RESIDENTIAL RENT REGULATION AMENDMENT ACT, 1990
MCQUESTEN LEGAL AND COMMUNITY SERVICES
ASSOCIATION FOR FURTHERING ONTARIO'S RENTAL DEVELOPMENT
ASSOCIATION OF CANADIAN REAL ESTATE SYNDICATORS
TOWER HILL EAST TENANTS' ASSOCIATION
CONTENTS
Thursday 17 January 1991
Residential Rent Regulation Amendment Act, 1990, Bill 4
United Tenants of Ontario
Tenant Advocacy Group
McQuesten Legal and Community Services
Afternoon sitting
Steeplejack and Masonry Restoration Contractors Association;
Operative Plasterers and Cement Masons International Association;
Local 172, Restoration Steeplejacks
Association for Furthering Ontario's Rental Development
Urban Development Institute
Landlord Self Help Centre
RAM Restoration
Association of Canadian Real Estate Syndicators
Tower Hill East Tenants' Association
Adjournment
STANDING COMMITTEE ON GENERAL GOVERNMENT
Chair: Mancini, Remo (Essex South L)
Vice-Chair: Brown. Michael A. (Algoma-Manitoulin L)
Abel, Donald (Wentworth North NDP)
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)
Murdoch, Bill (Grey PC)
O'Neill, Yvonne (Ottawa-Rideau L)
Scott, Ian G. (St George-St David L)
Turnbull, David (York Mills PC)
Substitution:
Poole, Dianne (Eglinton L) for Mr Scott
Tilson, David (Dufferin-Peel PC) for Mr B. Murdoch
Ward, Margery (Don Mills NDP) for Mr Bisson
Clerk: Deller, Deborah
Staff: Richmond, Jerry, Research Officer, Legislative Research Service
The committee met at 1005 in room 151.
RESIDENTIAL RENT REGULATION AMENDMENT ACT, 1990
Resuming consideration of Bill 4, An Act to amend the Residential Rent Regulation Act, 1990.
The Chair: I call the standing committee on general government to order. The committee is continuing with public hearings on Bill 4.
UNITED TENANTS OF ONTARIO
The Chair: The first presenters will be the United Tenants of Ontario. I would ask the presenters to take a seat at the front. The presenters have been allocated 40 minutes, 20 of which will be an oral presentation and then we will have 20 minutes for questions.
I would ask the presenters to identify themselves for the record, whom they represent and what positions they hold, if any, within that organization. I believe Pat Fletcher is the spokesperson.
Ms Fletcher: Good morning, Mr Chairman and members of the committee. My name is Pat Fletcher and I am on the council of United Tenants of Ontario. It is a 21-member provincial council. With me is Danda Massaquoi and he is also a council member.
United Tenants of Ontario is a province-wide umbrella organization which represents the interests of people living in non-ownership housing across Ontario. Our 21-member provincial council has representation from public housing, private rental, co-operative non-profit housing, student housing, rooming houses, homeless people and squatters.
UTOO is developing a diverse membership base of individuals and organizations of which decent and affordable housing is the primary objective. Our membership includes private rental tenant federations in Ontario: Windsor-Essex, Kitchener-Waterloo, Metropolitan Toronto and Ottawa-Carleton. The issues concerning private rental tenants are of significant importance to UTOO. The debate that Bill 4 has fuelled addresses concerns that UTOO discusses on a daily basis.
When UTOO was formed in June 1989 at a provincial housing conference in Hamilton, the 300 delegates voted unanimously on a motion that directed UTOO to implement a tenant inquiry into the cost of housing. The issue of the cost of housing was recognized as being the key issue for tenants across the province. For all private rental tenants in Ontario, government rent regulation policy directly relates to the cost and affordability of their housing. Numerous studies, including Judge Thomson's Transitions report on social assistance reform, have shown that high rents are a direct cause of hunger, poverty and homelessness in our province.
There is a serious concern among our members that the heated media attention to the debate on Bill 4 has further reinforced and distorted the opinion that housing is simply a commodity. Housing is a basic human right. When we lose sight of that premise and fixate solely on the economics of maintenance and repair issues and the cost of financing new mortgages, it becomes very clear that the current rent review system does not ensure that peoples' basic housing rights are met. This government made a commitment to the people of Ontario through a promise of rent control and a significant increase in the construction of new affordable housing to ensure that all of us have access to decent and affordable housing.
Mr Massaquoi: The past: When the existing rent review system was introduced in 1986, it was designed taking into account an aging housing stock and need for minimum maintenance standards. The legislation had one major flaw: The cost of all repairs to a building, be it maintenance, repair or luxury renovation, was borne by the tenants alone. The current rent review system is simply a cost pass-through system. There is something fundamentally wrong with a system that does not take into account the real revenue generated by a rental property. Long-time landlords have been collecting decent rent, with generous annual guideline increases for many years. The accumulated value of their investments is never considered in the current system.
Many landlords have also developed a very disturbing habit under the current system of not carrying out any preventive maintenance on their buildings, or any maintenance at all. They have discovered a loophole in the legislation which allows them to bunch together what should be routine maintenance into a huge lump of capital expenditures and in turn pass these costs on to their tenants. Often these pass-through costs result in unconscionable rent increases that lead to the economic eviction of tenants and the loss of affordable housing.
There are two components of the original legislation that we saw as critical in the proper administration of rent review: the provincial standards board and the rent registry. Neither of these cornerstones of the legislation has been adequately implemented. In fact, there are still hundreds of thousands of units in buildings with six or fewer apartments that have never been included in the rent registry. The tenants in these units, many of which are in smaller communities around the province, have been the innocent victims of a dismally managed system and have faced huge, illegal rent increases from unscrupulous landlords. The landlords who own unregistered units often raise rents illegally by not going through the rent review system. The delay in verifying the rents that have been registered has also resulted in a number of tenants being denied proper process in the establishment of their legal rents.
The standards board was initially created to develop and enforce minimum maintenance standards. We have seen over the years that any recommendations of the board have been shelved and the ability of the board to effectively enforce minimum maintenance standards has been feeble at best. Tenant access to the standards board has been limited by lack of information and the incredible long time it takes for a decision to be reached.
This legislation is not working. It is not ensuring the minimum maintenance of the private rental stock. It is not protecting tenants from economic eviction. It is not ensuring accountability by landlords in the reasonable management of their buildings. Rent review has virtually destroyed any positive and co-operative relationships between landlords and tenants across Ontario.
Ms Fletcher: The present: Bill 4 is the first step in recognizing that the current situation in Ontario for renters is desperate. The cost pass-through system has failed to keep rents affordable and at the same time has failed to ensure that the housing stock has been well maintained. The tripling of rent review applications from 12,000 to 36,000 affected units in the months since the NDP was elected reflects the blatant abuses of the system. Tenants currently will still suffer from high rent increases under the old rules with a first effective date of increase on the building which is before 1 October 1990. Bill 4 provides the landlord with above-the-guideline increases for any escalation in municipal taxes, water, cable, insurance and interest rates on refinancing of existing mortgages.
The obligation to maintain a building is not dependent on the rent review legislation. It is an obligation that was specified under the Landlord and Tenant Act that indeed dates back to English common law. Landlords did not wake up on 28 November and realize that they had an obligation to maintain their buildings. They were aware of that obligation when they bought the building.
This legislation will not address all the problems created by the current rent review system. There are tenants out there who still do not know what rent on their apartment should have been two years ago, let alone be able to do reasonable financial planning with regard to the rent they will be paying this year and next.
United Tenants of Ontario are pleased to see that the interim legislation does address the need to protect land lease and mobile home tenants.
Mr Massaquoi: The future: United Tenants of Ontario is committed to actively participating in the development and implementation of a real rent control system.
It is obvious to all of us involved in this issue that the question of the maintenance and repair of our aging housing stock and how this maintenance and repair work will be paid for is of primary concern. We strongly support the development of a capital reserve fund in which a portion of every tenant's monthly rent payment is earmarked for maintenance and repairs. We also look to a time, in the very near future, when a democratic system of consultation between tenants' associations, their landlords and a fully empowered provincial standards board on issues concerning tenants' homes is legislated into an equitable rent control system.
United Tenants of Ontario urge all members of this standing committee not to delay the passing of Bill 4. We must get on with the design and implementation of a new, permanent system of rent control. The fact that there are 150 people on the waiting list to be heard by this committee further substantiates the urgency of the situation.
The Chair: You have a few more moments if you wish to make some further comments before I turn the questioning over to the committee.
Ms Fletcher: I think at this point, with the interim legislation, we could go through certain things that we feel were problems with it, but I do not think it is necessary at this time. We really feel this is the interim stage. It is not permanent legislation and the urgency is to get on to the permanent. I have nothing else to say.
The Chair: Okay, then I will increase the time for the committee members by a moment or two: the PCs first this morning, the NDP and then Liberals.
Mr Tilson: You have made some excellent comments, some of which I agree with and some of which I disagree with. I would like to ask you a couple of questions on some of the things you have raised, dealing first of all with your observation, and this has been raised by other tenants' groups, that is, the suggestion of a capital reserve fund.
This is a question to either of you. Presumably you are thinking along the lines of condominiums where they have just that type of fund, where in a new condominium when the condominium is created, people purchasing various units put money into a fund at the outset and that fund is spent in due course on whatever renovations, capital expenditures or whatever is deemed fit by the members of the units and, as that fund is depleted, the unit owners then add to it. Is that the type of capital reserve fund that you are suggesting?
Ms Fletcher: It is. I was looking more to the model of the co-operatives rather than the condominiums. I know a little bit more about that. I could explain that model. Basically, the members of the co-operative have input in it throughout the years of the co-op and it is a long-range plan. If it is the renovation of an old building so it is an older co-operative, a rehab or a brand-new building, there has to be intensive long-range planning to pay for capital expenditures and those rent increases would have to be negotiated in a co-operative with the whole process and it would be spread over many years, rather than the way the rent review system is, which is an instant system where you have a huge rent increase.
Mr Tilson: Just so I understand you, each year moneys would be put into this reserve fund by the tenants.
Ms Fletcher: Out of their monthly rent.
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Mr Tilson: Would that be added on to the individual increases they are given each year? How do you determine what that contribution is to the fund?
Ms Fletcher: I think this again has to be a long-range plan with the planners. It is not something where you come up with an instant figure. It would have to be budgeted over many years.
Mr Tilson: But nothing standard for each individual apartment, for example?
Ms Fletcher: No, there would be one rent increase for everyone and that would be set out so that tenants would know a year in advance what it would be.
Mr Tilson: I am trying to determine how this fund is created, because obviously we have all kinds of different rental units. We have basement apartments, we have two-storey buildings, we have 50-storey buildings. I am just trying to determine whether you have thought out that process as to how the fund is initiated.
Ms Fletcher: I am not an expert on how that would be done, but I think there are a lot of people out there with whom you could consult who would give you that information. But, as I say, co-operatives have done it for a long period of time and have done it very successfully, so I would suggest looking at those models.
Mr Tilson: The second question I have is on your observation, and I happen to agree with you, about the social right of people to have a decent home to live in and a decent, good, clean, safe home to live in; in other words, a home that is continually maintained. Obviously there are landlords across this province who have taken advantage of the situation, as you have raised. There is no question. There are a lot of good landlords, we are hearing, who have tried hard to maintain their buildings, and there are some bad landlords.
I suppose that is so in all walks of life, whatever we are talking about. There are good people and there are bad people and what we are trying to do is to stop the bad people from doing these things that they have been doing. I guess I am asking philosophically what role the government should play in all of this. Should government own all housing?
Mr Massaquoi: I do not think we are asking the government to own all housing units in the province. However, the government has a major role to play. There are people who cannot afford to buy their own homes, including myself, but I would like to live in a decent home that I can afford. However, if I am spending 25% to 35% of my income on my rent alone, what is left for me to live on? That is where we are asking the government to intervene and to intervene positively.
Mr Tilson: I appreciate that and I understand what you are saying. That makes sense. Therefore, how should a government or how should you or how should I encourage landlords to build more apartment buildings, to build more units, to maintain those units? We are talking about slums being created, we are talking about where work is not done and it should be done. How do we encourage landlords to get into capital expenditures, to maintain the buildings the way we should and to create more housing, which hopefully would reduce those rents? How do we do that?
Ms Fletcher: I do not think any system of rent review or rent control has ever encouraged them to do that. We heard years and years ago, "Give us the cost pass-through and there will be cranes in the sky." We realize that did not happen. I think there has to be a different process of housing being built. We look at the non-profits that do it very successfully. There have to be other models to get housing built.
I think we do need a new housing program. There is no doubt about that, a Homes Next. But that is only one measure. I think what we have to do is find some way of building housing other than the luxury condominiums which they have chosen to build because there was a much higher gain in the market. Again, it is using housing as a commodity, not as a right.
Mr Massaquoi: To support what Pat has just said, there is also a program of projects going around, a housing intensification program that many tenants across Metro and across the province are talking about. Those areas have to be explored to see what can be done by government, by developers and by tenants themselves.
Mr Tilson: I guess I get back to the question, which is that I am still looking for your comment as to how we encourage landlords. If we create restrictions and bureaucracy, which we would be doing, how do we encourage landlords to get into the business of building apartments? How do we encourage them to do that? Why would they do that if it is not going to be economically profitable for them to do that?
Ms Fletcher: We have been joined by Ted Starr, whom I should introduce. Ted is also a council member and I think he wants to make a comment as well.
Mr Starr: I apologize for being late. The weather was worse than I thought and, as we were coming down, there was a traffic accident so we had to stop and help. Everything just piled up.
I do not know whether I can answer your question directly, but it occurred to me last night, and what I am really worried about is, that the way the rent review system seems to be working now it is almost as though it is being supposedly run on, shall we say, a profit-capitalist model, yet at the same time we are guaranteeing them the recovery of the expenses. It just occurred to me that I do not know how we encourage building more buildings right now, but I think we have to really watch that we do not get into effectively a residential savings and loans fiasco where the costs for the landlords are guaranteed and the tenants say, "Well, the government will come in and protect you," but it does not.
I am from Mr Drainville's riding and I had an experience where, about a month ago, we formed a new tenants' association in a building and we went down to the Peterborough rent review office. In Victoria-Haliburton there is a legal aid office, but there is no clinic. I used to practise law and at that time there were very few people who got involved in welfare or landlord and tenant matters. When we got down to the rent review office, because we went down as a tenants' association, they did not seem to know what to do with us. We quite literally sat there for half an hour.
I have had experience in the Ministry of Labour where the enforcers become identified with the enforcees. What I am really concerned with is the present rent review system. When you do not have things like legal aid clinics to make it work, I am really concerned that what happens is the rent review officers and so on identify solely with the landlords. In this particular case, notices had not been sent, improper notices had been sent and the officer just said: "Oh, we don't have to worry about that. It will all be all right."
Mr Drainville: I would like to make a comment about the broader issue that was raised by those giving the deputations and carried on by Mr Tilson, and that is the issue of rights and shelter being a right. I want to raise this because it has been brought forward quite often, particularly by tenants' groups, about this right. The reality is that there is no right, and that is the problem, that there is no right. If you look at the Charter of Rights and Freedoms, it is very clear there is no right to shelter, there is no right to a job, there is no right to food in this country. There are lots of other rights, but the reality is that at this point in time, even with the definitions that have been given presently under the charter in cases that have been held across Canada, there has been no definition that indicated there is a right to those basic essentials. That is a problem and that is why we have the kinds of questions and confrontations that we have across Canada on this issue of housing.
Because it is not a right and because we have to depend upon market value and the goodwill of people to work for the betterment, the common good of the whole of our society, we end up in this situation. Up to this point in time, people who have been self-interested in this issue have not been willing to offer to people proper accommodation, and many have come before us to indicate how they have been in situations of housing that are totally unacceptable.
I just want to conclude that comment by saying we need to make these things a right. They need to be enshrined in our Constitution. More to that point, it is my hope that in terms of our deliberations as a committee and in terms of the government, when the government is dealing with this issue, we will begin the long road towards seeing shelter as an essential right for all people.
Ms Harrington: Thank you for your brief. I appreciate that it is only two pages. That is great.
I have a question. At the bottom of page 3 you said there should be a capital reserve fund. Mr Tilson picked up on this as well. In your brief it says this should be earmarked for maintenance and repairs. I would like you to expound on that, because from my point of view, I believe maintenance should be part of the rent. It should not be a special reserve fund. Maintenance should be ongoing and it should be part of your monthly rent. Would you agree with that?
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Ms Fletcher: Yes. Definitely, I do agree with that. I think what we were getting at on this point was the fact that if it was an older building and there had been a long time period that it had not been well-maintained, it could end up being a much larger expenditure than the daily maintenance.
So it would depend on the state of the building exactly what that assessment would be, but we definitely do believe that ongoing maintenance has always been the responsibility of the landlord to do out of the monthly rent, that there has always been enough money involved in that monthly rent to properly budget and plan to do regular maintenance.
Ms Harrington: So this proposal for a capital reserve fund, however that could be organized -- I am not sure about how it would be set up -- you are saying it would then be for major repairs.
Ms Fletcher: Yes. That would be the differentiation.
Ms Harrington: That is clear. In the first two pages of your brief, you really have a very condemning expounding of what the previous legislation has done and you have put it very clearly. Also, what we have heard over the last two days, that the current system has, you said, allowed or even fostered the not carrying out of preventive maintenance on the building because of a loophole, so this 1% that we had talked about before is causing people to not do their maintenance and then put everything together and do it as a package and pass that package through as a capital expenditure. You have said that very clearly. You have also said that the standards board and the rent registry are not functioning, and I think most people would agree with that. It is not working the way it was envisaged.
At the bottom of page 2 you have said: "It is not ensuring accountability by landlords in the responsible management of their buildings. Rent review has virtually destroyed any positive and co-operative relationships between landlords and tenants across Ontario." That is probably the very worst aspect of this legislation, if that is true, and from what you are saying you have given evidence that that is what has been happening. From our point of view, we have to get landlords and tenants together, because that is the only way legislation can work.
Have you any positive suggestions as to how we can overcome this very horrific situation? Landlords are taking advantage of the system and tenants are being -- and it is getting worse and worse; they are diverging from each other instead of coming together. Have you any suggestions that we could use?
Ms Fletcher: Right off the top, I would have to say that for ongoing dialogue between tenants and their landlord, we have found that the best model for that is in the tenant association. Rather than this system that has been created whereby it was convenient for the rent review administrators to have a body to deal with, therefore create a tenant association, it is not the right way to form good relationships between the tenant association and the landlord. If the tenants could have input in saying, "We don't want new washers and dryers. They work perfectly fine. We need something like the roof repaired" or whatever it could be, and I am using that as an example, not necessarily the best of examples, but I think what we are saying is that it is the tenants' property. It is their home; it is not to them a huge investment, it is not equity to them. They gain nothing out of it as far as long-range equity. What they have is, their home is their castle, and that needs to be recognized by the landlord as something other than something to make money out of.
I think if we could get back to the stage where there is that open dialogue between the two and looking at this as a long-range plan, "How do we develop this?" I know with the tenant associations we have all worked with, the best tenant association is the one that has the social club where they meet for teas or whatever. It means that the landlord allows them to have a room set up where they can have their social events, that there is an open dialogue between the two instead of having this open, horrendous debate over this cost pass-through system. It just does not work.
Ms Harrington: Are you saying that tenants' associations foster dialogue with the landlords?
Ms Fletcher: Yes.
Ms Poole: Thank you for your presentation today. This legislation has found me in a very awkward position personally. I have always taken a very balanced approach to life and I have always felt that whatever we did, it should be fair. That is why I sometimes had battles with my own government over the last number of years with regard to tenants' rights. I said that the system, while it works well in many cases, is not perfect and we should work to improve it. I now find myself in a position where I think the legislation has gone to the other extreme. Yes, it does on the surface at least provide protection for tenants in an interim period, but I think in the long term it will have a definite penalty that tenants will pay, and that is the deterioration of their buildings.
You have mentioned the fact that routine maintenance has not been done in a number of cases and that the landlord will bunch all the capital expenditures together, many of which have been caused by the lack of routine maintenance, go to rent review and get a large increase. I agree. There have been a number of cases where this is definitely a problem and we should deal with it. But I am going to make a proposal to you and I want you to comment on why this proposal as interim legislation could not work.
First, there is a provision right now in rent review of deliberate, ongoing neglect being a defence tenants can use, but one of the problems with it is that tenants cannot use it if the building has changed ownership. My first proposal is that deliberate, ongoing neglect can be used as a defence by tenants even if the building has changed ownership, because obviously the landlord would have gotten a better deal on that building because it was not in a good state of repair.
