing the wounds since 1976. To date, no effort has been effected towards dealing with the real issue of affordable housing for those who would otherwise require the same in a rent-control-free market.

For example, in London I understand there are about 2,000 units currently vacant. Furthermore, I understand there are about 1,300 people on a waiting list for affordable housing. Why does the government not respond to this by subsidizing the rent for the 1,300 rather than putting the problem off, claiming it is dealing with it by proposing to build these units in the next two years. I might add as well that I think the cost at which they propose to do so is ridiculous. But I am certain they will spend that, if not more. I also have to wonder how they propose to deal with the growth in the waiting list during that time. It seems to me there has been no proposal to reduce the waiting list.

1420

The second point I want to make is a general note. There has again been an obvious attempt, and this is a personal view of mine, to railroad this proposal. I ask you, what do you think the Thom commission did for four years reviewing the same issues? We have been subjected to rent controls for the last 16 years. They have been revamped time after time and after considerable deliberation of the same issues. Now this proposal has been thrown together in half a year and we are expected to believe it will solve the problems of a system that has evolved for years.

Furthermore, the Thom commission recommended rent subsidies instead of controls, but for political reasons it was put on the shelf only to collect dust. Please dust off the Thom report. It is now outdated, but it will provide a foundation that is vital to your review, from which you can update and make valid recommendations. To obtain the material available in this report would otherwise take at least four years to gather and then further time to update it.

Finally, the third general issue or point is that we need some sense of stability in the system and the way it is administered if we are to respond to it in the manner it is proposed. The retroactive legislation that had the effect of throwing out applications which were made under the laws at that time is totally inequitable and counterproductive. We, and now I am speaking on behalf of the company I work for, had planned expenditures exceeding $3.5 million under the prior legislation. This is not a plan that could have been executed overnight. Instead, we commenced in the fall of 1989 and were in the process of completing the same a year later when we were told the rules had been changed. Regardless of previous promises, it is now unlikely that we will recover even a quarter of the same.

Given the uncertainty of the market and legislation which changes without notice and retroactively, it is difficult to imagine a serious increase in the construction starts of rental units. If you want to encourage construction, we need assurances that today's promises and the plans we make based on them will not be wiped out without notice, and before we are committed to those plans. A good start in that direction would be to process the applications resulting from work committed prior to Bill 4 under the rules that were promised at that time.

Now, focusing on some specific points, where I had the time to do proper preparation -- and I have to apologize; unfortunately, business takes precedence. I was dealing with some issues today and I simply set the future aside in hopes that maybe some day I will be able to deal with it. Perhaps I will try to deal with that by way of a letter to address some other points I did not have time to prepare.

None the less, the first point, the distinction between large and small buildings, might sound rational to the person on the street, but regardless of whether it is true or not, the basis on which it was proposed, in an artificial market of controlled rents, does not matter. Assume the rent for two newly constructed units, regardless of the size of the complex, was equal today; 10 years from today, the current maximum rent for the small complex would be substantially higher than the large complex. It does not stand to reason that 10 years from now people will suddenly be willing to pay more for the unit in a smaller complex, but the maximum rent for that unit will be higher, based on the current proposal.

The only way people will be willing to pay more is if it is the only unit left on the market. But we are to believe that the five-year exemption for rent controls will ensure adequate supply. Therefore, the small building will be forced to rent for less and will not benefit from this proposal. Therefore, it is not practical to attempt distinction between buildings for size, or age for that matter or any other seemingly rational basis, because the very nature of rent controls does not work.

I touched upon the five-year exemption. The flaw with this proposal is similar to the problem just outlined. If the market has vacancies, then by keeping the rent artificially low for the existing rental stock, you force reduced rents in the new stock. Only when vacancies decline will landlords be able to ask for the rents they need to fund their new complexes. New starts to provide the units required for the future will only result when vacancies are low, and that is not good. If we must have rent controls, and I sincerely oppose them, then this window should be expanded to a minimum of 10 years in an effort to give it a chance of a positive effect. But it must also be accompanied by a sense of stability, as outlined in my opening remarks.

Another point of contention is the 3% cap. It is totally arbitrary, and that further gets compounded by the fact that if I spend X dollars today that would otherwise justify a 15% increase, under the current proposal I am now going to get 5% this year, which is really 3%, because I was already granted the 2%. None the less, that 2% was for capital, so I accept the fact that in the year I make my application I am getting 5% towards my 15%. The next year that money is spent and I have got other capital projects going on, so I have spent my 2%, but if I wanted to deal with it in my original application, so the tenants knew what to expect for rents over the next few years, I would effectively throw away the additional 5% in the second year of my 15%. As for the other 2% that I spent in that second year, I would get nothing. Finally, in the third year the 5% is gone because I am talking about a building that is greater than six units.

I think the intent of the 3% cap was to provide some form of stability to tenants, that they did not see 10% and 20% increases. I will come back to that in a minute. If that is the true intent of it, then why limit the carry-forward on these capital expenditures to two years for large buildings and three years for small? Why not have an indefinite carryforward? You still maintain the stability of the maximum 3%, which I do not agree with, but you have maintained the stability that I believe was the point of that 3% cap.

I think some serious studies should be done as to the merits of the 3%, whether it is fair or not. Certainly 2% a year towards capital expenditures sounds more than reasonable to the person on the street. But Ontario has a tremendously aging stock of rental units and I do not believe the 2% will be adequate in the future.

I would like to talk briefly about the effect of work orders. As I understand it, if a work order is issued against our building, regardless of what efforts we are making to deal with that, if we do not deal with the work order -- ie, extinguish it within 30 days under the proposed legislation -- we will not see any increases until we do so. Again, I guess the intent of that was to ensure that, first, they did not even allow themselves to get into a situation of work orders and, second, having got into that situation they respond to them and do not ignore them. That sounds fair enough on the surface of it, but the reality is that from time to time there are disputes about the validity of a work order. There are no provisions for that in the proposed legislation.

Second, sometimes it is just not practical to solve a problem in 30 days. Whether it be the size of the problem, whether it be a labour strike in the industry that is being affected, whether it be electricians, plumbers, bricklayers, roofers, 30 days is not practical. There has got to be a provision with this kind of proposal for adequate efforts towards dealing with a work order as opposed to a flat out: "If you don't deal with it in 30 days, tough luck. Kiss your increases goodbye."

In closing I will ask you to read -- or, if you already have, to re-read -- the Thom commission report, which recommended phasing out rent controls and promoted a system similar to that practised in British Columbia. We know it is a sour pill to hand out, but it is good medicine.

I have already presented a copy of both volumes I and II of the report and will cut short my presentation at this point in time.

1430

The Chair: I have to remind committee members that we have less than two minutes for questions and answers, so we are going to ask for very short questions and very short answers.

Mr Winninger: You are right, London does appear on the surface to have a very high vacancy rate, over 3%, but a recent study called Living in London by the United Way indicated that the supply of affordable housing is much lower than that.

Your suggestion was for the government to subsidize rents to be paid to landlords, and you are probably aware that this is already being done to a limited extent with rent supplement agreements administered through the London and Middlesex Housing Authority.

Mr Krauel: We have some buildings in that category.

Mr Winninger: Yes. However, to inject the kind of money it would require to subsidize all of the units that are not affordable now to make them affordable would drive the deficit up even higher Is that something you are looking for us to do?

Mr Krauel: I am not convinced that it truly would drive the deficit up. I have seen what they are proposing to spend over the next few years. If you look at that versus subsidized rents, maybe it does not seem to justify it, but what people fail to recognize is that those proposed building starts are going to carry on. They are not going to stop at the end of the two years.

Mr Brown: I am interested in your comments about the 3% cap and the carry-forward. I really do not have a question for you, but I do have a question for the ministry which I think you would be interested in. I would ask the ministry, when they meet with us next Tuesday, to bring forward their information on how much the 3% and the cap as it exists in this legislation will lever in terms of capital improvements to Ontario's buildings, and how they arrived at that amount and why we need 3% rather than 4% or whatever. Give us some logic for that. I think you would be interested in the answer also.

Mr Krauel: Absolutely.

Mr Turnbull: Unfortunately, I think this horrible piece of legislation will pass, because they have the numbers. Given that fact, do you not think it would be more appropriate to have some differentiation between old and new buildings, if you are going to have a differentiation in terms of the rate, as opposed to between small and large?

Mr Krauel: Perhaps I did not make my point clear enough. I am not trying to propose whether there should be distinctions between old and new versus small and large. I think that in itself would open up a phenomenal debate. My point was that to make these distinctions is ludicrous, because if you are controlling the market, we start out today with the rent for a brand-new unit in a large complex, $500, and we market the similar unit in a small complex for $500 because that is what the market will bear today. If we then make distinctions and say that units in small complexes can increase more each year, 10 years from now that small complex is going to cost more. Why will the market 10 years down the road, suddenly justify more for that? If we have artificially deflated the rent in the large, it will not work.

The Chair: I am afraid that it is all the time we have for this witness. Thank you for coming before us today.

Ms Poole: While we are waiting for the witness, could I please ask for an addendum to Mr Brown's request to the ministry?

The Chair: Okay.

Ms Poole: Would they also provide us with an explanation of the cost pass-through, why it was limited to one year for large buildings and two years for smaller buildings and what the rationale is in limiting the cost passthrough to those two sets of years?

The Chair: We will certainly try to get that information.

LONDON AND DISTRICT LABOUR COUNCIL

The Chair: The next witness, London and District Labour Council.

Ms Bell: My name is Sandy Bell and I am an executive member of London and District Labour Council, representing 25,000 members in the London area. I am employed at Ford Motor Co in Talbotville and I am a member of the Canadian Auto Workers, Local 1520. I am also a tenant.

I had the opportunity in March of this year to submit a report to the Ministry of Housing during the public meetings that crossed the province. It is heartening to know that our provincial government is taking steps to try to arrive at a fair piece of legislation that addresses some of the concerns that both tenants and landlords raised at that time. We recognize that rent control is a double-edged sword. With that double-edged sword in mind, I am going to comment on some of the main features of this legislation, and I am going to try to be brief and to the point.

Prior to the proposed changes to the act, party policy was that annual rent increases would be no more than the rate of inflation. We now find that increases are to be calculated by a portion of a rent control index based on the rate of inflation, plus a 2% allowance for capital expenditures, and in addition, landlords will be able to apply for increases up to 3% above the guideline in certain circumstances.

While 3% might sound like a modest rate, it is a great deal to families living on the average industrial or service wage. The reality is that tenants have even less means of keeping up with the inflation rate than landlords do. The problem here is that wages are not going up as fast as inflation. In fact, the real wage has declined in the past 10 years.

It is definitely a progressive step that government is acknowledging the differences between landlords with many units and the landlord with only two or three units. However, the tenants in these smaller buildings are in effect being penalized because they do not, for whatever reason, live in the perhaps lower-priced larger buildings.

Landlords are allowed now to apply for increases in the event of higher heating, hydro or water costs. What about the tenants, though, in many town houses and apartments who pay their own utilities? There is no protection for them. Keep in mind that London water costs may go up by as much as 44% in the near future. Many of these units are heated by electric baseboards, and hydro bills can be as high as $300 in the winter months. There does not seem to be much sense in subsidized housing with utilities this high. Maybe we could have some money set aside from the Ministry of Energy as an incentive for conversions to gas or cheaper methods of heating, or perhaps tenants could get some kind of a rebate on their heating costs.

It is also a step in the right direction that landlords have to be more accountable for the repairs being done. It seems that this legislation will prevent a lot of the past abuses of the system that led to high increases. It should encourage the serious landlord while discouraging the people who would buy properties with a small investment and pass on the high cost of financing in a quick sale. It is a sad fact that some people in the "landlord business" forget the human element involved in it, and that these rental units are not just investments but people's homes. Landlords not being able to claim any increases until work orders are completed should help to improve many people's living conditions much more rapidly than before, but taking this one step further, we need to educate the public on what is an acceptable standard, and how and who to complain to. Ideally, a province-wide system for standards should be implemented.

The new system designed to resolve differences between landlords and tenants seems to be more streamlined and efficient, although there is still a need to assist tenants to organize and educate themselves on this and other related legislation. A single tenant on his or her own does not always have the knowledge or expertise to go up against large development corporations or landlords with clever lawyers.

Regarding the five-year exemption from rent control on new buildings, I guess the question here is, will it stimulate investment and employment? A few months may be a little early to tell, but I think the number of building permits issued for rental housing should be closely monitored from year to year, and if it proves the five-year exemption is not doing what was intended, then it should be removed. At the least, long-term leases could be offered to give tenants in the new buildings some protection.

The system to allow tenants to get key money back and for reduced rents when services are withdrawn or maintenance is poor should be applauded. Finally tenants have some leverage when dealing with unscrupulous landlords.

When you speak of rent control, it is not an isolated subject, so if you do not mind, I would like to digress for a moment to make a few points on some peripheral areas indirectly affected by rent control.

Many non-profit housing groups end up hiring property managers from Toronto or other cities, and it ends up much like the famous absentee landlord situation. If these non-profits were turned into co-ops, the tenants could manage their own affairs.

We are all concerned with urban sprawl. Of the 30 or so co-ops in London, only one is downtown. Construction on the second is just starting. London is classified with smaller towns in the area, such as Woodstock, Strathroy and St Thomas, as far as land costs go, which puts our maximum unit prices for construction, or our MUPs, way out of line for downtown land costs compared to the smaller towns. If cities of 300,000 or more could have non-profit and co-op MUPs changed to reflect Toronto, then underdeveloped downtown areas could be utilized, helping with the urban sprawl problem.

With rent control legislation in place, government has a responsibility to build more co-ops and non-profit units to offset the decline in rental housing by private developers. This would also give tenants more options in the housing market.

We have reviewed the section in this legislation on regulations and sincerely hope that the spirit of this legislation will not be subverted by these regulations. All in all, we feel that this is a comparatively good and fair piece of legislation. It is good to see a start being made and we will continue to work and lobby for affordable housing for all. Thank you.

1440

Mr Tilson: I am looking at the name of your organization. I assume it has something to do with employment as well. We have had landlords, owners, construction and concrete people come and say that thousands and thousands of jobs have been lost. Restoration projects have stopped, maintenance projects have stopped, capital improvements have stopped because of the provisions of this legislation and thousands of jobs, many of whom are held by tenants, across this province have been lost because of this legislation. I would like you to give me your comments, as a result of the position that you hold, as to how we would encourage the government to encourage owners of buildings to get back into the business of restoring their buildings and maintaining their buildings and putting capital improvements in their buildings to get many of these people back working again.

Ms Bell: I am not an economics expert, but I think the transitions allowed for in this legislation for people who have started improvements are quite good.

Mr Tilson: We have faxes coming to us that say the jobs have stopped. The projects are not proceeding. They are being cancelled.

Ms Bell: My personal view is that I think it is a little bit of sour grapes on the landlords' part; they are just trying to arouse the public's sympathy. The jobs are being lost all over, not just in that area.

Mr Duignan: Thank you for coming and making this presentation this afternoon. In your experience as a tenant, how do you feel this new bill will affect tenants? Do you think it will be more fair than the previous piece of Liberal legislation?

Ms Bell: Yes, I do. I think it gives you more options and more ways to deal with the landlords. Granted, there are not a lot of bad landlords, but the ones who are make it difficult for a lot of the poorer people who cannot afford to live in the higher-priced buildings, and they are the ones this legislation is going to help.

Mr Duignan: What would be your main concern in relation to Bill 121, and what would be a recommendation to change that?

Ms Bell: I guess my main concern would be the increases. I am not sure how the increases are going to affect buildings that already have been given rent increases because of previous construction and things that have been done, and I am not clear on how that is going to affect future increases, whether the other percentages now added to what they have already been given will be large. That is one part I am not clear on.

Mr Brown: I want to pick up on what Mr Tilson was talking about. We had the Toronto-Central Ontario Building and Construction Trades Council in front of us telling us that they had lost construction jobs, not as a result of the recession but rather specifically as a result of Bill 4. We had concrete restorers tell us this.

What particularly they suggested, and this is the trades council, was that for concrete restoration work, which is megabucks when you are fixing a concrete garage, the pass-through allowed in this legislation just will not work, it will not allow those things to happen. Those were their words, not the landlords' words, not Liberal or Conservative words. I wonder what your membership thinks of that, both tenants and people in the construction trades.

