RESIDENTIAL RENT REGULATION AMENDMENT ACT, 1990
HAMILTON AND DISTRICT APARTMENT ASSOCIATION
DUNDURN COMMUNITY LEGAL SERVICES
GEORGIAN COURT ESTATES TENANTS ASSOCIATION
DENNIS LATTANZI AND ED LATTANZI
DINO NICOSIA AND ROBERT ADORANTI
HOUSING HELP CENTRE FOR HAMILTON-WENTWORTH
HAMILTON-WENTWORTH AND HALTON COALITION OF TENANTS ASSOCIATIONS
CONTENTS
Monday 11 February 1991
Residential Rent Regulation Amendment Act, 1990, Bill 4
Hamilton and District Apartment Association
Dundurn Community Legal Services
Arun Pathak
Georgian Court Estates Tenants Association
Dennis Lattanzi and Ed Lattanzi
Italo Gallace
Jerome Sawchyn
Dino Nicosia and Robert Adoranti
Sandra Kondo
Effort Trust
Housing Help Centre for Hamilton-Wentworth
Bruno Megna
Hamilton-Wentworth and Halton Coalition of Tenants Associations
Adjournment
STANDING COMMITTEE ON GENERAL GOVERNMENT
Acting Chair: Abel, Donald (Wentworth North NDP)
Vice-Chair: Brown, Michael A. (Algoma-Manitoulin L)
Bisson, Gilles (Cochrane South NDP)
Drainville, Dennis (Victoria-Haliburton NDP)
Duignan, Noel (Halton North NDP)
Harrington, Margaret H. (Niagara Falls NDP)
Mammoliti, George (Yorkview NDP)
Mancini, Remo (Essex South L)
Murdoch, Bill (Grey PC)
O'Neill, Yvonne (Ottawa-Rideau L)
Scott, Ian G. (St George-St David L)
Turnbull, David (York Mills PC)
Substitutions:
Mahoney, Steven W. (Mississauga West L) for Mrs O'Neill
Owens, Stephen (Scarborough Centre NDP) for Mr Mammoliti
Poole, Dianne (Eglinton L) for Mr Scott
Tilson, David (Dufferin-Peel PC) for Mr B. Murdoch
Ward, Margery (Don Mills NDP) for Mr Bisson
Wilson, Jim (Simcoe West PC) for Mr Turnbull
Clerk: Deller, Deborah
Staff: Richmond, Jerry, Research Officer, Legislative Research Service
The committee met at 1304 in the Holiday Inn, Hamilton.
RESIDENTIAL RENT REGULATION AMENDMENT ACT, 1990
Resuming consideration of Bill 4, An Act to amend the Residential Rent Regulation Act, 1986.
The Vice-Chair: Good afternoon and welcome to the committee hearings of the standing committee on general government. We are having a look today at the provisions of Bill 4. We have, I believe, 13 presentations to the committee today. Because of the number of presentations, we have to restrict people very carefully to the time allocations. This means that for most presenters there will be 20 minutes allocated to you. We do that by allowing a 10-minute formal presentation, and then evenly dividing the other 10 minutes among the three caucuses represented here.
HAMILTON AND DISTRICT APARTMENT ASSOCIATION
The Vice-Chair: Our first presenter today will be the Hamilton and District Apartment Association, and they are being represented at the table by Jeff Walker, John Bruno and Ken Mate. Good afternoon, gentlemen.
Mr Bruno: Good afternoon. Jeff Walker is late. He did not say he might not be here; however, in his stead we will continue.
The Vice-Chair: For the purposes of Hansard, perhaps you would introduce yourselves and repeat the name of your organization and the positions you hold in the organization, please.
Mr Bruno: My name is John Bruno. I am the executive director of the Hamilton and District Apartment Association. On my left is Ken Mate. He is a member of our association and a landlord.
Mr Mate: A local landlord in Hamilton.
Mr Bruno: Ladies and gentlemen of the Bill 4 committee, since we are first on tap, welcome to Hamilton.
As previously stated, my name is John Bruno and I am executive director of Hamilton and District Apartment Association, an organization covering the area of Oakville, Woodstock, Brantford, Hamilton and the Niagara Peninsula. Our association, which was formed in 1965, is made up of landlords and property managers, and we represent some 44,000 units of the 75,000 units in the mentioned area. Our membership is made up of small landlords consisting of duplexes, triplexes and apartment buildings of 10 units or less, with a monthly rent of approximately $500 for two bedrooms.
It is important to note, however, that the 1990 provincial policy statement covering region 7, a region we are in, says an affordable rent ceiling could be $1,240. Our association is somewhat unique as it is the largest association outside of Metro Toronto. Much of my time as executive director is assisting not only landlords, but also tenants, as we are the only known association that has a mediation service set up to assist the two mentioned. I might also point out that in the past 10 years in our mediation service we are batting a thousand.
I would like to pass on to the committee today, in this forum, that it is not my personal views but the results of a survey conducted by our association via its members covering two important items.
First, it is felt that Bill 4, if passed into law in its present form, may assist tenants in the short term, but in the longer term will be devastating to landlords who in turn will reflect it on the tenant population. A better way must be found. Bill 4, we feel, is not the answer. Our association feels that the Stuart Thom commission report should be reopened, looked over and adjustments made where necessary in conjunction with associations, landlords and tenants.
Second, another item that is of concern to our members is that Bill 4 will remove previously granted phase-in provisions, and by doing so will put many of our small landlords out of business or into receivership. It is also thought by some of our legal advisers that the inception of Bill 4 and its provision is a form of expropriation, and if it is deemed to be a form of expropriation the government must pay fair compensation. I expect that if Bill 4 is passed into law, some type of court challenge may be initiated with regard to this expropriation item.
I mention these two items and hope you will take this into consideration when you deliberate prior to making your final report. In closing, I hope I have passed on the views of our association. At this time I would like to pass on the floor to Ken Mate, who I introduced previously as a landlord and a member of our association.
As I understand it, our time is limited. Some of the associations in previous hearings were given 40 minutes, so we had to cut our procedure to roughly 20 minutes. If time permits, we would be happy to answer any questions you might have. At this time I would like to pass the floor on to our associate, Ken Mate.
1310
Mr Mate: Good afternoon, ladies and gentlemen. My name is Kenneth Mate. I had an opportunity to meet John a number of years ago and have been very fortunate to be a member of the association in Hamilton.
I would like to tell everybody a little story about a young man who in 1975, after recovering from cancer surgery at the age of 26, felt he was getting a raw deal where he was living here in the city of Hamilton. He was a steelworker at one of the steel mills here in Hamilton.
Basically, what he used to do whenever he had a problem, whether it was a plumbing problem or a problem getting his apartment painted or some minor repair, he would go to a landlord and he would be talking to deaf ears. Being ambitious like this young man was, he decided that he would take it upon himself to go ahead and spend his own hard-earned money to improve his own unit, and he never did ask the landlord for anything in compensation of whatsoever nature. However, when the landlord increased the rent yearly, he paid the increases without any qualms.
Feeling that he had been helped by the community through the cancer society, he decided it was time to give back of himself to the community that had helped him. He thought the easiest way would be to help other people. At that time, in 1975, there was talk of a new rent review system. While not knowing very much about landlords or tenants other than his own situation, or rent review, he decided maybe he would become a landlord.
As the story goes, this young man looked at a lot of different properties, over 100 to be exact, and he decided that he would put offers in. Bear in mind he only had $2,000 that he had saved through Canada savings bonds, and he had two credit cards with $500 limits on each one.
He solicited two or three local realtors and he went out to look at various properties in the community of Hamilton and various areas of the city, and he put in various offers, most of which were rejected. But there was one particular property that he spotted when he was out looking in the neighbourhoods himself. There was a "For Sale" sign by owner. So he jotted the number down and he called the owner who lived in Grimsby, which is not too far from the city of Hamilton, and the owner was nice enough to meet him at the property two days later and show him through the building.
Basically, the young man, being a novice, noticed two empty units that were in very bad disrepair and needed paint, new plumbing, new kitchen counter tops, new carpeting and basically a general cleanup. One was a one-bedroom, the other was a two-bedroom, and the other two units in the building were inhabited by tenants with very low rents and also were in very bad disrepair.
The young man said to the owner of the building: "I'm interested in buying your building. There's only one problem. First of all, the building needs a lot of work, which I am prepared to do, and second, I don't have a lot of money." So they negotiated a fair and equitable deal where the young man would put $1,500 down and the vendor of the property would hold the financing for five years.
With two empty units he had his hands full. He spent many long hours during the day and in the evenings, depending on what shift he was on at the local steel mill, to go in and renovate these two particular units. After about two weeks, he said, "It's time to put an ad in the paper and time to put signs out looking for tenants."
On a Saturday morning when he was there doing some work, a lady came to the door with two small children and she said, "Are you the landlord?" He said, "Yes, I am." She said, "Well, I'm looking for an apartment." So he showed the lady around and showed her what he had done to the particular units, and she said, "Oh, sir, I really like this two-bedroom that you have fixed up, but there's a small problem." He said: "Well, I have problems too. How can I help you?" She said: "Well, I'm on mother's allowance and I have two small children. We have looked the neighbourhood over, and there is a school close by. There's a church for worship, and we would like this neighbourhood." She said, "How much is the rent?" The young man said, "Two hundred dollars a month."
Needless to say, he was looking for a tenant and she was looking for an apartment and they made an arrangement. There was no lease signed. There was not even a last month's rent taken because she could not afford to pay it.
The young man said to the lady with the two children, "Can you afford to pay the first month's rent and move in within two weeks?" She said, "Yes, I can." "Would you be willing to make sure your own garbage is put out?" She said, "Oh, that is not a problem." He said, "It does not look like you would be able to shovel snow or cut the grass. I'll make sure that is done for you."
About two weeks later, after this particular tenant had moved in, the landlord found another young fellow looking for an apartment who was a postman who happened to come by and see the sign out front. Liking the neighbourhood as this young fellow did, he too talked to the landlord and the landlord said, "Yes, I would be very interested in renting you the apartment and the one-bedroom is at $175 a month."
There was only one other stipulation for the postman. Would he be helpful in making sure the grass was cut and the snow was shovelled? And again, there was no agreement. It was all verbal. That arrangement was made.
That arrangement lasted for five years for this young man who was a landlord, but in the interim he went ahead and renovated the other two units that had existing tenants.
After about three years this young man thought that this was the ideal situation to help people and improve the community and he started looking around for various properties that had been vacant or that had had certain problems with them, or fires. He found two of them, but he had the same problem that he did when he found the first property. He did not have any money but that did not stop him. He put an ad in the newspaper, in the local Hamilton paper looking for money and got three calls. One particular call was from a gentleman who worked at the same steel mill as him and said he was interested in getting involved. How could he get involved?
They had various meetings and they wanted to put a partnership together, which they did and they both had the same initiative. They still went through the same process of selection of people and working with the people that they had as well as renovating the buildings together. Now both of these gentlemen were novices. They did not know about rent review. They did not know about capital expenditures. They were just happy to get their units rented for whatever the market would bear as far as a rent price was.
As time went on, these two gentlemen became a little more sophisticated and friends and fellow workers joined them and said, "If this can be an improvement to the community, we're willing to work at it with you." Through their endeavours and contacts at their local mill, they worked with various partners such as a carpenter, a plumber, an electrician and they amassed about seven properties. They felt it was time to get in from the smaller single-family duplex, triplex, fourplex to a small apartment building.
At that time is when I met John Bruno and we became a member of the association here in Hamilton. We became more aware of what was happening. As you can tell from the change of the conversation, that young man was me, and 15 years later after renovating 80 properties between Hamilton and the fair city of Sarnia, including Brantford, I find that the rent review legislation has complicated our business in trying to help the community. We still do that. We are not looking to become millionaires because that was not our goal from the beginning and is still not our goal now. We are just trying to give back to a community that has been helpful to us.
The New Democratic Party has come in. I have often heard our Premier, Mr Rae, talk about equality. Well, I believe in that too. But there is only one problem. His term and definition are totally different from mine, because as a landlord I do not have any rights, equal or unequal. How am I going to go back to these various individuals who invested their hard-earned money? Some of them put their houses up for risk in order to borrow money to help in renovations. What they had thought was a long-term investment basically is a short-term mis-investment.
1320
I just wanted to mention that I have recommended to all of our people in various areas that they should write to their local member of Parliament. The 40 people involved with our investment club -- and that is what it is now, to help various areas of the community -- wrote letters to Mr Rae, Mr Cooke, Mr Harris and Ms Poole, and as of 4 February, we received responses from Mr Harris and Ms Poole. However, we have not as yet received any response from Mr Rae's office or from Mr Cooke. I would hope that if in fact we get a response, it is on the same lines as we received from the Liberal and Conservative members; that is, if we get a response at all.
If we are going to have a fair and just system, we must deal with it all as tenants and landlords as well as legislation. I know in our business we have found the best customer is your tenant. You get a lot of good feedback from them, and you have to listen to what they have to say. When I go shopping, I would hope --
The Vice-Chair: Thank you. We can perhaps pursue this in conversation and questions from the members.
Mr Mahoney: I have a question. I think we are probably limited in time and numbers, so I will just ask one question on this. I am interested in how you formulated your rent increases, say, over the past few years. You told us the story of how you got into the business, and you now have a number of buildings. What I would like to know is on what basis, or perhaps you have an average increase, how you have been passing on rent increases to your tenants. The second part of the same question is what your turnover rate might be.
Mr Mate: In the past five years since we have got into larger buildings -- when I use the word "larger" I mean from eight units to 25 units, and we have one building that is 49 units -- we have on average about 10% in increases over the past three years.
Mr Mahoney: And turnover?
Mr Mate: Our turnover varies from building to building. On average, of the 100 or so units we may have, our turnover would be about 8% to 10%.
Ms Poole: Because time does not allow us to have a very lengthy conversation, I will limit my questions to one. You mentioned that you had conducted a survey of your members. How formal was this survey? Do you actually have any published results you could share with the committee?
Mr Bruno: No, unfortunately we do not have any published results. We send out bimonthly bulletins to our association members, and it was a phone-in and write-in response covering the two items I mentioned, the expropriation portion of the item I mentioned and also Bill 4 with regard to the bankruptcy item. The results of the survey were as stated in my presentation. The smaller landlords felt Bill 4, if passed in this form, will bankrupt them or put them into receivership. The larger landlords -- I am talking landlords with 10,000 units or more; that is probably the Toronto area; we do not have anything of that size in our area -- might be able to struggle through with some buildings that are paid for maybe subsidizing some of the buildings that are not. However, the smaller landlords, which make up a great deal of our association, will find financial hardship if Bill 4 is passed in this present form.
Mr Tilson: To the second speaker [failure of sound system] when you ran out of time. Is there any evidence that the government is listening to the concerns of people like you?
Mr Mate: I am not a politician. I work in the steel industry. As a matter of fact, talking about the steel industry today, the government supposedly is listening to our fellow workers at Algoma in Sault Ste Marie. Whether anything will come of that is unknown to me. I would like to think that these hearings that are progressing -- although I did hear on the radio this morning that the green paper presentation will come out on 18 February and we still have not finished all these hearings. So I am curious why the government would even propose such a situation at this time.
Mr Tilson: Our point as well. To the first speaker, you commented about legal proceedings. Is your organization planning or do you know of any organization that plans to institute legal proceedings against the government?
Mr Bruno: No, not at this time. This was not a threat. I hope you did not take it that way; it was just a point of information. There has been discussion with our association and the 10 other associations in Ontario that are recognized by the Ministry of Housing. There has been some talk on a possible court challenge with regard to the legality of the expropriation portion of items that have been previously proclaimed law by previous governments.
Mr Tilson: Several weeks ago the Minister of Housing announced that $15 million would be made available to landlords to repair low-rise apartments. Our belief, of course, is that that is an acknowledgement of the need for repairs to many of the buildings, 75% of which are 20 years old or more. Do you have any thoughts on that type of thing, as to how much money might be needed by the government? In other words, if private enterprise cannot do this sort of thing, how much money will it take for the government to pour into your buildings, for example?
Mr Mate: On average, if it is a one-bedroom apartment, for painting, decorating, new carpeting, you are looking at approximately $2,000 per unit. If you want to get into other repairs, such as plumbing repairs, counter tops, new vanities for bathrooms, taps, etc, you may run up to $3,000 per unit. That is provided you do some of the work yourself as a landlord, which we do in a lot of instances because we are small landlords, and subcontracting the work you cannot handle.
Mr Tilson: With Bill 4 and, if it becomes more concrete, with the permanent legislation, do you intend to do those things?
Mr Mate: No.
Mr Tilson: Do you intend to do anything at all with respect to any sort of capital expenditures?
Mr Mate: The only thing I will do is keep up with the standards board as it has outlined. However, if we do need a new roof we will go to the Minister of Housing and we will look for a grant under the low-rise rehabilitation program, because for a roof on a 25-unit building, for example, you are looking at between $30,000 and $40,000 or more, again, with us doing some of the work.
Ms Harrington: You have told us your very personal story, and we appreciate your concern and it is nice to see people who are steelworkers being that much involved in the community.
I first wanted to respond to your question about the green paper. Our position as a government is that Bill 4 is interim legislation and that we are committed as quickly as possible to try to get into the long-term legislation and come back and talk to everyone around this province about what kind of system is going to work for the long run. We want a system in place that is much simpler than what we have had, that will be of benefit both to landlords and tenants. That is why we are trying to get this green paper out. It is a series of options.
I better not use up all my time. We were going to be going all through spring and summer trying to get the right choices made with your help so that we can bring in the legislation this year, so that we will not have Bill 4 in effect any longer than is necessary.
The questions I wanted to check with you: First, Mr Bruno, how many buildings do you personally own?
Mr Bruno: I am not a landlord. I am executive director of an association.
Ms Harrington: I see. So it is Mr Mate?
Mr Bruno: He is the landlord.
Ms Harrington: How many buildings would you own?
Mr Mate: We have five presently, five apartment buildings.
Ms Harrington: Over the past, say, four years or so, have you gone for rent increases to rent review?
Mr Mate: Yes, we have. We have become a little more sophisticated because of the cost to operate.
Ms Harrington: What type of increases have you received?
Mr Mate: On average, 10%.
Ms Harrington: And is that every year in the last five years?
Mr Mate: I would say on average yes. Some buildings were a little bit higher. In two cases, we just had guideline rent increases.
Ms Harrington: Of the tenants you have, most of them would be fairly low to moderate income, would they?
Mr Mate: Yes. All of our units range less than $600 a month, on average, and that includes bachelors, one-bedrooms and two-bedrooms.
Ms Harrington: Approximately how many of those tenants would be on fixed incomes?
Mr Mate: Again, it varies from building to building. I would say that out of the total of 150 tenants approximately 50 tenants would be on fixed incomes.
1330
Ms Harrington: If they are on fixed incomes, basically they might get a cost of living allowance increase every year, which is maybe 5%. How can they then afford a 10% increase each year? Of the tenants you have, how many have had to move out because of the increase of 10% a year?
Mr Mate: I do not believe we have had so many people move out because of the increase. I think it is just basically economic situations for various people. People have lost jobs. They just cannot afford to pay the rent. Maybe they will share with somebody else. We have tried to look at every case individually, not just as a whole. We have one building where we have some senior citizens, right here in the city of Hamilton. We have directed them to the self-help group, and it has been very helpful. We are willing to work with our people. The key thing is to have a full building, 100% occupancy, and in one case we have even reduced the rent to keep the tenants.
The Vice-Chair: Thank you very much, gentlemen, for coming before the committee today. We will be taking your views into the fullest of consideration.
[Interruption]
The Vice-Chair: They are having difficulty hearing at the back. We will attempt to raise the volume.
DUNDURN COMMUNITY LEGAL SERVICES
The Vice-Chair: The next presenter will be Dundurn Community Legal Services, Judy MacNeil. Welcome, Mrs MacNeil. You have 10 minutes to make your presentation and then the members of the committee will discuss your presentation with you for 10 more minutes. Would you introduce yourself and your organization for the purposes of Hansard?
Mrs MacNeil: My name is Judith MacNeil. I am the executive director of Dundurn Community Legal Services. Dundurn Community Legal Services is a legal aid, community-based clinic in central Hamilton that has been providing services in the area of housing issues for the past 12 years. Presently, the clinic represents various tenants associations that are comprised of residents from over 150 apartment units, as well as individual tenants in various locations throughout this city.
As approximately 45% of the population of this city resides in rental accommodations, legislation that imposes some form of rent control is of prime importance to this segment of the population. According to the 1990 regional housing statement update of the Hamilton-Wentworth planning and development department, 24% of all households had incomes of less than $15,000 per year and 35% of tenant households are paying more than 30% of their gross income on rent. In addition, 16% of tenant households pay more than 50% of their gross income on rent. Therefore, for the working poor and the financially assisted renter, rent control is vital to their housing needs. Continuation of unbridled rent increases could threaten this segment of the population with the real possibility of homelessness. We therefore endorse the amendments to the Residential Rent Regulation Act as proposed in Bill 4 as interim measures to prevent excessive rent increases while the present government proceeds with drafting permanent rent control legislation.
We in the clinic system come face to face with the financial burden that the present legislation imposes on tenants. Perhaps the most onerous part of the present legislation from the tenants' perspective is the allowance made for capital expenditures which, when granted, is factored into the total rent increase of the base rent. Such an increase extends beyond the lifespan of the repair or addition for which the capital expenditure was made. The tenants then must continue to pay for this expenditure, as the act does not provide for automatic rollback of the capital expenditure allowance after the lifespan of the repair. Consequently, the landlords continue to receive this increase on an ongoing basis, long after they have been reimbursed for the cost of the capital expenditure.
The other allowed increases for financial loss, operating costs are added to this allowance, and the financial benefit to the landlord compounds. While most tenants willingly pay an increase to which a landlord is entitled by reason of inflation and increased operating costs, it is mind-boggling to all tenants that they should bear the financial burden for expenditures that directly benefit the landlord's investment. Not only is the actual expense of the capital expenditure passed through to the tenants, but the landlord is also allowed an additional 10% for management and administration. Therefore, the elimination of this allowance for capital expenditures as proposed in Bill 4 is particularly gratifying to tenants. The tenants we represent heartily welcome this amendment.
The proposed Bill 4 does not, however, address all areas of concern to tenants. One such continuing problem is the landlords' demand for illegal rents in excess of the maximum legal rent. Prospective tenants who are unaware of the rent registry system or of the concept of maximum legal rent pay excessive rents. Recently, our clinic became aware of a situation where the tenants had been paying rents which were 61% above the maximum legal rent. The landlord's response to our protest was that the building was under rent review, although the amount of increase requested in the application was 19%. This is not an isolated case. Landlords continue to exact exorbitant illegal rents from tenants who, by reason of ignorance of their rights and/or fear of being forced out of their homes into a housing market plagued with a paucity of affordable rental accommodations, are willing to pay these amounts.
The present legislation and the proposed Bill 4 do not fully address this situation, aside from providing for applications for rent rebates, which are notoriously slow to be processed. The penalty provisions as set out in section 122 of the present legislation do not benefit the tenants who have suffered the economic hardship of overpayments and who continue to carry the responsibility of seeking out their rights in an obtuse paper process.