My second proposal -- and this is a package deal; I cannot say I like one but none of the others; or you can say you do not like it, but I am offering it as a package -- is that in order for landlords to even receive the 4.6% or 5.4% statutory guideline amount, even for that, they could not get it unless they produce a municipal certificate from the building inspections department stating that the building is in a good state of day-to-day repair. We also might have to relook at the standards that are currently in existence and see if they are stringent enough.
The third part is that there would be a cap on the total amount of rent increases that a landlord would be allowed to seek under any circumstances. Again, these are all proposals for interim legislation, some of which might be incorporated in the long term.
The fourth is that only necessary repairs be allowed, and that this together, as interim legislation, could provide a balance where we still get some money put into our buildings and they do not continue the pattern of deterioration but, at the same time, provide that interim protection for tenants until we can look at a long-term system.
Would you give me your comments on that package?
Ms Fletcher: We can split some of this up. Hopefully, we can each add to this if there is enough time.
Right off the top, I would like to say that I think some of these concerns should be looked at for the long-term legislation. I would hate to think that anything at this stage would stall the whole procedure. It is desperate for tenants out there. We are talking about tenants being economically evicted if we stall the process any longer, and I am talking about the tenants who are caught in not knowing what next year's rent is, not knowing "two years from now" from "two years previously," according to the previous legislation. It is a desperate situation we cannot stall.
I will comment on the one on necessary repairs and I will leave something for the other two here. The previous government tried to do obviously what it felt was necessary to look at the regulations of the rent review legislation to decide that the unnecessary and luxury renovations were a problem. Obviously it recognized that was something that was a flaw, yet the regulations certainly did not resolve that. I think we would have to be very, very careful about how that would be determined, because it is very hard to differentiate between what is unnecessary and what is necessary. Whether it can be done or not, it could not be done by the previous government. That is not to say that this government could not differentiate between the two.
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Ms Poole: Just before the others comment, if they wish to, I would like to point out that the reason we could not give a definitive definition of "necessary repairs" and include it in the previous legislation was because that would need an entirely new piece of legislation, an amendment to the act. The route the government chose was to go by way of regulation, because it could be brought in much more quickly. We would have the scope on this committee to provide quite definitive amendments for necessary repairs, which we could not have done under regulation.
So the fact that there was an attempt to correct the problem last year which you feel did not go far enough could be corrected today -- not today, but in this process -- without stalling anything. When we make our clause-by-clause analysis at the end of these hearings, we could make all these amendments at that time without delaying Bill 4 for one extra day, if we felt this was a fair way to go about it.
Ms Fletcher: My only comment back to you on that is that the rent control issue is only one of many concerns that tenants have. There need to be many amendments to other pieces of legislation, the Landlord and Tenant Act and the Rental Housing Protection Act, whatever they may be, in that for the long term, yes, we need to look at it very much in depth. We would be very willing to make as many comments as we could, but at this point we would like to move ahead.
The Chair: Time has expired for this. Mrs O'Neill.
Mrs Y. O'Neill: I want to speak on something other than the deputation, so I would like to do it between deputations.
The Chair: Certainly. We want to thank the United Tenants of Ontario for coming before the standing committee on general government and making a presentation. It was well received.
Before we call the Tenant Advocacy Group, Mrs O'Neill would like the floor.
Mrs Y. O'Neill: Mr Chairman, I have two serious concerns this morning and I think they affect the whole committee. We have the news clippings from yesterday. I feel the report in the Globe and Mail is inaccurate -- and I am very sorry because I understand and I do feel it is a very responsible newspaper most of the time. The bill and what it means is not quoted correctly here. I do not know whether the reporter is present this morning, but the figure that was presented, that 83% of the 1.2 million are over the guidelines, is quoted as a fact when indeed this committee stated that this was the exact reverse and the correction was made.
The other is that the landlords cannot get money back from renovations done between then, which is 1 October, and 28 November, which as we know has absolutely no relevance to the truth. It disturbs me and I hope that this will be rectified because this paper is certainly one of the channels we depend upon to get our message out.
That being said, we got a report this morning from the Ministry of Housing and I appreciate the speed with which this is returned to you, Mr Chairman. I am very gravely disturbed by this response.
The Chair: Can you identify the document?
Mrs Y. O'Neill: The document we all received from Mr Glass to yourself.
The Chair: The one dated 16 January 1991, "Standing Committee on Residential Rent Regulation Amendment Act."
Mrs Y. O'Neill: That is correct. I appreciate the honesty and I appreciate the inclusion of the letters that have been referred to. But it states on page 2 that landlords are instructed that the law has not yet passed and that the applicant has the choice of filing an application with us or holding the application pending passage of Bill 4.
In the letter to the tenants, it states that the most current applications will not be processed. I have only been here three years; many have been here longer, certainly yourself, Mr Chairman. I have worked on several bills, however, and Bill 147 is one that had all very sweeping application. It was the Independent Health Facilities Act. That bill had a major amendment indeed presented by the NDP members of the committee. It then affected six times as many people in this province as it was originally intended to do. That amendment came as we were going through clause-by-clause. I feel that this is an absolute abuse of democracy to have legislation which is only at second-reading stage not even examined by clause-by-clause. No possibility for amendment is being presumed or even considered at this point. I think this is an incorrect direction to public servants in this province. It is a very bad message to people in this province. There are 1,096 applications pending. I do not know how many employees are in the rent review legislation branch. What is the direction going to be to these employees when these applications are completed? This bill may not yet be back in the House.
So I would like you, Mr Chairman, and I am requesting it formally, to have a letter go to the minister -- he is the only person who can answer this question, because the civil servants have done their job and they are telling me exactly what they have been instructed -- to explain this letter, which states, "We are not going to process applications," to explain his reasoning and thinking on presuming that a bill is passed that has not been passed. I feel this is very serious.
Ms Poole: I would like to support the comments by Mrs O'Neill. I would ask for one further request of Mr Glass when he appears, if he could bring a copy of any communications to either landlords or tenants, whether it took place in a separate letter or on the bottom of any forms they have sent out, if he could bring any and all letters with him so that the committee could take a look at what exactly is going out from rent review.
The Chair: Ministry staff and committee staff are taking notes of the requests of the members, and the requests of the members will be duly forwarded.
Mr Turnbull: I would like to support what Mrs O'Neill and Ms Poole have just said. This is clearly an abuse of the government process and we should ensure that it is stopped immediately.
Mr Drainville: I would like to find out from Mrs O'Neill and perhaps from you, Mr Chair, just a little further. The request is therefore, Mrs O'Neill, for the minister to come before the committee again?
Mrs Y. O'Neill: He said he may do that. I am asking for him to respond to my concern in writing.
Mr Drainville: So it does not matter whether he appears in person, as long as the communication is sent.
Mrs Y. O'Neill: If he would rather come, certainly it would be very helpful.
Mr Drainville: I am just trying to clarify that.
Mrs Y. O'Neill: I understand ministers' schedule, however.
Mr Drainville: The second thing is in terms of the actual document here. Mr Glass is going to be coming before us, is he, at some point?
The Chair: I do not believe that he was scheduled, but I am sure that upon a request from the committee and with instructions from the committee that I make time for him to appear that can be accommodated.
Mrs Y. O'Neill: Mr Glass's report is excellent. I have no further questions of Mr Glass.
Mr Drainville: I do have more questions. I agree there are questions that are raised, questions that need to be gone into, but I would not say it is only a matter of the minister responding. We could get a fuller report by finding out from Mr Glass. To have just this report as it is does not necessarily give us as full a view as we might have.
The Chair: As long as there is consensus. If I feel there is some consensus to call Mr Glass, we certainly will, and if there is need to call other people or direct correspondence to the minister, if there is consensus for that we can do that also.
Mr Tilson: I certainly support Mr Drainville in his request and I hope he in turn would support me in a request for other members to attend this committee. That was moved on and rejected by the committee, but I think the more information we have, the better.
With respect to Mrs O'Neill's comments. I certainly support her, as does my colleague Mr Turnbull. This is not the only document that has come out with this slant. There is a document that was just drawn to my attention, published by the Ministry of Housing. I do not know when it actually came out. It was just recently drawn to my attention It is called What is Happening with Rent Review? One of the comments just echoes what we have seen this morning. It is to assist tenants, I think, and hopefully landlords, although there is very little advice to landlords. It is mainly designed to assist the tenant. I do not know whether there is a similar document to assist the landlord. It states, "What if my rent is going up right now by more than those amounts?" and they refer to the 4.6% and the 5.4%. The answer is: "Just keep paying your rent. We'll sort it out when the changes become law. You may well end up having rent money refunded to you by your landlord."
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As Mrs O'Neill has stated, that is just outrageous, to even assume that the law is going to be passed.
The Chair: Is this the document you are referring to?
Mr Tilson: Yes.
The Chair: Can I ask members, when they refer to documents, that they give a date, if there is a date, and title? I ask that for the viewers' sake, because we do have people watching, there are Hansard records being taken, and we have organizations following our proceedings.
Mr Tilson: I am quite prepared to have the clerk copy this for everyone.
The Chair: It would be helpful if you could just read the title of the document.
Mr Tilson: I tried to do that, but there is no date on it or I would have referred to it.
My point is simply to echo Mrs O'Neill, that to assume that this is going to become law is simply outrageous. Hopefully, that is why we are having these hearings. Should the whole bill be withdrawn? Should there be amendments to the bill? Should there be no amendments to the bill? That is why we are having these hearings, to listen to the reaction of members of the public. To simply state that when the changes become law you may end up getting moneys paid back to you by the landlord -- I think the Ministry of Housing is not only going to have to clarify what has been stated by Mr Glass but by these documents that presumably have been distributed to members of the public.
Ms Harrington: As we do have staff from the ministry here, I would like to invite them to answer the questions that have come up. Maybe we can at this point clarify it, a little at least.
The Chair: I think that is a good suggestion. As soon as the committee is finished its general discussion, we will do that immediately.
Ms Poole: On a point of order, Mr Chairman: I am very concerned that our committee continually in the last few days of hearings has kept witnesses waiting while we had procedural matters brought up. I have no problem with bringing up procedural matters, as Mrs O'Neill did, but I would suggest that if we are going to debate these matters, perhaps we wait until the last presenter has left and discuss it then. I do not think it is fair to the people who have to get back to their real work, their real jobs. It is putting them in an awkward position.
The Chair: I would agree with you under normal circumstances. Committee members may on occasion have felt they have been cut off by the Chair when they wanted to bring something up, because I have some similar feelings you have, but I have to say that I believe the information brought forth by the member this morning was, as far as I could determine, quite serious, and I did not think I could just allow it to be put forward without at least a few minutes of conversation and input by the members. I think we have obtained some good advice from the members based on those few minutes of discussion. I am very near the point of terminating discussion. There has been a request made by a member that I have already acceded to, that we maybe spend a moment or two questioning staff who are already here. I have already agreed to that. That was going to be the extent of it, as far as I was concerned. We will do that immediately.
Mrs Y. O'Neill: You have made the decision to invite staff to respond. I am saying this with all the heart and head I have: I do not think it is fair to ask staff the questions, because I worked in a ministry, as did you, and you know that directions come from the minister.
What I find so very offensive here is that everything we are doing, and we are spending long days, is being presumed that it will have absolutely no effect and there will be no amendments and that not one thing -- no matter how many people come, emotionally and with facts and data -- nothing is going to change. That is what is disturbing me. Maybe ministry officials can help us a little bit.
The Chair: Order, please. I thought there was consensus early on to question staff for a moment or two. Am I wrong? Is there no consensus for that? Do we want to proceed with our hearings?
Mrs Y. O'Neill: (inaudible) but please do not let that affect anything.
Mr Drainville: Very briefly, I object to the last comment. Let me say that on our side we are very seriously looking at the deputations that are made, listening to all sides of the arguments. We have questions ourselves about different parts of the legislation. I want to say that my original comments were in a sense reinforcing concern to Mrs O'Neill. I am sorry that she does not perceive support sometimes for some of her suggestions, but it is there nevertheless. In terms of my request to have further clarification from a member of the ministry on this issue, I have questions about what has been raised and I would like to speak to the person who sent us the document.
The Chair: The Chair is going to call ministry staff forward for three minutes. Members can question for three minutes and then we will immediately proceed back to hearing the delegations that are here. A request has also been made -- I want staff to take note of this, please -- that the executive director of the rent review program, Robert K. Glass, be requested to make himself available to this committee for further questioning. The Chair will let staff know when time has been allocated for that. Questions?
Mr Tilson: Both documents that have been referred to, one with the memo that has been given to us from Mr Glass, I would like that one as well as specifically this document which appears to be published by the Ministry of Housing, called What is Happening with Rent Review? It lists a number of questions. It seems to be designed to assist the tenant as opposed to the landlord. Is that correct?
Ms Parrish: I am afraid you have the advantage over me, because I do not have the document in front of me. I would have to go back to our office and obtain all the documents to find out whether you have a document that is for tenants and there is another one for landlords. This is the kind of answer I am going to give you, which makes everyone dislike civil servants. I am from the policy branch and this is an operational issue. I can assure you that I will undertake to get all the documents I can, and I am sure that Mr Glass would be pleased to respond to some of these issues. I think the first thing we should do is go back and see where all the documents are and make sure you have them.
I would just say, though, from a policy consideration, that there are a number of issues around what to do with applications that may be in the system and what is the best way in terms of both landlords and tenants. There are, it seems to me, just from a theoretical viewpoint, a number of approaches. One approach is that you take every application and put it under the existing law. Therefore, you issue orders that say to tenants. "This is the increase you pay," and you say to landlords. "This is the increase you'll get," and then if the legislation is passed in this form or another form, you send them another form saying: "Remember all that stuff we told you two months ago? It's all changed. Now it's something else." Another approach that could be taken was that you would say, "We're going to enforce Bill 4 the way it's written, so we'll issue all notices saying, `This is it.'" The third approach that could be taken, theoretically, is to say, "We'll do nothing pending what's going to happen."
I guess that is a very difficult choice, because none of those answers is really ideal. The first option could cause a lot of confusion and heartache for landlords and tenants who are unsophisticated, because then they will get very confused communication --
The Chair: We have one minute left.
Ms Parrish: -- first of all do this, then do something else. If you told landlords and tenants to conduct themselves as if Bill 4 were passed, that would also be wrong. I am not saying this is the right option, it may just be Hobson's choice, but the only option left is to say, "We'll wait."
Mr Tilson: Excuse me. Before you use up all the time --
Ms Parrish: I am sorry. I did not intend to do that.
Mr Tilson: -- I simply want to know, and you may not know the answer yourself but you can get back to us, who directed that document to be prepared, who it has been distributed to and when it was distributed, because it says quite clearly, "when this becomes law," which makes the whole purpose of this hearing useless. That is all I want to know from you.
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Ms Parrish: In this document here?
Mr Tilson: Yes.
Ms Parrish: I am sorry, the other material talked about how it was not law. All right.
The Chair: The time has expired for this particular section of our discussion this morning.
I have asked the clerk to review the comments made by Mrs O'Neill this morning. We will see whether there is any precedent for the concerns she has raised. I have received preliminary advice that a previous Speaker has ruled on a similar matter, about whether it was appropriate for such information to be provided in the manner in which it was before a piece of legislation has been passed. I have asked staff to obtain that precedent ruling for me. I will review it and will get back to the committee at the earliest possible opportunity. That is all I can do at present.
TENANT ADVOCACY GROUP
The Chair: The next delegation is the Tenant Advocacy Group. Thank you for waiting. We have allocated 40 minutes for your organization, 20 of which can be used for your presentation and a further 20 minutes to be used by the committee members in discussion with you. I ask you to please introduce yourself and your delegation and the offices you hold.
Ms Mahoney: My name is Elinor Mahoney. I am a community legal worker with Parkdale Community Legal Services. I am here today as one of the co-presenters of the brief of the Tenant Advocacy Group.
Ms Wandal: My name is Deborah Wandal. I am a community legal worker at Scarborough Community Legal Services. I will also be presenting a portion of this brief.
Ms Mahoney: I will start off with a brief introduction. We may run slightly over the 20 minutes, but as we are going through the brief fairly analytically, I would like some indulgence from the Chair if we go over to about 25 minutes.
The Chair: I usually show tolerance of about a minute.
Ms Mahoney: Then show indulgence for five and we will all be happy.
The Chair: I need consensus from the committee to give up some of their question and answer time, to go over five minutes. Do we have consensus to do that? No problem? You will have 25 minutes for your presentation.
Ms Mahoney: If we get through sooner, all the better.
We are here today representing the Tenant Advocacy Group, which is a coalition of case workers in landlord and tenant law. TAG is comprised of lawyers and community legal workers from 14 Metro area community clinics, with additional representation from the Committee for Equal Rights in Accommodation, the Federation of Metro Tenants' Associations and the private bar.
As advocates of tenants and tenant associations, we are all too familiar with the many inequities and weaknesses of the current rent review system. For the past four years, TAG members and our clients have experienced the administrative nightmare created by the Residential Rent Regulation Act: cases backlogged for years, a Byzantine and Kafka-esque bureaucracy, and orders rife with errors and omissions, necessitating appeals. Quite frankly, Bill 4's initial attraction to those of us beleaguered by the rent review system is that it will cut down on future rent review applications and give us all a break.
More important, though, Bill 4 must be enacted because it will help to correct some of the problems and inequities created by the previous government's legislation, problems we anticipated and warned the previous government about in our brief on Bill 51. Unfortunately, we were ignored and these problems were incorporated into the rent review legislation you seek to correct today.
Here are some case studies for your consideration:
On financial loss: Rent review based on the cost pass-through system is supposed to prevent unjustified rent increases above the guideline, yet it rewards landlords who buy and sell buildings by granting them an additional 5% per year to cover the cost of increased mortgage payments. This encourages the flipping of properties and escalating rents for tenants who receive no benefit in return.
The case of 1430 King Street West and 160 Jameson Avenue clearly illustrates this point. In 1986, the long-term owner of these Parkdale buildings sold both properties to a numbered company controlled by landlord A, who promptly applied to rent review. A few months later, landlord A flipped the buildings to landlord B for a greatly inflated price. At the same time, landlord B sold a Scarborough property he had recently acquired to another numbered company controlled by landlord A. Landlord B also made a good profit on that sale. Then each landlord took over the other's rent review application, substituting his higher loss for the loss experienced by the original applicant. The profit each landlord made on the flip was ignored by rent review in its calculations. Consequently, the tenants are still paying off what we consider to be a totally artificial financial loss.
Ms Wandal: With respect to the issue of capital expenditures and ongoing deliberate neglect, we have the case at 2590 Argyle Road, where the roof leaked for several years. The tenants complained. The landlord did nothing. Eventually, the entire roof had to be replaced. The tenants argued that this work was necessary because the problems they had brought to the landlord's attention had been neglected for years. The landlord was granted a capital cost allowance for the roof and other repairs amounting to a 21% rent increase.
Ms Mahoney: Again, at 100 Gamble Avenue the landlord never bothered to rustproof his metal balcony railings by scraping and repainting them. After years of neglect, the railings, like a car which is never washed or treated, rusted away and had to be replaced entirely. Their cost was included in a 22% rent increase to the tenants. The old adage, "A stitch in time saves nine," is perfectly apt in this situation.
Ms Wandal: Tenants are often seriously inconvenienced when capital work is done, as evidenced by the following examples.
At one south Parkdale building, Regal Aluminum sent employees into a tenant's apartment to replace windows in the week before Christmas 1989. In spite of sub-zero temperatures and the tenant's protest that his child was sick with a cold, the workmen moved the tenant's Christmas tree, knocked out the existing windows and replaced them, leaving the tenant to clean up his mess.
Ms Mahoney: At 110 Jameson Avenue, the landlord had done little or no maintenance for 20 years. During this time, rents had increased annually, often beyond the guideline permitted by law. In 1987, the landlord began an extensive capital expenditure program. Tenants were unable to use their kitchens for days on end and had to clean up the mess created by the contractor hired to replace their windows. Invoices and contracts submitted by the landlord were found to misstate the cost and nature of the work done. Despite all of these circumstances, the landlord was awarded a large rent increase.
Ms Wandal: Examples of where capital work was done instead of using the operating cost allowance under the guideline increase: The guideline increase is intended to cover many types of maintenance. However, capital cost allowances are often granted for these same maintenance projects. For example, at Argyle Road, the landlord did not include painting in its regular maintenance program and then claimed painting as a capital cost after six years of neglect.
Ms Mahoney: Again, at 100 Gamble Avenue, the landlord did no painting, plastering or other basic maintenance in the years prior to going to rent review. As the landlord clearly did not apply the annually collected rent increase to the operation of the building, we have to ask, what did the landlord do with the increased revenue?