Ms Bell: I am not sure I can relate to what Toronto is doing, but I think that in a lot of cases if these garages and so on had not been allowed to get into the state of disrepair they are in, they might not have had this problem.

Ms Poole: The expert testimony has said with regard to underground parking garages that it had nothing to do with the state of disrepair. It was at the time of the construction, which was basically in the late 1960s and early 1970s. They did not then have the technology to do it properly and did not even know it at the time. Now the salt has gotten in and corroded. So it does put another face on that particular problem.

LONDON HOME BUILDERS' ASSOCIATION NORQUAY HOMES LTD

The Chair: Norquay Homes Ltd. We will be following the same procedures: 15 minutes, and you can withhold some time for questions if you wish.

Mr Howe: My name is Michael Howe. I am speaking to you today on behalf of the London Home Builders' Association and my own company, Norquay Homes Ltd. The London Home Builders' Association represents more than 200 builders, renovators, subcontractors, suppliers and related professionals in the residential building industry in London. Norquay has constructed in excess of 1,400 rental suites in and around London over the last six years.

It has always been our intent to go into the residential business for the long term. To accomplish that we always understood and expected to have large losses in the early years of operation of the buildings we build, knowing that as time went on and rents slowly increased under the old legislation these losses would end and eventually we would earn a reasonable return on our investment.

During the course of formulation of this new legislation, the concept enshrined in the old legislation -- that 1% of the rent increase was for capital replacement and 1% was for the owner's return on equity -- was lost. It was replaced with a new dictate that this 2% portion of all rent increases must be used for capital improvements. This sleight of hand guarantees that buildings which are presently in a money-losing position will continue that way indefinitely.

Some committee members may recall that when I spoke to this committee last January regarding the proposed Bill 4, I said that we had put a hold on further construction of new rental projects until we had a chance to review the final rent control legislation. Given that the present Bill 121 will become law in the very near future without significant change, we have decided that we will no longer construct any new rentals in the province of Ontario. The human effect of this decision, which I assure you was not taken lightly, is that 48 employees presently on temporary layoff or on work-share will be laid off permanently. We no longer have any prospect of providing employment for these people.

I do not need to tell you the catastrophic effect that this decision has for the employees and their families, many of whom have been in our employ since the early 1980s. With the economy in its present shape, these people have little or no prospect of finding work and many will soon be facing the end of unemployment benefits. We planned to construct two more rental complexes this year and would have been in a position to recall most, if not all, of these workers. These rental complexes will never be built because of the misguided, ill-conceived and punitive legislation that you are now reviewing.

I have spoken to many others in the business of providing rental residential accommodation who are as concerned with this piece of legislation as I am. They too have indicated that they will not proceed with any new rental projects. Do not let today's 2% and 3% vacancy rates lull you into complacency. These vacancy rates, just like the 5% and 6% rates in 1981, will evaporate within two years. Before the next provincial election this province will be faced with a residential rental crisis more severe than anything we have witnessed to date, and the government will have no one to blame but itself.

Let me explain to you, for example, just how this legislation has affected one of our complexes. It is a 22-yearold, 130-unit town house complex. In late 1988 a review of the complex with the property manager indicated that all roofing should be replaced, as it had reached its life expectancy and could no longer be repaired on a satisfactory basis. In addition, the original site lighting installed by the then owners in 1969 was felt to be less than adequate from a security point of view. Again, most of the underground cable had exceeded its life expectancy and was continuously failing, causing night-time blackouts of portions of the site lighting. Exterior soffit, fascia and window frames needed to be painted, as bare wood was beginning to show on most of the window and door frames. If left unattended, this would result in rotting of frames, requiring complete replacement of windows and doors -- an unacceptable situation.

1450

The work was contracted and undertaken during the spring and summer of 1990 and completed in its entirety in September 1990. This work was undertaken and completed in accordance with the legislation in place at the time. We were advised by our solicitors that we would be entitled to a rent increase of 4.1% above the guideline or approximately $24 per month per unit. This work and application was supported by our tenants at an information meeting held to discuss work that both we and the tenants wished to see completed.

Based on the legislation that was in force, we would have had a first effective date in 1990 for this rent increase. Unfortunately, just as the work was being completed, an election promise of this government resulted in retroactive legislation that wiped out this rent increase. And this, notwithstanding that the work was completed in accordance with the law that was in force, that the application for increase was made in accordance with the law that was in force, that the money to pay for this work was borrowed on the basis of legal increases that would have started in late 1990 -- we are now making payments on that loan without the benefit of those rent increases -- and that the application for a rent increase can only be made after the work is completed.

"Don't worry," the then-minister said of Bill 4. "It is only temporary. We will see that you get your increase under the new rent control law." Let me tell you how we are being looked after under this new rent control. Based on the law that was in force, that we followed explicitly, we would have received total increases of $42,217 starting in late 1990. Under the proposal before you today, we may see an increase of $24,000 starting in June 1992, with a carry-forward increase of $14,000 starting in June 1993. However, it is unlikely that we will see all or even much of these increases. For an order to be eligible, we would be required to complete an additional approximately $100,000 per year of capital work in addition to that which we have already done.

Unfortunately, the new legislation does not consider appliances, flooring, carpeting, cupboards and new shower tiles as capital improvements. That is the work that we are now trying to complete and the work that our tenants are much more interested in seeing completed. Let's face it, tenants do not care about new pipes, structural members or roofs. They are more interested in the carpets, flooring, cupboards and showers that are inside their home and that they live with every day. Unfortunately, if you do not fix the roof first, there is not much sense putting in new floors or carpets. It will only get destroyed and the structure will rapidly deteriorate.

If you do nothing else to this legislation, make sure that you include these items specifically as capital. These are the things that our tenants and customers want to see done.

If one were to analyse the logistics of completing $100,000 per year of capital costs in this complex and financing them by way of some form of secondary financing each year, there will by its nature be a floating rate instrument. Presumably on the five-year anniversary of the first mortgage, one would try and roll this into the fixedrate first mortgage financing.

It all sounds logical until one looks at Bill 121 and finds out there is no pass-through of increased costs if interest rates do in fact increase. The inability to pass on an increase would make this whole scenario of secondary financing and renewal a financial nightmare, and in all likelihood impossible from a practical point of view. What financial institution would loan money under such circumstances?

All that aside, the government will tell you that it is going to get builders to construct new rental complexes by allowing the five-year exemption from rent control for new complexes. My company and many others were induced to start building rental complexes in the late 1970s when the government of the day declared that buildings constructed after 1975 would be exempt from rent control. These buildings were retroactively covered by rent control in 1987 without warning. My company and many others like it were encouraged to complete capital improvements in 1989 and 1990, only to have our rent increases retroactively denied after we had completed the work in good faith and expended millions of dollars under the current law of the day.

Just how many times does the government of the province of Ontario think it can abuse the industry? My company, for one, will construct no further rental accommodation in Ontario until some old-fashioned common sense and fair play is put back into the rules of operation. Quite frankly I do not believe that many other builders in this province will be lured back into building rental residential accommodation until this legislation is dramatically altered.

Mr Mahoney: I would like you maybe to expand on what it is you would need to see changed before you would alter your corporate decision to stop building -- recognizing that, frankly, all three parties have been involved in the creation of rent controls or exacerbation thereof in one way or another What kind of changes would you need to give you the level of confidence that common sense would be brought back?

Mr Howe: I am not sure that there is a very short, fast answer. There are so many problems with the legislation, starting just with the 3% cap, that it does not permit capital expenditure, that the 2% supposedly now included in all rent increases does not include the things that tenants want most. If we are trying to do a 3% capital project that is legitimately capital, and simultaneously satisfying our tenants' requirements for new carpeting and flooring, those items are not even going to be allowed to be included in that 2% calculation. How can we do it? The money is not there. There is no magic to this business. It costs money to renew.

Mr Mahoney: So your biggest interest would be an expansion of the items that would be allowed. If that were done under the definition of capital, are you suggesting that this bill would then be acceptable?

Mr Howe: No. I think there is a lot more wrong with it than that. The search-and-seizure provisions. The fact that one tenant can hold up all the rent increases for a building for ever -- they will never be reinstated -- over what could be a very minor maintenance issue, allows so much abuse of the system. We support the fact that there are bad landlords. They are out there. We know them and they need to be controlled. We do not have a problem with that. But the things you have done here are going to allow such abuses of the system that the average landlord simply cannot cope.

Mr Tilson: It has become more and more apparent that Bill 4, and now Bill 121, do benefit the rich or, as the government refers to them, the bourgeois. But clearly people with high rents think this legislation is wonderful because the higher rents are frozen. My question to you, in your capacity as a member of the London Home Builders' Association, is why would people in that category, the higher rents, leave and buy homes or build homes? So the whole housing industry is affected by these two pieces of legislation. That has been alleged in other parts of the province. My question is, do you notice any trend starting in this part of the province?

Mr Howes: I think it is even more apparent in lower rent units. If a person has a fixed rent of $500 that includes their hydro, their taxes, their heat and all the costs of living in their shelter and it is controlled at such a low level, why would they even consider going out and paying $1,000 a month to have a house -- plus having to pay hydro and gas and subject to 40% increases in their electricity bills over the next three years -- when they are totally sheltered from the realities of the world?

Ms Harrington: I would point out that if people can save money in rental accommodation, then hopefully they will be buying homes if they can save a down payment. We are open to amendments on this legislation just because of the reasons that you are saying. We do not want abuses of the system. We want it to work. We want it to work fairly. Do you also build homes?

Mr Howe: Yes, I do. That is our primary business.

Ms Harrington: When was the last time you constructed rental units?

Mr Howe: We finished our last units in December 1990, our last two projects.

Ms Harrington: That is good to hear. The situation you were talking about with the renovations to kitchens and bathrooms and these types of things, you are saying they really wanted this to be done. What kind of increases in rent did they face?

1500

Mr Howe: Speaking in general terms, the cost of replacing carpet and appliances in a town house is something in the order of $2,500. That would be in the same order of the capital work we had already done, what we felt was of primary concern, the roof and structural work, and would probably have resulted in the following year in a similar 3.5% to 4.5% increase. We discussed this with our tenants. They understood that and they were happy with it. This is something they want to see done. The units are 20 years old. The carpet is lovely in most cases except that it is orange or lime green. It will start to show wear on stairs and things.

Ms Harrington: Just to clarify, you said you would be charging them a 3% increase?

Mr Howe: In addition to the basic guideline increase. It would have been approximately 3.5% to 4.5%. The problem is that this legislation does not allow us to declare those things as capital.

CARLTON GROUP

The Chair: Our next presenter is the Carlton Group. We will be following the same procedure, 15 minutes, and you can withhold some time for questions and answers if you wish.

Mr Wolf: I am Norton Wolf, president of the Carlton Group. It would come as quite a surprise to me if our government came to me and said, "We'd like to retain you as a consultant." However, I believe that is exactly what should happen because of the experience, the background, the education I have had, a lifetime in this business. One of the things I would promise in such a case is that I would not dwell on the benefits or the evils of rent control, but I would dwell on the basic philosophy of rent control as we know it in Bill 121.

First of all, if I were consulted, I would like to make it very clear to my clients that they should never delude or deceive themselves that there is going to be any major political value in passing such a law. I know and I have heard -- and I do not think there is anybody in this room who has not heard it a million times -- that there are more tenants than landlords. That would imply very clearly that anything that is done is done for political expediency. That is not so and I would like to prove to you that is the case.

Generally speaking, we are looking at three players: the landlords, the tenants and municipalities. With the municipalities, I mean pretty well all the people of Ontario.

When we talk about the landlords, I am not going to even get into that because it would be akin to an innocent party being led to the gallows and falling in love with his executioner.

The tenants fall into two categories. We have those who are truly in need, and they are defined as individuals or families who pay more than 30% of their income for rent. Looking at that group, on Wednesday, August 7, 1991, the Toronto Star had an article "Business Finds Rent Review Bill `Chilling'." In that article, the former Housing minister, Dave Cooke, introduced the proposed system saying, "Ontario's tenants will have the best protection in Canada." Actually, they will have the best protection in pretty well all the western world.

The next paragraph says: "However, tenant groups heard from yesterday said they were also disappointed with the bill. `It will only result in more homeless people if landlords are allowed increases" said Marnie Hayes of the Ontario Coalition Against Poverty."

The point I am making to the NDP government of Ontario is that if these are the people you are playing to, if this is the market, they are coming out publicly and saying,

"We're not happy, it is not enough." Basically, if you cannot afford rent, you cannot afford it. It does not matter if the rent is artificially held down, if improvements are not allowed they are going to have a problem with paying the rent and they are saying so. There are cases, I am sure, in the marketplace who cannot afford any rent. So this is not going to work.

By far the vast majority, 73% of tenants, are not heard from a great deal. They are professionals who are paying less than 30% in many cases; the majority less than 20% on rent. They are very concerned about the level of accommodation they are living in. They want a good rapport, they want to have a relationship with the onsite people with the landlords. They want improvements to come along. They would like to see fresh new furniture in the lobby, new carpets and so on. They do not mind a moderate increase. They realize, sure, if they can get a bargain, great.

I do not think any of us in this room would not complain about the price of gasoline, but if it were put to us, "We will drop the prioe of a litre of gasoline one cent, but we will not repair the roads," I do not think we would be too happy. We would say: "Okay, let's leave it as it is. We want to drive on improved roads." This is a similar situation.

The municipalities are a different story. They are being hit exceedingly hard these days with escalating costs. We have already heard of the additional burden that is going to be borne by the municipalities with the pass-through of the addition to the welfare costs.

The cities are hit basically in two areas. There is very little -- and chances are, with the implementation of Bill 121, almost none -- new construction in apartment buildings. Second, as the values decrease in the apartment buildings -- and they are decreasing; economists and appraisers say as much as 40% -- eventually, and it will not be that long, those decreases in value will be passed on as lower taxes to be paid to the municipalities. The municipalities cannot expect increases in apartment buildings if in fact the apartment buildings are devalued and if the owners are having financial problems in meeting their obligations.

So the burden is going to be on (a) the home owner to make up the slack, and (b) small business, neither of which municipalities are happy to see. If they are not aware of it now, they are going to be very aware of it in the next four years.

To sum up, we are seeing who really are the targets, who are the beneficiaries of Bill 121. I cannot see it as a bill that is going to improve the social or economic life of the people of Ontario. If a very small group is going to get the benefit, maybe that is the minor area being targeted. The total picture is one of who is getting the improvement and where is the target of the government in this bill.

Ms Harrington: Thank you for coming. I want to let you know we are here to govern for all the people of Ontario, not just a particular group. You are right when you say some people cannot afford any rent increase at all, we realize that. The housing picture in Ontario is much larger than strictly rent controls. We have to look at providing places for people to live who cannot afford any rent increase. That is why we are dealing with non-profit housing and the Ontario Housing Corp. Now we are beginning to look at this, after being in government 10 months or so, and how to improve it.

We want to encourage housing starts as well. What has happened in the last 10 years -- and I am sure everybody in this room and beyond knows this -- is that there has been land speculation. The cost of land has caused a lot of the problems, even in the rental market in Ontario, especially in Toronto and other larger cities. There has been a lot of abuse in the past. We cannot rectify the sins of the past as a new government, but we have to start from where we are now and govern in a manner that is equal for everybody in this province and try to get a good system, and it is very difficult.

1510

Mr Wolf: I can appreciate what you are saying. Land speculation is an area I find difficult to justify. Basically, it is a supply and demand situation, but that very supply and demand situation is why a free market system works best when it comes to apartments. The free market --

Ms Harrington: Free market and speculation, then.

Mr Wolf: You have to understand the psyche of developers. They really want to develop, there is no question about it. It becomes a part of their life, it becomes an excitement and they will overbuild, I guarantee you, and I can show it over and over again, allowed free rein they will overbuild. They will overdevelop and as soon as you get a marketplace with a surplus of supply, prices are going to come down. Free rents are going to be offered, all kinds of incentives-are going to be offered. There is no question. This is one of the areas you must try to look at very clearly. There is now at least a two tier- and maybe a three-tier system in rentals. When you get that lower tier not moving up, it is all part of a socioeconomic system. The lower-tier people stay there because they have such a bargain they do not wish to move.