One is left to wonder how often the penalty section is even used and landlords are brought to task for blatant non-compliance. While section 100r of the proposed amendments allows for automatic deductions by the tenant for excess rent paid resulting from non-compliance with sections 100o, 100p and 100q, the tenant must still rely on the section 95 application process for repayment of excess payments in situations where these sections would not be applicable.
It would be reasonable to expand section 100r to allow for automatic deductions of rent wherever there has been a payment of excess rent and to provide allowance for interest to accrue on excess rent payments not repaid.
Another area of concern is the landlord's failure to maintain properties in a state of good repair while at the same time applying for increases in rent based on capital expenditures for repairs and additions that do not affect the ongoing repair of the property. The guideline rent increase includes an allowance of 1% for minor capital expenditures. There are few landlords who utilize that 1% for minimal repairs and maintenance. Tenants are living in buildings where basic repairs are not attended to but cosmetic expenditures are made as a matter of course.
The foregoing submissions represent some of the concerns of tenants here in Hamilton. As was stated, the changes as proposed in Bill 4 are welcome amendments to the present legislation, which has not been a satisfactory vehicle for protecting tenants, especially those from low-income groups, from spiralling housing costs. Tenants throughout the province are looking to the NDP government for permanent rent control legislation that will protect them and at the same time provide housing at fair cost. Tenants here in Hamilton look forward to participating in the development of such legislation. Thank you.
1340
The Vice-Chair: Thank you. Mr Tilson.
Mr Tilson: One of the main problems that we have in this province is that there are very few, if any, new starts in residential accommodation, particularly in the apartment sector. Do you have any recommendations to this committee or do any of the groups that you have spoken to have any thoughts with respect to recommendations to this committee as to how a government could encourage private enterprise, or the government, for that matter, to start new starts in the residential field?
Mrs MacNeil: I really cannot think of a proposal at the moment.
Mr Tilson: If I could just interject, that is one of the criticisms that has come to us from people appearing before us at this committee, that all Bill 4 is doing is digging a hole even deeper and deeper, and landlords and owners are simply refusing to build or expand new housing accommodation. So my question is simply, how do we get out of this hole, as opposed to digging deeper?
Mrs MacNeil: Maybe it is a situation where landlords have to be re-educated, or potential landlords have to be re-educated. Right now, I think landlords expect almost to have a ready-made moneymaker in a building. The money that is made, the capital that is produced on the turnover of the building seems to be, as in any real estate investment, enough incentive for landlords. Why does there have to be ongoing incentives on a continuing basis of more return on your money? If you are cutting even on your expenses and making a small profit, is not your profit to be looked to at the end of your ownership?
Mr Tilson: I guess I am looking for a response from an organization such as yours to people who come to this committee and simply say, "We're taking our money out of the country," that is, investors from out of the country. "We're not investing in Ontario" or "We're getting out of the housing industry. It simply does not pay us. They show us statistic after statistic after statistic, but it doesn't pay to build apartment buildings. It doesn't even pay to own them." So how do we deal with that? Have you any thoughts on that?
Mrs MacNeil: I find it hard to believe that large property owners in this province can actually show something on paper that they are not making a profit and that they are not encouraged by the rental market. I just find that hard to believe.
[Applause]
The Vice-Chair: This is a hearing of the Legislature of Ontario. Public outbursts, either in support or against or of any other fashion, are not allowed.
We have some questions now from the New Democratic caucus.
Mr Owens: Thank you, Mr Chairman. With respect to the case load that your centre has dealt with over the past few years, have you seen an increase in that case load, and if you have, what type of percentage have you seen with respect to an increase?
Mrs MacNeil: An increase in case load pertaining to rent review legislation?
Mr Owens: That is right.
Mrs MacNeil: Definitely. I am just ballparking when I give you a percentage, but I would say we are seeing twice as many clients coming into our centre with rent review problems. We are representing a clientele that is in the lower-income bracket of this society and I think they are the ones who are most seriously hurt by the situation right now, and definitely we are seeing large increases.
Mr Owens: With your case load, do you have any idea, first, what the average percentage increase that these folks who have come into your office to appeal has been and, second, with respect to the type of clientele, as well as the city of Hamilton, which tends to be very sensitive to external economic forces, the type of social costs that are involved in landlords obtaining these large increases?
Mrs MacNeil: As far as percentage of increase, we are seeing anywhere from 15 to high 20s, and very often we see people in the same building experiencing increases year after year. I am saying maybe 11% this year, 19% the previous year and it is an ongoing thing. I know in one situation where we represent a tenants association, the landlord has submitted applications for a whole-building review from 1985 through to 1991.
Mr Abel: Mrs MacNeil, I certainly do appreciate your presentation here. It certainly concurs with what a lot of tenants have been telling me. I take it from your presentation that in your opinion the current legislation simply does not work, is that correct?
Mrs MacNeil: Absolutely not.
Mr Abel: Do you see Bill 4 as a temporary measure to perhaps give us breathing space to look for a long-term solution to deal with these obvious problems in the current legislation?
Mrs MacNeil: Yes, yes, it will. Obviously its own repeal is built into it and it is going to give tenants some kind of encouragement to look forward to new changes with the permanent legislation. I think it will be a hiatus that is badly needed for tenants right now, who are just deluged with not only the effects of these applications but the mind-boggling state of why this is all happening and how it can happen to them and relate to what they are living in, the situations they are living in.
Ms Poole: Thank you, Mrs MacNeil, for your presentation today. It has been quite helpful. You have highlighted several areas which Bill 4 does not redress but which are of concern for tenants. For instance, you have mentioned the fact that once a capital expenditure has been paid for through the amortization period, once that amortization period is finished with and the repairs paid for, tenants continue to pay for that increase in their rent, and I appreciate the fact that you have highlighted that. That is something I am concerned with, that Bill 4 does not have a cost-no-longer-borne provision for those capital expenditures, so that has been quite helpful.
The second area which you mentioned was payment in excess of the maximum legal rents and the fact that there is no penalty. Again, I feel that this is an oversight in Bill 4. While there are provisions in the current act which say that you cannot charge more than the maximum legal rent, the penalties are not as stringent as some of us would like, so that too is an improvement that I suppose you would like to see in Bill 4 as well.
Mrs MacNeil: Yes.
Ms Poole: The third one was the failure to maintain properties in a state of good repair while putting through rent increases for capital expenditures. Now, I share that concern, but what I see happening with Bill 4 is that on the one hand it says there shall be no capital expenditures whatsoever put through, not even if the structural integrity of the building is in jeopardy, not even if the health or safety of the tenants is in jeopardy, and I have a concern that even in the interim period, which may be up to two years, none of these repairs will take place. Would it not make sense to have a provision in Bill 4 that there be necessary repairs to the structural integrity or to that which places the tenants' health or safety in jeopardy but that it be capped and there be a provision in, where there has been ongoing, deliberate neglect of the building, that the rent increase might not be allowed? Would you see that as an acceptable alternative which would help some of our buildings which desperately need these repairs and yet protect tenants from high rent increases?
Mrs MacNeil: Yes, in part. Well, there is the problem there again of, where is it capped? Who determines what is necessary? Right now the standards branch relies on the municipality bylaws as far as maintenance is concerned, and the state of the building. This has proven unsatisfactory, and are we not getting into that same situation? What is necessary is a broad term, and I know that philosophically it may not be, but in the practical aspect of it, in the practical interpretation of it, and that is my concern, we are sort of back to where we started from.
The Vice-Chair: Thank you, Mrs MacNeil.
1350
ARUN PATHAK
The Vice-Chair: The next presentation will be from Arun Pathak. Good afternoon, sir. If you would introduce yourself and your organization, if there is one, to the committee for the purposes of Hansard, you have 10 minutes to make your presentation, followed by 10 minutes of questions from the committee.
Mr Pathak: Excuse me, I have a bit of a sore throat. My name is Arun Pathak and I am property manager for SMAR Holdings Ltd.
I prepared a presentation which would take me 25 to 30 minutes to read. It is detailed and gives my views and experiences on a number of points, many of which I have seen raised by various groups to this committee. I have submitted the complete presentation to you in writing, and I will proceed to give a summary of it to you now.
I ask this committee to seriously look at my proposal as an alternative to the current bill. I have also related some of my experiences with certain matters, including economic eviction, and I would like to introduce the concept of tenant imprisonment, a matter I feel very strongly about.
The minister has introduced Bill 4 as a temporary, interim measure to stabilize the rental market, but the market is not unstable. Rent increases have been at an average of 5.8% for 1989, and 1990 was probably similar. The market is not in an unstable condition, and recent instability is in the tenants' favour, giving many tenants benefits in terms of reduced rents or sometimes in terms of better upkeep and maintenance of apartments.
The proposition that we must jump from this frying pan regardless of where we land is totally incorrect, because the market is not unstable and we do have enough time to look where we are about to leap. To try to justify this reckless legislation, the minister and Premier are fond of quoting three things: 100% or 150% rent increases, luxury renovations, and flip after flip after flip.
First, the 100%-plus rent increases: They have affected one in 14,286 units and if any person tells me that this problem cannot be solved by a cap or a phase-in of capital expenditure, he is a fool or a liar and should withdraw from this debate.
Luxury renovations have also been exaggerated out of all proportion. No figures are available, but they can be solved in one of two ways. Either define luxury renovations in the legislation and disallow any of them, or give tenants a veto on renovations in their apartments.
Flipping of apartment buildings can be stopped by a speculation tax, about which there has been some discussion. Again, no figures are available with regard to flips, and a change in management can lead the tenants to think the building has been flipped. Of course, when a building is sold, capital expenditure is not allowed in the first year. Therefore, sales of buildings generally give 5% over the guideline increases for financial loss.
These three things would stop the perceived problems without stopping capital expenditure. The effects on the economy would be minimal; job losses would be minimal. Landlords would not face hardships and possible bankruptcy, and I expect all parties in the legislature would show general support, as would landlord and tenant organizations.
I would like to go on to some of the other concerns of tenants, most of which are not addressed by Bill 4.
Economic eviction: First, tenants only get large, retroactive rent increases because when Bill 51 became law, it was implemented too soon. If the old system had continued for a year, the staff could have been trained in that period and the large backlog of applications would not have occurred. This is, or was, one of the major complaints of Bill 51. There is a lesson to be learned here: Give new legislation time to be set up before it is implemented. If it is true that all rent review applications are on hold pending the outcome of Bill 4, then when the orders finally come out, they will be retroactive. My experience with retroactive orders is that some tenants decide they would rather move than pay the legal and justified increases. They immediately stop paying the rent, not just the retroactive portion but also the current rents. They then wait for the landlord to go to court and get an eviction. They live rent free for two months or more. Just before they get evicted, they find a new apartment and, having stolen enough of their current landlord's money to put down as first and last month's rent, they move, having made quite an economic profit from their eviction.
Are these the people on fixed incomes, often seniors? No, generally people on fixed incomes understand they must budget and they generally either pay the proposed increase or put money aside for it. Usually, they have a surplus because the increase is not as high as the proposed amount. I do have two possible solutions to help people on fixed incomes. The government can issue every person who goes on a fixed income a card showing which year he went on the fixed income and then ask or tell or retroactively legislate for food, clothing and other suppliers to charge 10- or 20-year-old prices. The other solution is to ask the United States, Japan or Saudi Arabia or anybody else to subsidize the income of these people and fight the war against poverty in Ontario. We all know the problems of insufficient income are the responsibility of our provincial and federal governments, but they can try and pass this problem off elsewhere.
A number of tenant groups have spoken of housing or shelter as a right. I agree that housing should be a right, right behind food and clothing. Should the third right not be a part of the market economy when the first two are? The government has not suggested that supermarkets should give cheaper food to the needy; then why should landlords subsidize tenants? The correct thing to do is to ensure that every person has sufficient income to pay for his food, clothing and housing, and I think shelter subsidies must be part of a long-term plan.
It has been suggested that landlords can purchase a building at any price and pass on the cost of 85% of the mortgage to the tenants. It has been suggested in such a way as to say there is no ceiling, that the sky is the limit. This is a myth. The value of an old building will always stay proportionately below the cost of construction of a new building, maybe 20% or so. To achieve the construction of new rental buildings, the value of older buildings must rise to this level, and the value of the older buildings is determined by the current and projected rents. The fair, long-term solution must allow a gradual increase in rents to reflect increased value due to increased construction costs.
Here, I want to bring in my concept of tenant imprisonment. If legislation does not permit a pass-through of increased mortgages due to increased values, rents will be as follows.
The rents on a building built many years ago at a cost of $20,000 per unit will be the current operating costs plus the cost of a mortgage of $17,000 based on 85% financing. Buildings built at a cost of $50,000 a unit will have rents of operating costs plus a mortgage of $42,500. Buildings built at a cost of $140,000 a unit will have rents of operating costs plus a mortgage of $119,000. The rent differential will be great and ever-expanding. Will there be any units available in the buildings that were built for $20,000 per unit? Yes, when a tenant dies. Will a senior citizen or a single mother be able to move from an old building in Toronto to be near friends or family in Hamilton? No. All units available in Hamilton will be in the higher-priced, newer buildings. That is the imprisonment of tenants which will be created by our NDP government if it does not allow financial-loss pass-through based on increased value.
Our industries will suffer due to lack of labour mobility; people starting their adult lives will face the highest rents, as will immigrants and people getting divorced. Seniors will be stuck in cities far away from their children and grandchildren. The distortion created in the marketplace over the years will threaten our livelihoods, our freedoms, our rights. Everything Ontario and Canada stands for will be adversely affected.
You will have to read my written presentation regarding reserve funds and landlords putting money away for major renovations and repairs, because I want to get on to other points.
1400
Retroactivity: I understand that it is a principle of democracy that no government will put forward legislation which is binding on a future government and which cannot be changed by the future government. The same principle must be applied to retroactivity. No government should go back in time and make changes to what a democratically elected government did when it was in power. It can be changed for the future but not for the past. Retroactive legislation is something one expects to see from the illegitimate government of a Third World dictator who has seized power, killed his predecessor and is determined to not just change but annul, abolish and declare invalid his predecessor's actions.
How would this government feel if either opposition party stated that it would reinstate current orders that are being cancelled when it comes into power in five, ten or twenty years' time? All landlords should get any increase due to expenditure they have already made whether it be capital expenditure or financial loss on the purchase of a building.
What does the bill do for tenants who have bad landlords? Nothing at all. Only a free market with rents high enough for construction of new units, thus creating a small vacancy rate, can force landlords to compete to keep their tenants and thereby provide a better service to the tenants. The free market has worked well all over the world. Countries behind the Iron Curtain are now looking to adopt a free market economy. We could perhaps learn from them.
Mr Abel: Thank you, Mr Pathak, for your presentation. It did bring a couple of questions to mind. First, in your opinion, what responsibility should landlords take in protecting affordable rental stock in their respective communities?
Mr Pathak: Why is it a landlord's responsibility as a general industry to look after the affordable stock? There are a lot of parties involved in that, and you have also got to consider --
Mr Abel: Are you saying landlords should not take responsibility?
Mr Pathak: Well, landlords are running a business there. They have responsibility for their business.
Mr Abel: And because they are running the business, they should not take the responsibility?
Mr Pathak: Responsibility for what? For making sure that the rents stay --
Mr Abel: No, we are talking about protecting affordable rental stock here.
Mr Pathak: Well, the rental affordable apartment has been defined as $1,200 something if you are looking at new units, so there are very few units in the area that are anywhere near that. But that is the Ministry of Housing's definition of affordable and most people cannot afford that.
Mr Abel: What responsibility should landlords take in the ongoing maintenance of the building?
Mr Pathak: The ongoing maintenance is their responsibility and yes, I have sat here and I have listened to the television and I have heard tenants come up and describe criminal landlords, and there are some of them. But there are also criminal tenants out there, and if there are criminal landlords, Bill 4 is not doing anything to stop that. A free market would solve that problem but Bill 4 will not.
Mr Abel: Then Bill 4 is only a temporary measure.
Mr Pathak: It is temporary but it is retroactive and it is going to affect business decisions made three or four years ago so that affects five, six years.
Mr Abel: Are there any outstanding repairs on your buildings?
Mr Pathak: There are always repairs. I have got somebody doing repairs right now while I am here. So I cannot say there are no outstanding repairs. Yes, there are new repairs that come in every day to be done.
Mr Abel: What level of increases have you asked for in, let's say, the last two years?
Mr Pathak: Generally we have had phase-ins of 5% over the guideline.
Mr Abel: Over the two years, a total of 5%?
Mr Pathak: No, 5% over the guideline. The guideline was --
Mr Abel: Oh, 5% over the guideline. Okay.
Mr Pathak: Yes, the guideline was 4.6%, and was it 4.4% the year before?
Mr Abel: How many tenants in the buildings that you own are on a fixed income?
Mr Pathak: Quite a few. I see people come to me to rent an apartment and they tell me that they are going to be spending between 50% and 60% of their income on the rents. These are single mothers, and sometimes I look at them and they tell me, "I've budgeted like this and I can manage," and I take them. Sometimes they do not seem to have done their homework and I do not feel that they can manage. But a lot of people in my buildings are single mothers and I also have subsidized units. There are people paying 50% to 60% of their income, and they should not be doing that. They should be subsidized through housing subsidies or something.
Mr Mahoney: More and more, I think, as we have gone around the province, we have seen concerns brought by small independent landlords. Of course government members are admitting that the bill is temporary, which in a sense is admitting that it really does not solve any of the problems. They are just going to put it in place for a while.
I would like to know if you have analysed it and come up with any answers to the very many problems. The previous presenter outlined five specific areas about costs that are no longer being borne, illegal rents, a number of areas, none of which were addressed by Bill 4. What I have had some trouble grasping is how Bill 4, as temporary and obviously flawed as it is, solves any problems for tenants. I have even asked that of tenant groups who simply have said, "We like the cap." I understand that, but is there anything other than the cap that you have seen that is helpful to tenants?
Mr Pathak: No. Basically, I cannot understand what has been going on. The minister introduced this as temporary, interim legislation, saying that capital expenditures are not going to be recognized. He has then gone on and made different statements, one being that perhaps in the long run we will have to recognize capital expenditure. He has also gone on to make a statement that this committee can change Bill 4 and that this committee will have to recognize legitimate concerns regarding capital projects.
It seems that this bill was introduced without the homework having been done, without landlords being consulted. It has been something that is rushed in to try and show that something is being done, but it is not doing anything for the tenants.
Mr Mahoney: On the side of repairs, you have repairs outstanding, and I would assume you would do repairs to make sure that the security and safety of the tcnants and your property is protected. But what is your thought on future repairs? Will you bother under this type of legislation or will you just do the very basic minimum and havc the quality of life deteriorate for your tenants?
Mr Pathak: You have got to understand that no matter how you legislate, unless you have got thousands of policing people, you cannot go around policing everything. The bylaws are minimum standards, and you have got to have some sort of a free market for tenants to get the sort of accommodation they want. It is very difficult for landlords if they cannot get increases to go around doing repairs and renovations. It depends on what sort of income they are making.
I have been making $11,000 a year for the past six years and I have been working very hard at this work. Perhaps I should be on welfare or something, but I really work hard. I have invested a lot of money. I worked hard in England for many years and I came to this place and this province and invested a large sum of money. My father is sitting there, he worked hard all his life, he does not drink, he does not smoke, he has had no vices and I have none. We have invested a large sum of money and we are getting no return on that. We are working hard, and I do not know what is going on.
Mr Mahoney: With that kind of track record, you could be a member of the government. Thank you.
Mr Tilson: Sir, one of the areas that our party has been considering in reviewing is an area that you have raised in your comments, that is the democracy clause with respect to capital expenditures; in other words, some sort of clause that if the majority of tenants agree to particular capital expenditures and they acknowledge that their rent would go up by a certain percentage, that that be allowed. Have you any more thoughts on that other than what you have told us?
Mr Pathak: Well, there are a lot of ways of doing this, you know. If there was not such a conflict situation -- and Bill 4 is a very conflict type of bill -- if there was more getting together between landlords and tenants, a lot of problems could be solved. But it always seems that whenever something is done, it brings in a conflict and you do not get together, you do not get the meeting of minds. Of course, even within a building, you will get different people who want different types of improvements. It is a difficult situation, but we work together on it and try to do something.
1410
Mr J. Wilson: Sir, I very much enjoyed your presentation. It takes a lot of courage to come forward and to express some of the views you have.
We threw around in this committee and the hearings in the past few weeks the area of responsibility. It seems to me, as a member of the Legislature, that I bought into the responsibility of being part of a government process, and one of the primary responsibilities of government is to look after the weakest members of society.
I do not think landlords necessarily buy into that when they buy into a building. They may now that the NDP is legislating that. You call it temporary legislation, but I suspect this is just a rollover into your permanent legislation that is coming. But I am interested because I think it is the responsibility of government and not landlords to subsidize low-income people, a tremendous cost, I imagine, to society.
Have you any idea, in the buildings that you have, how many tenants would need a direct subsidy to, say, bring their rent below 30% of their gross income or below 25%, any idea what the cost would be? I think we should be seriously looking at that direction. We should be subsidizing people and not buildings.
Mr Pathak: Yes. I already have some tenants who are subsidized by the Halton Housing Authority, and it may be a large number of people will be affected. Different buildings will have different percentages affected, but that is the way to do it. To have landlords doing the subsidy is wrong. The general community has to subsidize these people.
There are people out there who need help, and whatever it takes, it has to be done. But you do not say to Miracle Food Mart, "You lower your food prices to help these people." It has got to come from the welfare, the unemployment, the family benefits, minimum wages. I do not know where it has got to come from, but it has got to come from those types of things, not out of landlords' pockets.
Mr J. Wilson: I think we would go a certain way towards agreeing with you on that.
Second, I did not totally understand your "imprisonment of tenants" section. Can you briefly cap that?
The Vice-Chair: Very briefly.
Mr Pathak: Well, if tenants have an apartment which is a very low rent then they are trapped there because when they go out to look for another rent on the market, they have to pay so much more. They are imprisoned where they are now. They do not have the mobility.
The Vice-Chair: Thank you, sir. Your time has expired. I would like to mention that the committee deeply appreciates your providing a summary. I am sure all committee members will have a look at your full paper and your full discussion of the issues. Thank you very much.
Mr Pathak: Thank you, sir.
GEORGIAN COURT ESTATES TENANTS ASSOCIATION
The Vice-Chair: The next presenters will be the Georgian Court Estates Tenants Association, represented by Tim Lee. Mr Lee, welcome to the committee. If you would introduce yourself and the organization you represent for the purposes of Hansard, you have 10 minutes for your presentation followed by 10 minutes of questions.
Mr Lee: My name is Tim Lee. I am here representing the tenants of Georgian Court Estates in Burlington, and I will just read for you my prepared text. I made copies and I think you should all have them.
First of all, I would like to thank you for giving us this opportunity to speak to you this afternoon on behalf our association. The proposed legislation and the current freeze have given the tenants of Georgian Court Estates a stay of execution
I live at 681 Marley Road, Burlington, Ontario. The area I live in is a town house/maisonette complex owned by ManuLife Insurance Co, based in Kitchener, Ontario. The complex is known as Georgian Court Estates. It consists of 280 units, a combination of town houses and maisonettes. Rents in our complex are perhaps the best in Burlington, with most residents paying around $600 for a three-bedroom unit with heat and hydro included. There is also a pool and tennis courts available for the tenants during the summer months.