Ms Wandal: Unnecessary capital work: Tenants frequently experience rent increases arising from capital work which they never wanted. At 3370 Havenwood Drive, the tenants' rents increased by 30%. Air-conditioners were installed in every unit although many tenants already had their own. Other tenants did not want them, finding them noisy and an unnecessary expense. The 30% increase also was partly justified by the construction of a fence. This fence now encloses a former playground area. The gate is permanently locked. Perversely, the tenants are actually paying here for the loss of their playground facility.
With respect to non-arm's-length transactions, at 44 Walmer Road, the head office of the Window Installation Co was located at the same address as the corporate landlord. However, the arm's-length nature of the transaction was never challenged by the administrator and therefore neither were the installation costs, which substantially exceeded the market values for such transactions.
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Ms Mahoney: Such stories are all too common and they illustrate the need for the measures introduced by Bill 4. It is clear to us that tenants ought not to be billed extra for necessary repairs and renovations done in the normal course of maintaining the buildings. They already pay for this in their rent. It is also clear that tenants should not have to pay for unnecessary luxury renovations and that they should have some control over work done in their units and in their common areas.
The previous government's response to this concern is in clause 15(1)(d) of the act and I am going to read it out to you. It mandated the standards board to:
"Recommend to the minister methods of providing for recognition of the importance of dialogue between the landlord and the tenants occurring on a meaningful and timely basis regarding proposed capital expenditures in respect of a residential complex while at the same time acknowledging the rights and responsibilities of landlords to manage their buildings."
Now, it is hard to believe that someone was paid to write this garbage, but someone was. Certainly the clause has proven totally ineffectual in protecting the affordability of rents or privacy and autonomy of the tenants. Bill 4, by removing the financial incentives for doing capitals, achieves both objectives.
Now we would like to move on. If we have time, we will go back to the extraordinary operating costs on page 5. We would like to move on to address some of the concerns raised by landlords in the press and also here at these hearings.
The first concern we hear coming from landlords is that their buildings will deteriorate. Perhaps the most common objection is that buildings throughout Ontario will deteriorate to unacceptable conditions if landlords are prevented from claiming a capital expenditure allowance at rent review. They tell us in many situations their buildings require repairs now. These repairs will be postponed, they say, because of lack of funds and it is the tenants who will suffer in the long run.
Now, tenants must be forgiven when they regard this claim as a malicious threat. Tenants have the statutory right to a competently managed and maintained home. For years they have paid an ever-increasing rent to safeguard this right, yet under the current rent review system, landlords who have neglected their buildings for years, then carried out major catch-up repair programs, have been able to charge increases even larger than the guideline increases. In essence, tenants have paid double for the maintenance their landlords are required by law to provide. Now that the government is moving to correct this inequity, some landlords are threatening to provide no preventive maintenance programs at all while still collecting their rents and annually increasing them.
Now, a maintenance strike would not only violate the contractual leases that landlords and tenants usually have, but also, and more important, the Landlord and Tenant Act that clearly establishes maintenance as every landlord's responsibility.
The Tenant Advocacy Group deplores these threats. Indeed, we are surprised that a lobbyist with a name like the Fair Rental Policy Organization would publicize and support such threats. Where is the fairness in a landlord's extracting rent from tenants for which he provides no service? Because the rent review system certainly contemplates that service will be given on a regular basis to the tenants, and the costs that they anticipate a landlord will spend money on are located in the building operating costs index, which I believe has been distributed as appendix A to our brief on a separate piece of paper.
Not only does the ministry assume that all of this maintenance work will be done, but it assumes that a landlord will allocate about 25% of the annual operating budget to cover the superintendent and maintenance costs. The ministry then incorporates projected increases in these costs into the next year's annual guideline. Thus, tenants also pay annual increases for maintenance, whether or not their landlord actually provides the maintenance that they are supposed to.
Some landlords may say that the annual guideline is not enough, it does not provide enough revenue to finance necessary repairs and that is why they are in the situation that they are complaining about today. To this argument, basically, we say, "Hogwash." For the past several years the guideline has been so generous most landlords have been able not only to maintain their buildings but also to increase their profit margins. We are going to explain just for a second how.
Each year the landlord can raise the rents by the guideline percentage or apply to rent review for more. On an annual basis, a prudent landlord assesses costs and anticipated cost increases before deciding which option to pursue. Generally there are two types of costs that a landlord will have: the operating costs of running the building and the financing or mortgage costs. In years where the mortgage costs go up, the landlord will of course apply to rent review because the landlord is entitled to an extra allowance to cover the difference. But in most years only operating costs go up, because mortgage costs are fixed for a specific term.
According to the Ministry of Housing's figures, only about 50% of the total costs the landlord has are operating costs, yet the guideline that is chargeable this year at 5.4% is based on the entire revenue. In 1990 the guideline was 4.6%. So, if you are with me, a landlord whose operating costs increased less than double that -- 9.2% -- would increase his profit margin by merely charging the guideline. But by ministry calculations, the average landlord's costs only went up 3.9%. Therefore, a guideline of 2% would have covered this cost increase, yet landlords were entitled by law to charge more than double that figure, the guideline of 4.6%. A similar story can be told for each of the last five years that the guideline under this act has been established.
Given this generous guideline, given full recognition of mortgage costs, given a capital expenditure allowance that is extremely generous, it is beyond belief that competent landlords can find themselves unable to fulfil their responsibilities under law. We are also unmoved by the plight of those who have recently acquired rental property which they are operating at a loss, and hence have no capital reserves to make the necessary improvements.
First, the prudent buyer would have researched the condition of the property and negotiated an appropriate purchase price; and second, we have to look at what the purpose of this bill and the role of the government are. It is not the responsibility of the government or the tenants to bail out investors or speculators who buy a property they cannot afford to run. Nobody asked them to buy the building; certainly not the tenants who, if this bill is not passed, would have their rents go up at more than twice the rate of inflation.
Land speculation is a risky business and accepting short-term losses for a long-term gain is part of the cost of doing this business. The alternative, making tenants continue to subsidize new landlords in deteriorating buildings after years of paying for the maintenance they never received, would be completely unacceptable as government policy.
Landlords who fulfil their responsibilities have nothing to fear from Bill 4. Speculators and others who took advantage and got caught by the bill, well, for them the years of freeloading are over. In a recent letter to a Tenant Advocacy Group member, one landlord made the following observation:
"I think there will always be landlords in the rental game and they will make money. Some of the high rollers might be shaken out, but that is a good thing for tenants and the remaining owners as it will give them a chance to improve their image.
"A few will take millions out of the system, then go bankrupt. It will be hard for Rae not to bail them out but they must be left to their own solutions. The taxpayers are long past the time when they will suffer in silence when their money is being spent for such bailouts."
The government must resist the temptation to bail out speculators and it must refuse to be intimidated by threats of landlords. Bill 4 merely rights the wrongs done to tenants by the previous government.
Ms Wandal: Landlords have also complained that not compensating landlords for capital work that has already been done is unfair. There are landlords who have completed various kinds of capital work in the past year, relying on the current legislation that guarantees a full recovery of all such costs. These landlords are now complaining that, having done the work, the rules have changed and they will be denied recovery of their costs. In their opinion, retroactive changing of the rules prejudices them unduly.
We have several responses to this. Any time new legislation is introduced, some people are caught with their expectations up and reluctantly have to lower them. For example, the tax regulations which an investor relies upon to calculate potential profits may very well be obsolete when the time comes to collect on the investment. The potential profitability of such investment is directly proportional to the risk involved. Tenants themselves have experienced some mercurial changes in government legislation and policy. For example, in 1985 tenants were assured that the annual guideline increase would be frozen at 4% for the next two years. However, by January 1987 the guideline had been hiked to 5.2% despite tenant expectations. This change cost tenants of Ontario $8 million in 1987 alone.
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It is true that some landlords who expected their tenants would pick up the tab have now been left to pay the bill. Does this mean that the new legislation unfairly burdens landlords with costs from which they can expect no return? Of course not. Any responsible landlords recognize that maintaining and improving their buildings is a built-in cost of ownership, it is a wise protection of their investment.
Some landlords, anticipating the passage of this bill, have cancelled contracts. Other landlords are threatening that they will not commence or continue work if this bill is passed. These are idle threats. As mentioned earlier in this brief, landlords are obliged by law to do work necessary to maintain their property in accordance with housing and safety standards.
If this work is not done, their tenants can enforce their own statutory rights and obtain court orders requiring the landlord to do the work. Such orders may also grant tenants sizable reductions in their monthly rent payments as compensation for the substandard living conditions.
We would like to mention here as well the cosmetic work that has been done by some landlords which was not in fact essential to the upkeep of the property. It may well be that microwaves, marble lobbies and the wholesale reconstruction of kitchens would not have been undertaken had the landlords known that the costs would not be transferred to the tenants. It may also be that such alleged improvements will not be done in the future if this bill is passed. Our response to this is that the tenants never wanted this wholesale remodelling of their units in the first place. If this bill discourages landlords from carrying out these disruptive, expensive and unwanted cosmetic renovations, it will be an improvement.
Although these landlords now cannot recover their costs directly from the tenants, the work which they did last year is not a useless expense. In the first place, as noted, landlords always benefit from the upgrading of their own housing stock, and second, the work in many instances had to be done.
It is not these few landlords who have been unduly prejudiced; it is the tenants who have been severely prejudiced by rent review legislation which for the past four years has made them liable for all the landlords' bills while the landlords reaped huge profits from these buildings.
It is looking through the wrong end of the telescope to say that these landlords are prejudiced by the retroactive provisions in the bill; it is the tenants who have been prejudiced for so long and who can finally hope to have this imbalance addressed by the new legislation.
The election on 6 September 1990 made it clear which end of the telescope provides the proper perspective on the present affordable housing crisis. The people exercised their political will and brought in a government which promised to redress the inequities of a system which provided windfall profits for landlords at the expense of many thousands of Ontario tenants.
Another landlord argument against this bill has been that their buildings will not be worth as much should this bill be passed. Landlords are complaining that this bill will be responsible for a reduction of their equity on the following grounds. The new legislation, apparently, will make their buildings less attractive to potential buyers as a new landlord will no longer be guaranteed that any financial loss will be covered through higher rents; in addition, purchasers of post-1975 buildings may not be entitled to raise rents to ensure a 10% profit margin; finally, capital costs will not be automatically passed through.
Our response to this argument is twofold. We acknowledge that landlords cannot, at this moment, profitably sell a building that they bought six months ago. Our first point is, why should they want to do so? Why should we encourage them to do so? A landlord who bought a building five years ago can still sell that property at quite a profit on today's market. We believe that housing should be a long-term investment and not a speculative endeavour, and we applaud the government's removal from the legislation of the financial incentive for landlords to flip buildings. It is long-term investors and their interests which should concern the government. Such investors will understand that long-term ownership involves weathering many fluctuations in the market before the profits on their investment are realized. They do not consider the present decrease in equity as a crisis requiring legislative protections.
Our second point is that the financial position of landlords must not be seen in a vacuum. It should be considered within the context of some very powerful forces affecting today's general economy and housing market.
We are presently in a recession, which has struck hard at all kinds of business ventures. The recession was finally given its proper name almost simultaneously with this government coming into power. While there are ordinary people who are losing their jobs and suffering severely, we must put the landlord's position in perspective.
Given our present economic climate, it is naïve to argue that property values have decreased simply because of the introduction of new legislation. A landlord's equity may have gone down, but what does this mean in practical terms? It means this is not a good time for the landlord to sell a building. Do landlords have alternatives? Of course. They can keep their buildings and wait for an improvement in the economic climate. They are sitting on tremendous assets. The only real hardship is that their gratification may have to be delayed slightly.
In 1988 thousands of people invested in houses in the hopes of profiting from the rapid rise of housing costs in Toronto. The bottom fell out of that market in late 1989-90 and many ordinary small investors are suffering as a result. However, there has been no legislated remedy for the financial difficulties of these small investors, as speculation is risky. The same holds true for big landlords. There is no reason to bail them out of their speculative ventures. Throughout the 1980s, certain landlords rapidly expanded their assets with a minimum of capital investment, taking advantage of a rent review system which rewarded quick flips in an escalating market.
There are several reasons why their financial position should not concern the government at all. In the first place, of all groups hit by the housing slump, such large landlords suffer least. As corporations, the principals are not affected directly by any bankruptcy proceedings. Second, these landlords should never have been allowed to exploit the system as they did. Previous governments have attempted to control the negative effects of land speculation. For example, in the early 1970s the Conservative government imposed a land transfer tax to control the spiralling cost of property. The measures introduced by Bill 4 are just as necessary now.
Ms Mahoney: For our final major point we would like to address the concern that Bill 4 hurts workers. I think a lot of us feel some sympathy for the workers who have been laid off at some of the construction-renovation companies. It has been argued by them and landlord lobby groups that this is basically a result of Bill 4 and the fault of the government. There have been some demonstrations at Queen's Park on this point.
Is this a reasonable conclusion to draw? We do not think so. We think that the anger of the workers, although justified, is directed at the wrong target. It should be directed at the landlords who are cancelling the contracts, not the government which is moving to protect tenants and affordable housing.
Mr Drainville: Thank you very much for this very complete report which you have presented today. It is well documented and presents a point of view very, very strongly, a point of view with which we are obviously in sympathy.
I would like to just ask your view on retroactivity. You obviously see the retroactivity as being an important part of this legislation that is being put forward by the government and I just wonder if you could explain how you view this.
Ms Mahoney: We are glad that the bill is retroactive. We understand the landlords' concerns. We heard some of them yesterday, or I did when I popped in. I would like to quote again the figure quoted by United Tenants of Ontario, which is that in the month before the election applications affecting 12,000 units were made, and after the new government took power applications for 36,000 units were made in that month. We think this, in our view, shows that landlords were trying to apply for their rent increases as quickly as possible so as to avoid the effects of the new government changing the law.
You have to apply at least 90 days before you expect a rent increase to take effect. I believe there was also quite a significant number of applications, as I say, affecting 12,000 units, even in August. That would be for November rents. The summertime, with the construction industry going on, saw a lot of applications come forward. I think that in order to fulfil the promises that the government made to the Ontario electorate, it had to introduce a measure of retroactivity into the bill to protect those particular units.
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I would also like to say that this was a point of some discussion at the Tenant Advocacy Group, whether we felt the government had gone far enough. The general consensus was that no, it had not. I have been a case worker in landlord and tenant matters for 10 years. This act we have now, the Residential Rent Regulation Act, is so bad and so inequitable to tenants and so damaging to the cause of affordable housing that if the government had gone back and cancelled all the orders issued since 1 January 1987, we would have been happy and we think that would have been justified.
When we discussed this, we thought, "How militant should we get when we come in front of this committee?" We thought we should probably present that point of view, but on the other hand, because you at least recognize that retroactivity to some extent is important, we thought we ought not to criticize you unduly for not being perhaps as militant as we would like.
The compromise position we took as an organization is that since cancelling an order would be going maybe too far -- although in our view it is justified -- any outstanding, impending rent review applications and phase-in notices, some of which are three years late being issued, we would like to see cancelled and put under Bill 4 as well.
Ms Harrington: In the last two days we have heard some very good presentations. They were all very well prepared and very enlightening for us. This presentation is just outstanding. It has answered all the questions that we have had before us. It actually looks at the whole big picture, not just your point of view. It looks at everyone's point of view.
On a couple of things you have mentioned, no one is making a profit in the real estate market this year. That is obvious. This answers some of the concerns that have been brought forward to us by the landlords. I am glad that you also looked at the retroactivity. As I mentioned before, it is a very difficult issue, because fairness and justice are what we are all about. You look at that angle from all sides to try to look at retroactivity.
We would like to emphasize again your statement here that investing in real estate is a long-term investment. People who own buildings are there, I believe, to serve the tenants, to provide service. That is their job.
Last, landlords always benefit from the upgrading of their housing stock. That is what you have mentioned. I think that also answers a lot of the concerns that we have had with landlords in the last couple of days.
Ms Poole: Thank you for your presentation today. You are right -- it is very militant. While I think you have brought up a number of points that certainly have to be addressed and show very clearly that there are problems in the system, there are a few instances where I think you perhaps have not been fair in your representation.
The first I am going to make reference to is when you said that the previous government response to this concern, meaning the luxury renovations, was to include clause 15 in the RRRA and talk about the Residential Rental Standards Board taking a look at the situation. That was totally unfair. When the minister brought in specific regulations late last spring, which were never given a chance really to be implemented, they included the fact that flipping a building after doing major renovations would be discouraged by putting a five-year limit on it, which said that landlords would be allowed to put in multi-year plans so that would try to discourage putting all the renovations in in one year, statements of disclosure being required. In fact, there were plans to bring in amortization schedules that would heavily penalize luxury items such as jacuzzis, marble lobbies, all that type of thing. So I think you have been quite unfair on that.
The second point was regarding the retroactivity, where you have basically said, "Well, it does not matter if the rules have changed along the way, because that is the landlord's risk." I was quite -- I guess "impressed" would be the word -- as it brought the point home yesterday: In one of the presenters' briefs, which he did not get a chance to read into the record when he talked about the retroactivity, he said, "As a home owner, could you imagine having arranged a five-year mortgage at 11%, feeling secure in your new home until after one year the mortgage company informs you that your mortgage is declared void and that for the remaining four years the interest rate has risen to 15%? As an employer, could you imagine new minimum wage laws being passed retroactive to 1986? As an employee, could you imagine your written employment contract simply being cancelled in midterm and your wages reduced?"
I do not think in any of those situations we could possibly justify it. While I have for years been taking the tenants' part and will continue to do so, I also have acted on the measure of fairness. The retroactivity clause bothers me for that reason.
I would like to ask you a specific question about the retroactivity. You have stated that in the month before the new government came to power, there were 12,000 applications to rent review.
Ms Mahoney: I understand 10,000 to 12,000 units.
Ms Poole: In the months following, there were 36,000 units. My understanding from rent review and from various sources is that this is a cyclical trend, because as you know, in order to make application to rent review for capital expenditures, first of all, before you apply, the work has to be substantively completed, and then you have to wait for a 90-day period for your application before the rent increase. That means that most of the construction work is done in the summer months and that normally there is a large influx every year in the September-October period as the work has been completed and then the landlord makes application. Would you like to comment on that?
Ms Mahoney: Yes. I would like to comment on that and one other point, and then return to Deborah who wishes to comment on the first point you made.
I believe what you have just said, Ms Poole, emphasizes the point that we made, which is that the government had to act because of the cyclical trend. There were applications affecting it. If they had not made the bill retroactive, they would have lost out on protecting all those tenants for their late 1990-91 grants. So the fact that there was a cyclical trend contributed to the need for the retroactivity.
The other point I would like to comment on very briefly is the landlords' presentations from yesterday. First of all --
The Chair: The time allocated to the Liberals has expired. The Progressive Conservatives are next.
Mr Turnbull: Thank you very much. In view of the indulgence we gave you with regard to time, I would ask that you make your answers to me very short so that I can get a lot of questions in. What is your view of private ownership? Should it be allowed within the housing industry?
Ms Mahoney: The rental housing industry? I think we are stuck with it for the time being.
Mr Turnbull: But do you agree with the concept?
Ms Mahoney: I could not answer that in a short statement. We have to have a really meaningful dialogue on that for me to present my views adequately to you.
Mr Turnbull: Do you believe that for those landlords who are in for the long term, as you state, profit is reasonable? What would your definition be? Should they get the equivalent of a bond rate of return?
Ms Wandal: At this point, as Ms Mahoney has stated, private ownership is certainly a reality. What we are looking at is not stating that profits should not be a possibility for landlords. We are simply looking at some kind of assurance that a proportion of their revenue always be set aside and be available for maintaining buildings.
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Mr Turnbull: Excuse me. You did not answer my question. I said, do you think that a bond rate profit level would be an appropriate approximation of what you think would be commensurate --
The Chair: Order, please. Yesterday I was cautioned by committee members to keep our discussions to Bill 4. I do not mind philosophical questions.
Mr Turnbull: I think this is important. I am leading up to a point.
The Chair: I am not cutting anyone off. I am just reminding the committee that yesterday I was cautioned, as Chair, by committee members about trying to keep everything to Bill 4. I will continue to show all the latitude I possibly can, but I just remind everybody about what the Chair was cautioned about yesterday. That is my only point.
Mr Turnbull: Let me restate it then. I think the exact wording Ms Mahoney used was that it is hogwash that renovation costs are not covered. We have heard expert testimony from the Ministry of Housing stating that large capital items were never included in the guidelines, that it was only maintenance items. How would you get the money to pay for the capital items?