Mr Mahoney: I think your chances of being hired as a consultant by this government are somewhat remote, but I did enjoy your presentation. We heard the real answer, the real agenda here, from the parliamentary assistant who talked about land speculation -- I believe I am pretty close to quoting her -- and she said, "especially in the city of Toronto and large urban areas." It seems to me they have drafted a bill to resolve some perceived problems by some specific interest groups in some of the larger urban communities. There is no question that we saw examples of very unfortunate problems in some parts of the city of Toronto and other parts as well. As a result, they have simply drafted up legislation on a province-wide basis to solve the problem. Do you know of any of these supposed horror stories that --

Mr Duignan: What did you do in five years?

Mr Mahoney: I love it when they get excited. Wehear the justification being the marble lobbies and all the great expenses and exorbitant amounts of money being spent driving people out of their homes, economic eviction and land speculation. Do you know of any of those kinds of stories here in London?

Mr Wolf: I know of no story of that nature here in London, no.

Mr Mahoney: Would you anticipate that land would be any kind of a speculative nature? Would you buy land for speculative purposes, in other words, to flip in the London community, or would you buy it for perhaps longterm economic viability and development purposes?

Mr Wolf: If I were buying land it would be with the idea of having a development for that land. That incidentally is true in Toronto. Do not misunderstand me, there are some land speculators right now in Toronto who are getting very badly hurt. The more you pay the more it costs you for carrying costs, and the more it costs you for carrying costs the faster you have to do something. These guys are getting hurt.

Mr Mahoney: If you take your hypothesis and your explanation of who is affected, etc, can you explain to us what the agenda might be? Are the people drafting this legislation on behalf of the NDP -- I do not mean to be unkind -- stupid? I would hope not. Or would they have some kind of an agenda that perhaps we are not familiar with?

Mr Abel: That's a leading question.

Mr Wolf: As a consultant.

Mr Mahoney: Yes, as a consultant, absolutely. I do not think it was a leading question at all.

Mr Abel: He needs a crystal ball to answer that one.

The Chair: A very short answer.

Mr Wolf: All right. I talked about political expediency. They made promises. Whether those promises are logical or sensible or not, they are going to have to try to fulfil those promises.

Mr Mahoney: They're not even keeping them.

Mr Wolf: There are those who think they are not.

Mr Tilson: The question I have for you is with respect to subsidies of the poor or lower-income groups. I would like to hear your comments for or against, or both, with respect to that subject.

Mr Wolf: I believe there should be a rent supplement to those who are truly in need. The money would come from the savings in costs, the very onerous cost of rent controls. Far beyond just the cost of administration, rent controls are truly costing the taxpayers of Ontario a mad fortune. If you took 50% of today's cost for rent controls and gave it to the people who really need it, instead of holus bolus -- why should a wealthy person living in Grosvenor Gate, for example, in London, a beautiful apartment building, be subsidized, but not the poor guy with a blue-collar job who is busting his butt to pay his mortgage because he has three or four children, works on an assembly line, but he owns his own home? He is not getting these benefits.

Mr Tilson: I agree.

Mr Wolf: But they are. Definitely support those people, but the money has got to come from within. The money is being spent poorly now.

Mr Tilson: The socialists will tell us that the cost of subsidies will far exceed the cost of rent control. That is what they will tell you.

Mr Wolf: Only if they subsidize people who do not deserve to be subsidized, which is what is happening now.

SOUTHWESTERN ONTARIO TENANTS ASSOCIATION

The Chair: The next presenter, Southwestern Ontario Tenants Association, Susan Mellor. We have been allotting 15 minutes for presentations. If you wish, you can withhold some time for questions.

Ms Mellor: I am choosing to respond to only a few points in Bill 121 and I will illustrate my concerns about those points through a particular building whose tenants I am working with right now. I chair a regional organization of tenants and tenant associations. I also work privately as a rent review consultant for tenants. I have a background working with university student government in student housing problems and I sit as vice-chair of the access to housing committee in Guelph and so have a background with people who are on the most severe end of what happens in the affordability crisis.

I am currently working with tenants on a volunteer basis in a building in Guelph. It is a low-income rental building. Last year the landlord applied for a 25% rent increase for capital expenditures. The capital expenditures included putting a roof on the building, paving the parking lot, putting a new boiler in, redoing the plumbing in all of the building, redoing all the windows, doing balcony work redoing a laundry room, basically reconstructing the building.

The landlord simultaneously applied to change the hydro meters over from a bulk meter for the whole building to individual meters for each tenant. The tenants in the building are comprised of very elderly people on lower fixed incomes, low-income families, many of whom are waiting for positions in subsidized social housing, and low- and fixed-income single people. The education level of the tenants in the building is very low, on average, and some have quite complex problems other than income and education.

1520

The building has been owned by the same landlord since it was built 23 years ago, and since it was built, no major capital expenditures have been done on the building and no major maintenance work has been done on the building.

Now, of the issues that arise around Bill 121 concerning this building and where it is in the process right now, for the tenants in this building, the first issue is that of tenant consent. It is considered by people with whom I work that the tenant consent provision in Bill 121 is dangerous. It is dangerous to tenants. Under the RRRA certain provisions were made for tenant consent. Those regarding changes in services and facilities require tenant consent. One of the services and facilities, for instance, would be the hydro metering. Tenant consent in this building when the meters were changed over last year involved getting a notice from the landlord, saying: "Your hydro is going to be shut off on the first of next month. You'd better get down to hydro and turn it on." Those tenants who were frightened or unknowledgeable did so, without realizing that they had the right not to consent.

The important thing is, consent is good. No tenant would say he would like things done without his consent, but it has to be accompanied by increased tenant protection as well. Otherwise, consent is going to involve coercion. What that has meant to the tenants in a subsidiary way -- this changing over of meters -- is that the landlord has estimated an average $15-a-month reduction in their rent to compensate for the metering, but those who have changed over are paying approximately three times that now for their hydro, because of the different rates for individual metering and because each one of them is paying an administrative cost to the hydro authority. That is an affordability issue as well, I think.

The same thing happens with tenant consultation. The changes last spring or a year ago last spring requiring consultation with tenants are meaningless. Tenants are informed but what can they do with that information? They need to know that under the old legislation, there was nothing they could do. They could only be informed and leave if they did not like it. I cannot see that Bill 121 is making any difference in that.

The second issue for tenants is tenant involvement in the process or the procedures under Bill 121. It is section 59 that I am referring to in particular, that tenants have 30 days to request a hearing. Unless tenants are already organized they are not going to take advantage of that. They will not know what it means, and they will not know why they should request a hearing because they do not know what the difference is, what the advantages are, what kind of input they might have. For instance, in the building I am talking about the landlord submitted September 1, 1990, for his capital expenditure increase. Only two of the 72 tenants in the building had sufficient education, confidence and concern to even respond in any way in writing to the ministry, and their responses are completely off the mark as far as the legislation is concerned because they do not know what the mark is. They do not know what they should be responding to and how. Again, I see no improvement in Bill 121.

I have a specific recommendation for this provision: that tenants be given an amount of time after they have been notified by the ministry that the ministry has received the application from the landlord; that the notification from the ministry briefly summarize for the tenants why the application has been made; and that the notification have a mail-back request included with it, so that all tenants have to do is sign it if they want a hearing. I think what happens and what has happened in previous legislation is, if you look at the forms that are provided to landlords, all landlords have to do is fill in boxes, check off other boxes. Tenants have to actually compose something to write, and I do not think that is fair, particularly in that many landlords have staff to compose things and to fill out these forms. I would like to see some kind of mail-back, some initiative on the part of the ministry to ensure that tenants are involved in that process.

I am pleased to see that the financial loss allowances are gone, but regarding capital expenditures and capital allowances, under section 12, the 2% allowance in the guideline, there was, under previous legislation, an amount for capital expenditure in the guideline every year, but no one ever asked the landlords if they spent it or not. So they took it as a gift, some of them. Some of them were very honest. Some of them made capital expenditures without ever going to rent review. I do not want to put a blanket on everybody, but when someone does come for a rent increase on capital expenditures now, he should be required to account for that 2% in previous years. That is easy. It is in landlords' interest to separate out their capital expenditures, capital costs on their income tax every year. It is in their interest to account for those separate from income and maintenance expenditures, operating expenditures. They have that information. It is not onerous; it is not a burden. They already do it.

Ms Mellor: One last point is on the issue of neglect. It appears to me that under section 15, clauses 15(2)(a) and (3)(a) contradict each other. Clause 15(2)(a) says that an eligible expenditure would be one to restore the building's integrity, whereas clause 15(3)(a) renders an expenditure ineligible if it is caused by neglect. Why would you have to restore a building's integrity if you had not neglected it? They do seem to contradict each other.

Mr Stockwell: This building you are speaking about in Guelph, are any of these particular renovations or capital improvements he is doing caused by neglect?

Ms Mellor: If a building has not had anything done to it for 23 years, I would say that everything is caused by neglect.

Mr Stockwell: Okay. I understand the answer. So you would be in favour of the landlord doing these capital improvements?

Ms Mellor: I would be in favour of the tenants being in active consultation, empowered consultation with the landlord over them.

Mr Stockwell: But that was not the question. The question was, you would then be in favour of the landlord doing these, considering it has been 23 years since he has done any major improvements.

Ms Mellor: The ones that are necessary for health and safety, yes.

Mr Stockwell: Roof, boiler, windows; it appears that most of them are. So then, contrarily, could I assume that you would be in favour of a 25% increase?

Ms Mellor: No.

Mr Stockwell: Why?

Ms Mellor: Because the landlord has owned this building for 23 years. He could have been doing a number of these things over the years.

Mr Stockwell: But would that not have meant they would have got increases previously?

Ms Mellor: No. Since we have had rent review legislation, he has been given an amount in his guideline increases every year --

Mr Stockwell: Oh, I see.

Ms Mellor: -- and over the 23 years, he has already got 25% for capital expenses.

Mr Stockwell: So in the 23 years he has owned this building, his increases he has passed on to the tenants.

Ms Mellor: They have all been guideline increases. This is the first time he has been to rent review.

Mr Stockwell: Do you know what those increases would be?

Ms Mellor: Even if he is allowed 1% over 23 years, that is 23% for capital.

Mr Stockwell: What about inflation?

Ms Mellor: On what?

Ms Harrington: You made some very good points. The first one I noticed was that you are in favour of consent but not coercion, and that is certainly something we will have to look at in more detail, how that can be accomplished. Further to that and the whole idea of trying to empower tenants, you mentioned the word "confidence." We can see even in our presentations how important it is. The whole question of how you do that is very difficult. The committee you sit on, the access to permanent housing committee, is hopefully part of that process. I would like to compliment these committees. We have seen them in action in various parts of Ontario. It was an initiative of the previous Liberal government, and I think a fine one, and I hope it will continue.

But any help or any suggestions about how to empower tenants is something that I think will give a real balance here, and if landlords and tenants can deal with each other, then hopefully the government is not going to have to get as involved, as we do not want to be.

Mr Mahoney mentioned that the majority of the problem, he feels, is in Toronto. How great do you feel the problem is here in London?

1530

Ms Mellor: I have worked here in London and between Windsor and Scarborough, so I have a good sense, maybe more than most people, of the differences between Metro and this region, because I am the only one I know who actually works for tenants in Metro and in the southwest region. I would say the problems here are worse, as far as empowerment goes.

Ms Poole: You raised a very valid concern about the right to a hearing in section 59 and that the tenant would have 30 days to request it. We have also noticed your helpful comments about the mail-back, but I just wanted to let you know it is even worse than you feared; it is 15 days, so that is something that really does need remedy.

I think Mr Brown had a question.

Mr Brown: Specifically, I am interested in the building you used as an example, and I think we here are all concerned with the affordability question. What would you estimate the income to be of the people in this building? It is relatively low, I would suspect.

Ms Mellor: Very low; a number of people on social assistance, working people on minimum wage.

Mr Brown: So it would be fair to say that at best you are looking at $300 a month as a rent they could probably afford, using the kind of formulas that we toss around for affordability.

Ms Mellor: They are already paying an average of $420 for one bedrooms and $470 for two bedrooms and they are looking at 25% on top of that.

Mr Brown: So right before we get to rent review, a rent increase, whatever, they are already paying 40%, 50%, maybe even 60% of their incomes in rent.

Ms Mellor: Very hard-pressed, yes.

CARPORT STRUCTURES INC

The Chair: The next presenter is Carport Structures Inc. We will be following the same procedure: 15 minutes; you can withhold some time for questions.

Mr Riopelle: Just so you will be familiar with the product that I am talking about, I had a little kit passed around; the product is on the front page of the brochure. These products are not available anywhere in Canada at this time. They have 30 years of track record in the United States and do very well supplying a demand for, let's say, covered parking that the tenants would like.

I proceeded with this venture after consultation with the rent review administrators on a local level who assured me after one day of preparation on their part that a separate charge for these carport systems, if kept separate and not included in the rent, would not be subject to rent legislation. Obviously, that was a key question because everything hinged on whether or not we were going to continue with this venture. After a day, we got the answer: Keep it separate and accountable and they are not subject to rent legislation. Great. Away we go.

Two years later, $257,000 later, four jobs later, we discovered some nine months ago that, whoops, I think maybe there is a misunderstanding somewhere; so I recontacted the people who review this, and I said "Let me run this by you one more time, just to make sure we understand where we are going." I went through this scenario again. Okay, the tenant would like it. He is willing to pay for it. We have put it in, and so on. They said: "Oh, no, that does not work like that at all. No, if they are put in it is a capital expenditure under section. .." and so on. Well, I just got in my car, drove over and said, "Please, tell me it is a dream," but we went through it over and over again and started to dig into it. Then I started to write to various people, and you have the privilege of having the fattest file of our entire corporation. It is all rent legislation.

So we contacted various people. Obviously, the minister, David Cooke; he wrote and answered some of our inquiries. Colleen Parrish did as well. The local people here in town did as well. Everybody is trying to come up with some sort of a solution. We are now $482,000 into this endeavour.

The people who would put up new buildings or who do not have their rents regulated at any particular time, or set or whatever, they are allowed to put these in and, in agreement with the tenants, either included in the rent or separate, charge whatever they want to, as long as it is a new complex. That is fine.

What I am concerned about, and a large part of our business depends upon, is the existing complex, the people who now are living in apartment buildings and who are saying, as a new one is going up, "Well, can I not get a carport, a covered parking system as well?" And I say to them, "I don't have an answer, other than, if the landlord wants to give it to you, sure, you can have it; but if he wants to charge you for it, you are not allowed to have it." But he will say: "Well, I don't mind paying extra, if I am getting extra. I am a little irked at having to pay another $20 if I am getting the same four walls and the same carpeting and so on. I can buy that." But he is willing, and we did an extensive amount of research in this to find out the marketability of it and what they would be willing to pay and how we could work this out, and invariably the results were: "Yes, I would pay extra for my own spot. It is there. It is covered." Especially the elderly people, they really like the idea of being able to get in and out of their vehicles, arms full of whatever, and be in some sort of comfort, especially in the rain.

We are out there doing feasibility studies and as we are marking the parking lots and designing this thing, people are coming up to us, "Are you marking the parking lot?" "No, we're not. We're actually going to be considering putting in carports." Their biggest question is: "How soon are we going to get them? Are we going to be able to get them before the snow starts?" That is their basic question. And I say: "Well, these can't be free. You can understand there is quite an expense to them. You know, we would like to make them available." And, as I said, their biggest concern is: "How soon can we get them? Of course, we expect to pay more. These things are not for free."

We have seven people on our payroll and our staff right now who are working developing this, and there are 25 people who are on hold. We have our backhoes, our trucks, trailers, our augers, our welders, everything is all set up, sitting for one year right now, and we have not been able to put them to work, other than on new complexes. As you all are aware, there are not too many of those going up at this particular time, so we were kind of stuck with saying, "Keep making the payments on this stuff; it is going to go absolutely nowhere."