On the whole, the complex has been relatively well maintained and comfortable during the five years I have lived there. Most minor repairs have been done without too much or too many problems. From the outside it appears to have been a relatively well managed complex, In fact, it may well be a testimony to the fact that rent controls can work. Which is why one might ask, what have these tenants got to complain about? If all had been left as it was, quite frankly there would have been very few, if any, real complaints. However, as you have guessed, or should have, all was not left as it was. In the fall of 1989, the greed bug bit and a massive renovation project was undertaken by ManuLife at a cost in excess of $6.5 million, and there was no peace left in the kingdom.
Min Realty took it upon itself to practically rebuild the complex and in so doing paid several thousand dollars in consultation and management fees. At no time was there ever any real attempt to explain to the tenants what was going to be happening or to consult with the tenants as to the necessity of the work being undertaken. This is not to say there was no attempt, simply that there was no real effort on the part of management to explain to the tenants that the work which was about to take place would be followed by a 62% rent increase, in most cases amounting to an increase of $400 per month.
Judging by the work that was undertaken and the reckless manner in which it was performed, it seems more than likely that the work was done not out of necessity but rather in order to justify a huge and unnecessary rent increase at the expense of the tenants.
It began in April 1989 when Min Realty informed us that it would no longer be paying for our cable and would give us a rebate of $4 per month in order to compensate us for the loss of this service. Cable in Burlington costs $15.32 for basic service. In effect, what happened left us with an increase of $12.32 a month in order to maintain the service we were getting before.
Let me give you just a few examples of the types of things that we tenants feel were not needed.
All fences were removed and replaced with new pressure-treated lumber. In some cases the fences replaced were indeed required, being in excess of 20 years old. However, why would fences that were no more than three years old and constructed of pressure-treated lumber be ripped down and replaced with the same type of material yet new? The lumber which was removed was given away to the Mennonites in Kitchener, apparently free of charge.
All patios were removed, regraded and replaced with approximately 150 square feet of paving stones. The two-by-two patio stones were removed and many given away. In addition to this work, the yards that were bigger than 10-by-15 were filled in by old two-by-two stones. Upon examination of the cost revenue statement submitted to the rent review office, it appears that there were $66,000 worth of two-by-two paving stones used to accomplish this task. We inspected the patios and we found that all of the two-by-two stones that were used were indeed used and were not new.
All windows and storms were removed and replaced with new high-grade aluminum windows and storm doors. The windows that were removed were thrown into the trash bins and destroyed. This alone seems at first to be an acceptable course of events due to the fact that there seems to be little use for used windows. When one looks closer and sees there were many windows replaced that had just been replaced not more than two years earlier, it seems absolutely absurd. We asked the staff at the rent review office about this and we were told that since the landlord had not submitted an earlier request to increase the rent, such a waste was totally acceptable and would not be considered in the present application.
The roofs on all units were removed and replaced with both new sheeting and shingles. Flat roofs were removed and replaced, re-tarred and regraded. The roofs were quite old and therefore probably due for replacement. My question is, why would all shingles have to be removed and new sheeting have to be applied to all roofs, regardless of the condition of the sheeting underneath?
During the work done on the patios and fences there was considerable damage to the grass in the common areas, resulting in the necessity of extensive replacement of sod to these areas. If there had been a little more care and concern taken during this work, most of which was unnecessary, much of this expense could have been avoided.
1420
Work done in the inside of our homes was extensive, and to a great degree unnecessary. For instance:
All electrical service panels were removed and replaced with new 100-amp circuit-breaker systems. It seems to be a legitimate upgrade until one realizes that what they replaced was a 100-amp service as well. While speaking to the workmen doing this job, it became obvious that this was a total waste of money of approximately $450 for each unit.
Refrigerators, stoves and dryers were removed and replaced with newer ones. Many of the ones they replaced were less than five years old. They did not need to be replaced at all. Approximate value of the replacements was $1,200 per unit. All were replaced. Some of the units had no dryers and therefore were not given new ones.
Laundry tubs were removed and replaced. Those which were removed were concrete two-tub systems to be replaced by a single plastic tub which cost about $15 each.
In all units, kitchen and bathroom corridor floors were replaced with new cushion linoleum, an off-white colour which is next to impossible to keep looking good. The ones they replaced were old, but in many cases the tenants had replaced them already at their own expense. In one case of a bathroom floor that was replaced, the tenant had at his own expense installed ceramic tile on the floor and around the tub enclosure, only to have it ripped out and replaced with inferior linoleum.
All bathtubs were removed and replaced with new ones and walls around the tubs were removed and replaced with ceramic tiles. This, it seems, was a legitimate expense. The one thing that bothers me about this project is the fact that the shower controls that were installed were inferior because the water temperatures can vary so radically that it can be very dangerous. One can be scalded very easily one second and frozen the next.
When the project manager was approached about this, his answer was to retrain your family so that they do not flush the toilet or turn on the water when someone else is in the shower. Had they spent a few less dollars on needless floor repairs and a few more on pressure-controlled shower controls it would have made a much safer and more acceptable upgrade.
All bathroom countertops, sinks and faucets were replaced regardless of the condition of the old one. Perfectly good sinks and countertops were removed and trashed, to be replaced needlessly. The faucets may indeed have needed replacing. However, why should one install shutoff valves under the sink where none existed before? The washerless faucets installed had a 10-year warranty. At first it may seem that these shut-off valves were necessary. However, each unit has its own main shut-off which always worked in the past, and why not in the future? This indeed seems to be a needless expense.
Kitchen countertops and faucets were replaced regardless of the condition of the previous countertops. In many cases, the old ones were still in good condition and did not need to be replaced.
The door locks, both front and back, were replaced with a deadbolt system. The cost was about $11 each and have actually fallen apart in my hands. In addition to the fact that the locks that were installed were cheap and easily broken, most units had already installed deadbolt locks on their own homes and provided the management with keys. This new system provided the convenience for the landlord at our expense in providing him with a master key system. That in itself seems legitimate. However, what happens when several dozen contractors are given master keys to the units? How secure can you feel about leaving your homes?
The exterior of the front and back doors was painted, which indeed was needed. However, the paint used was a latex which was put on top of an oil base and therefore would not stick. I spoke to the contractor who did this work and he told me that he advised management of the impending problems; however, was ignored. When the weather-stripping was installed, there was a chemical seal created and the doors could not be opened. As a result of this, the doors had to be repainted and the weather-stripping had to be replaced at considerable expense.
These are but a few of the instances of mismanagement and needless waste and expense which the tenants are being expected to pay for. These renovations were in some cases required; in many others were not. To have rebuilt the entire complex without concern for the necessity was, in our opinion, reckless and irresponsible and we as tenants refused to accept it without a fight.
I would like to share with you some of the things that we think would have prevented the current situation from occurring in the first place.
The Vice-Chair: Perhaps, Mr Lee, you could share with the members as we go through the question time. Ms Poole will start that process.
Mr Duignan: We are willing to waive our party's time.
The Vice-Chair: Fine. The New Democratic caucus has waived their time so you can use their three minutes, if you wish, to continue speaking.
Mr Lee: Our association was formed in reaction to the landlord's application for unjustified rent increases. Had there been an association in existence before this massive project began or was even considered, the tenants would have been much more able to respond and prevent the unnecessary expense. We would encourage the government to require all residential complexes of more than 10 units to have a representative body of tenants in place prior to the approval of any major renovation project that would necessitate an increase above the government guidelines. This body should be funded by a small percentage of the rent paid.
All rents collected by landlords should include a percentage for capital expenditure and major repair work. Individual home owners have to save for repairs to their homes. Why should landlords have a bottomless well from which to draw funds?
No major repair work should be allowed without adequate consultation with tenants and full disclosure of the impact of such renovations on the rents of the tenants involved, prior to any renovation project being started. No increase beyond that which has been presented to the tenants should be allowed.
Common sense and good management practices cannot be legislated; however, the lack of them should not be rewarded by legislation that allows for unjustified rent increases and in effect promotes poor management practices.
Large corporations have millions of dollars to spend on lawyers and consultants to justify and prove their cases. Tenants in most cases are simple, hardworking people trying to make ends meet and quite simply have nowhere near the resources available to them that corporations have. As a result, as such, we face a very unbalanced system. Tenants needs access to funding, expertise and resources in order to properly be represented. The government has a responsibility to both landlords and tenants, and therefore cannot act as an independent arbitrator for the benefit of both. Rent review officers should therefore be appointed independent of either party for the effective, impartial decisions to be made.
No rental payments should be made retroactive. If there is a delay in the system because they have an abundance of cases, then the system should be adjusted accordingly. Tenants should not have to live with a razor over their heads, uncertain of a pending increase.
Any increases that are to be accepted should be approved with two months' notice which would give the tenants an opportunity to find other accommodation should their present situation become too expensive.
Finally, I would like to comment on the retroactivity of the current legislation. I have seen some of the proceedings of this committee on television and it seems to me that the most debatable aspect of the current proposal is that of the legislation being retroactive. Is it fair?
To be honest, my first impressions of the retroactivity were that no, it was not fair. However, as I began to think about it, neither is it fair for tenants to be faced with astronomical increases based on unnecessary repairs. Does that mean that two wrongs make a right? Is it fair? No, it is no more fair than legislation that discriminates against a majority for the sake of minority rights. It is no more fair than legislation that gives women and minorities precedence for government jobs. It is no more fair than the minority hiring quotas on our police forces.
Quite frankly, it does not have to be fair; it has to be just. And yes, in this case, two wrongs do make a right. In order to right a wrong that has been allowed for several years, the scales of justice have to be weighted to one side for a period of time.
Thank you for allowing me the time to express our opinions and give you a brief history of our dilemma. If our landlord is given the increase he is asking, three out of five tenants will have to move from Burlington. I ask you, where are they supposed to go? What can I tell tenants who are senior citizens and single parents who call me, afraid of what will happen to them if they cannot pay? The rents will be increased to $1,000 per month, beyond the reach of most. If you, like me, earn around $30,000 a year and bring home maybe $22,000 after taxes, that would mean that rents of $12,000 per year will consume in excess of 50% of my income. How do I provide for my wife and two children?
One final question I have is, what will happen at the end of two years when this freeze is over? If the landlord does indeed get his increase, what will happen to those who could not pay to begin with? How are they supposed to pay what will be close to $10,000? Many of our residents are on fixed incomes and are single-parent families. What will happen to them? Is it fair? Is it just?
1430
Ms Poole: Thank you, Mr Lee, for your presentation. You have given us certainly a lot of food for thought. It would seem to me that a good deal of the first part of your presentation was based on a problem you had with your landlord's rent increases for two reasons: One is, I think you called it, the reckless manner in which the repairs and renovations were done, that the workmanship was shoddy and quite often what was replaced was in better condition than what they replaced it with; the second thing was that a number of the repairs or renovations simply were not necessary and did not take into account how long the previous repair or replacement had been in operation.
I share those concerns with you. But the thing is that Bill 4 will not do anything to correct it. My feeling is that there are some things we could do to correct Bill 4; for instance, if we ensured that work done was necessary and that tenants could use this as a defence. So, for instance, the fence posts that you said were torn out, the bathroom tiles that were needlessly torn out, that could be used as a defence that you should not have to pay for those. Second, that there be a value-for-money provision in the legislation so that you can say, "Yes, but the workmanship was shoddy," and that the results afterwards were worse off than before.
If those two provisions were brought in and if there were, for instance, a cap on the repairs and renovations and replacements in the legislation, do you consider that that might indeed be a better solution than by punishing all landlords, in some case punishing all tenants, by saying that no capital repairs or replacements will take place in the next two years?
Mr Lee: I would think that any legislation that is enacted should include that type of a situation. I understand that there are situations where capital expenditures are required in order to upgrade a building to the point where it becomes safe again.
The thing that really bothers me is when things like our situation are happening. There was one unit in our complex that was burned out two years ago, and it was rebuilt from the inside out; completely renovated and renewed. The same things that were done to every other unit in the complex were done to this place as well. So things that were no more than two years old were thrown in the garbage for the sake of putting in new things again. I really think that the landlord should be more willing to listen to what tenants are saying. Not all tenants are stupid and we are not there waiting for the landlord to provide us with a place to stay at his expense. We want what is fair and we want what is just.
Ms Poole: One thing you might be interested in is the fact that last April the previous Liberal government did bring in regulations which actually required a landlord to give disclosure to the tenant prior to commencing any work, and this disclosure was to let the tenants know what the cost is and the type of work, how long it was going to take and the inconveniences they would have to suffer. It was going to cover all of that and that might have remedied a situation such as yours where you had virtually no communication with the landlord.
Mr J. Wilson: Sir, I thought it was a very reasonable submission. You make a number of good suggestions there. It is clear that you are not looking for something for nothing, and that your tenants, if they had a reasonable landlord, would and did get along for many years. I am just wondering, do you think your landlord in particular would be willing to sit down? You mentioned having a tenants' organization or some sort of a joint co-operative effort to sit down and to talk about renovations prior to those renovations occurring. In your case, would your landlord be willing to do that, do you think? Because Bill 4 does not talk about co-operation and it does not address this issue, frankly.
Mr Lee: I think in our particular case it probably would not have happened simply because we were dealing with a corporation as opposed to an individual. Corporations tend to be very impersonal and to work from the bottom line and that seems to be the only thing they look at. When some of our tenants actually approached the management company with concerns that they had, they were told, "The problem with you people is that you think these are your homes." They would not deal with us. How are we supposed to deal with that kind of an attitude? There seems to be an us-against-them mentality that does not need to exist.
Mr J. Wilson: I guess that leads to the thought that you need legislation, then, to make people co-operate, and that becomes difficult but not impossible if landlords are forced to sit down with tenants and vice versa prior to renovations being made. You would support that, I suppose, because in your case, your landlord would not voluntarily do that.
Mr Lee: Yes, I would support that.
Mr J. Wilson: It seems to us that Bill 4 does not address that and that Bill 4 will lead to more of these games that your landlord has clearly been up to in the last little while. Dave may have one final question.
Mr Tilson: Just to carry on with that, I think that is our major concern with Bill 4. The legislation that seems to be coming forward from the government is a very confrontational type of legislation. It is either pro-landlord or pro-tenant, and I was encouraged to hear your remarks on the -- you may have heard me asking the previous speaker -- democracy clause. That is something that I think that our party will be pursuing, and I was most encouraged by your thoughts in that area as to encouraging tenants to participate and what expenditures should be made.
I guess I have one question, having said that. Should there be any repairs encouraged by the government? In other words, there are obviously, for example, roofs. Tenants, if you used the democracy clause, technically, I suppose, they outvote repairing roofs.
Mr Lee: I think the same standards that are in existence for the landlords, such as the Residential Rental Standards Board, which says how well a unit should be maintained, should also apply to tenants. So in that sense, I do not think tenants would be able to veto a roof that needed to be repaired.
Mr Tilson: If the government were suggesting some sort of an amendment, which we will be doing, the democracy clause, and then following along with perhaps the government standards clause that certain minimum standards must be met, you and your group would be content with that type of amendment?
Mr Lee: Yes, we would. Even with the increase that was proposed at 62%, everybody was expecting an increase, but not at 62%.
Mr Tilson: Yes.
Mr Lee: We would probably have been able to swallow even a 30% increase.
Mr Tilson: You were not consulted at all, then?
Mr Lee: Not at all.
DENNIS LATTANZI AND ED LATTANZI
The Vice-Chair: The next presentation will be made by Dennis and Ed Lattanzi. Good afternoon, gentlemen. Welcome to the committee. You have been here for a few minutes, I think, and you have seen the way the committee operates. You have 10 minutes to make your presentation, followed by 10 minutes of discussion with the committee. If you will begin by introducing yourselves for the purposes of Hansard, then you can begin your 10 minutes any time.
Mr D. Lattanzi: My name is Dennis Lattanzi and with me is my brother, Ed. He is also an investor in our building. I am a landlord. I am an engineering technologist and also a landlord. I am here before you to discuss the repercussions of Bill 4 as it directly affects me and the associates of our investment group.
Approximately two years ago we purchased a 40-unit apartment building in Oakville. All tenant investors are first-time buyers, and we are all middle-class Canadians. Please allow me to explain the effects of this bill in two sections: foremost, how it directly directs our investment, and second, its effects on me and my associates personally. I would like to begin by discussing the condition of our investment prior to the announcement of Bill 4, its immediate effects, and undoubtedly its future consequences.
Prior to the purchase of this building, we studied and understood the financial structure of our investment and what was essential to make it successful over a period of five to 10 years. In June 1989 we invested our hard-earned money in good faith with guidelines set forth by the previous Liberal government. We arranged the best possible financing at that time, and realized that we would incur financial losses for the first four years.
1440
After applying under the Residential Rent Regulation Act, 1986, we were granted 5% phase-in increases over the guideline for the next four years to recoup some of our financial losses. To summarize, given the above, we felt we had a secure investment.
On 28 November 1990 the NDP government announced its amendment to the Residential Rent Regulation Act, 1986. Its effects were immediate and devastating. The following are directly related to this bill:
A. The ability to negotiate any refinancing of existing mortgages has been eliminated due to retroactively voiding phase-in increases that were previously approved. In fact, we had received preliminary approval of some refinancing prior to the announcement of Bill 4. The loss of positive cash flow directly resulted in the denial of our application. In doing so, our financial institution also expresses concerns over this bill's negative effects, namely the devaluation of rental stock.
B. The possibility of selling our building at a reasonable price or, in fact, a reasonable loss, has become impossible. Bill 4 has sent out a signal to all potential investors to beware of rental housing. Lack of investor confidence in any industry spells nothing more than certain disaster.
C. All planned necessary renovations have been suspended indefinitely. This building is 27 years old. The need of structural repair to our underground parking facility caused by salt damage was first on our list of priorities. Another was the resurfacing of the asphalt driveway and parking lot. Bill 4 will not recognize any rent increases for capital expenditures, therefore our decision to suspend. It is in the tenant's and landlord's best interests to have a well-maintained housing facility.
I would like to add, just as a point of interest, that soon after the purchase of our building, we spent $8,000 in renovations to our lobby and hallways. We decided to absorb this cost rather than to apply for another rent increase.
Should this bill be passed in its present form, the result will unquestionably lead to our financial bankruptcy. The consequences described previously will be permanent. In fact, our losses will only compound. In 1990 alone, this building lost $40,000 in operating expenses. And if you factor in the following, I am positive it will prove my point.
A. The voidance of previously approved phase-in increases means that a projected loss of four years will now become infinite.
B. Retroactive to 1 October 1990, all previously collected rents above the proposed 4.6% guideline are to be returned. How do you pay back funds when you are operating at a loss? As an investor, you have to consider the worst possible scenarios. In our case, should any sudden and necessary replacements occur in the range of tens of thousands of dollars, we simply have no place to turn for financial assistance. An example of this would be the replacement of the roof.
When the 10 of us sat down and considered what I have just mentioned, it was quite evident that we are painted into a corner. As there is no incentive to continue operating at a loss, the only decision we face is: When do we walk away? In fact, all of us mortgaged our homes to enter into this endeavour. It will certainly mean that their sale is imminent in order to repay our debts. As first-time investors, I would like to think that we represent the future stock of businessmen in this province. As middle-class Canadians, we knew it was hard work that got us here.
I wish I could describe to you how incredibly disheartened the 10 of us have become. This government is on the verge of destroying the spirit of future entrepreneurs. I know I speak for the nine others when I say that the scars remaining from this horrible experience will be long felt and not soon forgotten or forgiven.
In my heart, I am certain that the predicaments facing us would have been much easier to accept if it strictly involved our poor judgement. Ironically, the opposite is true. The NDP's shortsighted ideology is about to enforce legislation that will lead to our certain ruin.
To this point I have spoken to Bill 4 and its effects on me and my fellow associates. I suppose it would be unfair not to mention the true intentions of this bill, the protection of tenants from high and unjust increases.
I do not think you can find anyone with any sort of decency, whether they are landlords or not, who would defend abusers, but it is just as unfair to penalize everyone for the actions of a few. I fail to see how the repossession of our building by a financial institution will serve the best interest of the tenants. The reduction of services can only lead to deteriorating living conditions, not to mention the loss of the landlord-tenant relationship. If this government is determined to protect tenants, then let it protect those who truly need assistance. It is unfair to protect all tenants at the expense of the landlord.
I can only plead to this committee and to the NDP government to reconsider the unfair, damaging, retroactive aspects of this bill. Thank you for allowing me the opportunity to speak in regard to this important issue.
Just as a point of interest, I put down the address of our building in the bottom left-hand corner strictly for the committee. I would prefer that it be left only with the committee. We are still hopeful that we can get some financing to make our way through this difficult bill, but if you keep it to yourselves, I would really appreciate it.
Mr Tilson: Before becoming Premier, the Premier made a statement on the question of who should have the majority of the ownership of the housing stock in Ontario. A specific question was directed to him as to whether Ontario should follow the Swedish model, where there is a very small percentage of private ownership, and he stated in response to that question: "Yes, that makes a lot of sense to me. What we want to try to do is to eliminate the unproductive speculative element in the economy as much as we possibly can. My model would be one where you have a very substantial non-profit rental sector which would be dominant." In other words, the government owns the housing stock. What is your thought on that philosophy?
Mr D. Lattanzi: I feel that basically, as far as the industry goes, it would be totally destroyed.
Mr Tilson: Could the taxpayer bear the brunt of that?
Mr E. Lattanzi: I can answer that. Absolutely not. We have to look at who the consumers are, and if we are asking for the general tax base to pay for this it would be ridiculous. You have to go to the consumer. It is a service we are providing and must be paid for by the consumer. It is not fair for anyone who owns their own home or is living anywhere other than an apartment to have to pay for other people's living. It strictly is not fair.
Mr J. Wilson: You have hit right on it when you said the NDP is a victim of its own ideology here. We cannot seem to convince them that they either have to be straight with the public and say, "Look, the government is going to own housing in this province from now on," that they are going to buy people like you out and incur the losses -- I do not think we are being forthright and honest here in the sense of this bill, because it mucks around.
Mr E. Lattanzi: If the government is willing to purchase our building, we will give it a bargain price and let it carry it and absorb the losses, if it feels we are being unfair to our tenants. We welcome an offer from the government to purchase our unit.
[Interruption]
Mr E. Lattanzi: You can speak when it is your turn.
Mr D. Lattanzi: We do not have any problem with the government looking to better the legislation or having rental housing or anything else in its intentions, but the retroactive part of this bill is just going to kill us. We are dead in the water. We could not plan for it. There is no way we could set our sights on something like this. We sat down for years before we decided to enter into this endeavour, and in a matter of two years we are history. We are going to have to sell our homes and pay back whatever we can and walk away. We would like to hold on to the building, but if this bill goes through as it is, we are just going to constantly keep losing money, so we are going to have to walk away.
Ms Harrington: First, I want to clear up something we were just hearing here, that is, the future of rental housing in this province. I would like to assure you and everyone else that there is going to be room for private and public ownership of rental housing. It is a partnership. It is very important to have good units out there in this province, and that is why we want to work with you.