Ms Wandal: Our concern is maintenance and necessary renovations, and large capital expenditures if they are required. The angle we approach it from is that a proportion of the profits have to be set aside for --
Mr Turnbull: What happens if there are no profits?
Ms Wandal: At this point what we would like to see, if we were to get into it once this is over and we have a consultation process for the permanent legislation --
Mr Turnbull: Please do not talk about the permanent legislation.
Ms Wandal: All right.
Mr Turnbull: Let us confine ourselves to this question: What happens if there is no profit?
Ms Wandal: In a particular instance where a landlord has just bought a building and is not in a profit situation, we do not have at this point a ready-made solution for what will happen to that building, as far as where exactly the money is going to come from is concerned. He may have to put himself into arranging a loan in order to finance the work to be done on the building but he will recover those costs --
Mr Turnbull: How will he arrange that loan if there is no money available in your view of Bill 4?
Ms Wandal: Because he is sitting on an incredible asset and that can be used --
Mr Turnbull: That is just simply not true. If they have owned it for three or four years, typically a landlord will be in a loss situation, which is typical with starting up any new business. They will not be making a profit, and therefore unless they are able to pass it through, they are unable to borrow the money, unless they can collateralize it against something else; in the case of one of my constituents, against his own home and he is in danger of losing it. How would you respond to that person?
Ms Mahoney: I would respond by saying that in our review there are very few landlords in that position. I would ask, how do you respond to the fact that for every landlord in that position there are hundreds of tenants who have for years been paying under a rent review system an incredible amount of rent increases and getting nothing or deterioration of maintenance and increasing spiralling land costs because of the system?
We can trade numbers here, Mr Turnbull, but we are not here with an answer to bail out people who got stuck in a land speculation deal. That is not our viewpoint.
Mr Turnbull: That is unsatisfactory. If you have renovations that are required which are of a capital nature, where does the money come from? Does it miraculously come from heaven?
Ms Mahoney: It should have come from the landlord putting the money aside, as any prudent investor would have done.
Mr Turnbull: The Ministry of Housing has said there is no provision in the present regulations.
Ms Mahoney: Capital expenditures have been allowed for 15 years.
Interjections.
The Chair: Order.
Ms Mahoney: Why did they not do the work --
The Chair: Turn off the mike, please.
Mr Drainville: On a point of order, Mr Chairman: With due respect, Mr Turnbull, you are coming very close to badgering the people. They obviously have a different point of view. We have had lots of different points of view and at some point we have to allow that there are different points of view. I do not think we are in the position of having to badger the witnesses when they have a different point of view. The fact that they differ is self-evident.
The Chair: Mr Turnbull, you have 30 seconds left.
Mr Turnbull: You have said the speculators were getting caught. What about the people who are not speculators who have owned small buildings, say for three years, and have bought them with their life savings? How would they handle the present situation when their financing is knocked out of kilter?
Ms Mahoney: You say they have owned it for several years?
Mr Turnbull: Somebody who has owned it, say, for three years and is losing money. How should they handle this situation?
Ms Mahoney: Well, I would like to go back and ask, why did they buy a building that they were going to lose money on in the first place? If I bought a car I could not afford, I would not expect somebody else to bail me out.
Mr Turnbull: No, excuse me. All businesses expect that during the initial years of an investment you lose money. That is the nature of business.
The Chair: Thank you, Mr Turnbull. I want to thank the presenters for appearing before us today. Your brief has generated a lot of interest.
Ms Mahoney: Thank you very much for the time and your courtesy.
Mrs Y. O'Neill: On a point of order, Mr Chairman: As a result of that presentation, I would like to make another request for information from the ministry.
The Chair: I would ask ministry staff to take note.
Mrs Y. O'Neill: This is in writing. I do not want it presently. I would like to have a review of the applications for the last three years. We have been told that there is a cyclical application process -- and I have heard this. I have not had it in writing -- and that is really based on the Canadian climate and when work has to be done and the 90-day qualification. I would like to know for the last three years the numbers of applications that have come in in each month of those years.
The Chair: You are requesting the Chair to formally request that in writing?
Mrs Y. O'Neill: From the ministry, yes, please.
The Chair: I will have staff prepare the request.
Ms Poole: One amendment, Mr Chair: The number of applications and the number of units.
The Chair: We will have staff review Hansard to make sure that we request what the members have asked for.
MCQUESTEN LEGAL AND COMMUNITY SERVICES
The Chair: The last presenter for this morning is McQuesten Legal and Community Services. I hope I have pronounced that correctly. I would ask the presenters to come forward, Denise Giroux. Please have a seat, make yourself comfortable. You will have until approximately 10 after 12 to make your oral presentation to the committee, and we will reserve a further 20 minutes for questioning by members. I would ask that you please, for the record, identify yourself and whatever position you may hold within your organization and I would like to turn the floor over to you.
Ms Giroux: My name is Denise Giroux and I am a senior staff lawyer with McQuesten Legal and Community Services in Hamilton, probably the only person from outside of Toronto here other than the members of the committee and Don Abel, who is one of our MPPs in the region.
We at McQuesten Legal and Community Services, and I in particular, service tenants with landlord-tenant matters or disputes, as well as assisting them in organizing tenants' associations and preparing submissions, etc, for rent review matters. I can say that I am speaking on behalf of several tenants' associations today. I understand that you are seriously considering bringing your committee to Hamilton and I hope that some of those associations will have a chance to speak to you directly. But in the meantime I can say that I am speaking for them as well as from our own experience.
You have in front of you my brief, and I would like to highlight the particular recommendations and problems that we see with the rent review system. I would like to commend the people who spoke before me. I think they have touched in a very detailed way on many of the problems with the legislation.
Essentially, the government itself has recognized that the legislation is too complex and riddled with loopholes and that it has more severely prejudiced tenants by far than landlords. The only true prejudice to landlords, in my opinion, is the delays that are caused by the rent review system itself which lead to administrative nightmares for them as well as for tenants.
The key concerns, though, are highlighted on the first page of my brief. Orders providing for large rent increases obviously are retroactively effective and result in sometimes thousands of dollars being owed by tenants who simply are never in a position to pay that kind of money if they are on fixed incomes.
The fact is that many buildings we have worked with have seen increases of 10%, 12%, 15% year after year after year as landlords return to the rent review system for increases. Certainly their incomes and social benefits have not gone up by anything near to the percentages of increases we have seen in their rents.
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Also, the other side of the story is that many, many landlords disregard any legislation in the province and collect all kinds of illegal increases. One of our key concerns with this legislation, the proposed legislation as well as the present existing one, is that there has been no enforcement of the protections that are there, no prosecutions or very few at all, of landlords who are collecting illegally, and in fact the number of enforcement officers in this province is literally a joke. One of our major recommendations is that if this government is going to be truly committed to real protections, it had better put a lot more enforcement officers in there and put an end to the illegal activity which is rampant out there.
The Ontario New Democratic Party in its convention of 1984 criticized the Conservative government at the time for being "too timid and ineffectual" in responding to the affordable housing crisis in the province. We have seen in the seven years since that time that the Liberals' legislation has also been very timid and ineffectual and that ultimately this rent review legislation has benefited criminal landlords, irresponsible landlords perhaps more than responsible ones.
I think that is a key element of my experience from the dozens of buildings we have worked with. There are no repercussions, no true penalties to landlords who are out there breaking the law or disobeying orders of the rent review system.
The Minister of Housing is stating that the government is committed to making the system simpler to administer, to understand and to use and that this initiative is a moratorium to protect tenants.
Before I go on to outline some of our more specific concerns with the proposed legislation, I would like to highlight on the bottom of page 3 our essential position, which is that interim legislation, particularly if it is only going to be for a year or two years, should provide a true moratorium and put a ceiling of the guideline increase effective 1 October until permanent legislation is passed.
We do not see any reason at all and very little prejudice to any of the landlords of a one- or two-year moratorium restricted to the guideline. That would be the easiest and most logical and fair response, in our opinion, in the interim while these larger issues are hammered out for the permanent legislation. We continue to call on the government to maintain its campaign promise in that regard.
On page 4 of our brief, you will see the major areas of concern and they are broken down into three. First is essentially the delays which have been borne and prejudices to tenants particularly. Second is the failure of this bill as well as the past legislation to link standards of maintenance with the entitlement to increases. You will see that our essential position is that unless a viable and effective link between maintaining property standards in buildings is made with the rent control legislation, then we will still see deteriorating standards regardless of what new legislation is created. Finally, the lack of enforcement, which I have already touched upon, is the third main area.
With respect to procedural delays and hardships, I would like to focus on rebate applications made by tenants who have or believe they have been paying excess rents or illegal rents and are trying now to get them back from landlords. The act is very short in remedies available to them. We have seen, in our office, a tenant who attempted to get a lousy $600 back that she had paid in excess rent. It took two and a half years for a rebate order, a very straightforward application. Never do we get an explanation from rent review services as to why these delays take place.
They are totally unacceptable and the government must ensure that these people are doing their jobs more effectively. This woman's order, which was in her favour, was appealed by the landlord, which delayed matters a further year. She was not able to collect, even though she had attempted to do so and when the appeal actually took place the landlord failed to show up. In my opinion, he had no intention of seriously appealing the matter. It was simply a delay mechanism.
This woman, in hindsight, would have been much better advised to take a small claims court action for debt and could have had the matter dealt with within a year in Hamilton, certainly within even four or five months. If the rent review system is not prepared to actually give a more effective remedy than they are able to get in the court system as it is, then what good is it? That is the kind of thing it must address.
In the meantime, we are seeing notices of phase-in issuing at a suddenly phenomenal rate from our rent review office. This itself is suspect, because I am still waiting for orders on buildings that I have made submissions on from December 1989 or January 1990. They are not being processed but notices of phase-in for increases effective after the 1 October 1990 date are coming out, allowing landlords to collect under those things until or unless legislation is passed. Ultimately, tenants will have the burden of trying to get that money back if it is passed.
Many tenants will never know they have a right to that money back and landlords will be unjustly enriched. That is not even touched upon in the act. In any event, those who do apply will already be seeing the same delays, I suspect, if the procedural delays are not addressed in this legislation and in the permanent legislation. If we are going to be seeing them waiting another year or two years for rent rebate applications to be processed, they will not be very much further ahead.
Bill 4's response to that -- found in several sections, such as section 100o, section 100p, section 100q, to be specific -- says that the landlord will have to pay these tenants any amounts that they may owe them after the legislation is passed within 60 days. But there is no penalty section. There is no sanction whatsoever if they do not. So a landlord has no incentive whatsoever to comply with that. In fact, if he is reasonable, he would delay it as long as possible because at present he does not have to pay interest on those amounts. He does not face the possibility of adverse cost awards when a rebate application results in an order.
On page 6, I have highlighted some very specific recommendations to deal with that and, if you are sincere about getting that money back into the right pockets quickly, I think you should seriously consider some of these. Interest awards should be possible on rebate applications and cost awards of about $50 to $100 should be granted where a rebate application is required. If the tenant has to make that application in the first place it is because the landlord has failed to comply with his obligation to return that money within 60 days.
Second, we see no reason whatsoever why rebate applications should not be processed within 60 days themselves. They are generally straightforward and there is no excuse whatsoever for a year or two years for these to be processed.
The fourth recommendation on page 6 suggests that a process for initially assessing an appeal provided by a landlord to the system should also be put into place. The kind of scenario I described where the woman had waited two and a half years and then the landlord appealed simply to be vexatious and to delay payment should never happen. These are clogging the system, taking up appeal board members' time and they come into Hamilton and they do not even show up. There should be some initial assessment to see if there are in fact valid grounds for appeal. This would help eliminate some of the backlog and get rid of cases that have no merit whatsoever.
With respect to the bill's proposals relating to whole-building applications made by landlords, we at McQuesten and the tenants we work with do welcome the restricted criteria which are outlined in this proposal. However, we, and you have to forgive us, certainly doubt whether landlords will not be able to come up with some very imaginative ways to start fitting everything into extraordinary operating costs.
They have called deferred maintenance capital expenditures. They have called regular operating costs capital expenditures. Why would they not be able to find creative ways, especially with the help of their overly well paid landlords and consultants? I am sure they would be able to find ways and I would recommend, on page 7, the first recommendation outlined there, that clause 100e(1)(b), which is the section defining the meaning of "extraordinary operating costs." be restricted more severely.
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It seems to me that the hurdles set out there for landlords to jump are much too liberal. Already it is foreseeable that with the increased hydro costs, for instance, that took place in January 1991, every landlord may have a cause under this extraordinary "operating cost" definition to get an increase above the guidelines. We could see again a swamping of applications for increases so there will be no moratorium. There will be no simplicity through this legislation. There will be no clarity. There will be no fast-tracking of the problems.
Section 100s in the proposal states that any application already received by the landlord either under the old legislation or in these months while you consider the legislation will be deemed to be an application under the new legislation. That section also sets out the possibility for landlords and tenants to make further submissions on such applications; however, it does not require that landlords actually do make submissions, and we see major problems with this.
First of all, we believe that the responsibility for determining or providing information in support of an increase lies squarely on the shoulders of the landlord. In the past, our rent review office has been provided by landlords with cost-revenue statements that have been so poorly completed that they are hardly legible. Often they are incomplete, but never have I seen them returned to the landlord and him being told, "If you don't clean this up, we will not consider your application."
In support of their application they will submit an envelope full of invoices in no particular order. It is not clear to the tenants or to the administrator, I am sure, what these invoices are supposed to go to. This is their standard of proof and it is laughable. As a lawyer I cannot believe that a system is intended to make decisions on that kind of a case. If landlords cannot take greater responsibility and meet a higher burden of proof, then they should have their applications automatically dismissed.
In relation to the proposed legislation, we believe it should not be up to the administrators to take the applications presently filed with them, sit down for hours at a time and try to weed out anything that falls under the old legislation and is no longer relevant and figure out what in fact is relevant among all of that. It should be on the landlord. If they are going to be given 30 days to make further submissions, it should be in order to withdraw all applications that are not, including extraordinary operating costs claims, or to highlight within those old applications those sections that actually touch on the present criteria.
If they do not do that, their applications should be dismissed. Why are you bogging down the administrators with trying to figure that mess out? It is going to take months at the rates we have seen. Those are specific problems that I think can be avoided if you as a committee give these matters serious consideration and actually make the act work in a more efficient manner.
On page 9 of my brief you will see those specific recommendations set out, and I have gone to the trouble of setting out the sections which I believe need to be amended. I am suggesting that section 100s be made mandatory so that landlords have to withdraw applications which are no longer relevant -- it should not be up to the administrator to figure that out; they know whether they have applied for extraordinary operating costs already -- and to highlight the relevant portions of their existing applications so that the administrator can immediately focus on the relevant portions.
In some of the earlier questioning that I have managed to catch, we have seen that some people of the committee and many landlords -- and I am sure you will hear from more this afternoon -- are concerned that they will not be able to make a profit or that they will not be able to make enough of a profit to suit them. What I hear in some of that questioning is that it seems some people are advocating that this committee should give greater weight to the possibility of a few landlords losing their business risk, their business investment, maybe in a very few instances possibly losing their own homes which they have personally mortgaged to get loans. That is supposed to be taken more seriously and be somehow more morally reprehensible and socially unacceptable than the fact that thousands of tenants have lost their homes through this system because they simply cannot afford these increases.
What about those thousands of tenants who have lost their homes? Why does that not greatly outweigh the few landlords who are not making profits high enough to suit them? The fact is that the landlords in this province are never going to make enough profit to suit them. They would like no system. They are calling for a ban of the rent review system completely. That is what they were doing in the past. That is what they will continue to pressure governments for.
The fact of the matter is that even with this interim legislation as it is set out we are going to see delays in processing, because even by the time this legislation is passed -- we can presume, let us say, 1 April as a passage date and royal assent is given -- that would be six months past the date of a 1 October increase. It takes at least 60 days before further submissions are received, so by 1 July or 1 August we are looking at an administrator possibly pulling the file to make a determination. We are going to be seeing orders coming out in December 1991 or early spring of 1992 that are retroactive to the fall of 1990 and the spring of 1991, and we will be facing the same problems with thousands of tenants in the province seeing a retroactive increase meaning they are in arrears by thousands of dollars, and they simply cannot afford them. This problem is not being dealt with.
I would like to go on now to the second major area of concern, which was the ongoing maintenance of rental residential complexes. Tenants in Ontario, particularly in large high-rises, usually owned by large landlords, have seen deteriorating standards in their buildings, and this, it must be said, at the same time as their landlords are getting 17% and 20% and 33% increases. It is a lie that it is not profitable to make maintenance -- in fact, many landlords who have received money for capital expenditures or anything else have also allowed regular maintenance to be neglected, so it is not necessarily a connection of no increase, no maintenance. What we see are plenty of increases, still no maintenance. The threat of a maintenance strike is a serious one and needs to be dealt with, but it is no news to tenants across the province, especially in large buildings, because they have seen a maintenance strike in effect.
The Chair: Thank you for your presentation. We will move right along.
Ms Giroux: Could I just add a word? I will not be able to finish the paper, but my recommendations are there. I said earlier that maintenance should be connected to the entitlements and they should be disallowed from entitlements if the maintenance is not done, breaches of property standards; and the commitment to hire more people in order to make sure that the illegal side of activity out there is put an end to.
Mrs Y. O'Neill: Ms Giroux, I have quite a bit of difficulty with your presentation. If I hear what you say, and I am doing my best, you do not seem to acknowledge a moratorium that is in existence. I do not know whether you were here earlier this morning when I raised what I consider a serious issue, that the legislation that is now in and has received royal assent in this province is somehow now on some kind of hold while we await pending -- I do not have the answer from the minister yet, but that has been the general impression that has been given both in this committee and in ministry documents.
If I go, first, to the top of page 5, that is in direct contrast -- I do not need to use the word "conflict" -- to when we had the presentation from ministry officials yesterday, and I read from those: "Phase-in: If the first date of rent increase affected by a notice of phase-in is on or after 1 October 1990, this will be voided under Bill 4." There are approximately 2,800 notices affecting 39,300 units that have been voided. I am speaking from ministry documents -- in fact, the documents of an assistant deputy minister. Whether you have just inadvertently not stated that first date of increase, 1 October, is a very significant date, and whether you are saying phase-in orders that may be arising from 1987, 1988 or 1990 are happening, you are certainly giving at least the impression here that phase-in orders are still being issued. That is not correct, if the ADM -- I do have to believe the ADM.
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Ms Giroux: If they have received a directive recently to stop issuing them, that is news to me. I have seen coming into my office a huge number of notices of phase-ins in the last few months since the interim legislation was proposed, and tenants have been told by rent review services that they are obligated to pay those phase-ins pending any retroactive voiding of those phase-ins.
Mrs Y. O'Neill: I really hope you will immediately check with the Ministry of Housing. You are in a very significant position in your community. You are giving advice to many people. I really believe you have a right to go even to the ADM to find out whether you are giving correct information. We have also been told this morning that applications are not being processed at all, and throughout the rest of your brief you do indicate that things are continuing as normal.
Ms Giroux: No, you misunderstood me there. It is not that applications are being processed now. The legislation says that those applications which have been filed, either prior to the proposals being presented to the government or to be filed under the new legislation, will nevertheless have to be seen and dealt with and will result in retroactive orders if landlords are able to prove a claim for extraordinary operating costs. I am suggesting to you that they will find very imaginative ways to try to squeeze things into that definition and ultimately try to justify increases above the guideline. I am not saying that they are processing them now and that orders are issuing; I am saying that they have to eventually. The procedures in place for dealing with that are very inadequate at the moment.
Mrs Y. O'Neill: Well, that is your opinion. I am glad you have that procedure correct, because you and I share the same understanding on that.
Mr Brown: I am interested in a quote you have chosen to make in boldface on page 3 of your submission. It says, "Rent review legislation has benefited irresponsible, indeed criminal landlords as much as, if not more than, responsible landlords." I wonder what evidence you have to present to the committee that that is in fact the case.
Ms Giroux: I can speak with respect to all the buildings I have represented where landlords are in clear violation of property maintenance standards and may be doing capital expenditures of work which is or is not necessary but is not necessarily addressing the more pressing maintenance problems, and getting increases under the rent review legislation which therefore rewards them for ignoring the more pressing repair problems.
Mr Brown: What you are telling me and the committee is that anecdotally you can say that, but you have no statistics whatever to back up your statement. Obviously, people with problems come to you; people without problems do not. If, following your statement, I was to go and look at rent review records for the last three years, I would assume that the majority of those people have to be criminal, irresponsible landlords, because they are the ones who ask for an increase. That is what you are saying here. Is that what you believe?