How do we get ourselves out of this? There are a few scenarios I am assuming, and I have gotten some very competent and qualified legal advice on this. I am working very hard at it and I am going to continue to work with Colleen Parrish and her people. All we are trying to do is save the seven jobs we have, plus the 25 additional jobs. This is just in London. We have had requests all over Ontario about becoming subdealers, getting involved with putting up these structures for people and so on, so the number of potential jobs is maybe 200 to 300.

I am biased. I am convinced that it is a small guy like myself, and 3,000 others like myself, who will create 25 to 100 new jobs every few years, who are going to get the whole thing going in the right direction. But I am obviously very much stuck with the way the thing ended up, and trying to explain to the consumer that I do not have an answer: "If you want to move into a new building, go ahead. You will have this opportunity for a carport structure."

1540

Why would the tenant want it in the first place? In your little kit there were a few little mentionable things. The main thing they like about the carport systems, especially the ladies we talked to, is that they are going to be much safer. There is no sheltered crime. We have some buildings in this city, unfortunately, where some people were attacked in their parking garages. So the ladies are parking all over the streets, on the top of the parking structures where parking is allowed. These things are open sided. It is almost like a Neighbourhood Watch program.

In the States in all of our research, they say there is very little crime involved in an open structure. The thing is wide open. You can see through. There is lighting involved, so therefore they feel they are much safer. There is not this sheltered crime, as I mentioned.

The other idea is the convenience of being able to say "I do not have to move. I do not want to move because my rents are reasonable here, but I would not mind having this particular structure." I do not have, as I said, an answer for those people at this particular time other than possibly taking subsection 45(1) and trying to see if you cannot prescribe, along with cable vision, carports and covered parking as part of an item where the tenant can decide if he wants it or not.

We do a survey in a building and there are 100 tenants, 60 of whom right off the bat will say: "Hey, I'm interested in that. I would pay extra for that coverage." Then I recommend to the landlord, "Don't put in any more than 40." Everybody gets enthused about something, a new idea, at the beginning. Put in 40, there will always be a number on the side waiting. If that person decides to change his mind, let him change his mind. Give it to somebody else who would really like to have it. If the person is going to pick up and move on, do not get him strapped into a 10-year agreement that no matter what, he has to take on the lease. We do not need any of that kind of stuff to start with. There will be people, once you get them in, who will be fighting to keep them, and their neighbours will be fighting to get into this covered structure.

It has proven itself 30 years in the States, and people say to me, "Well, how come it has taken so long to come into Canada?" If you had two days, I could tell you exactly why, and I am not even concerned about competition at this point. It is a nightmare that I am involved with, and I am just asking if you people could look into the possibility of giving them an opportunity to say: "Yes, I want it. Yes, I am willing to pay for it, and if I want to get out of it, I can just walk away." That is it.

Ms Poole: Hi, Mr Riopelle. It is nice to meet you in the flesh after I contributed to part of that.

Mr Mahoney: Excuse me?

Mr Riopelle: Your stuff is in my file, yes.

Ms Poole: Did I say something wrong? Anyway, I was glad Ms Parrish was able to provide some assistance to you. I just wanted to confirm something which is mentioned in your handout: that this will be entirely with tenant consent, that you are not forcing anybody to take something that they do not want. This is an agreement with the landlord and tenant based on consent.

Mr Riopelle: Absolutely. If you keep the numbers down, if 60 people want it, have a smaller amount available so that they do not feel pressured into keeping something they do not want. If they do not want it, just pass it on to somebody else.

Mr Mahoney: Why would something like this not be almost a separate lease in a sense? Maybe that is a question for the government members. If the parties agreed, presumably you would have some kind of a master lease to the actual person who owned the land, which would be the land owner. If he had 60 apartments and put in 30 spaces, it would be up to him to lease them totally separately. It would have nothing to do with face rent or with the actual lease or the tenure of the lease or anything. If they do not want to pay the amount, they do not pay it. They do not get the space.

Mr Riopelle: That is right.

Mr Mahoney: It probably is too much like common sense to work.

Mr Riopelle: It is exactly what we are talking about, and it is exactly the solution that I said. If the person who wants it is willing to pay for it, why not let him have it? You are not going to cover 100 spaces in 100 units because some people do not have cars, others do not want it no matter what. You are not going to force somebody to buy if he does not want something.

Mr Tilson: I guess the problem you are raising has been raised in other types of areas. In other words, any agreements between landlords and tenants under this Bill 121 simply are not allowed.

Mr Riopelle: Right.

Mr Tilson: In other words, if you do not meet those specific increases or specific allowances that are in the agreement, you are out of luck.

Mr Riopelle: Exactly.

Mr Tilson: We have had tenants and landlords come to us and say, "But we've agreed on it." Of course the bill says, "Tough." I guess that is the approach I would be interested in hearing some comments on, from some of the government members, as to whether there are ways of getting around that when tenants do agree with the landlord that a certain project such as this should go through.

Mr Riopelle: Precisely.

Ms Harrington: As I mentioned to the previous presenter, I believe there is no problem with the consent as long as there is no coercion, and we have to ensure that.

Mr Riopelle: Exactly.

Ms Harrington: We have to look at that. I understand you are already working with our ministry people. Hopefully, we will come up with a solution. We are looking at the problem of separate charges too, and taxes and other things.

Mr Riopelle: If it could only be prescribed, as it is with cable, because it is a unique product. There is nothing like it. You either go in the ground or to stacked parking. It is a completely new element. I think that is maybe what originally threw off the people who administered it. It took them a day to get back to me to say: "Keep it separate and accountable. It's not part of rent, so therefore it's allowable." I went along with that. I thought that was a solution.

Mr Winninger: As you know, Mr Riopelle, this is a fairly complex issue. You and I have discussed it a number of times, and while you were not told not to do it, it was suggested to you that you get your own independent legal advice --

Mr Riopelle: Which I did.

Mr Winninger: -- before going ahead with it.

Mr Riopelle: Oh, excuse me. No, definitely not. Two years later I went and got legal advice and started to work on the legal advice, but prior to that I was told there was no problem. It was going to be separate. I did not proceed with it until I had put so much money into the slot machine I had no choice but decide to walk away from $250,000 or put a bit more in development.

Mr Winninger: Sure, but no one told you not to do it. In fact, now the Ministry of Housing is looking at whether there is some specific amendment required to separate out your carport systems as a separate service --

Mr Riopelle: Yes, that is what we are working on.That is right.

Mr Winninger: -- so that they would not be included in the base rent.

Mr Riopelle: Right, that is exactly what we are working with.

JOSEPH HOFFER

The Chair: The next presenter is Joseph Hoffer, for 15 minutes.

Mr Hoffer: I have a handout which I have provided to members of the committee. I will be referring to it at some point in my presentation. I do not intend to throw out a lot of generalities because I have only a few minutes to make a pitch. I want to make a pitch on behalf of a number of people who were severely hurt when the NDP took office and overrode the rule of law and retroactively changed not only laws but people's lives.

The biggest problem with the Rent Control Act that has now been proposed is the uncertainty that it presents to landlords. This type of uncertainty has been found in rent control legislation before. It existed when rent controls were first introduced into the province, and it was only cured after the Thom commission of inquiry concluded that there needed to be certainty. Our experience with Bill 51 was that people did use the legislation when there was certainty. Prior to that there were no regulations. What happened was that landlords found themselves more or less at the whim of whatever administrator, at that time officer, they happened to be in front of. You are reintroducing that concept with this legislation. All the substantive provisions in the Rent Control Act do not address the real issues that are going to come before a rent review administrator. There are no particulars in here. They are shrouded in the secrecy of regulation. As you all know, those regulations can be changed overnight by the stroke of a pen. So how are landlords going to rely on this legislation?

In order to highlight the uncertainty, I want to focus on a particular section, section 16, by which the NDP recognizes that it treated a certain group of people very unfairly back in 1990. It is the section that allows landlords who completed capital expenditures between January 1990 and June 1991 to go back and collect some kind of increase as a result of those expenditures. That is the window dressing, but if you look at the section you will see that it offers very little to these landlords other than risk. The section itself says, "The landlord may base an application on a capital expenditure that the landlord has carried out" in previous years. "Capital expenditure" is not defined other than in the previous section and there it is extremely restrictive.

1550

Very few of the examples I will be referring to fall within these definitions of capital expenditure, so that while, on the surface, it looks as though you are giving them an opportunity to recover these costs as a result of the unfair treatment, in fact by the time you work these numbers there is nothing left for the landlord. It is going to be, in these examples, less than the 2%. So that part is meaningless. You do not specify anywhere whether or not the landlord and tenant can agree to capital expenditures other than capital expenditures which fall within this extremely restrictive definition.

I do not understand why landlords and tenants cannot agree on things and why this government seems to think tenants are too stupid to understand what a landlord is asking them to do. In my submission -- and I have seen lots of these agreements and I have attended many hearings -- tenants are not stupid. They do not need the government to say what they can and cannot have. If they want a fridge, if they want a stove, if they want a carpet, they should be able to have it without having to go to the government and get special permission.

Another problem with section 16 is that there is no indication as to how a capital expenditure allowance will be calculated. You have to remember that these landlords who spent, in the one case, over $100,000 and, in the other, over $200,000, financed those capital expenditures. They have been carrying the cost for the entire period of time. If you are going to recognize, by enacting section 16, that they have been treated unfairly, you should recognize that they have been carrying those costs for approximately two years by the time their application goes through, and you should build those costs into the costs of the capital expenditures. What I suggest to you is that with section 16 there should be a provision that treats capital expenditures as capital expenditures under Bill 51, not as capital expenditures that we have to guess at under the Rent Control Act.

I just want to refer to the examples I have given you. There are not very many pages. The first page is a petition for the attention of Bob Rae. It is 100% support by tenants of an application made by a landlord here in London. In effect, the tenants are supporting the landlord's application for a rent increase and indicating an appreciation of what the landlord had done in terms of renovating the complex. If you look into this case further, you will find that the previous year the landlord had also made a number of improvements. The type of improvements we are talking about in this particular case were a new roof, roof flashing, drains, en suite carpet, common area carpet, en suite painting, aluminum soffit and fascia and new countertops in the units. There were many other things of smaller value but these were the major value items.

If you look at this petition that was sent to Bob Rae, you will see among other things a concern by the tenants that the government is interfering with their needs and wishes. That is exactly what happened here. If you go in, you will see a letter from the Premier written to the tenants. It is the type of patronizing letter I have seen many times from the government in response to people who were complaining about the unfairness of the legislation. If you look at page 2, you will see that the Premier advises that the legislation is an interim measure only. It is going to pass and it will allow for an extensive period of consultation. I believe that what he is referring to is this brief summer period of consultation. If you think about this letter in response to that petition, you have to ask yourself what in the Rent Control Act addresses those concerns. Nothing in the Rent Control Act responds to these tenants' concerns.

The next page in the material I have given you consists of a representation by a landlord. He notified all the tenants of what he planned to do. He was going to install fridges and stoves in all the units, was going to put new carpet en suite and in all common areas and was going to replace an existing boiler that had been there for 14 years. The landlord obtained the tenants' consent to the purchase and installation of these things and made an application in complete reliance on the law. The NDP retroactively changed the law.

Here we have somebody else who is caught by these unfair provisions. This section 16 purports to restore or help the landlord in recognition of the unfair treatment, but it does not do that. The only thing the landlord in that second situation will get credit for is the boiler, and that is less than 2% of the rents by the time you work the numbers. The landlord has to eat the cost of all the other things that people got the advantage of, including the carrying costs for the last two years.

I ask that the committee, having recognized that they treated the landlord unfairly, offer a true remedy and not the kind of window dressing that section 16 is as it currently exists. I ask that you make specific references that the capital expenditures that a landlord claims on this type of application be capital expenditures that were allowed under Bill 51, under the same amortization periods, and that you also include a provision that would build in the interest costs the landlord has had to carry for two years waiting for this long-term legislation that was promised by Mr Cooke. This section, as it is presently worded, illustrates the uncertainty.

Many other sections create uncertainty for landlords. As a practical matter, it is very unlikely that landlords will ever go to rent review. Rent review will be the last thing a landlord will ever want to become involved in -- I think the government knows this -- because there is no practical benefit to a landlord. There is extreme risk, and we are not even sure what type of results can be achieved by a landlord, because everything is done through the regulations.

The last point is another concern I have with the act. You have taken away from landlords, especially the small landlords, the right of appeal. You say there is an appeal on a question of law to the Divisional Court. Ask yourself how many landlords of duplexes and triplexes and fourplexes, who are treated unfairly, are going to have the funds to go to the Divisional Court to correct that unfairness. You have robbed them of that right. The person who is deciding at first instance is a political appointee. You can bet that the political appointees, in order to keep their jobs, are not going to have a track record of making findings in support of the landlord. It has got to be independent and that is not the case right now. That is my presentation.

Mr Winninger: You made a point concerning the kinds of repairs and renovations that tenants may consent to that you feel were barred under this proposed legislation. As an experienced lawyer working in this field, you would be aware of section 17, which provides for an application based on specified capital expenditures that a tenant agrees to; and also section 18, which provides that a landlord can apply for an increase based on additional services that a tenant agrees to. There is that mechanism built in so that if a landlord and tenant agree, repairs and renovations other than the necessary capital repairs referred to elsewhere can be done and passed through, up to the 3% cap.

Mr Hoffer: With all respect, that is not what the section says. First, it is only prospective. Second, it talks about capital expenditures. Well, capital expenditures are defined in a very restrictive way, so the only things the landlord and tenant can agree on, apparently, are things like roofs, hot water systems, boilers things that fall within the definition of capital expenditure. If section 17 is to have the meaning that you put on it, then it has to broadly define capital expenditures beyond the narrow definition that we find in section 15. I think it would be tremendously important. If that is what you really intend, then you should specify that, because that would really go a long to resolving some of the problems.

Mr Winninger: I cannot imagine why we need section 17 if what you say is true. It would just be redundant, and section 18.

Mr Hoffer: Section 17 says "capital expenditure." If you go back to section 15, it tells you what capital expenditures are. There is no ambiguity there. It is a very restrictive definition.

1600

Ms Poole: I would like to elaborate on your point about the right of appeal. Quite frankly, I share your concern that it is very limited now. Certainly most tenants and most small landlords are not going to be able to spend the type of money to take it to the Divisional Court.

When I asked a tenant representative about the right of appeal the other day and whether she was concerned about the limited right -- she was also a lawyer, which is why I asked her -- she said she was not so concerned if there was to be a hearing, particularly if it was a three-member panel. She was extremely concerned if it was going to be in an administrative review and there was not going to be any right of appeal. Do you make any differentiation? Would you like to see that right of appeal right across the board, regardless of whether it has been a hearing or an administrative review?

Mr Hoffer: The right of appeal should be right across the board, regardless. There is even more room for error in an administrative review, but even at a hearing level, if it is not an independent tribunal -- and the way this act is set up it is not -- then there is no way that a landlord is going to be fairly treated. The pejorative nature of this legislation against landlords would dissuade any landlord in his right mind from risking a hearing in front of one of these officers. It would only be out of pure necessity that I would ever recommend that a landlord go to rent review.

Mr Tilson: Mr Winninger, I believe, is a representative in this area, and I am sure if you asked his assistance he would be pleased to present this petition to the House on your behalf because it certainly is an important point that needs to be raised.

Ms Poole: On a point of order, Mr Chair: I did read this petition in the House. It was sent back in the spring.

The Chair: That is a point of information, not a point of order.

Mr Tilson: The comments you raised with respect to section 16 certainly are repeated throughout the hearings. I appreciate your suggestions. Certainly our party will be putting forward an amendment to that section 16 for the consideration of the committee because it does not catch work done in 1989. The percentage increase it has allowed does not even cover the carrying costs or the financing that has been carried by individuals until now and, more important, the whole issue of neglect did not exist previously and now it does, so I do thank you for your thoughts on that section.

Ms Harrington: I wonder whether we could get a point of clarification from the ministry staff with regard to section 16, the definition of the capital costs it covers, whether it is defined in Bill 51 or Bill 121. It might help the presenter.

The Chair: Can we have that information now, or do you need time?

Mr Irwin: Let's have a little time in clarifying that one.

Mr Hoffer: My only point would be that it has to be in the legislation.