Let me just go back a minute. I think you may have realized from some of the presentations we have already heard that the system that was in place -- you have only been landlords for a fairly short time, I gather -- turned out to be a bottomless pit for landlords, as the previous presenter mentioned what was happening.
Mr D. Lattanzi: As I mentioned in my speech, I do not want to defend anyone abusing the system whatsoever. They should be penalized to the full extent, but we have done nothing wrong and you are penalizing me.
Ms Harrington: I understand that. The system also promoted poor management, and I think what we have to look at now, with you, is a system. We need a system that will have proper maintenance as part of the rent. You understand that, that the rent is paid for ongoing maintenance. We also have to have a system that includes some capital cost expenses, we realize that.
Mr E. Lattanzi: We are not saying that the current system is a perfect system by any means. However, retroactively voiding what has happened in the past and moneys that have been paid out and committed, and taking that and basically ripping up a contract is not the answer, is not the way to proceed with changing the system. The system must be changed with foresight, not with hindsight.
Ms Harrington: We are looking ahead --
Mr E. Lattanzi: You are looking ahead, but you are taking away what has happened.
1450
Ms Harrington: Let me just conclude, then, by saying that I believe, and I hope it is true for everyone, that real estate investment in this province is a very good investment and always will be. It has its ups and downs but long-term, hang in there.
Mr E. Lattanzi: That is the point. We cannot hang in there.
Ms Harrington: I understand you have had some personal hardship. I would like to have you also understand that there are very many tenants who have very many personal hardships.
Mr E. Lattanzi: We understand that point. We have said that we understand that point.
Ms Harrington: The last thing you mentioned was two years, that you will want to get through this period of two years.
Mr E. Lattanzi: It is impossible for us to last two years.
Ms Harrington: We would like to do it in six months for you.
Mr E. Lattanzi: Six months is impossible.
Mr Mahoney: I will be brief, because Ms Poole has a question as well. The Housing Minister, Mr Cooke, announced that he was going to create 20,000 new non-profit housing units. l guess you did not expect that they were going to be yours. I would suggest to you that the government does not want to buy your building. They want you to walk away, and they will just pick up the pieces. I really believe that that is part of their mentality.
Could you give us some details on the impact of the retroactivity from the point of view of moneys you have outlaid that you will not be able to recoup?
Mr E. Lattanzi: We are in the process of getting more financing to pay property taxes. That was our sole reason for refinancing at this point in time, to pick up some arrears.
Mr Mahoney: Increases in property taxes?
Mr E. Lattanzi: Property tax payments, one payment based on 1989 and 1990 property taxes.
Mr Mahoney: So your main problem is not repairs or conditional orders, it is refinancing.
Mr E. Lattanzi: However, our building is 27 years old. We have an underground parking lot which has salt damage to the concrete; the reinforcing iron bar is starting to become seen in some portions. We can see future capital costs on this particular building. It is 27 years old.
Ms Poole: Thank you for your presentation today. The government members have said time and again that you are not to be concerned because: "This is interim legislation, this is temporary legislation, therefore we don't have to worry about whether it's fair. There'll be something fair coming down the pipe." Does that make you feel any better?
Mr E. Lattanzi: Absolutely not. If we are talking about making something fair, if the government wishes to change something let it give a date when that change will be effected. Give us a chance. Making things retroactive -- my money is spent. That is like buying an RRSP and finding out six months later that instead of earning 10% on your RRSP, you are in fact earning 3%. What do you do?
Ms Poole: A person wrote me this week and gave me an analogy which I thought was particularly appropriate. He said: "We came into the ball game and then when we were in the middle of the game we found that the rules had changed. And not only did the rules change, with the retroactivity we found out that we had struck out before we even got to bat."
Mr E. Lattanzi: Absolutely. You have lost the game.
Ms Poole: That is the concern I have, that there will be no confidence left in the housing market to go to a year or two from now.
Mr E. Lattanzi: I believe this government is sending out a clear message, not only within this industry but to all industry, that it is not to be trusted, that this government can, at will, change existing laws and make them retroactive. The message is quite clear to the business community.
Mr D. Lattanzi: We can only hope, also, that if we do try to hold on to this building, even in the state we are in, which we will try to do, if we receive any type of exorbitant capital expenditures we have to perform on this building -- it is just unbelievable. We cannot even conceive. We are only praying that nothing goes wrong with this building that is going to cost us a lot of money, because we just do not have the funds.
The Vice-Chair: Thank you, gentlemen.
ITALO GALLACE
The Vice-Chair: Our next presenter is Italo Gallace. Good afternoon. If you would identify yourself for the purposes of Hansard and then begin your presentation, you have 10 minutes to make a presentation, followed by 10 minutes of questioning from the committee.
Mr Gallace: My name is Italo Gallace. I am here today on my own behalf and as a member of a group of people who pooled their life savings to purchase a residential apartment building in our neighbourhood. I act as a property manager and some of the other people look after plumbing, plastering, painting and other maintenance problems in order to run the building as economically as possible.
When Bill 4 was first announced I reassured a number of concerned individuals that this, after all, was an NDP government, which has a terrific history of being fair and just, thus any new legislation would also be fair and just to everyone. Now, however, we find out otherwise. Bill 4 is to limit rent increases to 5.4% for 1991, regardless of the consequences, and fairness and justice do not seem to really matter.
Let me go back in time two years so we can all understand the predicament of many property owners as a direct result of Bill 4.
Scenario 1: A group of ordinary people, some of whom are here today, and most of them construction workers, some of them construction labourers, decided to purchase an apartment building. Being careful individuals who had to use their life savings, advice was sought from accountants and lawyers regarding the implications of investing in an apartment building. Two main items were clearly understood:
Item 1: It was the law of Ontario that 5% per year rent increase above the guideline could be charged if a detailed rent review application, scrutinized by the rent review services and the tenants, showed a loss. Any loss above 5% would be the responsibility of the owners and would be lost for ever.
Item 2: It was the law of Ontario that if a building needs work, ie, capital expenditures, one is allowed to recoup these costs not in one big rent increase, but the increase is amortized between five and 20 years, depending on the item.
On this basis, and on this basis only, nine average working people pooled their resources and purchased a 95-unit apartment building, investing $900,000 of their own funds. All calculations showed a loss in year 1 of over $100,000, a loss in year 2 of about $60,000, a loss in year 3 of about $20,000 and a break-even position in year 4. It was hoped that this could eventually become a long-term retirement investment.
Enter Bill 4, and through its magical retroactivity it suddenly changed a careful and well-thought-out investment for retirement into a very real nightmare for all nine of us. This building shall now lose $100,000 per year, year after year, and shall not reach a break-even point for at least 20 years. l ask you, where are these individuals going to get the funds to continuously feed this building? Are we now sentenced to work for the rest of our lives so that all tenants, regardless of income, can be continuously subsidized? Nor can we simply walk away and lose our life savings, for the mortgages on the building are personally guaranteed and we are responsible regardless of what we do. Because of the retroactivity of Bill 4, it seems that the only way out is personal bankruptcy. Our only crime was to believe and invest in Ontario in 1989. How can you justify this to us? How can you justify this to yourselves?
Scenario 2. Three small contractors again pooled their resources and purchased a 70-year-old apartment building in Toronto, purchase date 18 April 1989, at $45,000 per unit -- in Toronto a very good deal -- times 40 units for $1.8 million; first mortgage of $900,000 due in 1994 and a vendor-take-back second mortgage of $525,000 due in April 1992. Again, it was projected that the building would lose about $40,000 the first year and would break even during the third year.
1500
These contractors also knew that all systems were 70 years old and it would be a long-term project to carry out renovations for a number of years. I was asked to manage the building and look after all rent review matters. A request form was distributed -- copies are attached -- and the following is a summary of events.
1. On 28 April 1990 a letter was circulated to all the tenants. Please read the sample letters at the back of my presentation.
2. By 15 May 1990, 27 out of 40 tenants replied. Plans were made, funds were secured and contracts signed to carry out the needed work.
Between 1 June and 23 June 1990 the roof was restored, the windows were replaced, the exterior doors replaced and only some work requested by tenants on the attached forms was done, for a cost of $85,000. As you can see, these are not exactly luxury renovations.
A rent review application for 22% was submitted on 29 June 1990, with a first increase date of 1 October 1990. Present rents average $400 per month, with parking.
Enter Bill 4 again and you know the rest of the story. The application is no longer valid. Bill 4 magically goes back in time, even though the renovations were done and paid for long before an election was even called. Thus, these unscrupulous individuals who go around fixing up 70-year-old apartment buildings are left with the following predicaments.
1. Continue to somehow come up with $3,000 or more shortfall month after month, knowing full well that no one is going to finance this building for the $525,000 second mortgage due in April 1992, and thus lose it then, or give up the building now and (a) lose all original investment, in most cases one's life's earnings and (b) lose the money spent on renovations and (c) lose the house and anything else one may have had since the borrowed money had to be personally guaranteed. Either way, we are looking at individuals who, after a lifetime of continuous hard work, are going to be left in total financial ruin.
At this point I would like to ask every member of this committee, how would you feel if you all started a job which clearly stated that pay is going to take place every two weeks, and after working and earning the two weeks' pay you go to the office and find the following note: "New boss, new rules. All pays due on Thursdays are ready; all pays due on Fridays are cancelled"? I ask you, how would you feel? I ask you, what would you do? I am sure that every one of you would expect to get paid, whether payday is Thursday or Friday.
Then it is only fair, it is only right and it is only just that the justified rent increases should be given and it does not matter whether they take place on 1 September or 1 October. The work was done. Our new boss has no right to cancel the justified increases with a stroke of a pen. Just as you need your two weeks' pay to feed your family and pay your bills, so do property owners need the increases to pay their commitments, which cannot be washed away with a simple stroke of a pen.
The magical retroactivity of Bill 4 is going to box a significant number of individuals into a catch-22 scenario. Since, unlike Bill 4, they cannot go back in time and unbuy these apartment buildings, they are either to go bankrupt now or to go bankrupt later.
If Bill 4 is passed without amendments, knowing full well of the disastrous consequences, then do not be surprised at the ill will and bitterness that Mr Rae and Mr Cooke are going to create. A law that is surely to destroy people and their families is not only a bad law, it is not only an unfair law, it is not only an unjust law, it is above all an evil law. It is retroactivity that makes Bill 4 unfair. It is retroactivity that makes Bill 4 unjust. It is retroactivity that makes Bill 4 illegal. It is retroactivity that makes Bill 4 evil, and it cannot be solved with a simple amendment. Bill 4 is to apply to apartments purchased under Bill 4.
I had prepared a totally different ending to this presentation until I read the article by Daniel Girard on 24 January 1991 in the Toronto Star. I would like to quote from the article.
"Cooke said Bill 4, which is being reviewed by a committee of MPPs, is open for change and will have to recognize the legitimate concerns landlords have regarding legitimate capital projects. If the final legislation was going to be exactly like Bill 4, then we would not be going through the whole review process," which means that this committee has a great opportunity and a great responsibility to delete the retroactivity of Bill 4 and stop all its devastating results. Help make Bill 4 fair, help make Bill 4 just and you shall have our full co-operation in developing and implementing future housing legislation which shall benefit all of Ontario's citizens in the short term and in the long term. Thank you.
Mr Duignan: I was wondering how many rental increases you have had over the last four years.
Mr Gallace: These buildings have been in our possession and our management for two years, sir, since 1989.
Mr Duignan: What rent increases have you had?
Mr Gallace: The first increase was 9.6%. There was no second increase. Everything is now pending and unfortunately frozen it seems.
Mr Duignan: What about your other buildings?
Mr Gallace: My other buildings? I do not believe that any buildings that I personally am involved in have any increase over 12%.
Mr Duignan: Over 12%?
Mr Gallace: Nothing over 12%.
Mr Duignan: That was an average over the last four years?
Mr Gallace: I do not think I have owned buildings that long. Maybe three years was the longest one.
Mr Duignan: How do you expect your tenants to afford that type of increase when you consider that an average raise in pay is only about 5%, if that?
Mr Gallace: Well, sir, I am not advocating that tenants who need help should not be helped, but please do not do it on my back.
Mr Duignan: Well, I am talking about all tenants. How do you expect the tenants to pay an average annual increase of 12% a year?
Mr Gallace: The best way to help a tenant, sir, is to help him buy a house. There should be some kind of avenue where tenants should be able to own their own units. I see absolutely no reason why tenants should not own their own units. That is their future investment. Basically, they will become self-sufficient. They will look after their own units. They will conserve energy. Help the tenants own their own units, apartments, town houses or otherwise.
Mr Duignan: So you then believe that the tenants' apartments are not their own homes.
Mr Gallace: They are their own homes, but they become temporary if they move out.
Mr Duignan: In a lot of cases it is not temporary; it is their home and it is their home for their lives, so I am asking you, how do you expect the tenant to afford a 12% increase each year?
Mr Gallace: Well, sir, I am asking you, how do you expect me to make up a $100,000 loss every year? Am I to go broke because the government refuses to help the tenants who need help?
Mr Duignan: No, we are not. That is why we are advocating building --
Mr Gallace: Then please do it. Do not do it on my back.
Mr Duignan: -- co-operative, non-profit housing. But I am asking you again, how do you expect tenants to pick up a 12% increase each year?
Mr Gallace: The tenants will pay for the 12% by basically having the government do something sensible. The tenants who need assistance, the tenants for whom that is over 30% of their income -- have a look at that. There are ways to raise money. You know, when a building is purchased, the government takes 1.5% of the purchase price in land transfer tax. Some of the buildings, like this one was -- the government took $30,000. Where did the money go? That should go to the tenants to help the people who need help.
Mr Duignan: So you are advocating a system of landlord welfare.
Mr Gallace: For the people who need it, anybody over 30%, sir. The people who need it. Since when are tenants so special?
Mr Duignan: What about renovations? Who gets the benefit of the building when you sell it, the landlords or the tenants?
Mr Gallace: Like the previous individual who was here, you, sir, and the government are more than happy to come buy a building for the price that I paid three years ago.
Mr Duignan: You still did not answer the question. When you improve a building, you also increase the value of that building.
1510
Mr Gallace: You do not, sir.
Mr Duignan: Yes, you do.
Mr Gallace: You do not, sir.
Mr Duignan: Yes, you do.
Mr Gallace: That is because you do not understand the value of apartment buildings.
Mr Tilson: This is a public hearing. This is not a cross-examination and I resent Mr Duignan simply repeating the question over and over when this witness has answered the questions. It is not a cross-examination, it is a hearing.
Mr Duignan: On that, Mr Chairman, I do not want to get into debate on a point of order, but Mr Tilson cannot ask a certain question a certain way as well. I wanted an answer to that particular question and I have a right to ask that question.
Mr Mahoney: He gave you an answer.
Mr Tilson: He answered it, answered it a couple of times.
Mr Mahoney: You will not take yes for an answer.
Mr Owens: Well, we will remember that, David.
The Vice-Chair: Order. Mr Mahoney.
Mr Mahoney: Thank you, Mr Chair. You can see the frustration by the way that we are feeling and it is coming through loud and clear.
I would like to deal specifically, sir, with your suggested amendment. You have suggested that Bill 4 apply only to apartments that are purchased by a landlord under Bill 4. How would you feel about, as opposed to that, that Bill 4 rules apply from the date that the announcement was made, which is 28 November, and that everything prior to 28 November be treated under the legislation that existed at the time?
Mr Gallace: Well, that is quite an improvement, sir, except that unfortunately, as you know, some people had purchased buildings at that time with --
Mr Mahoney: Since that time?
Mr Gallace: Definitely. If you buy a building, you do not close the deal in one day. You usually buy a building and you close the deal 60 days later or so. So even in that announcement, some buildings were in the process of being closed, and if you do not close it, you get sued, simple as that. You had no choice but to proceed and close the transaction.
Mr Mahoney: There may be some way of looking at deals that have been purchased and entered into agreements and not closed, but I have some difficulty with simply saying that you tie it to the purchase, whereas it really should be that anybody who entered into a purchase agreement after the 28 November announcement should have his head read, I would suspect. I personally would not have a lot of sympathy for anyone who made that error knowingly, but I think that if it was done after the 28th, notwithstanding the purchase agreement -- that perhaps could be worked out -- it would be more fair.
Have you met with a lawyer on this issue?
Mr Gallace: I do not think you have much of a choice. If the legislation proceeds, all we can do is go to court. I believe that Bill 4, the retroactive aspect, is quite illegal. It is quite an example to set for a new NDP government. It is unfortunate, though, that I myself have been a long-time NDP supporter including, unfortunately, the last election.
Mr Mahoney: I gathered that from your second paragraph. Oh, well, we all make mistakes. Some are a little more serious than others.
Mr Gallace: Some more than others, yes.
Mr Mahoney: I think this is great, that a fellow who admits openly -- I have not met too many -- that he voted for the NDP and now this is how it is paying him back. I want to thank you for coming because I think you are putting a face on this that is not of the large corporation that the government seems to want to stress and the numbered corporation where you cannot find the individual. You have put a very real face and a very good story to this, as you call it, evil legislation.
We have had tenant groups come before us, some of which seem to have rehearsed with government members, and sing the praises of Bill 4, and yet when you ask them if they can tell us how Bill 4 helps them either in effecting repairs that they have been trying to get done or in any way other than putting a cap on, we cannot seem to get an answer. Is there anything in this self-admitted temporary legislation that you can see that benefits tenants, other than a cap?
Mr Gallace: Bill 4 is something that the government is happy with, I guess, or it is looking for some reason to rethink the whole situation. It should not take more than three or six months. Everything is on hold. Every single thing is on hold until people know which way to go. You cannot even go to the bank and get a loan, because they laugh in your face, "To do what?"
The sooner Bill 4 is known, and the legislation and the rules and regulations, the sooner people can either walk away and just go broke or at least try to manage somehow, especially if it is retroactive. Because there is just no doubt about it -- a large number of people are going to go bankrupt if Bill 4 is made retroactive.
Mr Tilson: As a result of Bill 4, have there been specific plans for renovations or repairs that you have delayed or indeed cancelled?
Mr Gallace: For repairs, you have no choice but to do them. If a roof leaks, you go up there and throw on a pail of tar. What else can you do? You cannot get the money. You do not have the money. The buildings are losing money. What are you supposed to do? Everything, everything is on hold.
Mr Tilson: Are there any specific capital expenditures that you had planned on making that you are --
Mr Gallace: Yes. On the 70-year-old building, plumbing and electrical was planned for, obviously, 1991.
Mr Tilson: How much money was in that?
Mr Gallace: You replace all the plumbing and basically all the electrical. I think I projected about $120,000.
Mr Tilson: Yes. Anything else?
Mr Gallace: Well, on a 70-year-old building, you do one step at a time. You have not got the money. Just like the windows and the roof were replaced first, then the doors. You replace step by step.
Mr Tilson: The Toronto Star this past weekend wrote two major articles on Saturday and Sunday concerning what restrictive rent controls, such as Bill 4, have done to the city of New York. Do you believe that can happen in the province of Ontario?
Mr Gallace: It will not take long.
Mr Tilson: How long?
Mr Gallace: If Bill 4 remains, I would say in five to 10 years you are going to basically be seeing that the only owners of apartment buildings are going to be institutions. They cannot run a building like we run a building. It costs us 25 cents to change a washer. It will cost anybody else $25 to send a plumber. We do the work ourselves. It cannot be done any cheaper.
Mr J. Wilson: I think it is a very good presentation also, and I just pick up on Mr Mahoney's line that your second paragraph was based on the premise that the NDP have a terrific history, in a sense a track record, of being fair and just. I will just remind you, this is the first time they have been in government, had the responsibility of making these decisions, and I think we have heard from a number of people that it certainly is not fair and just in the approach they have taken to Bill 4.
Just to get a final handle, obviously retroactivity is something you detest in this bill. Is your bottom line that you would like to see Bill 4 scrapped and some other system brought in, or where do you think we should go if you could ever convince the government to scrap Bill 4?
Mr Gallace: If Bill 4 can be scrapped, and I am not saying that it should, but it should be very quickly done over, a three-month period at the most. I would like to continue to support the NDP, I really would. I voted always NDP. I think maybe it is their first time in power; they got a little bit carried away with it.
Eventually, I expect that Bill 4 will be fair and it will be just. I believe that there should be a penalty for people who go around and do not manage their buildings properly. Yes, there should be a penalty for people who go about selling and buying apartment buildings every six months. If you can, simply put a tax on it and prevent the flip. Put a 100% tax on, if that is what you like, and send that money to the tenants, the people who need it.
You must allow for capital expenditures. You should perhaps allow the tenants to have a say in their own units, but do not tell me you are going to have the tenants tell me whether the roof leaks. The person on the top floor is very concerned; the person on the bottom floor could not care less.
Mr J. Wilson: Well, sir, I think what I am trying to get through is opposed to NDP ideology.
The Vice-Chair: Thank you, sir. We appreciated your presentation very much. You might note you evoked some very spirited questioning.
1520
JEROME SAWCHYN
The Vice-Chair: The next presentation will be from Jerome Sawchyn. Good afternoon, sir. If you would like to introduce yourself for the purpose of Hansard and any organization you might represent and then proceed for 10 minutes with your presentation.
Mr Sawchyn: My name is Jerry Sawchyn. I have been a rent review consultant for almost 10 years. I would like to give the committee details of an ordinary rent review application, typical of thousands, which attracts no attention because there are no sensational aspects to it, such as the now almost mythical marble lobby. This is the silent majority of rent review applications. The subject building contains 36 one-bedroom units situated on a clean residential street in Hamilton. It is not a luxury building but provides decently maintained, affordable housing.
An order dated 11 October 1990 was issued in which the first effective rent increase date was 1 October 1990. The order granted a 9.33% increase for an extraordinary 12.6% municipal tax increase and the following major capital expenditures: a new roof, parking lot paving, counter tops, retiling bathroom walls. The justified total increase can be broken down as follows: operating cost allowance, 3.6%; extraordinary tax increase, 1.4%; capital expenditure allowance, 4.3%. Without Hamilton's tax increase the overall increase would have been 8%.
The capital expenditures are hardly luxury renovations and represent the type of costs associated with the normal aging of an apartment building. This building did not experience ongoing deliberate neglect, which is just a red herring, but was well maintained over the years. No matter how high the level of regular annual maintenance, eventually roofs, appliances, parking lots, etc, wear out and structural components of buildings deteriorate.
Before the ordered increase, the rents ranged from $292 to $364 a month for identical one-bedroom apartments. Such a level of rents can still be found in the Hamilton area. After applying the justified rent increase, the rents ranged from $320 to $398 a month. I find it very difficult to label the resulting rents an outrageous ripoff of the tenants.
I give the following additional facts relating to this rent review application: The capital expenditures were completed in May 1990 before an election was even contemplated. The application, with supporting material, was filed on 21 June 1990 in compliance with the current act before announcement of an election campaign. An order dated 11 October 1990 setting rents beginning on 1 October was issued well before the minister's 28 November announcement.
Using the first effective increase date as the criterion for the retroactive applicability of Bill 4 is grossly unfair since it penalizes applicants who acted lawfully and in good faith before an election was even contemplated. Bill 4, if passed as is, would gratuitously kill this existing order along with all other orders issued for a 1 October 1990 first increase date. The proposed bill would then reduce the rents back to the guideline increase, notwithstanding the lawful conduct of the applicant, who had no idea what the future held in store for him.