Ms Giroux: Some of them, yes. That is right.
Mr Brown: You are saying, "has benefited more."
Ms Giroux: Yes, because many landlords who do their maintenance adequately, maintain proper buildings, find they have fewer landlord-tenant disputes generally. In fact, most of them have not been the ones who have had to go to rent review, because they are making a reasonable profit and the guideline increases help them to maintain that.
Mr Brown: In other words, the ones who have gone to rent review, the majority of those will be criminal, irresponsible landlords.
Ms Giroux: No, that is your way of putting it. I am saying it has benefited landlords who ignore the more pressing repair problems and in fact have been documented to be in breach of property standards. Also intended by that bold statement are the enforcement provisions of the rent review legislation, which are a joke. They are not enforced and landlords know that any violations, any illegal increases they collect, will be completely ignored by the enforcement branch even when they are reported. They are not being punished for violating the provisions of the act.
Mr Brown: You said, "Thousands of tenants have faced economic eviction." That is an interesting statement. I wonder where you get those numbers.
Ms Giroux: I am sure if you wanted to give all the legal clinics in this province time to pool their figures, they could come up with quite a few thousand tenants they know have been evicted or have left simply because they cannot pay the arrears owing under this rent review legislation.
Mr Brown: So that is a subjective opinion you have given to the committee.
Ms Giroux: No, it could be backed by stats. I do not have them here for you. The point is that many do get evicted; many cannot deal with those increases that are awarded. My point when I made that statement is that their problems, their hardships, do not seem to be given half the weight of those of a few poor landlords who may not make the profits they want or may, lo and behold, lose on their business, purported by some of the members.
Mr Brown: We are going to Hamilton later, and perhaps when we are there you would have compiled those statistics for us.
Ms Giroux: Are you saying you will give me a second chance to present some information to you?
Ms Poole: In writing.
Mr Tilson: You and I probably have one thing in common, and that is probably all. That is that we are both lawyers. Shakespeare said, of course, that the first thing we have to do is get rid of all the lawyers. You are now saying, it would appear, that the second thing we have to do is get rid of all the landlords, which leads me to my first question, a question you have heard me ask other witnesses as you have been sitting here this morning. It is a philosophical question, which may not be yours personally, but at least from observations you have had in discussing matters with your clients. That is, should government own all rental housing accommodation?
Ms Giroux: I am prepared to answer that one. No, government should not own all housing. There is a place for private landlords, but not those who see it only as a commodity for buying and selling and making a huge capital gain.
In the Hamilton Spectator yesterday, one of the leading members of the landlords' association in our region, which extends down to Niagara, says that these poor landlords who thought they were entering into a nice retirement investment, something that would keep them a bit occupied when they retired and bring in some nice money, are disappointed. I am sorry, that is not what you get into this venture for. Housing is a right. People consider these places their homes, and their homes are not just a retirement investment, a nice little investment. If the big developers are unable to build affordable housing, I think there are very innovative ways to encourage them to do that. I think land deals, development rights, building permits, etc, could be tied to providing a mix of affordable housing in new projects.
As far as encouraging other affordable housing projects is concerned, I think smaller-scale responses are required. In the Hamilton-Wentworth region we have a task force on affordable housing which is coming out soon with a report. It will have great details which we will be bringing to the government's attention, and I hope you will look at those for more complete responses.
But already the intensification issue has been a major one in the province. Small home owners are finding innovative ways of helping them to pay the mortgage and housing other people who need small, affordable units. That is the kind of thing we should be looking at. Redevelopment, intensification of old warehouses, things that are going to make it cheaper and easier to build affordable housing. That is where small, private people with the right attitude about housing, seeing it as a decent place and, yes, a business where they can make a tidy profit, would be encouraged to enter into further developments.
Mr Tilson: Thank you. You have confirmed what I understood your philosophy to be. Following Mr Brown's questioning, on the comment that landlords are not complying with municipal bylaws -- I think that is what you said -- could you clarify that? Are you telling me that the municipal officials are not enforcing their bylaws? What are you saying?
Ms Giroux: I am saying that to some extent. I think they, too, complain that they are understaffed and under-resourced, but I think they also have their priorities mixed up. I think the province would do well to direct municipalities to make enforcement of property standards a high priority and empower them to actually prosecute landlords who are not complying and ensure that there are ways of bringing buildings up to standard where landlords simply refuse to co-operate, namely, already in place as I understand it, suggestions such as doing the work or hiring contractors themselves and then deducting those costs from the landlords by way of either additional tax levies or penalty fees. There are all sorts of ways it could be done.
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Mr Tilson: What municipalities specifically are not enforcing their bylaws?
Ms Giroux: I am from Hamilton and I can say that Hamilton-Wentworth's municipalities are not adequately enforcing their property standard bylaws.
Mr Tilson: Have you, as a solicitor acting on behalf of tenants, or your legal community services clinic, made representations to the city of Hamilton on that matter?
Ms Giroux: Certainly. I am also a member of that task force on affordable housing and pressing very strongly for that. But I am one solicitor in one of three legal clinics which each have one lawyer devoted to representing tenants, and basically those are all the representatives the tenants have in that community.
Mr Tilson: I think that leads to my final comment. We have a system that has become very complicated. The very fact that tenants have to hire lawyers to go through very complicated procedures, from which they are not receiving benefit, is a terrible thing. Hopefully, this green paper being introduced will do away with much of the bureaucracy that has been implemented in the past and will not create more bureaucracy.
The second thing, Mr Chair, is with respect to the comment you have made that perhaps there are more groups, more tenant groups, more landlord groups who wish an opportunity to be heard. I again emphasize that we are obviously getting into an area that is beyond Bill 4, and that hopefully the area being set aside by this committee to deal with the green paper will be devoted to Bill 4 as opposed to strictly the green paper.
Mr Duignan: Thank you for coming here this morning. I want to talk a little about pass-throughs. We have had a number of landlords come in over the last couple of days and say that because Bill 4 no longer allows pass-throughs there will be no financial incentive to maintain the quality of their rental accommodation. However, Bill 4 is not new government policy. The present Liberal legislation allowed pass-throughs only when there was ongoing and deliberate neglect. As only 15% of landlords apply for increases above the guidelines, do you agree that the majority of landlords will be unaffected and should continue to maintain their buildings in the same manner as before?
Ms Giroux: My general impression is yes. You touched on ongoing deliberate neglect; if I could touch on that, too. Ms Poole mentioned some proposals and I do support some of the ones she presented. The present section in the act on ongoing deliberate neglect has proven completely void of meaning, partly because boards have been unwilling to give it any meaning but also because it is very difficult to prove. I think her suggestion that no guideline increase at all be allowed where landlords cannot provide or come to a hearing with a complete bill of health, some kind of order from the municipal property standards branch saying they are in substantial compliance with property standards, would be a good idea.
Mr Duignan: That exists through the present Landlord and Tenant Act and the fire code and the residential standards act. The government can compel landlords to maintain the buildings under those acts, correct?
Ms Giroux: In theory, but they are not doing it.
Mr Drainville: Mr Brown indicated his doubt. I think it would be fair to say, that thousands of tenants have -- you did not indicate that?
Mr Brown: If I might just clarify that. I was not expressing doubt. I was asking for some statistics. When you make a statement, I presume you have the statistics to prove it. Otherwise, it is a conjuncture.
Mr Drainville: It might be conjuncture, but do you have a doubt or not? I just want to understand, because if you do have a doubt, I want to do something about it.
Mr Brown: I want to know what the facts are.
Ms Giroux: If you just took every unemployed person, every disabled person, everyone receiving social benefits of any kind, and there are many in the province living in rental housing -- or just looked at the numbers statistically that many of the ministries of the government must compile -- and asked them how they could afford to pay $1,400 retroactive rent increases, that will give you your answer. Those people cannot, and unless the landlord is prepared to waive it, they are out.
Mr Drainville: Mr Chair, I wonder if we as a committee could ask all the tenants' groups that have been here, particularly the legal aid clinics, to bring, to the best of their ability, statistics indicating the number of people that they have worked with who have been evicted because of what we call economic eviction. I think that kind of attempt to bring together those kinds of figures is helpful and germane to this discussion because I think it has been raised, I must say, by landlords who have been before the standing committee, it has been raised by them that really the problem is a matter of lack of income. Many of them have even indicated that there is no such thing as economic eviction. I think we need to deal with this on a straightforward basis, and there have been many requests for information. So I would ask, if you would, Mr Chair, through you to the tenants' groups that have been here, to indicate our need for such statistics, as much and as clearly as they can present them to this committee; in writing, of course, not to come back before this committee.
The Chair: Do you want us to go back to the groups that have already appeared and all groups that will appear?
Mr Drainville: Yes, that is right.
The Chair: And that is for all groups, both tenant and landlord spokespeople. We should make a request of everyone.
Mr Drainville: Basically. I think the view was that tenants are being evicted economically. The question was, how do you know that there are thousands? I think we need to clarify that, and one way of clarifying is by getting those kinds of figures from the tenant groups.
The Chair: I will have staff prepare a letter.
Ms Poole: I just wanted to make one addendum to that. I would like very much to get the statistics. I know there have been many economic evictions, and I would like to see it backed up by statistics, but I also think it is important we get the full picture. So at the same time, if the tenant groups that are presenting do have any statistics as to tenants who have been economically evicted and have not paid the back-owing rent, if they have any statistics on what the amounts of the back-owing rent that the landlord forwent in those circumstances, I think that would give us two sides of a very distressing picture. That is only if they have that information. If they do not, that is fine.
Ms Giroux: Collecting that information would be so difficult.
Mr Brown: On this point I think the information would be very useful, but for it to be meaningful all groups have to be talking about the same thing. So some definition of economic eviction has to be presented, otherwise we could be comparing apples and oranges very easily.
Mrs Y. O'Neill: I feel that we have to ask the ministry officials the best way to obtain this information. I really do not think it is terribly meaningful. The individual presenters have not had a lot of experience dealing with government. I think Mr Brown's statement is very relevant. They will know what we mean when we ask for eviction orders or people who have skipped, and likely they will have some data on this. If they do not, they will be able to tell us how to get it. They have regional offices throughout this province. We have a lot of work for our clerks and I think we should at least get advice before we move on this one. I think it is very relevant information, and I want it to be as meaningful as possible when it arrives here.
Ms Poole: Might I suggest the steering committee could deal with this and then report back to the committee.
The Chair: I do not know when the steering committee would meet unless we decided to come back tonight at 8 o'clock.
Ms Poole: I was going to say I am sure that at midnight members must be available, because surely our committee will not sit beyond that.
The Chair: Before I see if I have a consensus, is there any advice I can have from ministry staff? Is there anything staff can tell me on these requests? Then we will have Ms Giroux give us some more advice.
Ms Parrish: I think we would have to sort of go back to the ranch and see what we have got. There may be some material that might be helpful from the Thom commission and so on, but I think some of this material will be difficult to obtain. We could also contact our colleagues in the Ministry of the Attorney General who administer the Landlord and Tenant Act. The problem will be that it is not always apparent why people have left. It is going to be difficult to extrapolate, for example, when you get someone who is evicted because he has not paid. You would have to sort of correlate that to a recent rent increase or retroactive payment. We will certainly do our best to find out what the data sources are that do exist about landlord and tenant turnover. We do have some statistics about basic turnover. We will do our best.
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The Chair: Mr Drainville, do you still want me to proceed by writing basically a form letter to all the groups that have appeared and the ones that will appear?
Mr Drainville: Let me say that what I find interesting is the kind of addenda that have been put on to this request, because quite honestly, there are many ways of being evicted economically. One of the ways is by, when the lease comes up and knowing that you cannot afford to pay it any more, moving out. The point is that when the person who was making this very fine presentation made it to the committee, to say that there have been thousands of economic evictions, I do not think, is a statement that really needs a lot of corroboration. I mean, any of us who has had any dealings over the years with problems around tenants and landlords have seen in our own cases scores and even hundreds of people who have had these kinds of problems. To say that there are thousands in the province of Ontario is to make the understatement of the year.
The point I want to make in all of this is that I do not think those kinds of statements need to be challenged, but if they are challenged, in my view then all of a sudden you should not come up with a definition that will preclude a great many things and add to the definition, because it is going to be difficult enough to come up with the information to begin with. My feeling at this point is that it hardly benefits us if we are going to define it so particularly, as the opposition has indicated. I think the point has been well made and I do not think we need to go any further with it.
The Chair: How would it be then, if that is the case, if we just have ministry officials go back with some suggestion that a review of the Thom commission data would, or may, add some information to this? We will take that as a first step, and then the committee can consider other steps when we receive that information. Ms Harrington, you have one minute.
Ms Harrington: I appreciate your statement that the previous bill has been an administrative nightmare. As a lawyer, I am sure you have gone into that. Your recommendations here, in very much detail, are appreciated, and I would refer you to our ministry staff person with regard to some of your questions. I believe she can answer some of them immediately.
Your statement that apartments are not just investments but they are homes and that they are a right and that this involves a change of attitude, I would like to underline that. That is why this government is here.
I had one question. As a lawyer, how would you view the retroactivity of this bill?
Ms Giroux: I think my paper outlines that, particularly in a section entitled "Retroactivity of Orders." I see that as touching on the fundamental problem of rent control legislation, and that is affordability, now and for the future. How do you guarantee that? If landlords get the increases, even if they continued to get 11%, 12% average increases across the province, people's real incomes just are not going up that high and neither are social benefits. So how do you address the affordability problem? I think we have to put an end to that continuing, spiralling increase. There has to be another way, and I think my paper does outline some of those specific things that could be done to control that spiralling effect.
Ms Harrington: Would you feel that the retroactivity that is involved in this bill is out of line?
Ms Giroux: Definitely. If you mean the application to October and the voiding of orders, no. But if you mean the possibility that it is going to take a year or two years before the applications, whether under the old legislation or under the new legislation, get processed and result in increases maybe smaller than what we have seen on average but nevertheless above the guideline, then we are going to be facing the same affordability problems and people being evicted.
Ms Poole: This should take a very short period of time. I would just like one other item of information from the Ministry of Housing staff. Could we please have the breakdown of multi-residential housing starts by the private sector on an annual basis over the past five years? And could we also have condominiums included in that?
I do not know whether there will be any breakdown available as to the number of condominiums that are actually used as rental. My understanding is that the vast majority of condominiums dealt with over the last five years are being used as rental accommodation. I would be pleased to go over with ministry staff any particulars relating to this.
Mrs Y. O'Neill: Mr Chairman, will we be getting our new calendar for next week this afternoon?
The Chair: I put that on a rush and the clerk is working very, very hard and has been all morning. I hope to have something very substantial to present to the committee this afternoon. We will resume at 2 pm.
The committee recessed at 1237.
AFTERNOON SITTING
The committee resumed at 1403.
STEEPLEJACK AND MASONRY RESTORATION CONTRACTORS ASSOCIATION OPERATIVE PLASTERERS AND CEMENT MASONS' INTERNATIONAL ASSOCIATION LOCAL 172, RESTORATION STEEPLEJACKS
The Chair: The first presenters of the afternoon are listed as Steeplejack and Masonry Contractors Association, and OPCMIA, Local 172, Restoration Steeplejacks. You have been allotted 40 minutes for your presentation, 20 minutes of which will be for an oral presentation or a visual presentation for the committee, followed by another 20 minutes of questions and answers. I would ask that the delegation introduce themselves and also acknowledge for the record what positions they hold with any of the organizations they are representing. We will turn the floor over to you; you have until almost 2:25 for your oral presentation.
Mr MacKendrick: Peter MacKendrick, president of the Steeplejack and Masonry Restoration Contractors Association.
Mr Kinsella: Jerry Kinsella, business manager and financial secretary of OPCMIA, Local 172.
Mr Wice: Tony Wice, with Steeplejack and Masonry Restoration Contractors Association.
Mr MacKendrick: To begin, I would like to thank the standing committee on general government for the opportunity to make this submission.
We have not come here today to make recommendations or demands about the recent amendments to the rent review process, but to let the committee know of the devastating effect the latest amendments have had on our industry. We understand and support that these amendments were introduced to eliminate luxury renovations whose sole purpose was to jack up rents as much as possible. While the amendments stopped the luxury renovations, they have also stopped hundreds of projects meant to repair and maintain these structures. These restoration projects create the work for our employees, the members of Local 172. Now many of these men are unemployed. Stopping these projects has also compromised these buildings' structural integrity, threatened public safety and reduced their energy efficiency. There is an enormous difference between luxury renovation and structural restoration.
I would like to acquaint the committee, by way of slides, with the type of work we perform. As our names suggest, we do masonry and other related work on the exterior of buildings, often 20 or 30 floors in the air. This work might typically consist of the removal and replacement of bricks, the repointing of mortar joints, the adjustment to steel shelf angles that hold brick panels on the wall, the repair of deteriorated concrete walls, floor slabs, balconies, the repair of stonework, the recaulking of windows and other necessary joints.
At this time I would like to dim the lights and show the slides.
What we are looking at are deteriorated brick panels on the side of an apartment building and the work that is going on to restore them. These are just other details of deteriorated bricks, concrete work.
These are close-ups. You can see the deterioration that is due to frost/thaw cycles, moisture getting into the bricks, freezing, popping off. Again, more details of the sort of damage that is typically found on a lot of apartment buildings, whether they be rental or condominiums.
This is a picture of a bulging panel. I do not know if you can see that on the left side of the panel there is a bulge in the brick. There is a phenomenon known as "shrink and creep," where the concrete substructure of a building actually shrinks with age and the masonry panels expand. It creates a pressure whereby the masonry panels want to expand, and when they are compressed what tends to happen is that they push out. You can see the beginning of that bulging.
Here you can see the side of a panel where the bricks have been removed. It has actually bulged out about two and a half to three inches and is in a very precarious state of falling. This one was about 20 floors above the ground, above sidewalks.
Here you can see a crack in a structural column. Again, this is about 20 floors up. Here you can see where some brick panels have actually bulged off the wall. Until they could be repaired, they had to be secured with wood and steel beams because the bulging was so significant that there was a potential they could fall at any moment.
Here is an opening in one of these panels. You can see that there is a steel shelf angle there and you can see on the bottom how much the brick panel has actually bulged out. That bottom brick panel should be flush with the top one. The space between the top of that brick and the shelf angle should be about half an inch. It is probably about two and a half to three inches.
The slide does not show it well, but this is an area where the bolts holding the shelf angle have to be resecured. They have rotted through and have to be replaced. The third balcony up shows the deterioration of the concrete. You can actually see right through it. Again, the corner has been eroded away. The front has eroded away. You can see the efflorescence on the bottom of the balcony. You can see the cracks just inside from the drip. You can see the sections where pieces have already fallen off and fallen down.
This is the removal of the top of a floor slab of an underground garage that had totally deteriorated and had to be completely replaced. The men have saw-cut it and then will pull it out with a crane. You can see on the bottom of this piece of concrete how badly deteriorated it actually is. This is concrete that has totally eroded away through wear and tear.
Here is an underground garage that has to be supported because the structural engineer felt it was deficient to the point that it could collapse. This is the underside that shows the type of deterioration of water and salts and stuff eroding through the slab. More examples of the deterioration of the underside of an underground garage parking slab.
As you can see from the slides, the work we do is not cosmetic. It is of a structural nature, often done under the supervision of a professional engineer. The committee might also be asking: Could these repairs not have been avoided through proper maintenance? The answer is no. From the mid-1960s to the mid-1970s this province saw a dramatic increase in the number of structures built that were over six storeys in height. Many of these buildings form a large part of our existing affordable rental stock. At the time these buildings were built we were unaware of many of the forces causing these buildings to age and deteriorate. We somehow thought these monolithic structures of modern architecture were impervious to the elements. Unfortunately, they are not. They are in fact subject to tremendous forces. These forces include high winds and penetrating rains, frost/thaw cycles, the creep and shrink phenomenon and attack by an increasingly more aggressive environment.
Over the past 25 years, we have gained new knowledge about these forces, how to analyse what is happening, the repair methods and equipment that work and those that do not. This new knowledge of the forces that affect building structures has led to the creation of a new high-technology service industry that deals with these problems. Ontario is a world leader in this field, in engineering, product development and manufacturing and repair methods. Much of the knowledge gained to create this cutting-edge technology was developed while working on our rental housing.
Until recently, we were an expanding industry that had excellent growth potential even in these recessionary times, our market being the restoration of buildings that were built more than 10 years ago. We employ highly skilled, well-paid tradesmen in a labour-intensive industry that is using sophisticated and expensive equipment. Unlike new construction, which has high material costs, our work is labour-intensive; 70% to 80% of total job costs are our labour costs. Our average hourly pay rate, including apprentices, is $23.87 an hour including benefits. Over four years ago, recognizing the evolving sophistication of our industry, management and labour set up and developed a four-year apprenticeship training program to better train the men and women who work in the restoration business.