Ms Poole: Mr Chair, just for the information of the committee on that point, I asked Dana Richardson that very question about those specific cases and she told me the only provision that would apply would be the 3% cap, not the definitions of "necessary" and "neglect." It would be good to get that confirmed for our committee.

The Chair: Very good.

Ms Harrington: In other words, it is a Bill 51 definition.

Ms Poole: That is what she said.

DAVE SOUTHEN

Mr Southen: I am Dave Southen. I am just a small property owner here in town together with four other people. We have a 16-unit building in London. H. L. Mencken observed that politics is a futures market in stolen property. There is no better example of that than this proposed legislation. I see that the committee here is basically the same committee I spoke to regarding Bill 4, so not much has changed in terms of my problem with the bill; and of course what I have said is now part of the permanent record. As I pointed out, I have four partners in a small property that was built in 1972, and it suffers from all those design problems that buildings of that vintage display.

Like the previous presenter, I feel profoundly let down by the legislation that was produced as a result of the inquiry into Bill 4. Politicians are not listening, and really do not give a damn about anything other than partisan politics. I had the dubious distinction of meeting with my NDP member of provincial parliament on Friday. Quite simply put, she said the tenants were the people who elected her, and too bad if I lost my life savings. The greatest good for the greatest number is the only thing that counts. Or, alternatively put, if you rob Peter to pay Paul, you can always rely on the support of Paul. What a vile, pernicious, self-serving, evil statement. Given that there is no chance to have any input whatsoever and that the NDP is going to ram through whatever it damned well pleases, at least the worst parts of this very bad legislation should be addressed. Let me address those.

First of all, the split between large and small buildings is really absurd, other than the fact that "capital improvement is a percentage of gross rents" may mean that a smaller building should need a larger increase. I cannot see any evidence to show that it costs more to operate a small building than a large building. Indeed, I state that the contrary is true, that a large building would typically have a larger percentage of operating costs than a small building.

Second, the issue of capital cost or capital expenditures: A 3% limit is completely and totally unworkable, especially for small buildings like mine. The roof on the building of which I am a partner is 7,000 square feet, and it costs about $35,000 to replace it. The property is 20 years old and we have done maintenance on the building regularly, including spending $9,000 on the roof a year ago, but ultimately it is going to have to be replaced. It is coming to the end of its useful life.

The 10-storey building has the same roof area, so how can we justify making that expenditure and getting nothing for it? It does not really make any sense. It certainly would not be efficient for us to do things in a piecemeal fashion on this building, a little bit this year, a little bit next year and so on and so forth so we could avoid being caught in this carryover problem other speakers have addressed better than I have.

Another problem for us is the reclassification of capital items. I am sorry, carpets, flooring, cupboards, fridges, shower tiles and so on are most certainly capital items. One fellow at the most recent hearing was taking me to task that our cupboards were only lasting 20 years. Well, I am sorry, that is a capital item when it can last 20 years. Taking that out and changing these classifications is absolutely absurd. Mike Howe put it more eloquently than I did. My tenants do not care about the state of the roof or the fact that we have galvanized plumbing, but they certainly care about the refrigerators and the carpets, and the carpets are 20 years old. These are things we could agree to replace, but we are no longer in a position to do so.

A cap on recovery of operating costs: If the hydro goes up 44% over the next three years, you are asking that we bear this cost almost entirely. A 3% limit on pass-through is completely absurd. Why do you wish to shelter the people from the market that you control, essentially, and make the landlord bear the entire increase? I guess the thing that disturbs me most of all about this legislation is the disregard of Dave Cooke's promise, that those caught with capital expenditures they could not recover under Bill 4 would be treated fairly. Another broken promise. As Dianne Poole pointed out, the electorate gets mad about broken promises. How can you trust what a government tells you? The truth is, you cannot.

I could not but help think when you were making that comment, of the old adage that the way to tell if a politician is Iying is if his lips start to move. Reaching to a legacy of lies and broken promises, it was a jaded and disillusioned electorate that voted for the NDP and I have seen nothing but a jaded and disillusioned electorate since then.

A permanent reduction in building value: Other people have spoken considerably more eloquently on this particular issue. All I can tell you is that my life savings have been confiscated and I hope you are happy about that.

The last point is perhaps a little more personal. I do not really want to rehash everything I told you during my presentation the last time through. My partners and I have owned this building since 1988. We bought it as a longterm investment. We have not generated a cent of cash flow, because anything the property did generate we have been reinvesting in the property. Indeed, it has had negative cash flow every year, because essentially we have been upgrading the property as much as we possibly could. We have received many compliments from our tenants about how much better things are.

Our building is going to require a significant capital upgrading due to its age and the materials that were originally put into the building, and really, quite simply put, we cannot afford to do this. It is going to be very, very sad for me to have to tell our good tenants that we cannot afford to do upgrading because there is no money available. I hope you are satisfied. That is it.

1610

Mr Tilson: Your disillusionment and frustration are showing around the province, sir; I mean the reaction we are getting from many people who have spoken to us with respect to Bill 4 and then returned. I would like you to direct your thoughts to one area that was raised in the bill and which you have referred to: the distinction between small buildings and old buildings. One of the alternatives to that clause is the idea of talking about the age of buildings, in other words, perhaps distinguishing buildings prior to 1975 as opposed to after 1975.

Mr Southen: I am not really an expert to speak on this. All I can tell you about is my own property. It was built in 1972 and, like I say, has galvanized plumbing, aluminum wiring and so on and so forth. Realistically speaking, the tenants do not give a damn about that sort of thing but the galvanized plumbing has to go. You have pressure problems. We have gone through a lot of it. We have replaced all the cross pipes completely but the risers are left to go.

Mr Tilson: I think that is the point that is being raised, that the realistic gauge should be the age of the building as opposed to small or large.

Mr Southen: It seems to me that under the old bill replacement parts were given a life -- risers 15 years, 10 years, 20 years, whatever it happened to be -- that bore some resemblance to how long things last in the field. That would be a reasonable way to go about replacing parts. I do not think delineating the thing based on the age of the building would make sense. If a building needs to have something replaced, it needs to have it replaced regardless of whether it was built last year or 100 years ago.

Ms Harrington: Our new minister asked us to look at amendments to the act. One thing we have mentioned is the small versus large buildings, the old versus new buildings and how to try to make the system workable. I will not get into any argumentative debate with you, but I want to know a little bit more about your building. How many units does it have?

Mr Southen: Sixteen.

Ms Harrington: I think I remember you coming before us.

Mr Southen: That is right.

Ms Harrington: What kinds of increases were you looking for?

Mr Southen: Like I say, we were just in the process of getting geared up to do the improvements on the property when the legislation came in and we quit doing that. To be quite honest with you, I am uncertain. I cannot imagine it would be large, and even if it were in percentage terms, by the time the rents were done it would still be very, very modest. Our two-bedrooms are probably 800 or 900 square feet. They are running for $450 a month all-inclusive. If we had spent $10,000 a unit and done everything, I rather suspect the rents still would probably end up -- I am not certain -- in the $570 or $580 range. For that size of unit, it would be very, very reasonable value.

Ms Harrington: You will be looking towards about 20% or 25%.

Mr Southen: It would be imprudent of me to say so. I do not know.

Mr Brown: Where is your building located?

Mr Southen: In south London.

Mr Brown: In the riding of London Centre?

Mr Southen: It is actually in David Winninger's riding.

Mr Brown: In effect you own a triplex?

Mr Southen: For all intents and purposes I guess that is true.

Mr Brown: You own a triplex, so you should qualify for two thirds. We have been having the same difficulty you are having with this because there is absolutely no reason under the sun that they have been able to provide why the buildings are differentiated, in terms of passthrough, by whether they are six units or less or larger. The mom-and-pop operation might be more likely to own the small building, but it makes no difference whether you go together with four partners and buy a 16-unit building or whether you own a triplex.

Mr Southen: That is right.

Mr Brown: Obviously, from your point of view, you need that money maybe more than somebody who just built a brand-new triplex. Quite conceivably, could that be true?

Mr Southen: I do not really want to take money at somebody else's expense. That is not really the way I was made. I do not really want to get into entitlements and that sort of thing.

Mr Brown: I agree with you entirely. I think the point here is that the differentiation being made is totally artificial without any kind of foundation.

Mr Southen: It really is. Like I was saying, it really is contrary to experience too, from what I know of larger building operations. I have owned a duplex or a triplex in my day and they operate at a considerably lower percentage of overall expenses than do buildings with elevators and so on and so forth. Those typically operate at 50%, the big buildings. Our building operates at 45% and it is just a walkup; and the small stuff, you might get away with 30%, I do not know, but certainly a lot less. It seems to me it is backwards, if anything.

LONDON CHAMBER OF COMMERCE

The Chair: London Chamber of Commerce. Gentlemen, we will be following the same procedure. You have been allocated 15 minutes for your presentation. You can withhold some time for questions and answers, if you wish, and we need you to identify yourselves for the record.

Mr Barry: My name is Frank Barry. I am the vicechair of policy for the London chamber, and with me is Jim Etherington, who is this year's chairman of the London Chamber of Commerce.

Essentially, our position supports that of the Ontario Chamber of Commerce, in that we are opposed to rent control in its present form. We have taken the position in the past and we continue to take the position that provincial rent review programs have mushroomed into a huge bureaucracy that inhibits construction of housing. We believe this contributes to the withdrawal of investment in existing and new facilities and causes more problems than it solves, thereby hurting the very people the legislation was designed to serve. We also believe that any benefit of the rent control legislation to tenants is short-lived in that there will be no extraordinary increase in rent.

However, on a long-term basis, we believe, in conjunction with the Ontario Chamber of Commerce, that the legislation will achieve the following negative results: It will discourage developers from building an adequate range of rental accommodations. It will discourage landlords, particularly the provisions for not capturing increases in capital cost, from doing major repairs and the maintenance that is required for a decent standard of living. It will discourage financial institutions from making loans to finance the construction and renovation of rental accommodation. Quite clearly, no financial institutions are going to make loans if they feel that the landlords are in a very shaky financial position. It will discourage people from making the normal progression from renting -- for example newlyweds -- to owning property of their own. It will encourage landlords with a small number of units, particularly those not subject to the Rental Housing Protection Act, to convert from residential rental to any other available use.

We feel it affects detrimentally those people in the construction industry, because it inhibits the construction of a range of rental accommodations. It artificially creates problems between landlords and tenants, and it causes personal hardship to many smaller independent landlords whose savings are tied up in their properties and who are unable to afford the necessary repairs. We view these small landlords particularly as independent businessmen. They are pursuing their ownership. They are in the business of providing accommodation, not from altruistic motives, but primarily as a business, and we simply see it as unfair and untenable that small businesses should be penalized in such a fashion.

We have three recommendations, in addition to those made by the Ontario chamber, and I presume, Mr Chairman, that you have seen the recommendations of the Ontario chamber. We would recommend, in addition to those, that the government continue to monitor the difference between actual rents and market rents, because that tells an awful lot about the artificiality of the situation. We should also be monitoring vacancy rates to determine whether or not the legislation is really necessary. As you may be aware, vacancy rates in London have been increasing. Third, we would like to see the government devise a new rationale for housing policies in Ontario so that the marketplace will function sensibly and not be subject to artificial controls. That, briefly, is our presentation.

1620

Ms Poole: Thank you for your presentation today. With reference to your comment about the legislation discouraging financial institutions from making loans to finance the construction and renovation of rental accommodation, have you had examples of that happening in the London area? Have members of the chamber brought you instances where they have gone to the bank to try to get a loan or to try to refinance and it has not been possible? Is this just a fear you have that this will happen, or do you have concrete knowledge that it is happening?

Mr Etherington: I am a vice-president of London Life and we are a major investor in residential mortgages and residential development in this country. Certainly in the planning process, in making the estimation of whether there is an adequate return in that business versus other kinds of investments, we have shied away from areas where there are very stiff rent controls. That is in a very general sense. I am sorry I cannot give you statistics, but I could probably provide them to the committee if it is interested. Rent controls tend to retard the interest of investors even the size of London Life.

Ms Poole: There are several aspects of Bill 121 which people have alluded to which might discourage the financial institutions from wanting to continue mortgages. One of them is the rent penalties; there is no security that the income will actually be continuing. The second thing was that there is no certainty that when a landlord completes the capital expenditures they will indeed be passed through, because I gather the financial institutions are finding it too restrictive and too uncertain. Do you have any knowledge of this? Can you confirm whether that is indeed a problem?

Mr Etherington: I cannot give you details. My area of expertise is not in the investment area. From what I have read, and in talking with our investment department, you need to have encouragement and incentives in order to make the investments. We are speaking not as a landlord, because London Life is not a landlord. We lend money to developers, and sometimes entire subdivisions.

Ms Poole: You may be a landlord sooner than you think.

Mr Etherington: That is correct.

Mr Brown: We have been made aware that the gap between market rents and economic rents is actually closing rapidly right at the moment, and perhaps recession is the reason for that. There is a Royal LePage study, commissioned for the Ministry of Housing, that is showing that blip. It would seem to me right at the moment a more restrictive rent control policy is almost counterproductive.

The government is always accusing the Liberals of having a wildly extravagant system, which, as you know, provided an average of a 5.8% increase across Ontario. Yet under that system we ended up with market forces and the rent control system actually coming closer together in providing more accommodation during the period it was in place. I do not know if you just want to comment on that statement. I would appreciate it. Are your statistics telling you the same thing?

Mr Barry: Yes, we can agree with that. The general sense is yes, that is happening, and it confirms our approach that in fact the market forces should be brought to bear, should be allowed to take place, because obviously in any situation with an oversupply of accommodation, the asking price goes down. It is a pretty simple economic situation that we believe should be allowed to exist.

Mr Turnbull: Premier Rae has stated that he wants the co-operation and confidence of the private sector. Is there anything in this legislation which would lead you to believe that this will engender such confidence?

Mr Barry: From the point of view of the business community, no. We see this as another example of the opportunities for the small business community being run over, if you will.

Mr Turnbull: We have had testimony from a lot of landlords, particularly small landlords, who have mortgaged their houses, and in some cases have gone out to their in-laws and got them to mortgage their houses too, to put down as the deposit on a building. Typically, they have put down 20% or 25% cash on it. They have seen their equity wiped out as a result of Bill 4 and now Bill 121 and they are still losing money on the building. Not only do they not have any capital gain, or any net after-tax income, but in addition, as they are trying to refinance their buildings, they are being told: "Your building is worth less. Therefore, we want you to have some equity in it. You will have to have a smaller mortgage, so you'll have to come up with some cash." What will this do in terms of the message this sends to investors in other businesses?

Mr Barry: I am not sure how to relate it to other businesses, but very clearly investment in the housing industry and that part of the housing industry is going to be very severely affected and in fact retarded. There is no question.

Mr Turnbull: Do you think this is going to have a negative impact in terms of foreign investment in Ontario?

Mr Barry: Absolutely. Oh, yes. If a businessman, a small entrepreneur, cannot see his investment mature in a small residential apartment, for example, what is the point of making that investment in the first place?

Ms Harrington: I think you may have heard me say this before, and certainly it is quite obvious, that part of the whole housing picture in Ontario is the viable private rental market. I think that is self-explanatory and we have to get to that point. But on the other hand, housing is such a basic need that we do believe as a government that there have to be regulations in that field to assure people. I understand that there is a period of instability now for people with regard to investment, whether or not it is pertaining to government or the legislation or the recession. Business all over, not just in the rental housing market, is in a period of instability, and we know that we want to get to a period of stability.

I have a couple of comments with regard to your submission. First of all, you say this legislation will discourage the normal progression from renting to owning. I firmly believe that people have to have an affordable place to rent in order to accumulate a down payment to move into owning their own home. I think that is a very strong urge in this province. We, as Ontarians and Canadians, do want to get into the home ownership market.

You also mention a deteriorating relationship between landlords and tenants. I am stating that there has been a problem in the past, and there probably still is. It is a very important part of our platform that within the mandate of this government, over the next five years, this has to improve. We believe that landlords and tenants have so much common ground that we have to improve the situation.

The last thing I wanted to let you know is that last week in Toronto we heard a submission from the Provincial Building and Construction Trades Council of Ontario, and it strongly endorsed this legislation. I do not have their brief in front of me, so I cannot comment in detail on it. But I certainly hope that we can try to work together.