It is as if a court rendered a judgement, but then six months later the judge said, "I'm sorry, I'm cancelling the original order and giving you a judgement for a lower amount." Such treatment is arbitrary, unconscionable and cannot be justified by any appeal to fairness. Such treatment is a complete perversion of the very meaning of the word "fairness."
A minimum argument for fairness, and I stress the word "minimum," may be made if the criterion for the retroactive provisions of Bill 4 were made to apply to applications filed on or after 1 October 1990 and not to rent increases taking effect on that date. For the government to counter that this would allow another three months of applications to be ordered under the Residential Rent Regulation Act, 1986, is not an argument for fairness, but a clear indication of the government's vindictive determination to entrap as many applicants as possible. There is no way a case can be made for fairness where an applicant acted innocently before the election, received and is in possession of a valid order, which as of today can still be enforced, but which will be declared void when Bill 4 as currently drafted is passed.
One small point: Bill 4 would continue magnifying the spread of $78 between the highest rent of apartment 202 and the lowest rent of apartment 406, which are identical one-bedroom units. Why is it fair to perpetuate this situation? How will Bill 4 protect the tenant of apartment 202?
It has been said that in politics perception is everything, and since much of what the committee has heard is based on perception of the rental housing industry in Ontario and not facts, I make no apologies for the ensuing observations.
For the past 15 years, rent review in Ontario has been based on the cost pass-through principle. In broad terms, cost increases have been allowed to be compensated by rent increases, so that the financial position of a positive cash flow building theoretically remains stable. The government appears to have jettisoned this principle in favour of a system of strict rent control. This conclusion is inexorable based on a reading of the party's manifesto, An Agenda for People, which I take literally, on statements made by the Minister of Housing and on the contents of the famous or infamous interview the Premier gave to the Federation of Metro Tenants' Associations.
An Agenda for People states in part that, "Tenants have spent the last three years fighting a rent review system that gives to landlords with both hands." To me that is a nonsensical generalization. "Landlords who neglect maintenance are rewarded under a system that passes costs on to tenants." This is interesting. How can neglected maintenance be passed on as a cost to tenants? "There would be no extra bonuses to landlords for capital or financing costs."
The minister has said to the committee, "We must move away from a system of rent review which offers the ability to pass through expenses to a system of rent control which will offer real protection for tenants." The Premier in the above interview stated he would "make it less profitable for people to own apartments. I would bring in a very rigid, tough system of rent review." Bill 4 will achieve the above objectives, with the exception of "real protection for tenants."
What does the bill actually do? Basically, it limits increases to existing rents with their inequities to 5.4% for 1991. This is trumpeted as a panacea for protecting tenants and providing for affordable rental housing for those genuinely needing it. However, the simplistic restriction of rent increases to a fixed annual guideline, with a few minor exceptions, does not physically create affordable housing, or any other type of rental housing for that matter. It does not make available to lower-income tenants those low-rent apartments hogged by high-income tenants.
Furthermore, since rents in Ontario span a wide range, from dirt cheap at one end to very high at the other end, Bill 4 merely ensures that a tenant paying a relatively high rent of $1,000 pays a $54 increase, while his more fortunate counterpart pays a $22 increase on a rent of $400. I leave it to the government to justify the hype relating to real tenant protection in connection with rents which are already high before any increase and which just keep getting proportionately higher through guideline increases.
The government's stock response to criticism of Bill 4 is to point out that it is interim legislation applicable until a new permanent rent control regime is legislated. Given the government's antipathy to the cost pass-through principle, its intense dislike of the Residential Rent Regulation Act, 1986, and its ideological stance towards private ownership of rental housing, there is absolutely no reason to believe that the permanent rent control legislation will not reflect the principles inherent in Bill 4. Indeed, there are grounds for believing that the provisions of the permanent rent control legislation will be even more onerous to the private ownership of rental housing in Ontario.
Finally, if the government espouses housing as a basic human right, then it becomes very easy to form the opinion that the private provision of rental housing for profit is morally repugnant. After all, how can any righteous person condone making money off the backs of tenants by providing a basic human right? Such a reprehensible state of affairs cries out for rectification. So what can a caring government do? It seems the government has three avenues of action:
Expropriate private owners without compensation; I do not believe the government would resort to this solution to its perception of the problem of private ownership.
Expropriate with compensation, the well-known "We'll buy you out" scenario. I do not believe the government has $40 or $50 billion to become the landlord of the people.
Enact Bill 4 and then the concomitant, permanent, strict rent controls. This sterile action does not address the needs and concerns of the landlords and tenants of Ontario. It does serve as a vent for a government frustrated at not yet being able to change the structure of ownership of rental housing in Ontario to conform with the socialist Swedish model.
1530
Ms Poole: Thank you for your presentation today. I should say from the outset that I support the principle of this bill, which the minister has said is to protect tenants from outrageous rent increases of 100% to 150%, luxury renovations and flippings. I even support the idea that there be a period of pause as they are looking for long-term solutions. But what I do have a very real problem with is some of the provisions in this bill and I would have a great deal of difficulty supporting it in its present form.
I would like to talk to you about the retroactivity which you have touched upon. The minister has said that he chose 1 October as the date to take the retroactivity to because that was the date his government took office and because there was a large, massive influx of applications because the new government was coming in. But in fact the retroactivity does not go to 1 October; it goes far beyond that.
For instance, a landlord might have commenced renovations and put out money, paid money in 1989 or in the spring of 1990, and still be caught by the retroactivity, and also the phase-in orders for the financial loss. They would be caught in the retroactivity even if the order was two or three years old. Would you like to comment on this aspect of the retroactivity, that it is not as it appears on the surface 1 October, but actually goes far beyond that?
Mr Sawchyn: What you have stated is correct. By using the first effective increase date as a cutoff point, you need to have work completed in the past before you can make application in the future, so what you have said is correct. The retroactive period goes back much further than 1 October. That is not fair because if someone did work under existing legislation, he expects to be compensated for that work. He does not expect the rules to be changed after it is all over.
Ms Poole: I think one of the problems with people comprehending the effect of the retroactivity is that many people do not understand the way the rent review system works, that if you were, for instance, going to have a rent increase effective 1 October, you would actually have to apply 90 days prior to that, and second, for capital expenditures, that you have to substantively complete the work before you even apply. So you could very well have applied on 1 July and that would be caught in the moratorium, but the work could have taken place the previous year even.
Mr Sawchyn: That is correct.
Ms Poole: I think that is something a lot of people do not understand.
One of the other problems I have seen with this bill is that it has no penalty for those who are abusing the system or, shall I say, those who are taking excessive advantage of the current law. It also concerns me very much that there will be no provision for necessary repairs and renovation for up to a two-year period; that you can have an underground parking garage that is on the point of collapsing; there can be a work order out against it, yet there is no provision for having that work done. Would you like to comment on that?
Mr Sawchyn: I feel there should be some provision for increases attributable to necessary major capital expenditures, even in an interim period, because otherwise the delay in completing the work frequently increases the cost.
Mr Tilson: The Ministry of Housing has provided this committee with statistics prepared by CMHC which show, of the cities this committee is visiting, that Hamilton has the second-lowest average market rents in apartments of structures of three or more units. My question to you is, because you seem to be fairly informed on this subject, are the problems in the city of Hamilton different to those in the city of Toronto?
Mr Sawchyn: Yes, they are. As you have mentioned, the level of rents in Hamilton is significantly lower than Toronto, and if you look hard enough, you can still find one-bedroom apartments in Hamilton between the $200 and $300 range, so we do have a rent structure that is a lot lower than Toronto's.
Mr Tilson: The information that I have is that for all units, as of October 1990, in Hamilton it is $483.40 and in Toronto it is $629.35.
Mr Sawchyn: I have seen the same information.
Mr Tilson: My question is, is Bill 4 designed more for Toronto problems? Certainly the types of problems that we have heard outside of the city are different than the types of problems that are occurring in the city of Toronto.
Mr Sawchyn: Well, it seems that Toronto is always taken to be representative of the province as a whole, and it is not; it is a unique area on its own. One of the problems with global legislation is that it imposes a uniform solution on situations which do not apply because they are unique.
Mr Tilson: One further question, with respect to the legality of Bill 4, which has surfaced periodically throughout these hearings: Do you have access to any legal opinions as to whether or not Bill 4 is legal or illegal?
Mr Sawchyn: No, I do not.
Mr Tilson: With respect to your position, you are a rent review consultant?
Mr Sawchyn: That is right.
Mr Tilson: The information that has been given to us appears to be that as a result of this legislation and other rent control legislation, the rich will get richer. This has occurred in the United States, and it shows that rent controls benefit the rich and the middle class and leave the poor in deteriorating units. In other words, units, because fewer funds are put into them, deteriorate more and more. Do you have any more specific information on that subject?
Mr Sawchyn: That seems to be a recognizable trend in Hamilton. It just seems to be something that rent controls bring, that generally people with greater income can be more aggressive in finding housing appropriate to their needs.
Mr Tilson: Are there people who are abusing the system, in other words?
Mr Sawchyn: There are people who pay perhaps 5% of their income towards their rental housing. I do not want to mention any professions, but there are professional people in apartments paying perhaps $400 or $450 for a three-bedroom unit.
Mr Drainville: I would like to first ask you, Mr Sawchyn, as a rent review consultant, could you briefly give us some indication of your clients? I wonder if AFFORD, the Association For Furthering Ontario's Rental Development, is also one of your clients.
Mr Sawchyn: No, they are not. I have nothing to do with AFFORD.
Mr Drainville: Could you tell me some of the clients that you presently have?
Mr Sawchyn: They range from individuals who buy buildings to corporations who manage buildings.
Mr Drainville: Could you name any of those people that you consult for?
Mr Sawchyn: I do not see the point of naming them.
Interjection.
The Vice-Chair: Order.
Mr Drainville: Well, let me ask you -- I have some questions.
Mr Mahoney: Think of a question and ask one.
Mr Drainville: I just did. The next thing I would like to say is, in terms of your role as a rent review consultant, Bill 4 actually helps to put you out of business in a sense because the loopholes and the difficulties of the rent review legislation that we presently have are going to be not helpful to your present status as a rent review consultant. Is that not correct?
Mr Sawchyn: What you call a loophole I call a justified ground for an increase over the guideline. That is right. If you remove grounds for increases above guideline, you remove the need for consulting.
1540
Mr Drainville: Let me ask also, in terms of your experience of working with landlords as a consultant, have you ever seen that a landlord has tried to pass through non-legitimate increases?
Mr Sawchyn: I cannot recall any instance of a landlord attempting to pass through an illegitimate cost.
Mr Drainville: Yet in the time we have been on this committee and travelled on this committee, we have seen exorbitant increases of 50%; 62% was mentioned today by a gentleman who was here representing tenant groups. Obviously, the reality is that there are tenants across the province who find themselves in the situation where they cannot afford a 62% increase in their rental accommodation.
Further to that, one of the problems we have been trying to address in Bill 4 is precisely this: We have been trying to allow for the new legislation which is being drafted from the government to be implemented so that we can ensure that these aspects of legislation that are grossly unfair to tenants are changed.
Let me go further and ask you this question. In terms of your experience in giving this kind of consultation, what types of increases have landlords asked for and what type of work do they need payment for?
Mr Sawchyn: The increase asked for is specific to a particular building. If a landlord, for instance, has a 100-year-old sixplex and he virtually reconstructs it by spending $100,000, then he may be able to justify under the current act a 125% rent increase. But the resulting accommodation cannot be compared to the former accommodation. You could have had a rent of $175; after virtually rebuilding the building, they ask for $400 or $425. But you really cannot compare the two accommodations.
Mr Drainville: In all your days of consulting with landlords and various companies, do you have any idea how many tenants have been economically evicted because of those kinds of increases?
Mr Sawchyn: No, I do not. So far I have not seen any indication from anyone as to the extent of so-called economic eviction.
Mr Drainville: Well, talk to some of the tenants here.
DINO NICOSIA AND ROBERT ADORANTI
The Vice-Chair: The next presentation will be made by Dino Nicosia. Good afternoon, gentlemen. If you would introduce yourself and the organization you represent, if there is one, and proceed for 10 minutes with your presentation, then the committee will be happy to discuss it with you for a further 10 minutes.
Mr Nicosia: My name is Dino Nicosia. I am a real estate agent and a landlord. With me is Robert Adoranti, also a landlord and a steel company employee. I am here today representing myself and a group of small landlords like Robert who have either mortgaged their homes or risked their life savings to invest in the residential market. All we wanted was a better life for ourselves and our families.
Before each purchase we carefully projected for long-term investments and not for these so-called flips we so often hear about. We knew our buildings would be in a financial loss situation for the first few years and we were prepared for it. However, we were not prepared for the sudden shock of Bill 4. With the introduction of Bill 4, with its unfair, unjust and devastating retroactive policy, we are going to be punished, and some will be financially ruined.
This government must realize that we are not faceless corporations; we are ordinary working people with ordinary jobs, with families. Why would a government that represents people and represents fairness and equality want to destroy one to help another? It is a fact that most of my partners are -- or should I say were -- NDP supporters, union people who really believed the NDP was a fair government.
Well, so far this government seems to possess incredible powers, with the ability to go back in time and take away something that was already given. It is unfortunate that we do not possess the same powers to go back in time and regain our original investment. We are left at the mercy of the NDP government and Bill 4.
At this time, Robert would like to discuss how Bill 4 has affected him personally.
Mr Adoranti: I decided to invest in the rental housing business three years ago. The decision was made after careful study of the market and rent review rules in place at the time. As I was not in a cash position, I mortgaged my home for a substantial amount of money. Over the past three years I invested in numerous multiple-unit buildings, using projections based on rent review legislation in effect at the time.
My intentions were long-term investments, and to date I have not sold a building. Original projections indicated negative cash flow on investment. However, financial stability was possible by applying to rent review. It is possible that the rules and regulations of rent review will be changed such that previous orders will be thrown out the window.
What does this mean for me? Two applications for rent review are held up in the moratorium. Rent increases legally granted on other buildings cannot be implemented. I have stopped all major repairs and capital expenditures, even those requested by tenants. The current situation has put me on unstable ground. Financially, I cannot carry the losses of the buildings and without the granted increases the projects will be a losing proposition indefinitely. The possibility exists that I may have to walk away from the buildings. Mortgage payments on my own house are now in jeopardy.
I stress and request that the people here today review what has transpired. Do not make the rules retroactive. Strive for a rent review system that is fair to both tenant and landlord. The current moratorium is not fair to people who are struggling to make the payments like myself.
As I look upon my investment decision made three years ago, I realize that I made a decision that is now haunting me because the government is changing the rules, some of them retroactively.
What is in store for future investors? There will be no confidence in the system. I would get out of this line of business immediately if I could get my money back. The constant harassment, effort and time has not been satisfying, and with strong government controls changing the rules from year to year it is clear that investors like myself would avoid this line of business. If investors like myself make this decision, the housing shortage will become worse, as buildings will be neglected and abandoned. No new buildings will be built. We have already seen this phenomenon. The situation for tenants will continue to deteriorate.
My family had been long-term NDP supporters in the Hamilton area, and I hope the NDP government will keep its promise to listen to the people of Ontario and be fair to everyone, not just a select few.
Mr Nicosia: This government has made it very clear that as long as you are a tenant, regardless of your income, you are the politically chosen to be protected.
David Cooke made his decision to pass the moratorium from pressure and not through consultation. Speaking to a tenant association, he says: "We intend to make it a real rent control system that I believe you will be proud of." Mr Cooke has also indicated that housing is a basic fundamental right for the people of this province. What about the rights of home owners and landlords? Are they not people too? Who is protecting the home owners from inflation, the high interest rates and the recession?
If this government is sincerely trying to address the affordability problem, why would it introduce such devastating legislation? I am totally confused about how this unfair policy is going to help those tenants who really do need help. Freezing all rents retroactively to a minimum and financially ruining landlords does not address the real issue. Needy tenants require assistance, not rigid rent controls.
These strict controls will take away any incentive for many tenants to purchase their own homes. Why should they? Tenants realize that as long as they rent they will be protected from the real world. Rents have not kept up with rising costs and house prices.
For example, in the Hamilton area the average rent is less than $490 per month, yet according to a local bank the average mortgage is over $100,000. This relates to a mortgage payment of approximately $1,200 per month, not including property taxes, insurance, heat, hydro, etc. Rents have simply lagged too far behind inflation.
I would like to conclude by asking the members of the NDP government to please reconsider the retroactive legislation. Respect the previous government's approved applications. If you are committed to strict rent controls, let it affect any new buildings, keeping in mind that Bill 4 will be counterproductive. Investors will never trust their government again. More and more tenants will hide behind rent controls and not enter into the housing market. Most importantly, poor tenants will still find it difficult to pay their rent.
One solution that I believe will work is a subsidy fund. This fund could subsidize the 33% of tenants that the Minister of Housing has acknowledged pay more than 30% of their income on rent. Is it not common sense to isolate the ones who really do need help, rather than subsidize all tenants, regardless of income, at the expense of the landlord?
Thank you for giving us the opportunity to voice our opinion. We sincerely hope our views will be considered in your final decision.
1550
Mr Tilson: To the first speaker: As a real estate agent you presumably come in contact with a number of investors, large and small. Have you had discussions with many of these individuals or corporations concerning Bill 4? If you have, what are those comments, generally speaking?
Mr Nicosia: First of all, there are no corporations; they are all individuals. Yes, we have had discussions. They are all very paranoid of losing their life savings. In fact, all of them have mortgaged their homes. There are 15 individuals I have dealt with in the last three years who have purchased the apartments, and they are all in a situation where they could go bankrupt.
Mr Tilson: Would you explain that?
Mr Nicosia: By taking away the phase-ins, their equity has dropped by 25%. When the mortgages come due in two years' time, they will have enough financing from the first mortgage to pay that loan. Therefore, the question they have is, do they walk away now or four years from now or three years from now? Without the phase-ins, they cannot obtain the financing. To carry those losses, they are in a loss situation for the next three to four years.
Mr J. Wilson: I very much like your idea on the people subsidy, tenants who require the subsidy, that it be to the people and not to the buildings. But I am a little confused. Like one of the other presentations we had today, you mentioned that your advice to the government is that Bill 4 only apply to new buildings. Two problems I have with that is, first, do you really think there will be landlords buying new buildings under Bill 4?
Mr Nicosia: No. The reason I said that is that I really believe this government has already set its mind to introduce Bill 4. I really believe that, so I am pleading to at least leave the old purchases alone. I do not believe Bill 4 is the solution, as I have stated in my presentation; it is a disaster. However, I know they believe this is the law and they are going to go through with it.
Interjections.
Mr J. Wilson: New purchases is what I meant, not new buildings; I do not really expect to see any new buildings popping up under Bill 4. So you are trying to be realistic today.
Mr Nicosia: Yes, I am.
Mr J. Wilson: We have taken, you might have guessed, the same assumption, that Bill 4 will go ahead. We will certainly be pushing to take the retroactivity out of that if we can, to make it fair, as you say. People were operating legally under the previous system.
Mr Tilson: The second speaker: You have described where you are going. What do you think will happen to you personally as a result of this legislation?
Mr Adoranti: If Bill 4 is introduced as proposed, and I cannot carry the losses, cannot carry the buildings, I will have to evaluate which buildings I need to walk away from to reduce my payments. I will have to walk away from them.
Mr Tilson: How many buildings do you anticipate you might walk away from?
Mr Adoranti: I would say two.
Ms M. Ward: I want to ask Mr Adoranti a question. In your brief you say: "I was not in a cash position. I mortgaged my home for a substantial amount. Over the past three years, I invested in numerous multiple-unit buildings." How many are "numerous," and what is your equity in these buildings? How much did you put into them? How much is financed and being passed on?
Mr Adoranti: I am part owner of six multiple-unit buildings. I do not know if I want to give personal information to the public.
Ms M. Ward: I think it is a major consideration, how much is financed and how much is being passed on in the financing costs that tenants are being asked to absorb in these phase-ins. If you have a substantial investment, I think it is a different situation than if you have 85% financed.
Mr Adoranti: Let me put it this way. As mentioned before, we are personally liable for the mortgages of the buildings, so it is maybe $500,000, $600,000 invested that I am looking at, and I am only a straight day employee. That is how much money would be guaranteed by me.
Ms M. Ward: But you do not care to say the percentage.
Mr Adoranti: On my house?
Ms M. Ward: No. Of what is financed on those six buildings.
Mr Adoranti: They are financed about 75%.
Ms Harrington: First, I wanted to respond to the remark you made in your brief about the rights of home owners and landlords: "Are they not people too?" I would like all of us to think back over the last 20 years or so. I firmly believe that those of us who are lucky enough to be home owners have had very many advantages, for instance, a $100,000 capital gains exemption. Anyone who owned a home over the last 20, 30 years had many advantages in the system in Canada, so I think it is about time that people who have apartments as their homes have some kind of advantages too and some kind of stability.
I want to ask you a few questions. First, do you feel, either one of you, that the system which was in place before this election was working?
Mr Adoranti: Working for me or working for the people?
Ms Harrington: Working in general.
Mr Adoranti: I do not believe so. I do not believe it was working in general. It was legislation maybe that was fixed up. Any time you get government control and private enterprise, you are always going to get a mishmash like water mixing with oil, because on the one hand they are trying to control something and you are trying to do something else. They do not have the same end goals, so I do not believe it is ever an easy task to perform.
Ms Harrington: So now is the time we need to have a breathing space and stop and ask what we should do for the future of rental housing in Ontario to help both landlords and tenants. We would like to do that with you.
Mr Adoranti: Yes. What you are doing is not a bad idea, but I do not think you can take a long time to do it. There are people here who need decisions quickly. I think it has to be looked at quickly.
Ms Harrington: I understand. Anybody in business has to know what the guidelines are.
Mr Mahoney: I understand you have made two applications for rent review that are currently caught in the moratorium. Could you just take a minute and walk us through one or both of those applications? The kind of thing I am interested in is what you applied for, the type of work that was involved, the notification to the tenants. Did any tenants leave as a result of this application? Did you have any kind of consultation with your tenants or difficulties?
Mr Adoranti: No. My application was for 9.5%, and I did not get any negative feedback from the tenants. Anyone here is welcome to speak to the tenants. I have done quite a few repairs. One building in particular was quite an old building: taps were leaking, toilets were broken, sinks were cracked, fridges were frosted up and hardly working. They were happy to see the improvements. Many of them actually commented to me, "It's about time we had an owner who would do something in here," and they did not mind paying the increases. You are talking a 10% increase. With average rents of $400, it was maybe $40 a month more, 5% of which they would have had to pay anyway. They were quite pleased with the improvements, and I had nobody walk out because of rent control applications.
Mr Mahoney: Have you ever had anybody evicted due to economic difficulties created by a rent increase?
Mr Adoranti: No, I have not, not to date.
1600
Mr Mahoney: I am curious. Perhaps it is your attempt to not dump all over the government in the hope that some of your points might come through, if you went through this process, if you applied, if your tenants saw the work that you were going to do and were satisfied and subsequently agreed with the increase, why you would consider what is under way now a good thing and what was wrong with the system other than, I understand, the bureaucracy that existed? Believe me, if you want to see bureaucracy, just hold on; it is coming.