The companies involved in our association have also made large expenditures in capital equipment to keep their operations efficient and cost-effective in a competitive marketplace. An example of these expenditures is the cost of one swing stage, a piece of suspended access equipment for two men to work on. The cost including motors, platform, beams, counterweights, ropes and cables is approximately $20,000. This equipment also requires between $2,000 and $3,000 of maintenance work annually to ensure that it is in proper working order and running safely. Several companies in our association employ upwards of 50 men each, so you can see the type of expenditures they are making for their suspended access equipment plus tools and other equipment.
These companies have made heavy financial commitments to this equipment on the assumption that the buildings deteriorating and needing restoration work would have the work done. The recent amendments of the rent review process have effectively closed the rental sector for business. Since the rental sector represents 52% of our business, it has the potential of seriously jeopardizing the financial stability of our companies. This is because of the commitments these companies have made in capital equipment.
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The result is that the companies will have to carry on in a reduced capacity. The real danger is not that the companies cannot survive operating in a reduced capacity, for they can, but that the companies will lose their highly skilled and highly valued tradesmen. The companies have spent a great deal of time and money training these tradesmen to do this very specialized form of work. These men have families and mortgages and cannot afford not to be working for a two-year rent review moratorium. Many will likely find employment elsewhere, because they are skilled tradesmen. The cost if these men are not put back to work is astronomical: the cost of retraining these lost workers, the cost of unemployment insurance, the cost of lost tax revenue, the potential cost of some of these men going on welfare.
At this time, I would like to turn the proceedings over to Mr Kinsella so that he may explain what a valuable resource we are potentially losing.
Mr Kinsella: I wish to thank this committee for the opportunity to present the concerns of the brothers and sisters of Local 172, restoration steeplejacks, chartered in 1966 as high-rises became the norm in urban centres; the eventual repair work to these tall buildings and the recognition that these people working 200, 300 and 400 feet above the ground needed to be organized, formed the basis of the beginning of Local 172.
While the underlying principle of the government's moratorium and review of rent controls is justified, we believe the application of these restrictive policies on such a broad base has created ramifications not considered. Approximately 80% of restoration work is in high-rise residential, of which 40% to 50% is on rental units. Not to make a distinction between unnecessary renovation and justified restoration has placed the structural integrity of buildings at risk, thus the safety of tenants and the general public.
Because restoration work is essential and therefore ongoing, during recessionary times our trade has not experienced downturns. During the present recession, the restoration trade was the one light at the end of the tunnel for the construction industry.
Because of the advancements in research and development of materials and methods over the past decade, the restoration trade is experiencing year-round employment. One year ago our employers actually increased their workforces. January historically has always been a month of winter layoffs.
Because of this trend towards a more constant work environment within the trade, we have developed a more dedicated, long-term, highly skilled, experienced and better paid workforce. People are looking to the restoration industry as a lifelong trade. Local 172 and the Steeplejack and Masonry Restoration Contractors Association recognize the need for an ongoing training program to keep abreast of the quick-paced technical advancements taking place in the industry. Therefore, in 1986, a labour-management committee was formed to outline and enact a four-year apprenticeship program.
Our tradespeople must be capable of rigging suspended access equipment, setting up stationary scaffolding, sandblasting, cleaning, waterproofing, caulking, pulling and joining, grouting, repairing masonry, concrete, stone, granite and marble. They also receive workplace hazardous materials information system training, first aid, cardiopulmonary courses and advanced safety courses.
Because the restoration industry has grown so quickly in the past few years, there is a large non-union sector. Local 172 has identified these companies and had an active organizing campaign in place.
The short-term concerns of Local 172 regarding the recent legislation are as follows.
Unemployment: On 1 December 1990, Local 172 had a 3.2% unemployment rate. As of Monday 14 January 1991, we were experiencing an unemployment rate of 60%. This represents an increase in unemployment of 1,875% in less than two months. This is all related to job-site shutdowns or cancellations, and I expect the unemployment rate in the restoration sector to soar to 85% by the end of January. In addition to these already staggering unemployment figures, there is a ripple effect even within Local 172. The related industrial sector of Local 172, companies that manufacture and rent suspended access equipment, have traditionally never had layoffs. In the past week, for the first time the industrial sector went from zero unemployment to 7%. These layoffs were directly related to lost jobs in the restoration sector. More layoffs are expected in the industrial sector. Because both the restoration and industrial sectors are skilled tradespeople with families to support and rents and mortgages to pay, a layoff beyond March of this year could see these valued workers lost to the industry for ever.
Financial: A reduced workforce puts a financial burden on the local, while a lost workforce threatens the local's viability. Programs and activities will have to be reduced and/or cut entirely.
Apprenticeship program: Due to the lack of funding, major sections of the program would have to be eliminated.
Organizing: Local 172 had to put its organizing efforts on hold, thus losing the momentum and cost of the campaign to this point.
Safety: Because of these cancelled contracts, the structural integrity of some of the buildings is at risk, thus creating a safety hazard.
Research and development: Ontario's temperate location has made it ideal for research and development of materials and procedures. Manufacturers and suppliers will feel the ripple effect of unemployment and lack of contracts in the restoration sector. Ontario could lose the research and development for which this industry has become world renowned.
Although the short-term effects the recent legislation has had on Local 172 and its membership have been costly, the long-term effects would be disastrous.
At this point, I would like to turn the proceedings back over to Mr MacKendrick.
Mr MacKendrick: Due to these amendments to the rent review process, members from our association have had 15 projects stopped, cancelled or put on hold indefinitely. This has meant the permanent layoff of 60 men. Employment from the companies in our association on 17 January 1991 is only 36% of what it was on 17 January 1990, and this represents only the work carried over from 1990.
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This is only the beginning of 1991 and not all the work done this year would have been tendered, but already members from our association know of $9.98 million worth of work in the rental sector which had been scheduled and is now cancelled. This $9.98 million translated into human terms represents 206,000 lost man-hours of work, 5,150 lost man-weeks of work, 103 lost man-years of work, and today is only 17 January, less than two months since these amendments have come into effect.
Another very important point that must be put into perspective is the fact that our association and Local 172 are only a very small component of the restoration sector. We represent only 10% to 15% of the restoration work that is going on in the greater Metropolitan Toronto area. The lost jobs we are talking about here are highly skilled, well-paid jobs in a labour-intensive service industry that simply do not have to be lost. There are hundreds of buildings in the province of Ontario that require major restoration work.
When I think about these lost jobs, I reflect upon what Premier Bob Rae said on 11 January while addressing the Financial Services Institute: "Everybody, including the financial institutions, must understand that jobs are important." The Premier said, and I am paraphrasing here, that the government of Ontario was not going to stand by and allow jobs to be lost during the recession, even if that meant a higher deficit. He later went on to say that he expected the financial institutions to pull together with government in saving jobs, "play an effective role...in fighting the recession."
He also said, "and I am stressing the importance of partnership." I would also like to stress the importance of partnership.
We have to work together and find a way to put these men back to work. Whether this means by allowing the landlords to capitalize the costs of structural restoration work through the rent review process or some form of tax credit or a type of granting process, it matters not to us how this is worked out, but it is absolutely imperative that we work in partnership to find a solution so that we may put these skilled tradesmen back to work without delay.
Mr Mammoliti: My first question is addressed to Mr Kinsella. Are you the president of the local union?
Mr Kinsella: No, I am the business manager and financial secretary.
Mr Mammoliti: It is nice to see that labour and management are working together, even though it is a negative situation. It is unfortunate. I wish that labour and management could work together this way at all times. I too come from the labour movement. I was the president of a local union for six years prior to the election.
I would like to ask you whether or not you have a COLA clause in your collective agreement.
Mr Kinsella: No, we do not.
Mr Mammoliti: Have you ever tried to negotiate a COLA clause?
Mr Kinsella: No, we have not. I am not sure of the total history of the negotiations because I was only on two negotiation teams prior to my taking over this position and that was just prior to the last round of negotiations, so it has only been the last six months.
Mr Mammoliti: Then I will get to my point. Most of the unions in Ontario have tried to negotiate a COLA clause and have been successful for the most part; a lot of them have not. There is a reason for that. We in the labour movement think it is important for a cost-of-living increase, whenever there is a cost-of-living increase. I just cannot see, myself, why tenants are forced to pay double, if not triple, the cost of living in their rents, and that is happening.
What would you have to say about that, being the representative of all these workers and wanting to be fair to the workers? What would you say to me when I ask you, what is fair for the tenants? Should they have to pay this rent?
Mr Kinsella: I would say half of our members are in rental units, the other half of course own their own homes. I am just guessing at that, but it seems to be reasonable.
It has been discussed among the membership just in the most recent past since this amendment has gone through, which of course they have a different light on. To address your question in a broader sense, no, we were not, from our standpoint, even considering where the funding was for what we consider very serious repairs to the high-rises until of course this issue came up. So there has been a lot of discussion.
We feel tenants should not have to bear the burden of the total cost. Unfortunately, society has demanded these high-rises and it has only been within the last 10 years that we have really recognized the causal effects of the deterioration of these high-rises. Just as I am sure everyone here is aware of the deterioration in our road system, our bridges, and the prime example of course is the Gardiner Expressway, in some cases it would be cheaper just to bring the whole works down and start over again, but unfortunately we are stuck with the repair. The costs have to come from somewhere.
We are not financial experts, but it has been tossed around that part of the cost could be absorbed by tenants beyond the recognized 4.6%, 5.4% increases, it is not for us to say where, but with a cap, and that could be shared along with the provincial tax credits or grants. These were just things that were tossed around among us. Directly our brothers and sisters have said, "I would rather be out there working and pay an increase than sitting at home wondering where my next rent is going to come from." It is really not a win-win situation that they are in right now.
The general consensus is, because society has demanded these types of structures, perhaps society should share in the cost of repair to these structures. I hope that answers your question.
Ms M. Ward: Can you tell me how many people are employed in your industry?
Mr MacKendrick: In our industry or our association?
Ms M. Ward: Could you give me an idea of both? I realize you might be guessing as to the non-union.
Mr MacKendrick: Members in our association probably employ, peak times, probably about 150 to 175 people. I would estimate there are probably at least 10 times that involved in other related restoration work. That really does not include the underground garages, where we do not do a lot of work. We do some minor work but most of our work is done on the exterior, on the sides of buildings. Traditionally, we were steeplejacks, as the name indicates.
Ms M. Ward: So the 10 times would include how many other types of restoration work?
Mr MacKendrick: It is the same companies. They are just not in our association. We bid against these companies, but for one reason or another they are not in our association.
Ms M. Ward: Mainly involved in the structural repairs.
Mr MacKendrick: That is right.
Ms M. Ward: You said you do not work in the garages.
Mr MacKendrick: We do not do a lot of work in garages. We do some work.
Ms M. Ward: I wondered whether there was any self-governing of the quality of work that is done, aside from any municipal requirement.
Mr MacKendrick: What happens to a lot of the work, whether it is either condominiums -- and we do work on condominiums as well as rental -- the owners usually have a professional engineer come in and do an investigation of the situation. They then propose a scope of work. They then put a tender document and tender the work. The work is awarded to a contractor. That work is then supervised. They then come in and determine what is taken out, what is removed. They then approve that it has been properly removed, that all the deteriorated concrete or brickwork has been removed. We then do the repair work. They then approve that it has been done according to the specifications in a proper manner and they are using the Ontario Building Code and things like that.
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Ms M. Ward: That is that original engineer.
Mr MacKendrick: That is the original engineer who would go through the whole process.
Ms M. Ward: Okay. The reason I ask that is because I have heard stories of garages being repaired and then being repaired again and again and it has not been successful.
Mr MacKendrick: Part of that in the beginning of the industry was, it is a new technology. A lot of these things we did not understand. We did not understand what salts would do to the structures. Okay?
Mr Duignan: Given that the present Liberal legislation allowed pass-throughs only when there was ongoing and deliberate neglect and since only 15% of landlords applied for increases above the allowable limit, did you feel that the present layoffs and work not followed through right now is a political ploy on behalf of the large landlords?
Ms Poole: On a point of order: I wish Mr Duignan would just explain that first statistic, which I have never heard of in my life, about ongoing, deliberate neglect being the only thing allowed to be passed through the rent review, which constitutes 15% of the cases.
Mrs Y. O'Neill: I have the same question. I would like an answer from the ministry on that, because that is not what was said yesterday.
The Chair: I am not sure if it is a point of order.
Mr Mammoliti: I am not sure if that is a point of order, Mr Chairman.
The Chair: It is certainly a point of information. I will add the time back to Mr Duignan. Up until now, when there has been concern over statistics and/or very specific policy matters, I have allowed ministry staff to come forward to offer whatever information they have. I have been very tight with the time. I will continue to be. I am not going to allow this discussion to go on for any long period of time. We will allow that one question to be answered and then I am going to allow Mr Duignan to finish.
Mr Duignan: Since this legislation allowed pass-throughs only when --
The Chair: Excuse me. I was going to allow ministry staff to give us some information. Then I will turn it right back to you, sir.
Mr Harcourt: Sorry. Could you repeat the question about ongoing, deliberate neglect?
Mr Duignan: Since the present Liberal legislation allowed pass-throughs only when there was not ongoing, deliberate neglect --
Mr Harcourt: Only when there was not ongoing and deliberate neglect.
Mr Duignan: When there was not ongoing and deliberate neglect.
Ms Poole: It is the "not" that I do not believe was there the first time.
Mr Harcourt: Okay. That is correct. There was pass-through allowed except in situations where ongoing, deliberate neglect was found, so you are correct.
The Chair: You have got 30 seconds.
Mr Duignan: Since that is the case, do you believe the present layoffs are a political ploy on behalf of the large landlords to kill Bill 4 or radically alter it?
Mr MacKendrick: I cannot really say. All I know is that we had jobs that have been cancelled or lost. I think that is for other people to determine whether they are political ploys. The reason we are here is that we have lost a lot of jobs and we have to put men off. I had men I thought I would have working through the winter period. I had told them that. The legislation was announced; the next day we get a phone call, that job is cancelled and I lose work for 12 men. I cannot say. That is something that somebody else --
The Chair: Thank you very much.
Mr Mammoliti: Point of privilege, Mr Chairman: I would just like perhaps if you would let us know who wants to speak, on our particular side anyway, so that we can determine how many questions we would like to ask.
The Chair: I usually do rattle off the names.
Mr Mammoliti: Just for my own benefit, that is all.
The Chair: I certainly will continue to do so.
Ms Poole: I would like to thank you very much for your presentation today. You have very graphically illustrated some of the problems that you perceive in the bill and what it will do to your industry.
First of all, Mr MacKendrick, there was a statement in your brief about whether these repairs could have been avoided if there had been proper maintenance. We have heard at least two presentations by tenant associations where they have claimed this is the case, and in your brief you emphatically have stated that in the work you are referring to, deteriorating brickwork, masonry, corroded underground parking garages and rusted-out balconies, that proper maintenance would not have cured the problem, that at some stage the weather, the conditions of our Canadian winters, and just the aging process would have meant these things have to be replaced and retrofitted. Would you please comment on that?
Mr MacKendrick: A lot of the work that we do is part of an aging process. These structures absorb water. The water goes in because of our climate. We get a lot of temperatures where it goes above freezing on a day like today; it may go below at night. The moisture in the wall systems freezes, it expands, it puts tremendous force there.
There is an ongoing aging process, the creep-shrink phenomenon, that was not recognized when a lot of these buildings were built. There have been remedies to rectify that in new structures, but we did not know about it. It has created a series of problems within the industry that were new and developed and are part of the new technology.
If I can make an analogy, it is like your car. Your muffler eventually just wears out and there has to be work done on these structures. They are not impervious to the elements. They absorb water. There are tremendous wind forces ongoing there.
Ms Poole: One further question along that particular line. Mr Mammoliti and I had an interesting in-camera or out-of-camera debate yesterday when we talked about underground parking garages. Mr Mammoliti was of the strong opinion that with proper maintenance they would not have to be retrofitted and this major work would not have to be done.
My understanding is that when these parking garages were done 20, 25 years ago the technology was such that it did not protect against rusting of the reinforcement bars that are in the concrete, and that no matter how many times the landlord waterproofed the sides of the garage or anything else, eventually this corrosion from salt, moisture and everything else would get to a stage where massive expenditures would have to be made. Would you comment on that?
Mr MacKendrick: That would be true of structures built today. In something that is built today, we know how to defend against that sort of attack. It was not true of the things that were built 20 or 25 years ago. One of the big problems is the latency of salts in the structures now that have an ongoing effect. The problem is they are in there now, we did not know about it, and there is not much we can do. We have to deal with sort of a containment issue dealing with the problems there. That is one of the ongoing problems. A lot of engineers will do tests to test how much salt is actually in the concrete.
Ms Poole: Since almost two thirds of our housing stock was built prior to 1970, many of the buildings are in this situation.
Mr MacKendrick: Yes. That is why you are seeing a real sort of explosion of the type of work that has to go on, because there is a real thing that happens at 20 years to a building in terms of the type of work that needs to go on, and it is not just the rental stock but it is the office buildings, it is the condominiums, it is all the structures that were built 20 years ago. They are having to undergo major restoration. I do not think there is a large structure in this province of that age that will not have to go through some sort of major restoration project, both on the walls and the underground garage.
Mr Mammoliti: On a point of order, Mr Chairman: I am not too sure about whether somebody can bring up a private discussion at these hearings. If so, I should have a chance to say something, I would think.
The Chair: I believe you are correct.
Ms Poole: Not out of my time.
The Chair: I will give you back your time. If you would like to make a comment on that, I will allow it, not in the form of a question but in the form of a rebuttal.
Mr Mammoliti: We did have the discussion and I referred to the delay of corrosion and what preventive maintenance could do to delay the corrosion. We brought up waterproofing and that sort of thing. My discussion also touched on the neglect of landlords by perhaps not using calcium as opposed to salt on their driveways to prevent this from happening. I think that should be pointed out as well in the question, and that was not pointed out. I think it should be.
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The Chair: Thank you very much. Ms Poole, please continue.
Ms Poole: I guess if people only drove in landlords' driveways, then maybe the calcium would help, but we will also have to look at the other roads.
I would like to ask a question of Mr Kinsella. You mentioned in your brief that unemployment in your sector went from 3.2% on 1 December 1990 to 60% on 14 January 1991, less than a two-month period. What percentage of this would you attribute to a downturn in the economy and what percentage was a direct result of Bill 4?
Mr Kinsella: I think in my discussions with Mr MacKendrick we arrived at a figure of 60 people directly as a result of the new legislation, so the balance would be either due to seasonal or the downturn. In the past few years we have not experienced a high unemployment rate, even through the winter months, except when it is extremely cold or the conditions are not conducive to work with concrete or concrete products.
We have traditionally, because of recessionary times, even back in the early 1980s, had an ongoing employment rate, other than weather causes, because people tend to turn towards fixing what they have, rather than turning and trying to invest in something new when the economy turns down. So the rate of unemployment, I would expect, in a normal winter would be running between 15% and 20%. I guess that would be the difference and I am expecting by the end of the month that it would be around 80% to 85%. So around 60% would be attributed to cancelled work in the rental.
Ms Poole: As a member of the union movement, which traditionally has been perceived to be quite close to the NDP, you are saying that you could not support this piece of NDP legislation?
Mr Kinsella: No, I am not saying that because --
Mr Mammoliti: On a point of order, Mr Chairman: I have a problem with that statement, "perceived to be" supporters of the NDP. What kind of a statement is that for this kind of a hearing? The question should be --
Interjections.
Mr Mammoliti: Come on. Be realistic.
Mrs Y. O'Neill: You just it said yourself.
Mr Mammoliti: At what time did I or anybody else on this side of the committee refer to landlords as supporters of Liberals or the Conservative Party? Let's have the same respect, please.
The Chair: That was not a point of order.
Mrs Y. O'Neill: I think I have a moment to make a remark.
The Chair: Yes, I am keeping track of it very carefully.
Mrs Y. O'Neill: Mr Chairman, I would like then to say to these gentlemen, I know of what you speak, because there is a major building in my constituency that has this problem and has had your service. The thing I think that is most important about your presentation is the job loss, but what it is going to do for the tenants in the buildings, and you say most of your work is residential, is that it is going to create unsafe buildings. That bothers me. Your work is connected with safety. It is structural safety and it cannot be neglected. I find that this presentation does not emphasize that even as much as I wished it would. I think yours is an essential service. They are essential repairs. They have absolutely nothing to do with frivolity or luxury, although they are very expensive. But they have to be done because it is certainly much more expensive to build new stock. That is all I have to say.