The Chair: I have a couple of questions myself. How large is the investment pool of the company where you are the vice-president, sir?

Mr Etherington: Of London Life in residential mortgages?

The Chair: Yes.

Mr Etherington: It is $5 billion.

The Chair: And that is all totally invested already?

Mr Etherington: Yes.

The Chair: How many more hundreds of millions of dollars per year would you expect to invest in the housing market?

Mr Etherington: The decision on investments is made on the basis of prospects of return, whether it is a small business or a business the size of ours. We would look at all the potential investment opportunities, whether they are commercial or residential on the building side or investment in businesses, joint ventures or stocks and bonds or whatever the case may be. In other words, I cannot give you a real answer because it all depends on what the opportunity is.

1630

The Chair: What is the corporate policy on the rate of return, other than the best you can get?

Mr Etherington: I think the return on equity in our company is around 19% to 20%.

The Chair: Per year.

Mr Etherington: Yes.

The Chair: That is one and a half times the Canada savings bond rate.

Mr Etherington: I do not know whether that is a fair comparison in the sense that our job is to return good value to our policy owners, of which there are more than two million Canadians, and our shareholders.

The Chair: Based on a 19% return, are there any rental properties in existence that could give you that rate of return, or any that could be constructed that could give you that kind of return?

Mr Etherington: Obviously not. The rate of return on the mortgage portfolio is nowhere near 18% or 19%. I am talking about total return on equity in the company as a whole.

The Chair: I want to zero in just on the housing if it is possible. What is the corporate policy on the rate of return in the housing sector that we were talking about earlier?

Mr Etherington: We work with the market, obviously, and seek a return at the top of the market as best we can. One of the things we try to work very hard on is quality of our investment as well, because we are using the money of policy owners. Our arrears position on mortgages is .001%.

The Chair: So you have good customers.

Mr Etherington: Yes. We work very hard on establishing good relationships with our customers.

The Chair: What has been the average rate of return in your housing portfolio, say, the last five years or maybe even the last one or two years?

Mr Etherington: I am not sure we segment that out. I will seek that figure for you if you would like to know it.

The Chair: If it is possible, unless it is confidential information.

MORNINGTON PROPERTIES TENANTS ASSOCIATION

The Chair: Mr Eric Harrison of Mornington Properties Tenants Association, we have allocated 15 minutes for your presentation. You can withhold some time for questions and answers. Anyone who is going to be part of the presentation or answer or ask any questions, we need you to identify yourselves for the Hansard record.

Mr Harrison: We are here on behalf of the problems where we are living at Mornington apartments. They are real concerns to us. We do not seem to be getting anywhere with the rent review board when it comes to overcharged rents. We have people who have money coming to them, and their case is with the rent review board and they have been there, some of them, for three years. The last figure I heard, about 100 people in the three complexes had money coming back to them. That is one thing.

In regard to the enforcement of new legislation and rent controls, how do you propose to enforce these?

The Chair: As Chairman, I am not here to answer your specific questions; I am here to conduct the meeting. We have staff here to answer specific questions or your questions can be asked of the government members or the opposition members, whomever you wish.

Mr Harrison: I will go to the government.

My question to the government is how it is going to enforce all this new legislation that is coming into effect. In the past legislation regarding rent control and all this stuff and regarding the maintenance of buildings -- for instance, I have been there 10 years and the only work we have got done in those buildings, three complexes, is by work orders through the city. We have been in touch with superintendents and management and we have got nothing done, so we had to go over their heads and go to the city, city health and city standards. We have had some progress since we did that, but this is our main concern.

Why should we have to go to the city to get work done? We have been in touch with the city standards and they have said they are understaffed. They do not have the people to go through all these buildings. As I said, we have had work done. It has taken a year to get some painting done in the buildings.

Ms Harrington: I certainly would be pleased to try to answer your questions or any other member here, but I thought you would want to make a further presentation of your position on the legislation or any amendments to it. That is our usual procedure.

Mr Harrison: All we have right now is what we are discussing. We just want to know how you are going to enforce all this new legislation. We have had rent controls and all this over the years, but they have never been enforced.

Ms Harrington: Okay, I will go at that. We have had not rent control; it was called rent review in the past.

Mr Harrison: Rent review, yes, that is right.

Ms Harrington: It started in 1975 under the Conservatives. This was regulation of the rental market, but it did not work.

Mr Harrison: That is right.

Ms Harrington: Now you have a new government that is saying: "It's got to work. We're going to make it work and have real rent control."

Your question is a very valid one. How do we make sure that maintenance is done? From listening to many other presenters, we have put in very tough controls that the landlord cannot get rent increases if there is an outstanding work order.

I understand that you are concerned about the city's bylaws being strong enough and having enough inspectors to do it in a timely fashion. I know what has happened in the past, it has dragged on for months and even years, and we do not want that. We want to have a system that will work and work quickly, and yet we want to be fair.

There is a period up to 30 days where this work order has to be enforced and we are trying to make sure it does work. We know we have to get after the municipalities and make sure that their municipal inspectors are out there doing the job. That is going to be tough but we have to negotiate with the municipalities on that as well.

Mr Harrison: I understand that, but the people who own these buildings, like the property management, they are from Toronto. Their offices are in Toronto. What they do, as far as I am concerned, is defy the city. You have to go right down to the wire before you get anything done.

They say they are going to do this, that and the other. Where I live, in 583, it has taken about a year to get my place painted. That is just the hallways and the stairwells. Now they have done 573; they are supposed to have done it over there, but they have not completed the job over there yet.

Ms Harrington: Under this legislation all I can say is that things are going to change. Maybe Mr Winninger might like to comment on the situation here.

Mr Winninger: I know a bit about the Mornington situation. I have heard many times about the leaks in the roof and many of the other problems within the apartments themselves. I know you have gone back and back on these same problems trying to get redress, trying to get city hall to respond.

One can only hope, as Ms Harrington just said, that unfulfilled work orders going to a special officer in the Ministry of Housing who can then issue a rent penalty order and allow the landlord only 30 days to fix this up or else, will provide a very strong disincentive to the landlord not to carry out these repairs because it can cost the landlords hundreds of thousands of dollars in lost rent if they do not comply with these work orders. If we did not have teeth in our legislation before, I hope this will give teeth to our legislation.

Ms Poole: With reference to your comment which I think was very well taken, I had a question. Is what you would like to see province-wide standards so that the province sets the housing standards and the bylaws as opposed to each municipality, thus having a big variation; or would you like to see provincial inspectors instead of city inspectors, or a combination; or would you like to see the province giving more money to the municipalities so they can hire enough inspectors? I just wanted to get an idea of the extent you wanted to go with this.

1640

Mr Harrison: I would like to see provincial inspectors and city inspectors. I am not blaming the city. They only have so much to work with, maybe, but the inspectors, you give them a call and within a couple of days they are out to see you. They say they have done the job, that is what the city says, but I would like to see somebody come up and have a look at the buildings when the job has been done, outside of the city inspector, like a provincial inspector. That is what I would like to see, because we have had jobs done and not even completed but we are told they are done.

Since I have been there, 10 years, they take the rents and they do not put anything back in the buildings. This is a fact. I have people here who will tell you the same thing, who live in different buildings. I am sure, out of your rent, a percentage of that goes to maintaining your building, but we do not get anything put back in those buildings unless there is a work order. Now they are trying to come back on us for two years' increase of rents. We have appealed that too, for the simple reason that we do not think it is justified, because they have never done any work in the buildings.

This is an outfit from Toronto. I do not even know the owner's name, but I know the property management is Kaymor. We have complained we cannot get hold of him. You phone him up in Toronto. So now they have appointed a lady, a Miss White. She is what they call the building manager. She is supposed to make sure that things are done in those buildings. I asked the superintendent the other day, "When are you going to put the light bulbs in the fire exits?" They have been out for three months. "We haven't got the money to buy the light bulbs." This is true. We have senior citizens there. If we have a fire in those hallways and there is smoke, there is nothing to see which direction they are going in. We have seniors down there. That is one of our concerns.

Also on the back doors, there were no locks on them, the locks had been taken out and we had bag people sleeping in the stairwells. They would come in at 2 in the morning, something like that. Anybody can come in. Last weekend we had a stabbing in the apartment. The police are there all the time. We have no security whatsoever. Are you not entitled to security? I remember around eight years ago, we had a man and wife superintendent and they had assistants, and every night from 11 o'clock until 2 in the morning they would check those floors; every floor, every hour on the hour. That was fine. Things worked out good then. We do not have that any more.

We have one superintendent in our building. He has a full-time job at the university. He is supposed to be the superintendent. He does not do any work around there in regard to cleaning. If somebody is coming up to check the building, he gives somebody a few dollars to clean the hallways. This is a fact. These people will tell you.

Where is the justice? We are paying rent and we should be able to live with dignity. This is my big argument. A lot of people do not understand what goes on in these buildings.

Mr Turnbull: I am sorry I had to step out just as you arrived, but I have picked up what you are doing. I want to tell you I am very much in favour of us enforcing standards in this province. I think it is most important that everybody live in clean, safe accommodation. Separating yourself from the buildings that you live in now, in a general sense, if you live in a building which is not owned by the public sector, do you recognize the fact that a private landlord has a right to make a profit?

Mr Harrison: Oh, definitely, yes.

Mr Turnbull: Would it be reasonable that he should be able to make a profit over a number of years -- I am not saying in year one, but let's say over the 10-year lifespan of an investment, because you always have to calculate when you sell it, whether he sells it in 10 years or not. Would it be reasonable, over the 10-year period of holding a building, that he should earn more money than if he were putting that money in the bank, because there is some risk involved in running a business as compared with putting it in the bank? Would that be reasonable?

Mr Harrison: It would be reasonable, but what I understand is going on with the landlords we have, they take the money out of them and invest it in other properties. This is what they are doing.

Mr Turnbull: Rents have actually gone up in this province, over the last few years, at less than the rate of inflation. The average over the last 20 years is that rents have gone up at less than the rate of inflation. Did you know that?

Mr Harrison: Well, everything else has, has it not?

Mr Turnbull: No, I am saying it has gone up at less than the rate of inflation.

Mr Harrison: Less. Okay.

Mr Turnbull: Did you know that?

Mr Harrison: I had some idea of it, yes.

Mr Turnbull: The statistic as to when accommodation becomes unaffordable -- this is according to our own Ministry of Housing -- is when your rent is more than 30% of your gross income; in other words, your income before taxes. There are some people who really cannot afford their rent. They are paying more than that.

Mr Harrison: Okay, I am going to give you an argument. We have apartments and every rent is different in those apartments. I am paying $60 more for the same apartment as they have down at the end of the hallway, but I have put more money in mine because I had to clean it up myself. I painted the place and I paid for that. But why should I be subsidizing somebody else? Is it because they are on a low income or what? Is this what it is all about? I pay taxes too.

Mr Turnbull: Actually, it is one of the peculiarities because we have had rent control for so long. If a landlord decided for some reason that somebody could not manage the rent and did not increase it, when rent controls came in, it has always been controlled at that level. So this apartment would keep on going up and would always be ahead by more.

Ms Hooper: I have been there 10 years. I am paying $487.80 a month for a one-bedroom. They have lowered the rents on one-bedrooms to $450 to get people to move in. On the guideline rent review sent out, there are seven people who are paying more than me and they have only lived there a year. I have been there 10 years and I am paying more than a lot of people.

Mr Turnbull: You can blame rent controls for that because people are controlled as to how much they can get and they are very reluctant to reduce it once they have that set.

Ms Hooper: I have had one year back-money that they did overcharge me; and another year that cannot be collected because the owners have taken out.

Mr Winninger: It is true that in many apartment buildings there are identical units that rent for different rents. Mr Turnbull gives the landlords the benefit of the doubt. I have yet to see a unit where the landlord lowered the rent because he felt sorry for the tenant.

Mr Turnbull: Well then, you are blind.

Mr Winninger: What was more often the case in the past is that a landlord raised the rent unlawfully and then, under the RRRA in 1986, registered that rent. So it became the lawful rent. If all apartments at the same base rent increased by the same amount, there would not be so much discrepancy, but because tenants come and go and some tenants do not know what the prior tenant paid, the rent can increase substantially. That is why you may have a $60 discrepancy. I doubt it is because of the reason Mr Turnbull cited, but your guess is as good as mine.

Mr Turnbull: You do not produce evidence to that effect.

Mr Harrison: Mr Turnbull, I do not want to be called a liar in anybody's presence. I am not a liar at all.

Mr Turnbull: I am not calling you a liar. I am suggesting that --

Mr Duignan: I would ask him to withdraw that remark, Mr Chairman.

The Chair: Order. Has any honourable member called another honourable member something unparliamentary?

Mr Turnbull: I did not call him a liar.

The Chair: What did you call him?

Mr Turnbull: I did not, but he seemed to infer that it was a lie. I certainly would say that what he was saying was a terminological inexactitude.

Mr Winninger: I resent that last remark.

The Chair: I have to tell the Mornington Properties Tenants Association that we are already three minutes over your allotted time. Thank you for coming.

1650

E. A. HOLDINGS

The Chair: The next presenter is E. A. Holdings for 15 minutes, and you can withhold some time for questions.

Ms Stevens: I am Joan Stevens. I am a small landlord. I do not have extensive resources, nor do I own a large number of properties. My units are older buildings -- 25 years plus -- with very affordable rents: $440 for two-bedroom apartments, including heat and hydro.

I think this bill is terrible. The implications on my ability to operate the buildings and maintain the standard of housing are almost overwhelming. One hardly knows where to start. I think the first thing we should mention is the problem of overkill. We have had so many changes in the rent review rules that it is very difficult to keep up to the new rules. It is difficult to find out what they are, how they are going to be interpreted or applied. Rent review offices are not helpful. Primarily, there are so many rules, the officers at the rent review office cannot tell you the answer. You have to phone three times and take a weighted average of what their answer was.

Next comes a problem which has been touched on: landlord-tenant relations. The present attitude of the ministry, where the last minister stated he was allergic to landlords and gave the impression we should all be put out of business, did not assist our industry. We, the landlords and tenants, have to live together, preferably in harmony. The government should be promoting co-operation. The open hostility the government is nurturing towards landlords is unhealthy for all parties concerned.

The proposed bill does not compensate landlords adequately for the losses they have experienced as a result of Bill 4. This bill must be revised to allow landlords, who had applications under Bill 4, to recover their losses by consecutive yearly increases of at least 10% to 15% over the guideline until the costs of their renovations have been adequately reflected in the rents. These landlords should not have to reapply. The increase should be automatic for anyone who has already had a judgement. It is wasteful of everyone's time and resources to squander them on creating and processing another application. You already have a backlog of people who are going to have to reapply under a different act with different parameters and definitions. This is all too time-consuming and unfair to both the landlords and the tenants. It is going to really create a logistical nightmare for everyone.

The provisions of the proposed act dealing with capital expenditures are inadequate. The narrowing of the definition of a capital expenditure to exclude major appliances, replacement of flooring, etc, ignores the reality that these items were purchased at the same time and will be required to be replaced at approximately the same time.

The 3% cap over the guideline for capital expenditures is not acceptable. Many major repairs require more than the allotted 5% expenditure -- the 3% plus the 2%. For example, if you are going to insulate and replace a roof it must be done concurrently for a flat roof. If I do it properly, I have to pay part of it myself. I could get a real cheap or an inadequate job done. I have a choice of ignoring the social responsibility of reducing energy consumption or I could reduce energy consumption and pay the difference out of my own pocket. Essentially the question is, do I take the money home to my family or do I spend it on my tenants? Do you spend your money on me or do you spend it on your kids? It is not much of a choice for you, I am sure.

As nice as it is to be socially correct, it is not practical to invest money with no expectation of compensation. Not allowing the real cost to be passed on is unreasonable. It is not in the best interests of the people involved.

In real terms, it costs $2,000 to $3,000 to take a 25-unit building to rent review. In my case, the extra 3% would amount to $3,400 a year. This would only fund an $18,000 loan at 10 years for 13%. You have to take administration costs off -- $2,000 to $3,000 -- so you are left with $15,000 to cover the cost of a major repair. That amount will not cover the cost of a major repair such as replacing old windows, reroofing the building, rewiring, replacing pipes, etc.