I am curious how you can arrive at the statement that what they are trying to do is good. Who is it good for? I have yet to hear one tenants' group tell me what good this bill does, other than the cap that gets put on, and the government is admitting it is actually not a good bill because it is yanking it in a few months, after they get done with the green paper. If you think you are confused --
Mr Adoranti: I believe the ultimate solution is elimination of all rent control, any government intervention, and let it go on a supply and demand situation. Let me give you an example.
The government has said that housing is a public necessity; so is a pair of shoes. I think everybody in this place here, I think every tenant I have seen has been wearing a pair of shoes. Now if he goes into Sears and cannot afford a pair of shoes, he applies to the government for help. The government then gives him help in the way of welfare or unemployment insurance. The government does not go in and tell Sears how much to charge for shoes. It goes on a supply and demand situation. If there is a problem with supply, then it should be phased out over time and let the supply take care of it.
I have heard some people saying that there are some vacancies now. Well, there is supply and demand at work. That is free enterprise and it will benefit the tenant in the end because the landlord has to improve his buildings and keep them up to date if he wants them to be full. The only way that can be done is on a supply and demand situation.
SANDRA KONDO
The Vice-Chair: The next presentation will be made by Sandra Kondo. Good afternoon, Ms Kondo. I will not make any puns about the name, but it is very appropriate that you are here. You have been listening to and watching the proceedings, so you will understand the 10-minute time for your presentation and the 10-minute questioning period. Perhaps you would introduce yourself.
Ms Kondo: My name is Sandra Kondo and I would like to thank you for allowing me the opportunity to speak to you today.
Please be advised that I represent several landlords in southern Ontario who have grave concerns over the implementation of Bill 4.
I ask that the panel consider the legality of a retroactive law and the unfairness of such an act. How does the government respond to landlords who acted in good faith and followed the Residential Rent Regulation Act, Bill 51 every step of the way?
First of all, giving 30 days' notice to all tenants of intended capital expenditures; prepares and files an application for rent review with the Ministry of Housing and gives corresponding copies to tenants; gives 90-day notices to the appropriate tenants; files a cost-revenue statement with copies of paid invoices and copies of cancelled cheques; then finds out that everything has been set aside because of a law that has yet to be passed.
I wish to point out that last April 1990 an amendment to Bill 51 was implemented requiring all landlords to give 30 days' notice to all tenants regarding capital expenditures the landlord wished to carry out. Had landlords not had to give these notices, their applications would have had a start date of September 1990 and would not fall under this new proposal. In all probability these applications would have an order issued by now.
Many landlords were severely affected by the delays in orders from the major changes that took place in the creation of Bill 51 during 1985 through 1987 when this act was implemented. The delays in issuing these orders under Bill 51 was sometimes close to three years after the fact of the people filing their applications. The bookkeeping and the financial problems caused by these delays were horrific. In many cases landlords were unable to collect the back rent owed to them. Surely the government can see the ramifications if such a situation is created again.
Had Bill 51 worked properly, orders should have been issued before or on the commencement date of the applied-for rental increase. In March of this year -- in fact next month -- landlords have to make decisions about their rents of 1991 and 1992, rents that they do not know at this point when they filed an application for 1 October and after. How does a landlord make such a decision? Does he take the current guideline of 5.4% to 1991, or does he go to rent review when he really does not have a clue what his current rents are?
I feel that landlords have been put in an extremely unfavourable position and cannot make any financially sound decision when such uncertainty exists. What possible benefit can be derived from creating such a situation as the implementation of Bill 51 caused? The landlord cannot make his decision and the tenant does not know what his rent is or whether he can afford it in the current confusion of Bill 4.
A landlord, I agree, should not be able to claim for frivolous items such as microwaves or a fish tank in a lobby as a way of getting a rent increase. In 11 years of preparing hundreds of applications for rent review, I have only seen one case of a blatant abuse of the system. In all other cases, major repairs or capital expenditures claimed were necessary. I would like to give you some examples.
Unsafe situations existed. Bylaw upgrades: Installations were ordered as per the case of the Ontario fire code. Items claimed had just worn out and it was not feasible to repair them any more, not because the landlord had wanted to raise the rents. I find it hard to believe that a landlord could commit himself to thousands, or in some cases millions, of dollars of financing just to raise the rents.
Landlords whom I represent contracted for their capital expenditures long before any election promises of the current government. In all cases the repairs and replacements were a necessary item. In some instances there were safety factors involved; in others building upgrading had to be done, otherwise severe water problems in kitchens and bathrooms would have happened; and in some cases tenants were asking for new appliances -- just to name a few situations.
The capital expenditures in my landlords' applications had been substantially completed and paid for long before the implementation of the proposal of Bill 4. You must not deprive the landlord of his right to recoup these costs under Bill 51. The landlord has followed the act in good faith and so must the government.
Surely the government can see the tremendous damage that is created by the amendments under Bill 4, not only for the landlord but for the tenant and the construction workers of Ontario who count on these repair and renovation contracts to make a living.
The government must realize that this amendment to the Residential Rent Regulation Act was a kneejerk reaction to election promises without properly thinking out the ramifications or legal aspects of such a decision. Does the government honestly believe it acted responsibly in its decision?
If the government truly believes that the Residential Rent Regulation Act is unfair and unjust, I respectfully suggest that a tenant representative and landlords or their representatives work with a committee such as yourselves and hold meetings before making any amendments. The start dates of any act or amendment should be in the future and definitely not in the past. However, regardless of any amendments to Bill 51, the ability to claim necessary, and I repeat necessary, capital expenditures should never be taken away from a landlord. The landlord must have the right to claim necessary repairs.
The findings from future meetings, combined with the information already compiled in the last few weeks, would allow a panel such as yourselves to make a sound and just proposal to the provincial government. Would this not be a fair and legal solution?
Before I close, you have a number of photographs that were provided by Nick Galli of B&G Construction which owns an apartment building in Hamilton. Mr Galli is unable to be here today, but he asked me to give these to you. These clearly indicate that the building was structurally unsafe and unsound and had to be corrected. There is a proposal that I have submitted and submissions that I have given that show that these amounts and the work and everything was contracted by way of Schroeder Engineering in December 1989 and paid for long before the implementation of the Bill 4 proposal.
Again, I would like to reiterate and say that the government must not take away the provision of a landlord to be able to claim his capital expenditures. I ask that you study the proposal that I have submitted and also the submissions of the landlords and take the time to review them. Again, I thank you for giving me the opportunity to talk to you.
Mr Drainville: I would like to ask one sort of general question to understand where the witness is coming from.
I believe that you did work at one time with Effort Trust, did you not, and that there have been charges laid against you about the absconding of funds from tenants in the past. Is that true? How many --
[Interruption]
The Vice-Chair: I would remind everyone that there can be no participation by the people present.
Ms Kondo: Excuse me. I came here out of good faith today and I will not tolerate such an accusation from yourself.
Mr Drainville: Are there any charges that have been laid against you?
Ms Kondo: For absconding with funds. No, sir.
Mr Drainville: Are there any charges? Please clarify then.
Interjection: That is irrelevant. What kind of question is that? Talk about apartments. She is not on trial.
The Vice-Chair: Ms Kondo.
Ms Kondo: Excuse me, sir. I do not have to put up with this at all from anybody.
1610
EFFORT TRUST
The Vice-Chair: The next presentation is to be made by Effort Trust, Mr Weisz. Good afternoon. Perhaps you would like to have a chair, and as you may know, you are allowed 10 minutes to make a presentation to the committee, followed by 10 minutes of discussion with the members. Perhaps you would introduce yourself and the organization you represent, if any, and your position within that organization.
Mr Weisz: Yes. My name is Arthur Weisz from Effort Trust and I am the president of Effort Trust.
I would like to make a very brief presentation. I think your group heard a lot of questions or a lot of problems with the apartment management companies in Hamilton. Basically I would like to bring to the board's attention that rent control was introduced in 1975 and the reason it was introduced was because in a small part of downtown Toronto rent increases were higher than the government at that time would have liked to see it. Rent control came in effect in 1975. Then, again, Toronto had some shortages.
In Hamilton at the time there was 10% vacancy, and rent control was introduced at the time with the idea that price and wage controls came in at the same time and it would be only for one year. When the one year was over, price and wage controls went out and rent control stayed for another year. The Minister of Housing at the time when the government maintained rent controls resigned.
Hamilton was always a very low-rent city because construction was quite active. From 1960 to 1975, in Hamilton I would say approximately 25,000 rental units have been built in that 15-year period. From 1975 to 1990 or 1991, not one unit has been built in Hamilton by the private sector without government help; not one unit. At one point the government offered an $8000 subsidy to the owners who built the unit. Even with that subsidy, nobody built anything. It means since 1975 this city never saw one unit built.
We are in this business since, I would say, 1955. We manage a large quantity of apartment units in Hamilton. None of the units that we manage, not one unit, was ever sold. We still manage -- we build some units. We group purchase some units, you know, mostly local people, and we are managing that portfolio. Never one flip occurred in our units, and I could say in all honesty that in Hamilton there are at least 20 builders and landlords who never sold a unit. The majority of the people own that unit. They manage it. They look after it.
That is the main reason I would like to bring to this group that it not look at everything from the negative point of view. This group did something for this city and we are part of it. May I show it to you?
In 1972 our company rented 535 units in Hamilton. That was one year; our company alone. This was 1972. All of these buildings are still in our management. None of them has been sold.
There are so many problems to solve with this rent control problem that it takes weeks and weeks even to understand. Rental units, when the 1975 reassessment took place, did not keep value with the rest of the real estate. The provincial government used a formula. For a single family house or a duplex, the formula they used for tax purposes is 10.5 per cent. For a unit which is three to six units, the formula is 15.49 per cent. For an apartment building over seven units, the formula is 25.5 per cent.
The same government that introduced rent control is taxing tenants in the buildings two and a half times higher than any single family house. This really does not make too much equity when we are thinking. But there are so many things that rent control created in this industry, that again I would much sooner answer some questions than go on and on.
One more thing that is maybe worthwhile to know. The housing market has become very difficult in Ontario at the present time. The condominium market died completely because a lot of tenants who are living in the best buildings in Hamilton -- I am sure that is happening in some other places too -- have not moved. There is a large quantity of these people that have large incomes. They are sitting on this wonderful unit; there is no turnover. They are paying $400 to $500 rent a month and because the house sales are very quiet, there is no opportunity even to develop a condominium, and that has hurt things, the construction industry and everybody.
I would like to answer some questions. Maybe you would like to hear a little bit more how I feel and what is happening in Hamilton, because I am in real estate since 1952. I am one of the senior brokers in Hamilton. We like this city. We work very hard and we hate to see that this industry is really dying out.
Ms Poole: Thank you, Mr Weisz, for presenting to us today.
I have some questions because quite frankly we have had very little input from the financial community as to some of the implications of Bill 4. We have been told anecdotal evidence that there are going to be a number of financial companies that do not renew mortgages, do not renew financing, because of Bill 4, that for instance in the case where a landlord has gone and got a $400,000 financing package to put in capital expenditures, if Bill 4 is going to prevent that landlord from getting the rent increase with which to pay off that $400,000, when that landlord goes back to refinance, there appears to be, if not evidence at least some suspicions that the financing companies will not refinance. Do you do rental as well as condominiums?
1620
Mr Weisz: Yes. We are a relatively small trust company and we have a very sizeable portfolio including apartment buildings. When this bill was introduced, the first thing our board told us was, "Don't lend any money for apartment buildings." There are two problems, not only the additional expenses, you know, what the landlord has, but the biggest problem is that with this bill the apartment value went down 30%. Anybody who bought a building one and a half years ago, his mortgage is coming up now. The value of this building -- not what he paid for it, $40,000 a unit -- is worth only $22,000 a unit. It means the financing is much, much higher. His equity is gone.
Actually, unfortunately, even a person who bought a single-family house in Hamilton a year ago for $240,000 with a $60,000 down payment has no equity. It is gone because of the economic situation. But an apartment building is a special problem because when the value has gone down 25% to 30% and his equity was 15% under the old rule, or 20%, certainly he cannot refinance this building.
There are a lot of situations like this and it is coming up more and more, because really we are a lending institution that is taking money from the public. We are very closely watched by the government. Standard Trust Co is a typical example. Their lending policy when they were -- that is a serious problem.
Ms Poole: So it is a twofold problem. One, the buildings are devaluing and, second, if the landlord does not get the increased revenue with which to pay off the financing, then your company's new policy will be that it will not refinance.
Mr Weisz: Correct. May I say one more thing that is worth my -- 1990, talking about Hamilton, rent increases were 4.6% and the tax in Hamilton went up 12.75%, one item. Now, how could you maintain? The tax increases in Hamilton wiped out the total increase. And let me say this to you. The better-quality buildings in Hamilton, and we have lots of experience -- when we go to a working-class district for rent control increases, and we do it very seldom, you know, honestly, I may say that in all fairness we did not do any luxury renovation. We do not even know what it means. We do not even understand this.
But let me say one thing. When you want to open a subdivision, nothing to do with rent control, when you want to open a subdivision in Hamilton, there are two government bodies setting a fee, how much you have to pay to open the subdivision; that is, the city and the region. Three months ago, the capital improvement, which the subdivider has to do, went from $7,500 a unit to $15,000 a unit -- a 100% increase without their doing anything. Nothing has been changed. They do not pay for the services, they do not pay for anything -- just capital contribution went up. I do not like to hear about a landlord doing luxury renovation, but when a local government can increase capital contribution 100%, from $7,500 to -- everybody was thinking that money is growing on the street, that everybody has a machine.
Unfortunately, we are paying a big price for it, and government is not better than a greedy individual, you know. We did a major renovation in one building that I could demonstrate to you, on Herkimer Street. The buildings are 50 years old. The government paid 50% of the renovation; we paid the other 50%. We got a 21% increase and we ourselves did that in two years. Now we are stuck with it because the second year is not allowed now. Unfortunately, this whole rent control is a much deeper problem than anybody in this room understands.
The Vice-Chair: Mr Tilson would like to ask you some questions.
Mr Tilson: Just to clarify one point you made, sir, are you telling this committee that since 1975 there have been no new buildings --
Mr Weisz: Not one building in Hamilton has been built without government subsidy. Not one free enterprise building was built and I know it.
Mr Tilson: All right, I assume the new tenants are going into non-profit type of buildings or government-sponsored buildings, but where are other new tenants going? Surely the government buildings cannot house everyone.
Mr Weisz: I tell you something, they are struggling. They are going into lower duplexes, you know; they are creating an extra unit.
Mr Tilson: Basement apartments?
Mr Weisz: Yes. May I say it loud and clear: Since 1975 not one building -- Toronto is different because in Toronto you can have a rent-controlled building, $500 rent, and next door somebody will pay $1,000 because there is a shortage. Hamilton never experienced it.
Mr Tilson: That is an astounding fact. Mr Weisz: It is fact.
I have a second question. It has been described to us, the effect on owners of buildings and landlords of not being able to receive financing as a result of the possible implementation of Bill 4. Do you have any direct facts to relate to this committee from either your own firm or other firms as to how Bill 4 specifically affects investment companies such as yours?
Mr Weisz: Yes. May I say one thing? Rent control -- I come back to this question. Rent control created a white elephant. Buildings which never were sold since 1975 -- and I am sure you know that in these buildings tenants who can pay a much, much higher rent than what they are paying now are enjoying a tax-free benefit compared to the buildings that went to rent control two or three times, you know, and the rent became much, much higher.
What happened to us now, these buildings went to rent control and the rent became not $400 for a one-bedroom
apartment but $490 or $550. These units could not be rented today. The lending institutions are really careful now, very worried about it. I could name you buildings in Hamilton which have 20 vacancies in 100-unit buildings because the market is not willing to pay it, and that is no shortage. People are offering one month or two months free rent when the rent is higher than the average rent in Hamilton. When you are a financial institution and you see that it is a risky investment, you will not lend money, and that is happening in many, many instances.
Mr Tilson: Yes. I am looking specifically as to whether there is any noticeable effect on banks, financial institutions, chartered banks, trust companies; whether there is any noticeable effect from people who you have spoken to in those industries --
Mr Weisz: Yes.
Mr Tilson: -- as a result of the introduction of Bill 4. Could you elaborate on that, sir?
Mr Weisz: Put it this way. Our own situation -- I could speak generally about the situation, more than our own situation. When you have a mortgage due today on an apartment building, the lender will look at it. You know, what is the situation with it, how much income you have, how much expenses you have. You know, a building has to carry the mortgage. When it will not carry it, you cannot get it. The same thing when a man is buying a house and his income is not carrying a $100,000 mortgage, Central Mortgage and Housing Corp will not allow you to lend on that coverage. And the same thing happened with an apartment building.
Mr Abel: Mr Weisz, as you probably know, I am from the Hamilton area and I am led to believe that you are probably one of the biggest landlords in the Hamilton area, both commercially and residentially. Is that correct? Well, one of the biggest ones.
Mr Weisz: Yes.
Mr Abel: Okay. Approximately how many buildings do you own?
Mr Weisz: I tell you, personally --
Mr Abel: I am sorry, sir, you will have to speak up.
Mr Weisz: Personally I do not own too many buildings. My activity in the last 30 years was syndication. I have a lot of people, you know, they like what we are doing and when we acquire a building, somebody has 10%, somebody has 20%. But we are managing a very large portfolio and this portfolio was never bought for resale. The portfolio is solid, nothing has been sold, and we are really the victim of rent controls to a certain degree.
Mr Abel: Excuse me, that was not my question, about the selling.
Mr Weisz: Okay.
Mr Abel: We have very limited time.
Mr Weisz: Yes, go ahead.
Mr Abel: So please bear with me. On the average, what are we looking at for increases, let's say, over the last four years?
Mr Weisz: Our average increases are 4.6%.
Mr Abel: Pardon?
Mr Weisz: Very few buildings went to rent control; very few, almost none. I would say maybe 10% of our portfolio went to rent control when some major renovation took place; never any other time.
1630
Ms Harrington: The buildings to rent review.
Mr Weisz: No, 10% of the buildings went to rent control and our increases were always --
Mr Abel: No, my question was, sir, on the average, how much have your rents increased over the last four years?
Mr Weisz: I would say in some cases, you know, 5% to 6%, 7%; nothing more.
Mr Abel: Nothing more? Okay.
Mr Weisz: But only 10% of our total portfolio.
Mr Abel: Okay. And maintenance, what had to be done along the lines of maintenance in that period of time?
Mr Weisz: You see, according to the present rent control law, the minute you go for rent control, your increased rent is reduced 1%. It means when you do not do anything major, it is not worth it to go to rent control because you do not gain anything.
Mr Abel: Okay. Being, let's say, one of the largest landlords in the area, how is Bill 4 going to affect you, your holdings?
Mr Weisz: Bill 4 is affecting us because our portfolio value was decreased immediately 30%. It means that when we want to refinance an existing mortgage we may have difficulty because the effective value was decreased by 30%. When something is worth $30,000 a unit prior to Bill 4, it is worth $20,000 a unit, and when that has maybe a $15,000 mortgage, you have a problem to refinance it.
Mr Abel: Just to put that in simple terms, it cuts into profits.
Mr Weisz: No, not profits. No, no, no, that is wrong.
Interjections.
Mr Abel: I am sorry, I must have read you wrong. That is what I thought you were saying, and using different words.
Mr Weisz: No. Anybody who bought a building for $30,000 a unit two years ago and he was hoping to make a good investment, he made a bad investment.
The Vice-Chair: Thank you, Mr Weisz. You were very helpful.
Mr Weisz: Thank you.
HOUSING HELP CENTRE FOR HAMILTON-WENTWORTH
The Vice-Chair: The next presentation will be made by the Housing Help Centre for Hamilton-Wentworth, Walter Mulkewich. Good afternoon, sir. If you would introduce yourself and your organization and your position within that organization for the purposes of Hansard, then you have 10 minutes to make your presentation, followed by 10 minutes of questions.
Mr Mulkewich: Good. Thank you very, very much, Mr Chairman and members of the committee. My name is Walter Mulkewich and I am the executive director of the Housing Help Centre for Hamilton-Wentworth and it is my pleasure to present to you the point of view, if you wish, of the Housing Help Centre, which has been approved by our program committee and the board of directors of the Housing Help Centre. I believe you have our presentation in front of you and since I never like anyone who just reads word for word, what I will try to do is highlight it topic by topic and page by page, so that the presentation stands out for you.
The Housing Help Centre's presentation is based on our experience with both tenants and landlords and its focus is on the needs and the problems of low-income tenants, because that is what our mandate is. We do support the government's stated position that the rent review system at the present time is not working and should be replaced with a new system, and we also support the proposition that a wide consultation process is required on the way to that system.
The temporary moratorium bill, if I can call it that, Bill 4, only makes sense from the perspective of low-income tenants if in fact that process produces a better set of regulations. However, in the interim we would argue that Bill 4 could be made, if I could use the term, more user-friendly and, further, we believe that the rent review system by itself, no matter how much reformed, if it is just a matter of rent review, will not deal with the problems of low-income tenants. Therefore we urge the government to set the proposed rent review legislation within the context of a comprehensive housing policy that in fact will deal with the problems, the needs and the issues of the low-income tenants.
Our presentation is based on a number of topics: market affordability, security of tenure, quantity of supply, quality of accommodation, equity in the system and the complexity of the system.
On page 2 we have summarized what the Housing Help Centre is, to give you some sense that we are involved in the community in housing issues and that we deal in a direct service way with a great many low-income people, the majority of whom make less than $15,000 a year. In 1990 we dealt with over 9,000 contacts.
We have given you some indication of a typical person who we might come in contact with, a single parent with one child living on family benefits allowance making slightly over $1,000, which is 34% below the established poverty level for this area. And yet in terms of our research, our vacant market rental research project which we published late last year, we figure a medium-priced two-bedroom unit is $675 a month. That is based on what is vacant, not based on what is out there, which means that particular family of two would pay 63% of its income on rent.
In terms of market affordability, this is one of the problems, that low-income people consistently pay more than 25% or 30% of their gross income on shelter costs and we see 50% to 70% as being common. Therefore this is really the basic problem of low-income tenants.
Bill 4 as a moratorium gives low-income tenants some breathing space in helping to prevent further spiralling of rents and certainly the moratorium on large increases as a result of major capital expenditures or a refinancing will help low-income tenants who might be faced with large increases they cannot afford to pay.
In the long run, we are arguing that low-income tenants will require some form of rent regulation system -- call it what you will -- but some form of system to put them in a fairer bargaining position. However, we are not convinced that a rent regulation system alone can deal effectively with the problems of market affordability and therefore we argue that whatever you do, put it within the context of a more comprehensive housing policy.
With respect to security of tenure, it is closely related to affordability, because low-income tenants tend to move a lot; that is, if the rent goes up more than they can afford, it is a matter of moving. If the system is difficult to understand or to deal with, for instance the present rent review system, if there is a large increase rather than using the system and fighting it, the easiest thing is to move. Therefore, we are arguing that the whole question of security of tenure should be addressed in the long-term system, and in the interim we would argue that you could make it easier for low-income tenants to be able to use the system.