Mr Turnbull: Mr Kinsella, Mr MacKendrick said that the renovations that you do are not of a luxury nature. Is that correct?
Mr Kinsella: We do not do renovations. We do restoration. There is a distinction.
Mr Turnbull: Yes, surely. Is it correct what he said, that there is a safety factor if these are not done?
Mr Kinsella: Yes, there is. As the slides had shown, there are brick panels which are dropping away from the buildings for various reasons. It is mostly due to weather, etc. But if those were ignored, and in some cases it has happened, those brick panels drop to the ground and it is just a matter of luck, I suppose, if someone is not underneath.
Mr Turnbull: I think I know what your answer to this will be, but I will ask it anyway. Is it reasonable to say that you do not do any sloppy jobs, that you do a proper job when your workers do jobs?
Mr Kinsella: We do very good work. There has been a question that came up as to repairs that have had to be done over and again, but that was pre-early 1980s. There was never really much research done into the materials used, etc. Now that research has been ongoing for approximately 10 years now and the work being done under engineering supervision, they tell us how to do it, we do it, they check it and the materials being used now --
Mr Turnbull: Thank you. Is it your experience that landlords are quite demanding and want to see a good job done?
Mr Kinsella: I would turn that over to Mr MacKendrick because I do not deal directly with landlords.
Mr MacKendrick: If we do not do the job properly, we do not get paid. What often happens is the engineer will certify that the work has been done properly and only then do we get paid.
Mr Turnbull: Mr MacKendrick, would it be your experience that sometimes when you are dealing with a building which is, say, 30 years old, the kind of restorative work that you do could cost 50% of what the building originally cost to build?
Mr MacKendrick: I do not really know what the buildings originally cost, but I can tell you that it is not unusual for projects to cost between $500,000 and $1 million. I would consider that a medium-size job, and a large restoration job is a job that is over $1 million.
Mr Turnbull: That is precisely my point, that in fact it is costing typically in some cases 50% of what the building originally cost. Is it good value? I mean, once you have done this, is it still cheaper than knocking the building down and rebuilding it?
Mr MacKendrick: Absolutely. The other thing that makes the cost so high is we are dealing with existing structures and we have to maintain public access, public safety. One of our biggest problems is we have to undo what has been done, that is, half our cost with our labour is to undo before we can actually even do the repair. We have to remove whatever has been destroyed and make it good and then build back up. That is part of why it is costly. It is also difficult working 20 or 30 floors up in the air.
Mr Turnbull: Mr Kinsella, it has been suggested in these hearings that the workers who have demonstrated outside of Queen's Park were in some way put up to this by their employers under the suggestion that they will not have a job unless they go and do those things. Is that true?
Mr Kinsella: I am not aware of it. I can only speak for our local. Our men did not go down. We are non-political and non-controversial because we belong to the Canadian Federation of Labour. We take that stand. My men were not there. I cannot speak for the non-union sector or any other groups.
Mr Turnbull: You mentioned a suggestion that you feel that probably the cost of restoration needs to be borne a little bit by society. Could you expand on that?
Mr Kinsella: It was during some discussions as to how we could solve the financial problems in structural repair. The comment was made, "Who has been demanding these high-rises over the last 30 or 40 years?" and it is the public. Unfortunately, we were stuck with technology that 20 years ago they thought was very advanced, but 20 years of wear and tear has shown that it is not.
Even at this point, the discussion went on to say, with the technology we are using today, what will we see 20 years down the road? When you start going that high above the ground naturally -- in the beginning, it was a new form of construction. Since society demanded that, the same as our roads and other sectors that society as a whole seems to have wanted, it was just our ideas and tossing them around, that "Why should the individual tenants bear the full burden?" because tenants naturally rotate and eventually become home owners.
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Mr Turnbull: Mr Kinsella, that is an extremely good point, I think, to the extent that if landlords sell their properties, and maybe we need to put some restrictions on how often they can do that, but if they sell their properties, typically they will pay 50% of the gain in taxes to the government which is funding society. I absolutely agree with your suggestion. Thank you very much. It was a good presentation.
Mr Mammoliti: On a point of information, Mr Chairman: Mr Turnbull suggested that somebody in these hearings had suggested that employees --
Mrs Y. O'Neill: That was this morning when you were not here.
Mr Mammoliti: Was it? Who suggested that, just for my own information?
Mr Turnbull: The Minister of Housing when he was asked in the House -- do you remember? -- way back in December.
Mr Mammoliti: You said in these hearings. Your statement was in these hearings.
Mr Turnbull: It was also mentioned in the hearings.
Mrs Y. O'Neill: I do not know which brief, but one of the briefs this morning said that.
Mr Mammoliti: Can I find out who said that somehow?
Mrs Y. O'Neill: I think it was the group for tenant advocacy, but I cannot find the reference right now. Maybe Hansard could help us.
The Chair: Is there anyone at Hansard who can review the records for us?
Mr Turnbull: Mr Mammoliti, what is the point? Perhaps I can help you.
Mr Mammoliti: The point is that you said that somebody in these hearings has said that and I would like to know who. I was not here this morning and --
Mr Turnbull: It was a reference made this morning. I am not aware of it, but I would point out the fact --
Mr Mammoliti: If you are not aware of it, why would you say that?
Mr Turnbull: -- that the Minister of Housing when asked in the House --
The Chair: Order. I want to thank the presenters for coming before us today. I believe your presentation was well organized and caught the attention of the committee.
ASSOCIATION FOR FURTHERING ONTARIO'S RENTAL DEVELOPMENT
The Chair: The next organization coming before the committee this afternoon is the Association for Furthering Ontario's Rental Development. Mr Every, I believe that you were here earlier on this afternoon so you are familiar with the procedure.
Mr Every: A little bit. I really just arrived about 10 minutes ago.
The Chair: I thought I had seen you a few minutes ago. Your organization has been allotted 40 minutes, 20 of which will be a presentation by you, sir, if you wish to use up to 20 minutes. The remaining 20 minutes will be divided by the committee for questions and answers. The only thing that I would ask for the record is that you identify yourself and the organization that you represent and then you have the floor.
Mr Every: My name is Allen Every and I represent the Association for Furthering Ontario's Rental Development.
Mr Chairman, ladies and gentlemen, our organization, AFFORD, is a housing advocacy group. Our members are landlords, members of the construction industry, manufacturers and other suppliers to the rental housing market in Ontario.
Our brief is a very simple one. We suggest that there are six key objectives for Ontario's rental housing market that all of us can share. We can all agree, I believe, that we should be working together to accomplish the following: (1) an adequate supply of rental housing at all price levels, (2) keeping Ontario's aging rental housing stock in good and usable condition, (3) a rental housing market that is fair to all, (4) reasonable and realistic access to clean and safe rental housing for those in financial need, (5) the cost-effective use of taxpayers' money.
Finally, we can all agree that landlords and tenants should work more positively and co-operatively together than they have in the past because both have direct and legitimate interests and concerns that must be addressed if we are to find fair and effective solutions.
We all know the two most significant changes that Bill 4 makes in Ontario's rent review system.
First, Bill 4 eliminates the major repair basis for rental increases over and above the inflationary increase of 5.4% annually. It cancels the provision that permitted landlords to apply for increases phased in over the useful life of the expenditure for major repairs to rental buildings.
Second, Bill 4 eliminates the provision for rental increases over and above the basic inflationary increase in cases where the building is losing money. The bill cancels the provision that permitted landlords who could prove that they were losing money to apply for gradual increases limited to a maximum of 5% annually until the buildings reached the break-even point.
What impact will these two changes have on the objectives we share for rental housing in Ontario? Will Bill 4 add a single new rental unit to the supply available to renters in Ontario? It will not. Bill 4 will not work to add extra rental units. Bill 4 has already led to a collapse of private sector investment in rental housing in Ontario.
We also ask members to consider: Will Bill 4 contribute to our second goal, keeping Ontario's aging rental housing stock in good and usable condition? The answer to that question is obvious. It is no. We ask the committee and the government to look at some basic facts.
The first fact is that Ontario's rental housing stock is aging. Eighty per cent of the apartments in the province are more than 20 years old. The second fact is that the rent control systems we have had since 1975 have limited the amount of money landlords have available for reinvestment in their buildings. Rent review permitted annual basic or guideline rent increases of about 5% annually which were never intended to cover the cost of major repairs. Where major repairs were needed, landlords were permitted to apply for additional increases to recover the costs of the repairs over a number of years.
Let me stress that the guideline rent increase permitted under rent review was never intended to cover the cost of major repairs. That is why the rent review system included the major repair provisions. By removing the financial basis for major repairs to apartment buildings, Bill 4 will contribute to continued and accelerating deterioration in rental housing across Ontario. In the long term, Bill 4 is a recipe for US-style slums in Ontario.
Our brief also addresses the issue of fairness. We once again ask that the members of this committee and of the government look at the facts. The Premier and his colleagues have dined out on speeches about rental increases, and I am quoting, of 100% and more, as though that is the norm in Ontario and commonplace. They have suggested that our rental housing market is rife with abuse. These charges just are not true. The government knows or should know that they are not true. Let's look at the facts.
The average additional increase from applications arising from major repairs, for example, has been less than 3%. Let's look at a typical example: a 200-suite building that needed a roof. The landlord got three quotes. The lowest bid was $150,000. He spent the money and had the roof replaced. Then he applied to rent review for an increase to permit the cost of the new roof to be recovered over a number of years. If rent review approved the increase, and that was far from automatic, the increase would be about $9.32 per month per apartment. The landlord's costs would be recovered over 15 years and the building would have the new roof it needed. That is a typical example of how the current system, the system that Bill 4 would scrap, works in Ontario.
But what about Mr Rae's charges that rent increases of more than 100% are normal in Ontario? According to the Ministry of Housing's own statistics, a total of 154 rental suites in Ontario, that is, one out of every 13,000 apartments, experienced rent increases in excess of 100% in the 22 months ending last October. Is it logical or sensible to disrupt the system that covers 1.2 million apartment units because of those 154 rent increases? We leave it to you to answer that question.
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But it is worth noting that when Mr Rae made his statements alleging widespread increases of 100% or more, it was during the election. It may well be that in the heat of the campaign he and his advisers had no time to check the numbers and were honestly mistaken, but the Minister of Housing has chosen to repeat these statements as recently as yesterday. That tells you more about the minister's willingness to disregard facts than it does about the rental housing market in Ontario.
If the government has concerns about the 154 units whose rent did go up by more than 100%, the proper course would be to investigate the individual cases. If there are abuses, enforce the existing laws of Ontario to correct them. Others who have appeared here have suggested other remedies, including establishing a reasonable cap to limit rent increases in any one year. That suggestion, we believe, is certainly worth considering. But for the rental housing market as a whole in Ontario there is no evidence of widespread unfairness. There is certainly no evidence of abuse on a scale that could be said to justify the draconian measures the NDP will impose through Bill 4. Bill 4 is unnecessary and Bill 4 will not work to make the market fairer.
The next shared goal that we discuss in our brief is ensuring reasonable access to rental housing for those in financial need. NDP rhetoric aside, Bill 4 fails any reasonable test. The vast majority of any savings Bill 4 produces, like the vast majority of savings generated by rent control in total, will accrue, not to those in need, but to middle- and upper-income tenants. The CMHC reports that more than half of all rental units in Ontario are occupied by middle-income people. Because they occupy the higher-quality and more expensive units, their savings from any government-imposed control on rents are greater in dollar terms than those enjoyed by lower-income renters. Most renters are not poor. CMHC reports that the average Ontario renter spends only 18% of gross income on shelter costs.
In our brief we call for effective help for those renters who are in real financial need. The way to help these individuals is not to impose new restrictions on the rental housing market as a whole in Ontario. Their problem is not a rent problem specifically. It is an income problem. The way to help those citizens is to provide them with more generous social assistance, including rent subsidies where that is deemed useful, and enhanced training and employment opportunities. Bill 4 does not address that fundamental income problem and so Bill 4 will not work to achieve real improvements in the situations of those with the lowest incomes in Ontario.
What of the bill's impact on government spending? Bill 4 will not work to provide real value for the taxpayer's dollar. Today in Ontario about 85 per cent of all rental housing is provided by the private sector, by Ontario's 100,000 landlords. The cost to the taxpayer for these suites is virtually nil. The cost to the taxpayer for the additional private apartments that could be built in this province would also be virtually nil. The only alternative is more public housing or more co-operative housing, at a capital cost to the taxpayer of approximately $140,000 a unit, to be followed by more thousands every month in subsidies and operating costs. The government spending for housing in Ontario is already in the $1-billion range. The deficit is approaching $3 billion. The government says it wants to build an additional 20,000 units a year for five years. That alone would add an extra $2 billion to the deficit by 1995. There is just not enough money in the government's coffers to provide public housing or co-op housing solutions to all who need them. And so, by picking these high-cost alternatives, government is in effect choosing to favour one group over another. A few thousand get housing, but far more get access to nothing more than a spot on waiting lists.
The housing needs of the people of Ontario can only be met by a combination of effective government action and by private sector investment to build the housing units our people need. If we can agree that making cost-effective use of the taxpayer's money is one of the goals we share, the answer is to encourage more, not less, private investment to provide more, not less, private rental housing.
AFFORD also believes it is important to encourage more co-operation and partnership between landlords and renters, but everything about Bill 4 presents landlords and renters as adversaries and landlords and government as enemies. Our best hope in Ontario is to work together and find solutions to the housing needs and challenges that face us. Bill 4 rejects and abandons that hope.
Our brief also includes a quick view of the historical context. Up until 1975, the year rent controls were introduced, there were always more private apartment units than government units built in Ontario: twice as many in some years, three times as many in some, five times as many in others. When rent controls were introduced, the number of private units being constructed each year plummeted from an average of about 27,000 units a year over the six years from 1969 to 1974, to an average of just over 6,000 units a year over the six years from 1975 to 1980. Over that same period, the number of government units constructed remained about the same each year. The result was the rental housing shortage that affected the province throughout the 1980s. Like it or not, the evidence is inescapable. The imposition of rent controls led to a collapse of private investment into rental housing, a collapse that resulted in an acute rental housing shortage.
By the three years from 1984 to 1987, private sector investment in new apartments had fallen to an average of only 3,600 units per year despite the fact that vacancy rates were below 1%. This was the situation in Ontario when the current rent review rules, the ones the NDP is determined to scrap, were agreed upon by a committee of landlords and tenants working together. As I have explained, these new rules did not result in soaring rents. They did result in rent stability plus very significant investments to repair and preserve Ontario's aging rental stock. With these new and more realistic rules in place, private sector investment began to recover, not to pre-rent-control levels, but to levels significantly above those of 1984, 1985 and 1986.
Over the three years from 1987 to 1989, the average number of new units being built in Ontario was almost 6,900, about double the rate of the previous three years. This was still far below the level of investment needed to ensure an adequate supply of rental housing and effective competition in the rental market. It was far below the level that had prevailed prior to rent controls in Ontario, but private investment in rental housing was recovering. If that recovery were prevented from continuing, the apartments built by the private sector would cost the taxpayers of this province nothing, but the cost to build a public housing unit or co-op housing unit instead would be $140,000 plus more subsidies and more thousands every month for management and operating costs. Those monthly costs will increase for ever and the taxpayer will pick up the entire tab. In the climate created by Bill 4, that will be the only option available, because the private sector will not invest in new apartment buildings. Cancelling the operating loss provision alone, by its attack on the long-term asset value and saleability of apartment buildings in Ontario, would drive out investment and the serious long-term investors would be the first to go.
We are not trying to scare you, we are simply reporting the facts about the rational business and investment decisions that our members and other investors throughout Ontario will make if Bill 4 becomes law as it stands.
The government action that drives out investment in the rental housing industry will drive out investment in other industries as well. This government is under a microscope. The business community here and the investment community internationally are watching carefully. The punitive and ill-considered actions in Bill 4 will undermine investor confidence, not just in our $70-billion industry, but in every other industry that provides the employment and the goods and services the people of Ontario need and want. As I have said, government cannot afford to replace the private apartments that will not be built because of Bill 4. It would cost too much. It would make it impossible for the government to pursue any of its other goals. There would be no money for child care; it will have been spent on public housing. There would be no money for social allowance reform; it will have been spent on public housing. There will be little money to begin to respond to the needs of Ontario's native people; it too will have been spent on public and co-op housing for a privileged few.
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There is one other aspect of the Bill 4 exercise that we deal with in our brief. The government's entire approach to this bill has been marked by vindictiveness towards the men and women who own rental units. We have heard that landlords are all greedy and evil, that we all disregard the law, that we are intent on gouging, that we have no concern for our renters, for the poor, for the welfare of the community as a whole and that we deserve no consideration or respect from government or anyone else in the community.
That is the message that is implicit in the decision to make these changes retroactive not simply to 1 October 1990, but in reality retroactive for months or years in many cases. By making the changes retroactive, the minister is saying that government in Ontario is under no obligation to tell the truth in its dealings with landlords. The minister is saying that government is free to break its word and change the rules after the game has been played. We believe that to be illegal and hope that this will be demonstrated in the courts.
When government feels free to break its word, and when political leaders feel free, as the Minister of Housing feels free in his dealings with landlords in Ontario, to scapegoat and abuse groups within the community, moral authority and ability to lead, that influence is lost. No group in our society is without a few whose ethics leave something to be desired, but we would not suggest that because one politician abuses the labour laws of this province all politicians should be assumed guilty. Because one politician finds himself in trouble with the governing body of his chosen profession, that does not mean all politicians are careless.
Our members are willing and anxious to work cooperatively with the government, but we cannot work with this Minister of Housing. We would ask that he be replaced by a person who is prepared to look at the facts, who is prepared to respect the laws of this province and the undertakings the government makes. Ontario deserves a Minister of Housing who is prepared and able to deal with us, and with any other group in the community, honestly and with the courtesy and respect that any citizen of Ontario has a right to expect from his or her government.
We do propose an alternative course of action for the government in our brief. It begins with the decision to withdraw Bill 4 and a firm commitment from the government that any changes made in the future will not be retroactive. We call for real consultation. We do not consider the three-weeks-now and three-weeks-later sittings the government has planned for this committee to be real consultation.
The members of this committee know that the so-called green paper that the government pretends will come out of these deliberations has already been written. You know that the minister and his friends have already made up their minds. We have an opportunity to build a new partnership involving government, landlords, renters and the community as a whole to seek creative solutions to the housing needs and challenges that face us. Instead, the minister is choosing to build a sort of Berlin wall between landlords and renters and between government and those who invest in rental housing in Ontario.
Our members want to work in partnership with government and renters to find creative solutions to Ontario's housing needs and challenges. We want to build new apartments in Ontario, and we are prepared to co-operate in creating the climate and conditions that would make that possible.
Despite what the Minister of Housing says, the rental housing industry in this province has served the people of Ontario well. We have provided the more than one million rental units the people of this province need at no cost to the taxpayer. Despite 15 years of rent controls and overregulation, we have maintained the vast majority of the rental housing stock in good and livable condition. We have charged fair rents. The average rent in Ontario is about $600 a month and that rental is increasing more slowly than inflation or taxes.
Mrs Y. O'Neill: Before I begin my questioning of Mr Every, I would like to bring the committee's attention to the question asked by Mr Mammoliti.
The Chair: Is that on Mr Mammoliti's point of order earlier?
Mrs Y. O'Neill: Yes.
The Chair: I will stop the clock then.
Mrs Y. O'Neill: The reference is on page 12 of the presentation by the Tenant Advocacy Group.
Mr Mammoliti: It was a point of information. It was not a point of order.
Mrs Y. O'Neill: I am sorry; whatever your question was, that is where the answer is. The statement is made, "Several hundred employed and unemployed workers joined landlords in a well-orchestrated demonstration at Queen's Park to show their opposition to Bill 4." I have a question for Mr Every. I am sorry that a person who has so many tenants and who no doubt seems to have tenants who are reasonably well served has developed such a negative attitude and I hope that that will somehow be restored to a more positive outlook on the environment of government. You have indicated that you are fully aware of a proposed bill and a green paper to go with it. Mind you, Bill 4 is still only a proposed bill. I want to reiterate that. I guess my first question to you then, Mr Every, is, could you tell me if you intend to participate in the consultation process that is being suggested to be a very important component of the green paper that none of us have seen yet?
Mr Every: In spite of our scepticism with respect to the willingness of the government to listen to what we have to say, we wish to participate in any form, no matter how slim we feel the chances are, to effect the changes that we feel are necessary under the circumstances.
Mrs Y. O'Neill: Thank you.