This bill assumes that Murphy's law simply does not happen, that everything does not go wrong at once. The cap is simply not adequate for an older building. The guideline increases allow for two rates: one for units less than six and another for the rest. It assumes that old and new buildings have similar operating expenses. These assumptions are not correct. I urge you to revert to the uniform two thirds of the rent control index. We are already bleeding. We do not need to be squeezed further.

The rent review process no longer allows increases in interest rates to be reflected in rental rates. The government creates the economic conditions that cause interest rates to increase or decrease. The proposed bill makes the landlord responsible for any increase. Government must accept responsibility for its own actions -- the increases of the interest rate.

I find the section of the act that deals with seizure of landlords' records very onerous. If you suspect a landlord is committing a fraudulent act, surely there is a way through the Attorney General's office or through other laws that exist to deal with this. I am not sure that we really need a rent police, in addition to Revenue Canada, the RCMP and the OPP, etc.

In closing, I urge you all to listen closely to what we landlords have said. We know what we are doing. We want to be proud of our industry and our properties. We must have enough room to make responsible decisions and maintain our buildings as they age. I think this committee has a challenge going into the 1990s. We do not need confrontation in government. We need compromise and conciliation. We need legislation that gives both the landlord fair compensation and the tenant adequate housing. This legislation is far too restrictive for the landlord.

Mr Tilson: Thank you, Ms Stevens. I think even the government will start to admit now that, with this legislation, rent review is out of control. It has just become too unmanageable.

I guess my question was surfacing in Toronto and I would like you to give me your perception as to the London area. What we seem to be hearing in the Toronto area is that landlords are saying: "We can't afford the capital improvements. The financial structure, the financial means that are being put forward by Bill 121 simply do not allow it. In many cases, we can't even afford the maintenance, so we won't do any. We'll do whatever it takes to keep the work-order people away and we'll survive until the rascals are thrown out of office." That seems to be the philosophy that is developing in the Toronto area. Do you have any thoughts as to whether that same perception is existing in this area?

Ms Stevens: I think increasingly, as people get their backs up against the wall, they become increasingly hostile. I personally try to say, "Am I really saying no because I think the government has gone too far or am I saying no because the money really isn't there?" So I have been particularly careful that I spent my full maintenance budget and so on. It is certainly in my best interest to maintain the building, but there is such a feeling of hostility on the part of landlords and I think you bear a real responsibility. I mean, when somebody says, "I'm allergic to landlords," it gives everyone the impression that we should all be tarred and feathered, and I am not that bad a person. My places are respectable. My tenants are supportive.

I had a building that was hit by Bill 4; 75% of my tenants are appalled that they might get some money back because the rent is so affordable. The four who thought that it would be okay if they got their money back are about 80 to 85 years old and they have some real income problems because they left their houses 10, 15 years ago. I can sympathize with that, but you bear real responsibility because as the hostility on both sides increases it is so much harder to co-operate and be harmonious. It is like having a divorce with two really wretched divorce lawyers in it, versus a conciliator between the two people. That is what you are building up.

You are building up such a venomous philosophy within the industry that it is frightening, truly frightening. I think you must address this. The biggest thing that comes out is the financial ability to make the improvements that must be made.

1700

Ms Harrington: I am not necessarily allergic to landlords, maybe just one in Hamilton yesterday, but --

Ms Stevens: I was not accusing you. I did see it on TV.

Ms Harrington: How many units do you have here in London?

Ms Stevens: I have 45 units in two buildings.

Ms Harrington: I really appreciate some of your statements. You want to be proud of your industry and your property and obviously these are the --

Ms Stevens: These are majority opinions.

Ms Harrington: I would like to believe that.

Ms Stevens: I have been in their buildings and they are not terrible. There are a few bad ones, but there are a few bad tenants too.

Ms Harrington: I do believe that landlords deserve their fair compensation and I do believe that we have to work together if we are going to get anywhere in this province. I have taken some notes about what you have said about capital expenditures for older buildings and I did want to let you know that we are looking at the older versus new buildings. My question though, to you: You mentioned right at the outset that the local rent review office is not helpful. I am wondering if you could explain that to me.

Ms Stevens: I did a rent review application and I phoned up two or three places to get help. It was $2,000 or $3,000; boy that was a lot of money. So I decided -- I used to be a bureaucrat, I have taken accounting courses at a community college at night school -- surely I can manage this on my own. But whenever I had a question I would call the rent review office and I would say, "What about this?" They would give me one answer, kind of vague. So, one day, I did not quite understand the answer, so I called back and I ended up with somebody else and got another answer. This is interesting, let's call back again. So the next day, I called back again and got a third answer. This is where I came upon the fact that every time you phone, you get different answers. They do not know the answers.

In Bill 51, you were allowed to amortize something over 10 years, 5 years, 15 years and so on, I am sure you are familiar with that. I phoned them up and I said: "You know, if I use a mortgage table, I get one number and if I use the at-payment function on my Lotus, I get another number. You just send me a list of your amortization schedules." I mean, this is fairly straightforward, you are going to amortize this expenditure over 10 years, tell me what the amount is because I want to be as close as possible. I do not want to ask my tenants for 5% more than I need and get them all excited because that is bad PR. It makes me look stupid when I get 5% less. It makes them worried because they think they are going to have to budget for 5% more and it makes it harder for us to live together. But the rent review office could not even provide the amortization schedules. They cannot provide you with a set of rules that you have to go by. Now, surely, anybody can sit down -- and you must have a rule book that is this thick -- if you can read it, I can read it. What is the hassle?

Mr Brown: London is a particular rental market. London is approaching what most people think to be the optimum market in that you are at 4% going towards 5% in terms of vacancies. Landlords have the economic difficulty that the real world presents in that you can only charge so much rent in a particular market. They also have this difficulty with the rent review system that is kind of imposed on you.

I was thinking about the 44% that we think we are going to get in Hydro increases over the next three years. That is subject to regulation as you well know. Not only is it a crown corporation, but it has to go before the Ontario Energy Board. All their costs are examined perfectly, at least supposedly --

Ms Stevens: But they are not landlords.

Mr Brown: But they are decidedly similar because Hydro's costs are hugely capital. I do not have a question other than to look at that regulatory system and the one we have here and how you come up with 15% in one and 44% in the other. It bothers me.

Ms Stevens: I wish to point out that as the owner of an older building, I do not live in a real world. I do not experience vacancy. I have people lined up waiting to get in my buildings; $440 for a two-bedroom in a nice building that is clean and quiet. People want it.

MICHAEL MOTORA

The Chair: Next presenter, Michael Motora. You have 15 minutes. You can withhold some time, if you wish, for questions.

Mr Motors: I am Michael Motora and I am property manager for two buildings in London with a total of 332 units. They have been held by my family since they were new in 1972 and they have been under rent control since 1975. We have never before been granted the opportunity to speak out on rent control issues. We always wished we would not have to. We rather had trust in the province that the bugs in the act would be worked out, that the controls were only temporary and they would be improved and simplified.

I believe that I am like thousands of other Ontario business people. You never hear from them. There is only so much time, only so much money and so much energy to do things. We would like to focus our attention on running our own business and we believe that you take care of the infrastructure.

It just seems, in the years we have been with rent control systems, that they do not work under any name, they cost so much money to maintain and our tenants are starting to notice it. We took our building to an appeal recently; they saw the lawyer fees just for the appeal process and they could not believe that we spent that much money just to get through an appeal which was to equalize rents, something that was a fair and just idea, to make all our rents the same. We used to do that automatically before controls, but now we have to spend the money and the time. In fact, we have been in this process three years, waiting for the computer to make up the equalization scheme.

If they knew the other costs involved, the hidden costs, like these meetings and everything else involved, the rent hearing board, the office space that is taken up. It is quite bad. I am totally in favour of lower rent increases or zero rent increases. I would be happy, but I am opposed to the way it is being done in this new regulation.

If you could control all our operating expenses and keep them low, I would be happy never to give out another rent increase and never receive another increase for my suppliers. That would be an ideal situation. It seems that the creators of Bill 121 calculated that an effective 2% increase will cover our increased operating expenses. I have just been looking at them. Our gas should be going up about 11%; hydro, 15%; water, 9%; municipal taxes, 13%. Just about anything that is not reclassified as capital expenditures is going up in the double digits and it seems we are only allowed 2% for operating expense increases. I cannot see how that adds up.

If the guideline increase is based on an index which accurately represented the bundle of goods our apartment buildings consumed, then when the index increased by 8%, our operating expenses would also have risen by 8%. So to provide just the same quality of service our tenants are accustomed to, we would have to pass on that 8% increase. The guidelines have never, in the past, covered even our increase and expenses and it seems that with the new controls, this disparity will be even worsened.

We work with limited amounts of money -- just the rent that we collect -- and we have to cover our expenses. I have taken pride in giving good service. You know, bright, clean and safe apartments to live in, but every year, there is so much more money needed to repair our aging buildings. So, maybe as a suggestion, if someone would set slightly more realistic guidelines to reflect economic realities or maybe set some guidelines based on the age of the building, older buildings needing more money to be repaired; or set higher guidelines for buildings that have been subsiding in the previous rent controls, that have been caught in the rent controls the longest.

I never did like giving out rent increases and I find this sort of offensive, the tone of the new rent increase forms that we are told we have to use. None of my suppliers or contractors give me notices like this when they tell me each year of their increases in cost. They always have something kind of nice in there, that they are sorry to have to increase but economic situations show that everything has to go up. I find the new forms I have to give my tenants make it sound as though, "I want to put up your rent and I am doing it by the guideline or less."

1710

There is a clause which I have never seen on other increase forms which offers a tenant, "If you want to dispute any increase, contact..." and it gives a number. That starts it off as an adversarial type of relationship. As soon as they get this increase, they start to feel: "This might be wrong. He might be trying to take advantage of me, and I should be able to fight this." So maybe as a suggestion, revise the rent increase notice forms to be slightly less offensive. Say something more like, "I'm sorry, but economic pressures force us to increase your rent this year by such an amount."

It seems that these forms were created to heighten the conflict between tenants versus landlords. Leave that fight in Toronto, or since this is an Ontario-based policy, forget about that fight. It is probably just Toronto where there is that strong adversarial relationship. In the rest of Ontario, we are more co-operative with our tenants. You can politically rile up people over most any topic. Please let the people relax at home and leave the fight somewhere else, not about the apartments where they live.

The issue of the search and seizure and rent police: This one is fairly new to me. I was only told I had this position to speak yesterday, and I just had a phone call about 15 minutes ago saying that my schedule was moved ahead almost an hour. I was trying to read through as much as I could on this issue. The rent police, it sounds like the RCMP. They even have difficulty with trained officers doing search and seizures, and now apparently we need rent police, which implies that you are painting landlords as needing more policing than other business people. As a suggestion, treat landlords more equally with other business people. We are not a bad bunch. We are no different than any other business.

When will you extend this idea to policing tenants? Was that something that was implied in the act? I have not seen it yet, and I was looking for that. Since we know there are good and bad people and there are many more tenants than there are landlords, there must be more bad tenants than landlords. If you are only policing the one side, how do you counter these new rights and powers that you are giving to the other side?

The issue of unreasonable maintenance enforcement: The more power you give the tenants to act on behalf of all tenants, the more responsibility you are giving them. When they can act as one for the whole building, the consequences are much larger; tens of thousands of dollars in the case of our buildings if they can hold back a rent increase for -- I heard someone today say it is not just five months, effectively.

Maybe as a suggestion, and maybe you already have this, to reduce the misuse of this power of freezing or rolling back rents, have the increase paid into a trust fund so that after the dispute is settled, the money can either be given back to the tenants or given to the landlord, so that this ability to freeze the increase is not misused to keep the tenant from paying money if he knows he is leaving or just to help him cover a momentary lapse in his budget, that he does not have enough to pay the rent. Maybe the tenants who misuse this new power, make them financially liable for their actions, at least to cover the legal costs involved in the landlord defending himself.

I really hope you can and will do something to amend Bill 121. Of course, I do not know the political pressures you face in putting together these recommendations. One of the comments I heard today -- it seems I still have a little time and I would not mind speaking about it again -- it sort of frightened me. I was here this morning when one member from the panel flung a flippant question to one of the presenters. To paraphrase it, it was something about: "Sam Katz, an immigrant and now a multimillionaire apartment owner, just invested $20 million in building housing in Israel, and he is not here today complaining that he is going to go bankrupt. How come you are here complaining?" That is something I heard this morning.

I left after hearing that and I started to make my notes on what I wanted to say. You can take one instance in anything, but that developer has so many other businesses that he makes his money from. There is not that much money in just the renting of apartments and I hope the other members of the panel know this. Besides that point, would it not be much better to create the business environment in Ontario where such developers as this fellow would reinvest the money they have made in Ontario rather than taking it out of the country?

I really thank you for the opportunity to be heard.

Mr Brown: I was interested in your observations about the cost of this entire system. It is not just a cost to the taxpayers of the Ontario, it is also a cost to tenants who have to go before these tribunals and reviews, and obviously a cost to landlords. You would be interested that I did a little calculating on what we might expect in terms of capital expenditures allowed -- the 3% that people could conceivably be allowed. If things are very optimistic, it might be somewhere between $60 million and $80 million in the entire province. There are many reasons why it may not be that high. Considering the system costs at least $40 million for the government to administer, and landlords and tenants are into probably a similar sort of cost, the cost-effectiveness of this system is remarkably low if you look at it.

I was wondering what positive suggestion you might make towards looking out for tenants in terms of keeping away from the large increases. I think that is what all tenants have a problem with. It is not the 7% or 8% raise particularly; it is the 30% raise that people have affordability problems with. What is your suggestion that would be simple, that would not cost the government of Ontario $40 million, that would not cost tenants or landlords a great deal to administer?

Mr Motora: We found in the past that having the current maximum amount that you are allowed to charge, if there is a lot of trust between the government and the landlords, you go to your appeal, you do your renovations, and your rents are set higher at the current maximum, and then you allow us to be flexible using the current rent that we charge. We are not going to give the full whatever per cent -- let's say it is a 20% increase -- but then you leave it to the market to say, "Okay, we'll only charge maybe a 5% increase." We know in the backs of our minds that we have done our work, our renovations; and our rents are set legally at that high current maximum.

I always liked to have a large gap so that our buildings could fluctuate with the market demand. In our neighbourhood, if the building down the street offers some kind of an incentive, we want to too, to be competitive and attract the tenants.

Mr Tilson: Two short questions. Your comments with respect to search and seizure were interesting: the very fact that a search can be made of a landlord's premises immediately whereas for the tenant you need 24 hours' notice plus at reasonable hours, all of which proves that old political maxim that all people are created equal but some people are more equal than others.

I guess my question to you is with respect to the increases in taxes, wages and insurance that are capped. Obviously, you make that application, but if it is over and above the cap, you are out of luck. The government members will tell you: "Well, landlords, you have been making money over the years. You have been making enough profits. You have been ripping the system off. You've got lots of money saved up. You're rich. You should be able to absorb that, because the tenants certainly can't absorb your passing it on." What is your response to that sort of attitude?

1720

Mr Motora: I disagree the money has been saved up over the years, as the government would tell us. Being under rent controls since 1975, they have not allowed landlords to stockpile that kind of capital nest-egg.

Mr Brown: Good point.

Mr Motora: You just have enough, and each year it is not quite enough to cover your expenses and that is why we go for appeals and try to get the rents up; but even that is so time-consuming that you try just to live within the rules. You believe what you hear that the next party that comes in will either simplify the system or they will abolish the system. There is always something that is in the works. You just put it off hoping that one day you will be able to make money, and for now, just make ends meet. Let the building go down a little bit just to keep your expenses equal with your increase and hope that some day you will let us come back up.

Ms Harrington: I will just briefly comment and I will ask Mr Winninger to comment. Your ideas about a revised form for rent review --

Mr Motora: No, it is a rent increase.

Ms Harrington: It has been a long day. Your revisedform sounds like an interesting idea. I just wanted to check with you, do you go often to rent review or are you able to manage without going to rent review?