With respect to quantity of supply, we have heard about quantity or about supply and demand, and we feel the real issue is not that of supply from the low-income tenants' point of view; it is the question of effective demand. In other words, low-income tenants cannot pay the rent that is required by landlords if landlords are to make rental property an attractive investment. We quote figures from an article in the Toronto Star that suggested that the rental housing market would require at least 8% a year above the rate of inflation to induce investment and that this would be at least 12% a year more for rent. This is more than low-income tenants could pay.
We also note that the choice that is available to low-income tenants is generally the worst of the apartments or the units available. In the last few years, we note that there has been more money available in selling condos. This has of course been driven by trends in demographics and the market economy. In the past, at least up until the mid-1980s, much of the private rental construction in the country was in fact stimulated by various governmental subsidy programs and we have a whole list of them there going back to the early postwar period, and particularly in the 1970s. Since 1985 or 1984, approximately, those programs have virtually ended.
Now, some would argue that the removal of rent controls will result in an increased supply in the market. We would argue that if the rent review system were simply removed, an increase in supply would depend not on simply removing the rent controls but on other factors such as demographic trends, economic performance and the availability of governmental programs.
Based on historical evidence, units affordable to low-income people, we believe, would not be increased by simply ending rent controls as such. We note the experience in British Columbia in 1983 and I have a chart that I can show you that in Vancouver when the rent controls were lifted, in the next number of years, the number of units did not increase.
1640
Therefore, we would argue that the concept of a temporary bill leading to a new rent regulation system is positive only if that leads to a new system that is part of a comprehensive policy that indeed will tackle the problem of supply from the point of view of low-income tenants.
We would like to say something about quality of accommodation. Much of the stock in Ontario is getting older and our experience is that low-income tenants often are forced to live in accommodation that is in deplorable physical condition.
The present rent review system has simply not dealt with that issue. We believe that even in the interim, Bill 4 could deal with the quality issue. We suggest, for example, that no rent increase be allowed at all if there are outstanding building, fire or health regulation infractions. Tenants clearly believe that the rents they are paying, even without large increases for capital improvements, are for maintaining their buildings. We do believe as well that in the long run a housing policy must address the question of quality.
With respect to equity, we believe that all stakeholders should be treated equally and fairly. We note that retroactive legislation is rarely justified and always dangerous and that retroactivity requires overwhelming evidence as to its necessity to justify such an action.
We note that Bill 4 incorporates retroactivity to 1 October and we are certainly aware of tenants who face large increases because of applications that precede that. However, we are not aware of the total number of applications or units affected, to know whether in fact retroactivity is justified, and we feel that the burden of proof is indeed upon the government to justify that to the public. That evidence may or may not be there. We would be interested in hearing that.
With respect to complexity of the system, the present system is clearly difficult for both landlords and tenants. We feel that now that Bill 4 has got the attention of both tenants and landlords the consultation process hopefully will be effective, more effective than previous consultation processes, and that if a better system emerges, the moratorium will be worth the wait.
In the meantime, we suggest that the government consider practical suggestions that have been made to this committee in other places with respect to making the system simpler in the interim, such as our suggestion of no rent increases if there are outstanding building, fire or health infractions.
In conclusion, ladies and gentlemen of the panel, again we support the basic premise behind the legislation that a new and better rent regulation system will be in place by 1 January 1993, even earlier if possible. We also support the consultation period and we hope it includes all people, including tenants and large and small landlords.
We strongly recommend that the consultation process and new legislation be part of a comprehensive approach to housing generally and that it would deal with the problems of low-income tenants.
In the meantime, our support for Bill 4 is conditional on the comments we have made throughout this presentation, and we would hope that this committee would consider those comments and pass them on appropriately.
We thank you for your consideration of our presentation.
Mr Tilson: If you are not a politician, sir, you would make a darned good one.
I agree with a lot of what you said, and really the only question I have is addressing one of the areas that you talked about. That is that no matter what rent is charged, there are a large number of people in this province who simply cannot absorb any rent increase. In fact, they cannot even afford what they are paying. As earlier speakers today spoke of, I guess it is something that the government should be getting into. It is a war against poverty.
I look specifically at senior citizens who are on fixed incomes, I look at single mothers who are not even on a fixed income -- in many cases they do not have an income -- and people and groups of our society that are in that category. This legislation or any of the suggested legislation that is coming forward from the government will not solve those types of individuals.
My question is how to address that. I quite frankly do not think it is something that you should be penalizing or allowing one segment of society to pay for; in other words, the jobs that are being lost -- and there are jobs that are being lost; at least testimony has been given about that -- the suppliers' contracts that are being lost. I would like to hear your thoughts, sir, specifically on the issue of subsidies and whether they are economically feasible.
Mr Mulkewich: Do you mean subsidies in terms of non-profit programs, or are you talking about other kinds of subsidies?
Mr Tilson: I am talking about other types of subsidies with respect to these different types of people who cannot even afford non-profit.
Mr Mulkewich: Clearly, as our presentation indicated, we understand that in terms of the private market, when it comes to low-income tenants, there is an affordability problem. Low-income tenants cannot pay the kind of rent that would be required to create the kind of rental stock that is required in this province. Therefore, we are talking about a comprehensive policy without going into the details, because we have not had an opportunity to do so, and we hope that that comprehensive policy would consider subsidies.
Obviously, non-profit housing programs and assisted geared-to-income housing programs are one form of subsidy which has been tried and true and proven. If you are talking about shelter subsidies or whatever that relate to individuals --
Mr Tilson: Yes, that is what I am talking about.
Mr Mulkewich: We as an organization have not taken a position. We have discussed it and we recognize the pitfalls in that. I think if you were to consider that seriously, you would have to consider the pitfalls; if you created shelter subsidies, how that would result in terms of the resulting rent increases. If it were along with an appropriate rent regulation system, I think we would have to look at the details. It is certainly an option. Clearly the question of providing affordable and decent shelter for low-income people is a difficult one, and your committee and the government should be prepared to look at all kinds of alternatives.
Mr Duignan: Thank you, Walter, for appearing here this afternoon. I have just got a couple of --
The Vice-Chair: Mr Duignan, Ms Harrington also has a question.
Mr Duignan: Okay. Just a couple of quick questions. I was wondering how many of your clients have been economically evicted because of the high rents.
Mr Mulkewich: We do not have a specific figure of how many are being economically evicted. We are certainly aware that this is indeed happening, and I think there are different variances of economic eviction. We clearly do understand that, in terms of the clientele we see, there are frequent moves.
Mr Duignan: Just a final quick question. Bill 4 basically is a step in the right direction in that it offers basic guideline protections and is definitely a lot simpler than the old law. Do you agree?
Mr Mulkewich: If it is moving towards a better system, we would agree. I think one of the points we have made is that it has not simplified the present system; it has more or less frozen it into place. We would like to see you look in the interim at simplifying the system, and that would make it a better bill.
Ms Harrington: First of all, the fact that you have had direct contact with over 9,000 people who are desperately in need of housing certainly gives your presentation a credibility.
I wanted to make a remark with regard to the shelter subsidy that has been proposed around this table. Basically, I would think that without a system of rent control, that is going to be just a pass-through to landlords. Would you care to comment on that?
Mr Mulkewich: That is one possibility, and I guess that is one short answer to the longer answer that I was giving to the other gentleman.
Ms Harrington: Okay. I wanted to just let you know that the rent control system that we hope will be in place as soon as possible needs you to consult with us. Also from Hamilton here, I was also going to ask Mr Weisz if he would be part of the consulting process, because certainly he has been around a long long time. You know, we want everyone who has got a stake in this to come up with a system that is going to work and work simply.
But you also said that you would only be in favour of Bill 4 if it also addresses the much wider problem of housing, and I would like to let you know that this is the first bill we have got our hands on. But we also are looking at the Ontario Housing Corp and trying to make that a good part of housing in Ontario, a well-run and a good place to live, and also the community-sponsored nonprofits. We obviously are very much into how to fund that, especially in a time of recession. We need to get builders out there building and labourers and workers out there working, this year especially. Also, we want landlords, the private sector, to have a fair profit, all sectors of the housing industry in Ontario to work well together. So I hope to do that. We hope to do that.
Mr Mulkewich: Thank you. I hope you do as well.
1650
Ms Poole: Thank you, Mr Mulkewich, for your presentation today. I might say that I think this is one of the best briefs that has come before us from the vantage point that almost every piece of evidence we have heard has been polarized on one side or the other. You have tried to take, and I think very fairly taken, a very holistic view of this and pointed out what I feel are some major improvements that could be made to Bill 4 to make it workable.
On the one side, we have the government members, who I think are quite enamoured of Bill 4 in its present form. On the other side, we have the Conservative members, who I do not think could be enamoured of Bill 4 no matter what you did with it. We as Liberals, as quite often happens, are right in the middle. I like the principle of this bill, but I would also like to see it to be fair and effective.
I would like you to comment on your suggestion that no rent increases be allowed if there are outstanding building, fire or work orders. This is actually something that I have been beating the drum for for quite some time and nobody has listened to me, so I am hoping that the fact that it has come from you now may have some results.
I would like you to comment on this and the fact that Bill 4 really does nothing to discourage what I call the bad landlords, the abusers of the system, who do not give quality for the money that is put in and who do not care for their tenants or their buildings. What suggestions do you have other than denying them rent increases?
Mr Mulkewich: In terms of the quality issue?
Ms Poole: That is right.
Mr Mulkewich: Well, I think we have to emphasize that there are good landlords and there are bad landlords and many in between, and frankly, a large percentage of landlords we deal with are excellent landlords. We have made that one suggestion, and it may on the surface be somewhat simplistic. Clearly it is not the total answer.
I think that we have also said that the quality question in terms of the kind of accommodation that is available to low-income tenants cannot be solved alone through the rent regulation system. That is only part of it. There is a larger problem to be dealt with, that is, how is the existing infrastructure going to be brought up to standard? I believe that that is really outside of the rent regulation system, that that issue has to be tackled. I think we are prepared to be involved in detailed discussions as to how that can be done. As a matter of fact, that is one of the topics of discussion at our centre.
Ms Poole: Do you have a problem with the provision in Bill 4 which basically says that no necessary repairs or renovations will have the costs passed through in rent increases for up to two years or the length of the moratorium? I am particularly concerned about this freeze and not allowing any repairs no matter whether the health and safety of the tenants is involved or the structural integrity of the building. Do you see that there is a place in Bill 4, temporary legislation though it may be, for having a provision for necessary repairs, provided that there are also a cap and provisions to prevent ongoing deliberate neglect?
Mr Mulkewich: From the point of view of low-income tenants, we have already indicated that the present guideline of 5.4% is somewhat above the cost of living that is predicted for 1991, and low-income tenants seldom get even the cost of living. Therefore, anything over five point something per cent is going to be burdensome for low-income tenants and is going to create problems of affordability, problems of lack of security, all of those kinds of things.
Therefore, what we are saying is that from the strict point of view that there is a problem of low-income tenants paying their way and living in decent accommodation, this freeze is, from their point of view, a good thing. It does not solve the other problem, and I think that is where the "temporary" has to be emphasized. I would hope that there is a long-term solution that will be fair to landlords as well and to the private market.
The Vice-Chair: Thank you, sir. Your presentation was most balanced and most enlightening. Thank you very much.
BRUNO MEGNA
The Vice-Chair: The next presenter is Bruno Megna. Welcome to the committee this afternoon, sir. You of course have seen the other presentations and realize you have 10 minutes to present and 10 minutes for questions. If you would introduce yourself and your organization for the purposes of Hansard, it would be appreciated.
Mr Megna: Mr Chairman, members of the committee, ladies and gentlemen, thank you for giving me the opportunity to present to you my concern about the proposed Bill 4.
Before I proceed, I would like to introduce myself. My name is Bruno Megna. I have resided in the Hamilton area for the last 27 years, most of which years I have spent in the real estate industry and rent review consulting. I have some investments in apartment buildings and I deal on a daily basis with landlords concerning rent review matters or, better yet, rent control nightmares. I am here today to express my concern and the concern of my clients in regard to the NDP's proposed rent control and the negative effect that it will have on the residential rental industry and the Ontario economy at large.
It is sad and unfair that the NDP government would even consider wiping out retroactively legal and equitable rights which have been accrued to property owners who were acting and complying with the law of the land. I am referring especially to the implications and the financial ruin that Bill 4, if passed as proposed, will bring to Ontario and possibly to Canada.
Bill 4 is unfair and punitive. It discriminates against responsible landlords. It threatens to destroy Ontario's present rental stock and make slums out of it. It will bankrupt the property owners, trades and suppliers, just to mention a few. It will fuel the present high unemployment and it will put Ontario in a deeper economic recession. Bill 4 forced my company to cancel over $1 million worth of much-needed capital expenditures and cut my maintenance employees from 12 to 4.
I would like to share a couple of horror stories that I and a client of mine are going through. These investors are individuals who, by working hard for many years and by saving every penny that they could, did succeed in accumulating a few dollars. They felt that they would be wise to invest in rental properties so they could build some financial security for their retirement. These investors are not the so-called high flyers. I like to give you an idea of what we are dealing with. These investors are a painter, a tile setter, a mechanic, a mail delivery man and a steelworker.
In 1990, a property located on Claridge Road in Burlington, Ontario, was purchased for a sum of $3,200,000 with $550,000 invested as down payment. Based on the legislation that was in place then and by not getting any return on the down payment, the project would have broken even after two years. Unknown to us, the NDP government had something in store for all landlords, regardless if they are good landlords or not-so-good landlords. Everyone would be painted with the same brush.
Bill 4 turned this investment into a nightmare and a financial disaster for most of the investors. Instead of breaking even in two years, now it will take nine years. Instead of losing $165,000 before the project would have broken even, now it will lose $1,157,000, and if the group would consider a return of 10% on the down payment, we would have to add another $495,000, which will bring the total loss to $1,652,000 in nine years. By the way, the monthly rent for two bedrooms in this town house project is only $485, including all amenities except heat.
1700
On top of all this, the Residential Rental Standards Board has written more than 15 letters demanding that the landlords have 45 days to make all necessary repairs, such as replace the leaking roof and change all the windows and doors that need to be changed, for a total cost of $280,000 to $300,000.
The investors took action to arrange a loan and get the work done. That was only until Bill 4 came to light. At that point, the lending company, due to the effect of Bill 4, withdrew the financing commitment, and the proposed new windows, new roof and repairs had to be shelved because the owners do not have any more funds to invest in the project, nor can they borrow more money on their houses. Two of them lost their jobs due to Bill 4's destruction of capital expenditures on apartment buildings.
In conclusion, the standards board demands that the windows and the roof be replaced and repairs be done. The tenants complain that they want the work done. The financial institution refuses to lend due to Bill 4. The landlords do not have any more cash to do the repairs. Maybe the minister, Mr Cooke, has a solution to solve this problem.
Scenario 2: It is a 155-unit apartment building on Rebecca Street. It was purchased in 1989 for $5,756,000, with a down payment of $956,000. Based on Bill 51, the building should have broken even in 1992. The owners made the repairs that all tenants asked for in writing. The owners applied to the rent review board for a 10% increase, which has been awarded, together with two phase-ins of 5% plus the annual minimum allowed.
The NDP came along and wiped out all the rent increases, leaving the building owners in a financial mess. Now, based on Bill 4, this building will break even in the year 2008. It shall accumulate a total loss of $1,157,000, that is, if the owners can afford to keep it that long. Further, this building is 23 to 25 years old and needs a new roof and windows. At a cost of $500,000 to $550,000, I ask this committee: What would you do if you were in this position?
We have heard so much from the NDP about flip and flip, and to date, to the best of my knowledge, they have not been able or willing to give a definition of how many properties an individual or a company has to buy and sell to be classified as a "flipper." In my management company, with a portfolio of 45 to 50 buildings, since 1981 to date only three or four small buildings have been sold. Are these owners classified as flippers or as long-term investors? Would the minister, Mr Cooke, once and for all clarify his definition of a flipper?
I am tired of hearing about marble floors, microwave ovens and luxury expenditures. I can speak for my company that no repairs and no capital expenditures are done in any of our projects unless the tenants request of us in writing the repairs they want done. We always inform the tenants in writing of the capital expenditures that need to be done, and we ask for their input. I believe that the majority of the owners are doing the same.
Therefore, it is my opinion that flipping and phantom marble floors and the high rent increases are only a poor, detestable excuse for the NDP to hide itself behind. In the process, they make property owners look like criminals.
The Acting Chair (Mr Abel): I am sorry, Mr Megna, your time is up.
Mrs Y. O'Neill: Mr Chair, as Mr Megna was only partway through his presentation, he may use our caucus's time.
The Acting Chair: The Liberals are giving you an additional three minutes.
Mr Megna: In Ontario we already have seen quite a few bankruptcies. Several mortgage companies have taken over several apartment buildings and they are now in a mess. Should this trend continue, the tenants will not look favourably on the NDP government.
I believe that living accommodation is a right. However, this right should not be exercised only at the expense of the few thousand landlords. Rather, it should be the responsibility of the Ontario government and our taxpayers. I believe the needy, and I mean needy, tenants should be financially and individually assisted. It is not right that all tenants are lumped together regardless of their financial position and have the NDP government demand that the landlords assist them with lower rents, while some of the tenants drive in, in my apartment garages, with a new Porsche and other cars like that, while other needy tenants are destroying the hallway carpets with shopping carts. Is this fair? It is time the NDP does some serious thinking and admits that its proposed Bill 4 will not work and will hurt the very same people it is trying to protect.
In the name of fairness and equity, the minister should implement the following: (1) remove the unjust retroactive proposal; (2) allow applications and rent increases including phase-ins and capital expenditures that have been submitted under the old legislation; (3) have Bill 4 apply to, and only to, buildings purchased under Bill 4; (4) develop a guideline to allow legitimate capital expenditures; (5) take action to provide incentives for the owners to maintain the rental stock in good repair and build new ones; (6) develop a program to give needy tenants financial assistance only if they are paying more than 30% of their total yearly gross income.
The Ontario government should allow conversion of rental units into condominiums or co-ops, all tenants to have the first right to buy their units or stay as tenants as long as they want. In the case where tenants can provide proof that they cannot afford the down payment nor the monthly payments, the government should give a loan secured by way of a mortgage on the unit itself at lower interest rates.
The above will give the following results. It gives the opportunity to tenants to become proud owners of their own units and gives them the ability to maintain their units as they best see fit. It will give the tenants seed money to start building a residence of their own for their retirement. It will give tenants the power to make decisions and take action in the upkeep of the whole complex. It will prevent good buildings from turning into slums.
I have many more suggestions, but the time actually ran out. I thank you for giving me the opportunity to express my point of view.
Ms M. Ward: You are an owner and a property manager, correct?
Mr Megna: Yes, I am.
Ms M. Ward: You own some buildings yourself. What would be the largest rent increase in those buildings over the last four years?
Mr Megna: On average, of all the buildings we are managing or partly own, in the last four years I would say it worked out between 6.5% and 7%.
Ms M. Ward: That is an average, but what would be the largest increase?
Mr Megna: The largest, to the best of my recollection, was about 17%.
1710
Ms M. Ward: Are there any outstanding work orders on your buildings?
Mr Megna: Obviously there are, as I mentioned before. In one project we have received already about 15 letters from the ministry stating that it wants us to install a new roof and new windows. We were willing to do so, except that the financial institution says, "Based on Bill 4, this building can't even carry the amount of mortgage you have on it right now."
Ms M. Ward: You did not have any outstanding work orders prior to the introduction of Bill 4?
Mr Megna: There are always minor work orders in most of the buildings, such as fire prevention, but it is minor stuff.
Ms M. Ward: Those are from the property standards branch of the municipality. Do you mean you would not contemplate doing these improvements without getting the work order?
Mr Megna: No. What I am saying is that if there were work orders for repairs, those repairs have been done. These work orders are now for major capital expenditures, to the tune of about $300,000 in one of them.
Ms M. Ward: My point was that I would expect as a major property owner that you would be ahead of work orders, that you would not get in a position where you would have a municipality hand down a work order to you.
Mr Megna: We are ahead of the work orders for repairs, but we cannot be ahead of work orders for new roofs and new windows. The reason is that this is not part of maintenance. With those things, it happens that you have to change, in most instances, after 15 to 20 years, so you cannot be ahead of those. These are just wear and tear within X number of years and you cannot do anything about it.
Ms M. Ward: I am not disputing the need to repair elderly buildings. I was saying that I did not think you would have to wait for a municipality to give a work order.
I have one other question about evictions. Have you ever had to evict people for economic reasons?
Mr Megna: Not to the best of my recollection. Some of them might have left, but we did not evict them.
Ms M. Ward: You have not evicted anybody because they have not been able to pay their rent?
Mr Megna: To the best of my knowledge, no, but there could have been. I cannot say.
Ms M. Ward: For any other reasons such as a spouse or a mate moving in with someone in a one-bedroom apartment?
Mr Megna: Managing a portfolio like ours, I am sure this must have happened. How many, I do not know. It is impossible for me to know how many, but I am sure not that many.
Mr Tilson: You are obviously, from your report, a qualified expert in the real estate industry. I have a question that I suppose arises from a story in the Toronto media over the weekend. It brought to mind the question with respect to work orders. There is a building in Toronto -- you have probably heard the story -- which was in terrible shape, with substantial work orders against it. The owner applied for a reassessment and there was a reduction of in the neighbourhood of $450,000. It was a substantial reassessment. I guess my question to you is whether you think this is an isolated act or whether this type of thing could occur more and more in affecting our property tax structure as a result of perhaps implementation of Bill 4 or other restrictive legislation like it.
Mr Megna: Based on my past experience I would say that this did occur on a few occasions prior to Bill 4, but I can assure you that with Bill 4 we will see that happening more and more on a daily basis, because if landlords purchased the building in the last year or two or three, in most instances they just cannot go ahead and make those capital expenditures. So we will see these work orders coming more and more.
Mr Tilson: In other words, you think there will be more and more work orders issued.
Mr Megna: Definitely, yes.
Mr Tilson: I am looking at your recommendations. Recommendation 5, which I will not read -- I am interested in encouraging land owners to maintain their buildings. How do we do that?
Mr Megna: Due to lack of time I will try to explain it as briefly as I can. What I am suggesting in recommendation 5 is to provide incentives to owners to maintain the present rental stock and to build new ones. I am saying that maintaining the present rental stock is much cheaper than building new ones. It can be done by allowing landlords to get a fair rent increase so that they can maintain those buildings and improve on them. I appreciate that the NDP has proposed giving $15 million for improving properties. However, that is merely a drop in the bucket. They are talking about $15 million. What is $15 million to free enterprise when a small company like mine has costs of $1 million and more in capital expenditures? If we multiply that by the thousands of landlords with the same thing, that $15 million the NDP is proposing -- take 15 property management companies like mine and it is wiped out already.
The Acting Chair: Your time has run out. We appreciate your presentation, Mr Megna. Thank you very much.
HAMILTON-WENTWORTH AND HALTON COALITION OF TENANTS ASSOCIATIONS
The Acting Chair: The last presenter of the day is the Hamilton-Wentworth and Halton Coalition of Tenants Associations. Could you please come forward? As an association, you have been allotted 40 minutes, which will give you 20 minutes for your presentation. For the sake of Hansard, as you speak would you introduce yourselves, please.