Mr Motora: Unfortunately, because it is expensive to take the building to rent review, we try to stay away. The first time the building was taken to rent review there was a lot of media hype about large increases, and we were not going for anything -- I think we went for about 6% or 7%. It was nothing really. But because of the media excitement about rent increases, when our tenants received the notices saying we had taken the building in, and there was a year between the time they got the notices and we got some kind of feedback, during that year we lost most of our building; about 60% of our tenants turned over. They were afraid of what might happen. We kept assuring them that it is nothing that we are asking for. It is just a little bit over the margin.

Ms Harrington: So you do want a better system. Mr Winninger would like to comment.

Mr Winninger: I just got the tail end of your presentation. I am sorry. I had something outside. But this idea of search-and-seizure provision has come up again and again. We have to be mindful that similar provisions already exist in other statutes, like the Securities Act, the Corporations Act, Income Tax Act, these are all search-and-seizure provisions, but the landlord who abides by the law and does not do anything illegal has nothing to fear. It may be something new in this particular legislation, but it certainly is not without its precedents elsewhere.

Mr Motora: You paint all landlords as though they are criminals by saying that you need the special police to take care of them or rental police to take care of the bad ones. Have you painted the tenants the same way?

Mr Turnbull: Since we are through the presentations --

The Chair: No, we are not. We have NeighbourhoodLegal Services and then we will be through.

NEIGHBOURHOOD LEGAL SERVICES

Ms Harper: My name is Cynthia Harper. I am a staff lawyer at Neighbourhood Legal Services. I thank you for the opportunity of attending today. Neighbourhood Legal Services is a local legal clinic in London and we represent low-income tenants in London and the county of Middlesex. I should advise you that we do not do rent review per se, although we are involved in rent review issues because we do handle a lot of landlord and tenants matters in London. Tonight I would like to express some of the concerns that have been expressed by our clients.

Typical examples of complaints or questions we get from clients include issues of maintenance to their premises. They are concerned about large rent increases and, in fact, in London recently there was an increase of 25% of their rents, and tenants live in fear of that sort of thing. We welcome the changes to the legislation which are addressing that. We also get questions which are just basically, "How much rent am I supposed to pay?" or "I've got a notice of rent increase and I do not understand it." As well, a lot of tenants are concerned about what their rights are to enforce what rights they do have under the legislation. So I would like to address those issues tonight.

One thing I have heard since I have been here tonight is the distinction that is being made between landlords of larger buildings and smaller buildings dealing with the guideline increases and the carry-forward provisions. This is of concern to us because we have a lot of clients who actually live in smaller buildings in London. In fact, there are a lot of students in London as well as other tenants who live in these types of buildings. A lot of our clients are low-income so we see the concerns they have.

One of the concerns being expressed is that this will discriminate against tenants who are in smaller units. We feel this adds unnecessary complexity to a system that is already very complex, and is rarely understood by tenants. Our experience has been that when tenants are living in smaller buildings, in fact they are getting less facilities than when they live in a larger building. For example, I have many tenants who cut their own grass, do their own snow removal, do not have a superintendent who is available at the building to do repairs, and just do not get the accommodations there are in larger buildings.

I believe the minister, as well as others, has said the reasoning for this is that there are larger costs involved in smaller buildings. I have seen no studies that have been done and I have seen no evidence to support this allegation. In fact, as I say, I would say some small landlords have less costs associated with their building. So we question why this provision is here and what the reasoning is behind it.

Another concern we have experienced is that tenants who live in smaller buildings cannot find out what rent they should be paying. With the rent registry provisions, the smaller units, the one, two and three-unit buildings do not have to register. This is of great concern to us.

We have experienced tenants calling us and saying, "I've been told by another tenant that they pay X dollars of rent." I cannot find out because there is no order that has been registered with rent review, so I have nothing to guide me. This landlord of course has not registered. We are finding it is this type of tenant who suffers abuse most often by a landlord in this situation and we are concerned that these tenants are not being offered the protection available to tenants in larger units or larger buildings with more units. We feel they should be provided with the same protection as other tenants.

We of course look forward to the introduction of the registering of buildings with four, five or six units, but we ask that it is ensured that sufficient resources be made available to the rent registry to make sure that it functions properly. We know there have been problems in the past, and we ask that there be enough resources to ensure the system is going to work.

We also welcome the provision in the act that it is an offence to fail to file a statement of rent information within the time required, and that this is a continuing offence. We hope the Ministry of Housing, and possibly the Attorney General, will actually utilize this section, and landlords who fail to register when they should will be penalized in accordance with the legislation.

As I have said, one of the concerns we have is that a lot of tenants feel they are paying illegal rent increases. We welcome the increase of the monetary jurisdiction to $5,000 and we were also concerned that tenants were being faced with having paid this money and not getting interest returned to them. So we welcome the provision of the interest award.

Again, we have concerns that the bill does not address enforcement of provisions concerning legal rents. For example, there is no provision in the bill for registering a rent review order as an order of the court and having it then enforced by the court.

We get many calls from tenants who have managed somehow to get through the system and bring a section 95 application under the RRRA and get an order, but then they have no way to enforce the order, and they do not know what to do. We suggest provisions be made that provide for proper enforcement of orders made when excess rent has been paid, that there be assistance provided from rent review to tenants who want to enforce orders they have, and that adequate provisions be made for enforcement.

One of the things we ask is why it is not an offence under the act for a landlord to refuse to pay a tenant pursuant to an order that has been made for excess rents. Certainly, the act has been improved in many ways by providing other offences, but this is not an offence under the act. We ask that this be provided in the act in the penalty section; this should be of great assistance to tenants.

1730

Dealing with offences under the act, another concern we have is that any prosecution that could be brought under the act for these offences be done by the Ministry of Housing or the Attorney General. There is little teeth in the legislation when a tenant cannot actually use these penalty offences. We have seen this happen under the Landlord and Tenant Act, where the Attorney General's office will refuse to actually bring a prosecution and it is up to a tenant to then lay an information and prosecute on his own, and it is a disincentive to even consider laying any complaint or seeking recourse through the courts. We also ask that there be included in the legislation a provision that where a prosecution is brought and a penalty imposed, a judge be given the power to order restitution to the tenant for excess rents, if that is a penalty.

One of the major concerns we are hearing from tenants in the London area is the lack of repairs to the buildings. Maintenance is a serious concern to them and I understand this has been addressed numerous times before you today.

The legislation does attempt to address this by providing for the grounds of inadequate maintenance. One concern we have is that the term "inadequate" has not been defined. We are also concerned that in the past tenants experienced long delays in getting work done, in going through the standards board and so on. We ask that the system be such that these delays are minimized and when there are inspections to be done and so on, that adequate money be provided for inspectors to ensure the system actually is efficient and is being used in a way that is useful to tenants.

The previous speaker has mentioned some of the complexity involved in rent review and I want to mention briefly that we get a lot of tenants calling who have received notices or orders and who say, "I have no idea what this means." So we ask that any forms or orders that are used be in clear, simple English language that tenants can hopefully understand. Thank you.

Mr Winninger: It was always my understanding, at least under the old rent review legislation, that if you got an order from rent review services or the board higher up, and the landlord failed to comply with it and repay the money owing to the tenant, you could enforce it through what was then the county court, now the Ontario Court (General Division). I know Mr Armstrong, who appeared earlier for the tenants' protective association, has had many times to enforce these orders through the courts. Are you saying the provision is not there but somehow they are getting through?

Ms Harper: No, I am requesting it be made clear that this is something you can do for the enforcement of the order. We find that tenants often have no idea you can actually enforce this in the Ontario Court (General Division). It is not in the legislation and at times they are not being told that by rent review. So we would like it spelled out that these are the ways you can enforce this order and that they be given assistance.

Mr Brown: The first part of your presentation dealt, if I heard you right, mostly with having everyone treated the same. All tenants should be treated the same, whether they are in small units, large units, it is something that should happen. I was wondering what your views would be on having municipal, non-profit housing -- government housing, per se -- included in this legislation, which it is not; it is exempt. Within that there are people at market. I was wondering if you think that should happen. This being a university town it may be useful to ask whether you think student residences should also be included in that.

Ms Harper: This is something I had not prepared a presentation on, but certainly we would say, yes, they should be covered by rent review legislation. They face the same problems other tenants do and should be covered by the legislation.

Mr Tilson: I have made a note of some of the particulars you have raised and your suggested amendments, but as you were talking I listed the people who are involved in this system and there are probably lots more; people who produce forms, administrative personnel, judges in the court system, lawyers, property managers, rent review policemen we are now getting into, lobbyists, accountants, inspectors, hearing officers, computer operators, enforcement officers, property standards officers -- when will it stop? How much can the taxpayer bear?

I do not know whether you will admit it or not, but in my perception of this law, whether it is direct or indirect, it is going to be great for people like you because no one understands what the heck is going on. We are going to have to hire lawyers for both the tenants and the landlords just to explain it to us. My question to you is, and hopefully you will be unbiased, how much can the taxpayer afford to do all this?

Ms Harper: We have a system now that involves the same expenses and the system is inefficient; we have seen that. I think the government is recognizing that rent controls are a necessary part of landlord and tenant relationships in Ontario and that there is expense involved, but that the expense is necessary to protect tenants and, at times, landlords as well.

Mr Tilson: The last speaker was a small landlord and he indicated that he simply cannot afford it. It is so costly to go through the whole process. He does not understand what is going on so he hires all these people and he cannot afford it.

Ms Harper: One thing we are suggesting is that the system be simplified to make it much easier for both landlords and tenants to utilize the system that is there.

The Chair: Thank you for your presentation.

Mr Turnbull, you had a point earlier on.

Mr Turnbull: Yes, Mr Chair. Mrs Harrington, on several occasions, I think in Hamilton and in London, asked questions and she did not get a satisfactory answer from anybody of a specific number as to what a reasonable rate of return would be. Two gentlemen were here from the London Chamber of Commerce, one of them was with London Life. In speaking to him outside I learned there is somebody in the audience who is somewhat of an expert on that. He works for London Life and is specialized in that and also has an apartment building investment. I suggest we bring him forward now and ask him those questions so Mrs Harrington's questions could be satisfied.

The Chair: Is there any discussion?

Ms Harrington: I do not think any one person has the whole answer. I am asking various people so I can get an idea of what people feel about that.

Mr Turnbull: But you did not get a specific number. Nobody answered you with the number.

The Chair: Why do we not think about this and maybe tomorrow before we adjourn --

Mr Turnbull: No, the gentleman is here in the audience. I do not know what his name is, I am sorry. But it was pointed out to me that he is somebody in London Life who specializes in that sphere.

Ms Harrington: It is up to to you, Mr Chairman, if you feel we have the time.

The Chair: I am driving to Windsor. Everyone else has a bus, so I do not know what other transportation arrangements have been made, if there is anyone else driving.

Mr Turnbull: I do not think it is going to take many minutes to ask these simple questions.

Mr Tilson: Mr Chairman, I do not think it is going to take very long. Why do we not just take five minutes?

The Chair: You will never do it in five.

Mr Tilson: How about 10?

Mr Brown: It would be useful. He is here.

The Chair: He is here. It is going to be useful. What is the consensus on the time? Can we ask the gentleman how long he thinks it might take. We will take 10 minutes. Mr Turnbull, what is it exactly that you want?

Mr Turnbull: Specifically on apartment buildings. Could you identify yourself for the record?

GARY MILANI

Mr Milani: I am Gary Milani. I was originally at this meeting to represent myself as a small landlord but I have been picked out also as being from London Life in the area of investment, specifically real estate.

Mr Turnbull: My question has been asked several times by several members. Given the fact that real estate by its very nature has a risk factor attached to it, I presume you would expect a higher rate of return than the bank. I am not trying to give you an answer, I am just saying I presume that is the case. Let's assume you were to measure it over a 10-year period, what would be the internal rate of return that you would anticipate?

1740

Mr Milani: Actually, I can talk very briefly to that and give you an answer that is common in the industry. We expect returns of a minimum of probably 12%; and where you have smaller centres, where risk could be greater, you are probably looking at closer to 13% or 13.5% as an expected return on any real estate investment, whether it be commercial, residential or other.

Mr Turnbull: Is that an internal rate of return you are using?

Mr Milani: That is definitely an internal rate of return that is calculated through cash flows and some reversionary value on the properties.

Mr Turnbull: On what number of years? On 10 years?

Mr Milani: It can be 10 years, it can be 15 years. Commercial typically is easier to determine, given the length of the leases. Residential is much more difficult to determine, obviously, because we deal with legislation.

Mr Turnbull: For the record, could you just explain technically what "internal rate of return" means?

Mr Milani: Internal rate of return is taking an initial investment of X dollars and getting some kind of cash flow on a year-to-year basis, projecting what your asset is worth at the end of the 10 years or 15 years and then discounting all of those cash flows and the reversionary value back to a present date. Based on your investment, you will get an interest rate.

Mr Turnbull: Is that before or after tax?

Mr Milani: Those numbers I threw out to you are definitely before-tax numbers.

Mr Winninger: Is it net return, net of all expenses?

Mr Milani: Absolutely net. That is the return on your equity investment in the property.

Ms Harrington: So that includes your capital gain.

Mr Milani: Absolutely. I can tell you right now that I am not speaking for myself specifically or London Life -- it is an industry standard. I guarantee you can go to any major appraiser -- there are many of them in Toronto -- and he will tell you exactly the same. There are a lot of surveys out there to indicate that.

Ms Harrington: For instance, if you took any particular building and then, say, held it for the 10 years or whatever and sold it and got your 12% at that time, during all the interim period you would not be expecting 12% every year.

Mr Milani: No, not necessarily, because return on investment is usually somewhat lower. It is a combination not only of cash flows but also of your sale value. Quite frankly, you are expecting some higher value for your real estate at the end of the line, and so that is part of the contributing factor to getting an internal rate of return.

Ms Harrington: So what would you say would be the percentage operating in the interim period?

Mr Milani: It depends. If you look at the situation today in residential, you are probably into negative returns. I do not need to tell you. You just have to look at surveys and indicators in various cities in this province and you will find virtually none of this real estate is trading. I am speaking specifically of residential. You will also find that major institutional players are getting out of the business.

Ms Harrington: What would you say would be a healthy year-to-year operating type of return?

Mr Milani: Without any kind of financing attached, on just straight value of property you are looking at probably rates of 8% to 9% going in. Given the condition of the economy today and also the situation of legislation and the uncertainty, you are probably looking at higher to 10% going in. It is not happening. That is why sales are not happening.

Mr Turnbull: Could you just clarify that? You are meaning that in order to make it an attractive investment initially, it would have to be 8% to 10% today.

Mr Milani: Yes, it definitely would have to. You are not going to get the growth and capital appreciation, so you have to depend more on your cash flows. That is the way any investor is looking at it today.

Mr Turnbull: That would be a net return in year 1 that you have to have.

Mr Milani: Yes, absolutely. We have seen properties now up for sale in Toronto that are trading at 10% initial return, and that was unheard of two to three years ago.

Ms Harrington: I rented out a property 20 years ago and all you had to do was cover your basic costs and of course with the escalation in the value you would certainly make a very healthy profit. It all depends.

Mr Milani: That is why a lot of landlords are here today. I should not be here criticizing, but that is why we are here. We are seeing declines in values of property simply because of the uncertainty of this and certainly the negative way in which this legislation is going to work against landlords. We are losing ground drastically. That is why everybody is turned off by these kinds of investments today.

Mr Frankford: Your cash flow is going to be influenced by the occupancy rate rather significantly, is it not?

Mr Milani: Certainly it will be, but typically with residential it has not been that bad in the past. We have had some glitches. I think, because of the type of legislation the Liberal government had put in place, as someone mentioned earlier. It probably came as close as possible to narrowing the gap, and that is why you see vacancy rates in the cities -- Mississauga and London are prime examples -- that have escalated considerably. Many landlords with higher rates of monthly rent are not even achieving those rents. There is where you are getting a free market effectively controlling the rent, and not rent control itself. I am just saying that gap is probably going to change with this kind of legislation. The vacancy rates will start to decline again.

The Vice-Chair: Thank you. I think you have provided the committee with some very valuable information.

The committee members will be happy to know it is now time to adjourn. We will commence in Windsor at 10 o'clock in the morning.

The committee adjourned at 1752.