Mr Scarlett: My name is Emmett Scarlett. I am the chairman of the Mountain View Apartments Tenants Association in a building which I have lived in for 21 years, and I am also here today as the spokesperson for the Hamilton-Wentworth and Halton Coalition of Tenants Associations. We are a just-formed association in January. We felt the need, since Bill 4 came out, to act as a united front in such an important matter as legislation that is going to affect the condition and the availability and the affordability of housing for thousands of people for years to come.
Since we formed, we represent 1,625 apartments already, which is a very small number of the 6% provincial total Hamilton represents, but we are growing by leaps and bounds. We have, as I said, taken Halton into our jurisdiction as well at the request of people who live there.
I am glad to be one of the last speakers today. I would like to say to the committee that it is probably a good job that a number of people who addressed you today were not under oath, because we have seen a fair number of misrepresentations. I am glad we are here for 20 minutes, because we were afraid we were only going to get 10 and we were all geared for the 20 and thought that we would not have time to present it.
The speakers Italo Gallace and Bruno Megna, whom you just heard from, are in fact really associated with the same company, Megna Real Estate. I believe they are also related. Italo Gallace claims not to be involved with any building receiving over a 12% increase, yet they control a building at 11 Catalina Drive, a 28-unit building which has received a 55.8% increase in the rents over the last four years. It is at the point now where some of the tenants who live there -- and it is a building that has elderly pensioned people or single parents or people on fixed incomes -- are going to have to get out because they cannot stay any longer.
In 1987 they got a 10.38% increase on order, in 1988 they got a 12.13% increase on order, in 1989 they got a 16.73% increase on order, and in 1990 a 16.56%, totalling 55.8% over four years. One of the apartments suffered this hardship: Number 101 went from $289 in 1986 to $465.24 this year. Another apartment, 306, went from $295 in 1986 to $529.82 in 1990.
1720
Mr Sawchyn, who represents our landlords as a consultant, was asked by somebody if there are any people abusing the system. Mr Sawchyn recently represented the management of the building that I reside in, in an application for rent review and an equalization. The act clearly states that a maximum of $25 per unit can be charged for the consultant's fee. Yet on the submission for the rent review he had put in a charge of $5,000 for 110 units. Any child who can do mathematics knows that, count that, it comes out to $2,750, not $5,000. Yet the rent review board will tell you that they do not have the manpower to check all these figures, and unless there is a prudent tenants' association that will take the time to check on these things, you do not even discover that these things are --
The Acting Chair: Excuse me, sir. Can I interrupt you for a second?
Mr Scarlett: Yes.
The Acting Chair: I would like to caution you that although the members of this committee are granted immunity from libel or slander, witnesses are not. So I would caution you, please, sir, to choose your words carefully.
Mr Scarlett: I am only stating facts.
The Acting Chair: Thank you. It is only a caution.
Mr Scarlett: Also in our recent submission, there were bills that did not even apply to our building. This is just one example where the rent review system that is currently in effect is not adequate and it does not protect the tenant, and it probably does not represent the rent system fairly on either side.
We are in favour, as a coalition, of Bill 4 because it is a firm and decisive step forward. It is a stopgap giving time to clear up many of the back orders that are still outstanding. It may not be perfect, but certainly neither is the legislation that is in effect right now. Much input is required from all groups, not just landlords and tenants, but housing for the poor, all groups, is required to make good, solid, fair and lasting legislation.
One thing I must stress is that whatever legislation is brought in must include a hard look at the overinflated current prices of buildings due to flipping. Our building has changed hands four times in five years. Just recently a phase-in was allowed our current landlord, who just assumed the building a year ago December, allowing a hardship that the previous owner had suffered, and yet the previous owner sold to this owner for $1.4 million more than he had purchased the property for 18 months earlier. That does not seem like a financial hardship to me. Yet nothing of that comes back to the tenant.
All the repairs that are done are done currently under the system ad infinitum. They go on and on and on. There is no amortization and then a reduction of the increase allowed for that. There is currently before the Ontario courts a matter that has been left for a reserve decision, and we are hoping that it is in the favour of reflecting that these amounts that are amortized must then be reduced from the continuous rent, because tenants just go on and pay for ever and ever for the same things.
Many of the landlords who talked to you today have made a big deal over the retroactivity of the current legislation proposed, Bill 4, yet the 1986 act that came in had many retroactive effects for over a year and even sometimes longer. In many cases it was over a year and a half. Now they are not too happy, but because it benefited landlords back in 1986 you did not hear very much of an outcry and you did not hear any question -- I even heard a question today of the constitutionality of it. They did not question the constitutionality when it was in their favour.
I would like to close by saying that I am happy that this is a committee of all parties because I think all parties represent all phases of Ontario tenants, and we need a committee representing all parties to work hard and be dedicated to bring up some legislation that will benefit everybody, because fair, equal housing -- as fair, equal investment -- is a right that everyone deserves.
I would like Lynn Hadfield now to talk to you.
Ms Hadfield: My name is Lynn Hadfield, president of the tenants' association for 2520 Barton Street and 45 Barlake Avenue, Hamilton. Our association handles a two-building complex totalling 290 units. Our landlord resides in British Columbia and has a very difficult time accepting or complying with orders issued from the rent review services and the laws of this system, as I will point out to you later. He also refuses to acknowledge or pay orders for section 95s filed by tenants for rent rebates owing them. In all cases tenants were forced to recover their money through provincial court and the sheriff's office.
We are a prime example, after four years, of how the landlord was able to abuse the rent review system for his own means through extensions of time appeals, hearings and incomplete forms. After the landlord's appeals and frivolous extensions of time have been exhausted and orders set down by the ministry, he still refuses to comply or recognize said orders, leaving discouraged tenants having to hire lawyers at their own expense and go through district or provincial court using judges' valuable time for ministry orders to recover money owing tenants to begin with. Why not let the courts handle ministry orders, as the rent review system seems powerless when it comes to reinforcing its own orders?
Applications for rent increases are held over sometimes for a period of a year or longer. We are a perfect example of this. I could go into detail, but suffice to say the final result was after three extensions of time, four appeals, one pre-hearing and two hearings within a period of one year and three months, all due to the incompetence on the part of the landlord's representatives. A second order was issued in favour of the tenants on 24 May 1989. By the way, Sandra Kondo was property manager and agent for the landlord part of this time.
The chairman of the board at the time of some of these hearings was Dr Ray and she said herself this whole process was a farce. We feel the rent review system in Hamilton is biased against the tenants and I am prepared to prove this. The tenants' association is facing an appeal 6 March 1989 against the landlord. This is concerning a specific room that was to be given back to the tenants in an order dated 24 May 1989.
Our lawyer was instructed by Doug Hunt, present manager of the rent review systems, Hamilton, to obtain signatures for a rent reduction due to the loss of said playroom as the landlord converted this playroom into a rental unit, receiving $675 per month. The association was given one day to obtain 290 signatures, which was done on a petition. We felt we complied with Mr Hunt's wishes, with a great deal of work on the tenants' part, and submitted his request on time. The following Monday we were informed to our dismay that this was unacceptable to Mr Hunt as he wanted 290 separate applications signed by each tenant.
We requested an extension of time. May I point out this was the first one ever requested by the tenants. It was denied. Mr Hunt's request was not made clear to ourselves and our lawyer as to exactly what he wanted. We had no choice but to appeal this decision. Why, earlier, did I state "biased against the tenants"? Please recall I stated earlier the landlord received three extensions of time, four appeals, one pre-hearing and two hearings, when the tenants simply requested a couple of days to comply with something not made clear to us to begin with. This, to us, is an unfair system.
The tenants' association found it necessary to approach Bob Mackenzie's office to plead with him to look into our case on 17 February 1990. The landlord to this date still will not comply with an order dated 24 May 1989. Mr Mackenzie, on our behalf, has sent extensive research to three different ministers of Housing: Ms Ho_ek, Mr Sweeney and now Mr Cooke. To this day we are still waiting to resolve this case.
1730
On my request Mr Mackenzie's office arranged a meeting with London's appeals board in June 1990. The purpose of this meeting was to reassure the tenants that the order issued 24 May 1989, which is still outstanding, was a very important document and did have meaning due to the fact that the landlord refused to accept it as such and would not comply with this order. The result: frustrating and disappointing to the tenants, to say the least.
It was made very clear to us by the board that they were powerless and carried no weight when it came to reinforcing their own order. We as tenants felt an order is a very important document and should be treated as such, ignored by the landlord.
The rent review system is so backlogged with no reasonable time limit for applications that in the end the tenants are the ones suffering for this. The longer the application sits unresolved, the more money the tenants are expected to pay in backdated increases if it is ruled in the favour of the landlord. Hopefully, a rent freeze set down now will clear up the backlog in the system.
The tenants and the tenants' association for 2520 Barton Street and 45 Barlake Avenue are in full support of the NDP platform regulating rent control. We feel the 5.4% increase goes along with provincial inflation, keeping in check rental increases with our cost of living.
As it stands, the present rent review system does nothing to protect tenants from extraordinary rent increases, poor living conditions and lack of repairs. This same Residential Rent Regulation Act, 1986, allows amortization for landlords who abuse this system to cover periodic replacement of necessities. The present system allows for amortization for various years, but when its time is up, the rents are never rolled back.
The landlords are quick to slap large increases on the tenants year after year, but refuse to invest these increases to properly maintain their own property. What happens when a building is remortgaged and large equity is withdrawn through the corporation? Our point is, where is the reinvestment?
It is certainly not put back into the property.
Example: landlords applying for extraordinary mortgage interest increases. In the past six years our building repairs were very inadequate, often resulting in major problems costing far more than need be. We feel there was a blitz of spending on cosmetic repairs in the past few months prior to the landlord's application for rent increase. Being a fact of recession, we, the working people, low-income families, senior citizens and families on fixed incomes are all on limited cost of living increases. Our rents must align with COLA.
Twenty-six thousand more people were jobless in the month of January 1991 in Ontario. Welfare applications are up 50% more from one year ago.
Without a viable and working rent review system, landlords have been and will continue to line their pockets at the expense of their own tenants through unjust, illegal rent increases. They must be held responsible for their own actions, so we implore you to please revise the present rent review system. We support Bill 4 as a place to start.
The NDP is for the people. Please listen to the desperation of all tenants begging you to put a stop to these money-hungry landlords who are abusing an outdated system of rent review. Tenants are finding it very difficult to cope with rising costs and unjust rent increases. Thank you for giving me the opportunity to speak on behalf of the tenants.
Mr Scarlett: Now Sharon Laffreneir from the Hamilton Against Poverty Group.
Ms Laffreneir: Hello. My name is Sharon Laffreneir. I chair the Hamilton Against Poverty Committee. It is composed of people from our local social service agencies, tenants, low-income people and interested citizens. We are an action-oriented group that acts on issues that will be harmful to the poor.
We were first formed in August 1987 as part of a growing antipoverty movement across the province of Ontario. Among many other activities, we have undertaken to advocate for people living in poverty. We have spoken to committees like your own about the conditions of rental housing and the lack of affordability of rental housing. Many of our members, the poor, already spend 50% to 70% of their incomes on housing costs.
The lack of affordable housing is a major impediment to alleviating the cycle of poverty. The vacancy rate in Hamilton is 0.4%. Unemployment and poverty in Hamilton will be further aggravated by rent increases. Approximately 20,000 people must utilize food banks in Hamilton in a month. At the regional housing update public hearing, many people complained about the approximately 10,000 illegal duplexes that the government was unable to control. Their concerns were the conditions of these homes and their absentee landlords. Our concern is the people living in these homes. They do not choose to live this way. Lack of affordable homes is their enemy.
Many tenants are vulnerable and at the mercy of landlords. The laws are not working for the poor. These divisive strategies in turn have been reinforced by ideologies that promote selfishness and greed. Some organizations have had to re-evaluate their facilities to accommodate people who cannot afford shelter in the Hamilton region. Shelter is a necessity of life which is used to exploit and abuse the poor.
Many people are losing their homes as they cannot afford the high rents. Poor people have become prisoners of abuse that they have no control over. As an example, a single mother of three children has reported that while living in a home infested with mice and cockroaches she was distressed because of poor living conditions. She complained to the health department and the landlord. The landlord was able to use a loophole in the Landlord and Tenant Act to remove this tenant. Another single mother reported she paid 70% of her income for rent. The landlord has sold the property and she no longer has a home. She is presently seeking housing.
High rent increases should be unacceptable in our society. If a tenant is in need of repairs or renovation, the tenant may take the landlord to court if the tenant can afford the legal costs.
The government should protect the tenant. There are homeless people living in the Hamilton region. Homes should be as water, a God-given right.
Our recommendations are to maintain rent controls; we understand that in Toronto it has been suggested that capital reserve funds be set aside. We recommend a percentage of revenue also be available to protect people living in substandard housing; the government acknowledge affordable housing as a fundamental right; housing be classified as a necessity of life and can no longer be used to strip a person of personal dignity; tenants be included in meaningful and effective participation in decision-making of renovations of rented property; the main objective of rent controls should be affordable housing in our community, and therefore a ceiling should be put in place. Thank you.
Mr Scarlett: Do we have any time left?
The Acting Chair: I am sorry. I allowed you almost an extra minute.
Ms Poole: Thank you for your presentation to our committee today. You made the comment earlier in your presentation -- I believe it was Mr Scarlett -- that Bill 4 is not perfect, but that it is better than what we have now, if I am quoting you correctly. I agree with you that Bill 4 --
Mr Scarlett: I do not think I said that it was better than what we have now, but I said that it is good because it gives us that stopgap and breathing-space to clear up the backlog and to bring in new legislation that will address all the matters that are wrong with the last system.
Ms Poole: What I was going to address with you and to you is the fact that the purpose of this committee is to take a look at Bill 4 and find ways in which to improve it. We will never make it perfect, because I do not think there has ever been a piece of legislation that has been created that is perfect, but hopefully we can improve it and I see ways in which it should be improved both from a landlord's perspective and from a tenant protection perspective.
For instance, you mentioned the cost-no-longer-borne factor, which means that if a capital expenditure has been paid for through the amortization period, right now the way the system is in place the tenant continues to pay for that capital expenditure through rent increases, even though the capital expenditure has already been paid off by the landlord. So I would like to see a cost-no-longer- borne factor in Bill 4. Do you believe that that would improve this temporary legislation?
1740
Mr Scarlett: I am not sure that we can bring everything into Bill 4 right away. My understanding was that it was a temporary piece of legislation while everybody got together and tried to put together a much better bill than we have now. What you are saying is certainly a valid point and I am 100% in agreement with it, but I do not think that we can take the time now to include everything that should be in the act because the bull has to be grabbed by the horns to put some kind of a stop on what was happening until the new legislation comes in.
Ms Poole: Perhaps it would help if I told you that it will not delay this legislation by one day in order to make improvements and add other things to it. We have had tenant groups who have come before us who have talked about inequities they see in the system that they would like addressed and addressed fairly quickly: for instance, tenants living in substandard conditions; for instance, the fact that Bill 4, while it does put a freeze on the rents, which is very attractive to tenants, at the same time does not do anything to the landlords who are, in many people's opinion, if not abusing the system, certainly take excessive advantage of the current law.
It does not do anything to penalize that situation. What it does in a blanket way is to say that all landlords are abusing the system, therefore we have to stop them in their tracks, and I do not believe that is happening. I think there are good landlords and there are bad landlords, and what I would like to see is the bad ones put out of business and the good ones encouraged to communicate with their tenants and to do necessary repairs and to keep rent increases reasonable.
That is what we are grappling with, but you do not see that there is any room for improvement of Bill 4 even as a temporary measure?
Mr Scarlett: No, I agree 100% that there is certainly room for improvement and taking into account the fact that you have said that it will not delay the passage of the bill by any length of time, then any improvement that anyone surrounding these four tables can come up with that will make it better than it is already would certainly be welcomed by everybody around these four tables.
Ms Poole: To précis, you would have no objection, in fact you would welcome some of these changes, as long as it does not delay passage of the bill?
Mr Scarlett: As long as it does not delay it.
Mr J. Wilson: Thank you very much for your presentation. Going back to the last witness, I think the problem we have in this province is -- you have hit it -- that there is agreement that housing should be a fundamental right, that agreement has come, is now, but we have not in the past put the process in place to ensure that we can fulfil that right, so we are caught right now.
I think part of the problem we have with Bill 4 is that it does not really address that. I can understand where the government is coming from the point of saying it puts a hold on things, but what do you do when you have had rent controls for many, many years, you are seeing very, very low vacancy rates, you are hearing landlord after landlord coming before this committee saying that if this bill goes through with its retroactivity, which they find to be very punitive, they may get out of the business?
I just wonder, is there agreement among the three of you that the government really should be moving in and providing housing? Because if it is going to be a fundamental right, it will have to become a major social program and it will be very, very expensive to the people of Ontario. All the major social programs we have had in the last 15 years, even the insurance programs, have difficulty paying for themselves, and we see the federal government in terrible trouble with the deficits.
Is that agreement the bottom line, or do you see we can keep going with rent controls of some sort which do not seem to be working very well? I think we have to be honest with the public. We have to say to them, "Look, I think we'll have to go to a more socialist model of saying it is a fundamental right and people below a certain income or percentage of gross income have a fundamental right to that."
Mr Scarlett: Housing is a fundamental right, and it is also a fundamental obligation of the landlords who are out there and who are renting what Ms Laffreneir described as illegal duplexes, that these landlords, realizing that their premises are only going to attract the low-income people, should still not be allowed to get away with murder, knowing that they can rent almost in any condition to these people because they are in such desperate need of housing.
We need some kind of policing there. I am all in favour of tenants' associations being good policing associations to check on these landlords, and we need involvement by many more people than we have now. The landlord does have an obligation too, when he puts up a rented premise, that it be, you know -- why do we have a standards bylaw in the province?
We are at the mercy of the city building department too. Our building was just done over with the assistance of an $800,000 low-rise rehabilitation grant, and the city building inspector stood right in front of me and other tenants and said, "It's for me to decide whether that's a crack that needs repair or not." Every crack should be repaired, if it is a major crack. There should be solid standards out there that they all have to abide by, but I think tenants and the landlord and the government have an obligation to police housing.
Mr J. Wilson: Mr Chair, I just want to make a point also in response. I do understand from the second presenter -- I had a case in my own riding, in fact, I am a tenant and it is the building I live in, where some of the former tenants are owed money and there are no teeth. I do very much understand that from a personal point of view, in the law. They are required to go to court and it is a lengthy and expensive process. But I was wondering, in your case, did the order not provide that they could also withhold their rent?
Ms Hadfield: No, it did not. This started in 1988 and we have exhausted the rent review system completely. We are at a point where we say, "Just what do we do now?" We cannot turn to anybody for help because now we have to go and take it out of our own pocket, go to district court, pay the money to get our money back, and it is costly to each -- I have 290 units. That is a lot of tenants. A lot of them just do not have the money to go through court.
I mean this is an order. We cannot understand this. Why can it not be reinforced? What is the sense in issuing it to begin with? What is the sense of the whole rent review system? It is a waste of time from what we have been through. It has been a nightmare. It has not helped us at all. We have been fighting and fighting and fighting for three years; we are nowhere, and nobody will help us, nobody. It is, "Sorry, we can't do a thing." That is not good enough for us. We have won this case twice. We have had two separate orders. They want their money. The landlord wants rent increases just like that, but he is not willing to pay these people the money he owes them back to 1985. We are completely, thoroughly fed up with the rent review system. We have exhausted it. Give me an answer. What do we do now?
Ms Harrington: Thank you very much, Ms Hadfield, for letting us know very clearly how the rent review system is not working. I want to reassure all of you that the government is going to move as quickly as possible; in fact, next Monday the discussion paper is coming out and you will be getting a copy. I want everyone who is interested to go through it and let us know which options you would choose and give that information back to us.
We are hoping to move as quickly as possible with this, to get it into legislation, but we will not compromise the consultation process, which is going to be going on all spring and summer.
I just want to also reassure you that the item of costs no longer borne being included in rents is something that we want to look at and eliminate.
I am very glad we came here. I used to be a tenant in Hamilton some long years ago and it is really nice to be back here and see the town again. You are making clear to all of us that the problems of rent control and tenants are not just in Toronto. You would agree with that, would you?
Ms Hadfield: Yes.
1750
Mr Duignan: Thank you again. You have a good grasp and knowledge of what we are trying to do in relation to Bill 4 as a breathing space while we introduce apartment rent control legislation, and I may say, much more of an idea what we are trying to do than some members of the opposition.
You indicated that your building was sold four times in five years?
Mr Scarlett: Yes, sir.
Mr Duignan: Could you give us some idea of the increase in rents resulting from that?
Mr Scarlett: We have had several applications before the rent review. I do not have my file in front of me right now. I have lived in the building for 21 years and they have always been seeking a somewhat larger increase than what was allowed by the guideline, although many times they settled for the guideline. This phase-in that I referred to that was just handed down to this current landlord was taken in option to requests for rent review that they had put in because the property was sold before the rent review hearing even came to light. I even questioned why, after the property had been sold to this numbered Canadian company now, we could receive a letter in the mail telling us that the previous landlord had opted for a phase-in for the financial hardship when already the property had been sold. But that is the way it came to us.
When the rent review handed down the phase-in, it was addressed to the previous landlord, not the current landlord, and we were totally amazed that this kind of thing could happen. So our rent increases have spiralled. When I first moved in there 21 years ago, I paid $140 a month. I now pay over -- well, I do not pay -- but the legal required rent is over $600, but because of incomplete forms being filled out and concessions being made, we have not reached that limit yet.
We received an order on 8 January for this last application and just prior to 1 February the superintendent came around with the proposed increases for 1991. Then on 1 February we received an amended order to the order of 8 January, stating that due to a clerical mistake on the part of the rent review office, they had omitted financing charges for a second and third mortgage. So instead of the 12.6% we got on 8 January, we wound up now with 15.8%.
To add insult to injury, as I said, the superintendent brought these increases, stating they wanted 5.4% on 1 May 1991. Now that is fine, because that is the guideline that was set out, but we begin to hear the horror stories. The little old lady around the corner from us, who does not have the guts and gumption to get up and speak for herself, her increase is filled out for 6.9%. We called the rent review office staff and asked them if this was legal and if they had another application for increased rent. They told us no application was on file for greater than the 5.4%, but it still exists there.
They just got equalization in our building, and we understood that equalization was all apartments of the same size would pay equal rent. But what happened in this equalization, and we are going to appeal the order, is they took every one-bedroom apartment and now they are all the same price, and we have five different sizes of one-bedroom apartments. So the current system really is not working and the rent increases that we have had over the years are not really fair.
Mr Duignan: Just one quick question. Do you think it is fair that tenants should pay for the financing and purchasing of buildings?
Mr Scarlett: No, because if I go out and buy a car, I do not ask who rides in it to pay for it.
The Acting Chair: Sorry, the time has run out. Thank you for your presentation. That concludes the hearings for today in Hamilton. I would like to thank all the presenters today and, on behalf of all the members of this committee, I would like to say that it has been a pleasure to hear from the people of Hamilton and the surrounding area.
Please be advised that we will reconvene at 10 am tomorrow, room 151, in Queen's Park. We stand adjourned until 10 am tomorrow.
The committee adjourned at 1756.