Ms Poole: Thank you, Mr Every, for your presentation today. You have mentioned in your paper some of the statistics on housing starts over the last few years. Actually, this is information that I just asked the Ministry of Housing for this morning. In the last three years it appears that is somewhere in the vicinity of 6,900 per year.
Mr Every: That is correct.
Ms Poole: You represent a coalition of landlords, contractors and investors. Have you done any analysis, whether formal or informal, on what impact you feel Bill 4 will have on future housing starts?
Mr Every: We certainly have not done any formal analysis of the effect that this proposed legislation will have on future housing starts, but as I said in the presentation of my brief, I do not really believe we have to do much in the way of analysis to understand what effect this bill will have. As I said, one of the major factors in this bill that I as an investor would find so harmful is the fact that the proposed legislation would have a retroactive effect on our businesses and therefore on that decision to invest in the future. If we cannot be confident that those business decisions that are being made, those plans are being made being based on the current set of circumstances in the laws of this province, can be carried out without the fear that down the road the rules will be changed retroactively, so negatively affect our investments -- if we cannot be confident that that will be the case, I just do not see how we or anyone else could, without fear and without recognizing that a new unknown quantity has been introduced into the arena, carry on with our long-term objectives of building units in this province.
Ms Poole: In other words, you feel that if Bill 4 in its present form is passed, the credibility of the government and trust in the government by the housing industry will be shaken to such an extent that it will have a serious impact on future investment in housing, whether existing or new.
Mr Every: Absolutely.
Ms Poole: You work, from what I understand here, for a large company which manages 20,000 units.
Mr Every: That is correct.
Ms Poole: Can you tell us what types of rent increases the units your company manages experienced over the last few years? Do you have any policy about it? Has there been a wide range?
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Mr Every: I think it is fair to say that we manage a real cross-section of the different types of residential accommodation available in this province, that is, self-contained apartments and town houses. We therefore manage all kinds of buildings. All buildings are different. We manage very old buildings and new buildings, small buildings and large buildings. For more than half of the units we manage, the increase has been taken annually throughout the last 10 years -- we have been in business for 13 years -- at the statutory guideline amount. For the rest of the buildings, the most common annual increase that has been taken has been one based on financial loss and to a lesser extent based on capital expenditures. Notwithstanding the fact that the justified rent increases and awarded rent increases could otherwise have led to increases in excess of 10% -- say, 15% -- it has always been our policy to encourage clients and it is indeed our policy with respect to most of our clients to increase rents at less than 10% in order to gradually ease those increases into the system so the tenants can more readily absorb such increases.
Ms Poole: One last question about the capital reserve fund that has been proposed by a number of primarily tenant groups. It appears that the way they envisage it working is that a landlord would put a certain proportion of the rents into this capital reserve fund and then, when a major capital expenditure was necessary, the funds would be there and there would be no further increase accruing to the tenant in most cases.
The argument has been put forward by them that just as a prudent home owner would put aside money if he wanted to renovate or fix a roof or something, so should a landlord. I have a problem with an analogy between a single-family dwelling and a 30-storey, multi-residential dwelling. To me it is hard to make the comparison. Would you like to discuss that for us and tell us what would happen, in your opinion, if we were to amend this legislation such that landlords were to be required by law to set up a capital reserve fund, where they were the only participants, and that this money would have to come either from profits, from rents in some form, but without rent increases.
Mr Every: First I would like to say that the current rents charged across the province, and certainly within our portfolio of 20,000 suites, are not at a level adequate to fund major capital expenditures. They never have been. The large majority of high-rise buildings that exist in this province today, the newer buildings you are all so familiar with, was built in the mid- to late 1960s, at a time when vacancy rates were higher, at a time when there was therefore much more competition among owners of buildings. Accordingly, while they would charge the rent the market would bear, in order to come close to break-even, they would at least have to cover their current expenses. Those current expenses, with brand new buildings, did not require any kind of layout at that time, in the history of a brand new building, for capital expenditures, capital major repairs. Those major repairs have just started to be something that has come to be required, particularly in the last few years, because of the age of the housing stock.
Mr Tilson: The Minister of Housing and other government officials have taken the position that capital expenditures and maintenance expenditures are one and the same. In fact, they have gone so far as to say that there is sufficient moneys in the system, in the rents, to pay not only for general maintenance but for capital expenditures, and that over the years, not necessarily all landlords but many landlords have been literally ripping off the system and that they should have lots of money to pay for these capital expenditures, and that is the reason the capital expenditure item is not listed in Bill 4. Can you comment on that?
Mr Every: I can tell you again that the current rents are not adequate to pay for these major repairs, to fund them. They never have been. Continuing from the early years when these buildings were built, with the rents charged as I earlier described, to 1975 and onwards we have been subject to various types of rent review and rent control legislation in this province. The fact of the matter is that the money just is not there. The average rent for an apartment in the greater Toronto area approximates $600. The cost of operating these units for our clients -- you are welcome to take a look at their books and their statements -- is such that, particularly for people who have purchased buildings in the last five to seven years, they are just basically breaking even or losing money.
You have to understand the types of expenditures and the magnitude of these. A roof costs $100,000 to $200,000 to replace. Plumbing systems in buildings were built initially, particularly in the mid-1960s, of galvanized steel. Those plumbing systems have limited lives. They are all at the point of needing replacement. That costs several hundreds of thousands of dollars in a typical building. We are all familiar with the major work that is being done across this province with respect to underground garages, concrete work. You are probably also somewhat familiar with the work you might have seen, over the last couple of summers in particular, with respect to concrete balconies and the need to repair and replace the railings.
All of these things are very, very expensive items. There is just no way the rents can cover these types of items in the normal course of events. That is why in 1986 -- in fact, prior to that -- the provisions that are there in the act are there. At the Rent Review Advisory Committee meetings held in 1986, that committee recognized the fact that rents were not adequate to cover and pay for these things.
Mr Tilson: One further question: It has to do with the issue of refinancing, which has surfaced throughout these hearings. I assume in your capacity, in your organization, that you speak to banks, trust companies and various other institutions. You speak to those individuals, people representing those institutions.
Mr Every: Yes, we do.
Mr Tilson: Can you tell us, as a result of those conversations, what impact they feel Bill 4 has, if any, on refinancing with respect to these buildings?
Mr Every: I can certainly comment with respect to my own personal experience and the 20,000 suites we manage. For the most part, that market has dried up. There are few people today willing to lend money at all or in the fashion they did prior to the introduction of this bill. I think most of them are sitting back waiting to see what the outcome of these deliberations is.
Mr Tilson: Have they made any comments that go even further, dealing specifically with the equity of these buildings; in other words, if mortgages are falling due, for example, or if more moneys are required to make these capital expenditures, where they will go from there?
Mr Every: There are two reasons they are reluctant to lend money at this stage. One is the simple fact that future cash flows in those buildings that are losing money or those buildings that require major capital work certainly are not going to be what otherwise they could have been expected to be prior to the introduction of this bill. The second reason is that the value of any property is nothing more than a function of its cash flow. Decrease its cash flow or increase its losses and the value of that property tumbles.
Mr Tilson: With respect to non-profit housing, which you referred to indirectly at least, do you have any facts that can help us on whether a unit that private enterprise can construct can be built any cheaper than a unit that the government can construct? The government has made a number of promises to construct I think 20,000 units in this year alone.
Mr Every: I understand that under the present system which results in the construction of co-ops and non-profit units, the recognized cost of that construction is in the $140,000 range. I have been told by some private builders that they believe they can build units today at something much closer to the $100,000 range total, all costs including land.
Mr Tilson: One of the other major groups similar to yours said they would support a 5% annual cap on capital expenditures. Has your organization any thoughts on that?
Mr Every: We certainly think the imposition of a cap on capital expenditures in terms of the annual increase that could be allowed is a very reasonable compromise under the circumstances. Whether that cap should be 5% as it specifically relates to capital expenditures, or perhaps a general cap of, say, 15% or any other amount that would take into account any grounds for increasing rents, is something that I think should be further explored.
Mr Turnbull: In the case of some of the buildings you are managing, specifically dealing with really small owners, where they have one or two buildings, are there any of those buildings where the people face bankruptcy if Bill 4 goes through?
Mr Every: That is definitely the case with a few of our clients. People who bought buildings in the last two or three years who went to rent review, received decisions and anticipated successive annual increases of the 5% ceiling as it relates to what they call financial losses or operating losses will now find themselves in a position where they will incur nothing but operating losses into perpetuity, or for an awfully long time.
Ms Harrington: Thank you for coming, Mr Every. I note that you started out your presentation on a very positive note, stating these were six things you thought everyone would agree to. I think that is a good way to start. You said something about a renting partnership in Ontario, that landlords and tenants have to work positively and co-operatively together more than they have done in the past. I think that is a line I said yesterday, so I would agree with you there.
In the last few minutes we have been talking a little about the government's co-op and non-profit housing programs. I would like to agree with you that certainly we cannot rely on that for future housing needs, for several different reasons. Ontario housing in the past has been a very great need and we are committed to that, but I would like to say that we are also relying on the private market system; it always has operated in the past and we are hoping it will in the future.
I think the reason for these hearings is for me to hear your point of view and to also have a better understanding of each other's positions. Let me ask you a couple questions so we can reach some understanding. Do you feel that the present RRRA system you are operating under is working?
Mr Every: We feel that it is functioning well. There are some administrative matters, problems with timing that for the most part have disappeared; backlogs, things that were a practical problem for landlords.
Ms Harrington: You are happy with the intent of its operations?
Mr Every: That is correct. We recognize that there are problems in the system and certain bugs, we agree, should be ironed out.
Ms Harrington: I think we disagree on that point. So you would agree that there is too much complexity in the system.
Mr Every: The thing about the present system is that it takes into account that all buildings are different. It has a degree of flexibility that allows the system in an intelligent sort of way, as far as I am concerned, to take a number of different factors and circumstances into consideration.
Ms Harrington: Can I ask you this, then? Do you feel that the people who own buildings in this province are in this ownership responsibility for the long term, that is, in order to operate the buildings in the best way possible?
Mr Every: Most of our clients, and certainly ourselves and members of our organization, are in it for the long haul. There are some people who perhaps buy buildings for reasons other than that, but they are the exception to the rule, as far as I am concerned.
Ms Harrington: So you feel the purpose of people owning buildings is in order to manage them in a professional manner?
Mr Every: Absolutely.
Ms Harrington: Good.
Mr Drainville: Before I begin my substantive comments, I would like to ask: Am I correct in assuming that you are part of an organization that ran the "Investors Beware" advertising in the Wall Street Journal?
Mr Every: That is correct.
Mr Drainville: I just want to make a comment about that, if I might, before I begin. You have characterized yourself as a good citizen and that you wish co-operation and conciliation between your industry and the government, and I would say that running that kind of ad in the Wall Street Journal with the kinds of comments it makes is not helpful to that kind of relationship. I just pass that on to you.
On the first page of your brief, you say "With respect to rent controls, our members have looked at the evidence -- in Ontario and elsewhere: we know that there is no reasonable doubt or question about the fact that rent controls are destructive. There is no intellectually honest argument in favour of rent controls as a long-term public policy in Ontario or anywhere else."
I would like to put to you some facts from British Columbia, where there was a rental control policy. In 1984 that was de-controlled. Some of the facts of the BC situation might be germane to the discussion you have had here today. Contrary to conventional market equilibrium theory, the removal of rent controls in the city of Vancouver has not resulted in balanced supply and demand. Private rental starts, as a proportion of total starts, declined from 47% in 1982 to 5% in 1988. Vacancy rates continue to decline from 2.3%, 1,226 units in April 1987, to 0.5%, 288 units in October 1989. Condominium starts rose from 395 starts in 1982 to 1,566 starts in 1988. The only measurable effect of de-control has been the high rent increases, 17% to 60% estimated by tenants' groups and the newspapers, and 9.3% to 14.3% estimated by CMHC, October 1988 to October 1989.
I use that juxtaposition of your comments that rent controls are not acceptable in Ontario or anywhere. I would like to hear your comment on those statistics from British Columbia.
Mr Every: First, I really am not familiar with that system in British Columbia, or for that matter in any other province in this country or outside of it. Our general proposition is that we do not believe that rent controls are a solution to the problem. Rent controls come into place, theoretically, as a social program to benefit those who are less well off in society, to help them fund their cost of accommodation. We very strongly believe, like any other social program, that if it is accepted by society then society should pay for that program, and in our particular case not just the landlords.
With respect to the statistics you have quoted, I can only quote you the experience here in Ontario, and I did go through that briefly when I read my material earlier on. The history and the track record is, I think, very compelling to show the disastrous effects that rent controls have had on the construction in this province. From 1973 to 1975, the units dropped drastically.
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Mr Drainville: You gave us many of the figures. I apologize for asking -- I did not want to get you into the position where you did not know the BC -- but because you were commenting on other parts of Canada, you said "everywhere," you were making a statement about that, I wanted to indicate places where there were controls and de-controls were put on, and just indicate that there is a strong case made in the BC situation for rent controls. By the way, there is already a move afoot in BC looking again at rent controls and the need for them. But I pass on, Mr Chairman.
Ms M. Ward: I would like you to explain to me something perhaps if you can about the behaviour of landlords, of whom you represent a large number. If I am a prudent house buyer, before I purchase a home I am going to make sure that the roof does not need extensive repairs, that the foundation is sound, that the plumbing and heating systems are in working order and will be for at least the foreseeable future. Otherwise, I will not purchase that house at a price that is a comparable price to others on the market without those defects. Why would a landlord not act the same way? Why do you find the landlords purchasing houses, according to what we hear -- not houses, pardon me -- but with all these defects that have to be corrected immediately? If this market system was working correctly, would that not reduce the price of those apartment buildings?
Mr Every: First, a number of factors are taken into account when --
Ms M. Ward: Sorry. I tried to get my question in real quick. I was speaking very quickly.
Mr Every: Yes. When any prospective purchaser looks at buying an apartment building, what I have to tell you is that all of the major components of an apartment building deteriorate, that is, depreciate over time, and at a given point in time in examining, doing a purchase investigation, if we can call it that, but a physical inspection of a building, a purchaser would observe the condition of all of those major components and would observe that they are in varying stages of deterioration. None of them is going to be brand-new.
Ms M. Ward: Can I interrupt you for a moment?
The Chair: I am sorry, but our time is up. I have already allowed two minutes extra. Sorry about that, but I am following the committee's instructions. Mr Every, thank you for appearing before us today. We appreciate your comments.
Mr Tilson: Mr Chairman, I have a couple of questions that I would like to ask Ms Harrington, as parliamentary assistant to the minister, as a result of statements that were made by the last speaker just to clarify in my mind certain areas. Can I do that?
The Chair: That is unusual.
Mr Tilson: She may wish to push the questions off to the staff, but I would like to ask the questions, whether she answers them or someone else answers them. Can I put the questions forward?
The Chair: I want to think about this before I allow it, because tomorrow there may be other members of the committee who may have questions for Ms Harrington and if I allow you to ask today, I may allow --
Mr Tilson: Perhaps not to her, but to members of the staff. That has been allowed.
The Chair: Yes, because that has been the normal, customary tradition that we have established.
Mr Tilson: The statement was made that the green paper has in fact been written. Is that true or not true?
Ms Harrington: Could I try to answer very briefly? I wanted to answer Mr Every, but I did not quite get the chance. What I wanted to say to him was that the green paper is in fact going to present options A, B, C, D, E -- "What do you like?" -- and we are going to ask everyone, on all kinds of different issues.
Mr Tilson: My question was, has it been written or not written? If it has been written, can we have it?
Ms Harrington: It is in the state of being written.
Mr Tilson: It has not been written as of yet.
Ms Harrington: It is not finally complete, no, but it is certainly on its way.
Mr Tilson: I am not too sure what that means, but we will pass for now. The second question was with respect to examples, not specified examples, given of landlords charging major increases in rents, 100%, tremendous increases. We have read of some of those examples in the paper. I guess my question is, and this was referred to by Mr Every, have the ministry officials or has the Minister of Housing instructed the staff to put an investigation on these landlords to determine whether or not there have been any illegal acts committed, whether criminal or otherwise, with respect to the tenants of these buildings?
Very serious allegations have been made by several sides as to these few individuals. I do not even know who these individuals are. I hate talking about abstract issues like, "Who are these people, and if they do exist, has there been an investigation?" If there are not any, then we should be told that too.
Ms Harrington: We will ask Dana to give that information to us, but I think that we should continue, Mr Chair.
URBAN DEVELOPMENT INSTITUTE
The Chair: We have before us the Urban Development Institute. Your organization has been allocated 40 minutes. I believe, Mr Kells, you are very familiar with the procedure here.
Mr Kells: Yes, thank you.
The Chair: It is nice to have you back, actually.
Mr Kells: Yes, it is.
The Chair: You should come and visit us more often.
Mr Kells: It is nice to come through the front door.
My name is Morley Kells and I am the president of the Urban Development Institute of Ontario. I would like to express our appreciation for being scheduled to appear before your committee today. Perhaps for the newly elected MPPs serving here on this committee, a little background about UDI would be in order.
The Urban Development Institute of Ontario received its charter in 1957 as a professional, non-profit organization comprising firms engaged in the development of lands in the province of Ontario. Our activities focus on promoting wise, efficient and productive urban growth. UDI also serves the industry as a forum for the exchange of knowledge, experience and research on land use planning and development.
Today, over 200 corporations representing thousands of individuals are members of UDI. The list includes land developers, architects, city planners, investors, planning agencies, financial institutions, engineers, lawyers, economists, marketing and research agencies, and all together we constitute the collective forces guiding land development and form the basis of the Urban Development Institute's membership. The construction and management of rental properties is a category that has always constituted a large part of our membership.
With me today is Yehudi Hendler, who is chairman of our apartment group. Yehudi will present UDI's brief for your consideration, and both of us will be available for questions at the end of the brief.
Mr Hendler: My name is Yehudi Hendler. I am the chairman of the Urban Development Institute of Ontario apartment group. Our association is made up of the larger landlords in Ontario, particularly in Metropolitan Toronto. Most of our members started small enterprises decades ago. Today they have grown to employ hundreds of people and provide shelter for thousands of Ontarians. Our members are the bedrock of the rental industry in Ontario. We are not buyers and sellers of apartment buildings. We have a very, very long-term perspective and we look at the rental industry as an ongoing business. As such, we recognize that customer service is our number one priority.
While we appreciate the opportunity to be heard, we are frankly sceptical about the outcome of these hearings. We say this with real regret, because we have been witnesses to many changes in rental policy and legislation over the years. It is our earnest wish that the politics of rental housing could once and for all be tempered with pragmatism and the long-term interests of Ontarians, tenants, landlords and all taxpayers alike.
With that hope in mind, we would like to make three points today. We want to speak of tenant needs for decent accommodation, of fairness before the law, and finally, we want to make some suggestions to the committee about Bill 4.
First: the tenants' needs. Historically, rent review was designed to protect tenants from large rent increases. The last major change to the legislation, which emanated from the New Democratic Party, the Liberal government, the landlords and tenants, produced Bill 51. This legislation has been the subject of controversy, particularly because the media carried stories of rent increases far in excess of the annual guideline limit, increases driven in part by improvements to rental buildings.
What is the truth? We understand others have testified as to the extent of rent increases in excess of the guideline. To our knowledge, of the 1.2 million apartments in Ontario, about 86% received only guideline increases under Bill 51. Our conclusion is that this legislation was serving to protect the majority of tenants, and where gaps existed, the government was moving to fill them, as it did last year. At the same time, needed work was getting done and most rent increases were phased in over time.
Let me be clear when I say "needed work." I am certainly not talking about the much misused term "luxury renovations." In our experience, the redecoration of a lobby or the replacement of kitchen counter tops and so on can lead to increases of a percentage point or two in a given situation. These types of renovations generally just are not significant enough to generate double-digit increases. I am not talking about items that some misconstrue as maintenance which should be conducted on an ongoing basis. Maintenance is conducted on an ongoing basis by our members and it consists of repairs and regular upkeep to a building.
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What I am talking about when I speak of needed repairs are the major capital improvements to preserve Ontario's stock of apartment buildings and to ensure that present and future tenants have a decent place to live.
I am sure you are going to hear a great deal from others involved in the rental industry as to the necessity for these repairs, so I will be brief. Simply put, the bulk of Ontario's apartments were built decades ago to standards and with technology that is out of date today. At the same time, the building systems are deteriorating through natural process of aging. I am speaking of roofs, of plumbing and heating systems, wiring, parking garages and so on. No amount of maintenance done on a daily, weekly or yearly basis can address the needs of these systems. Periodically, they require major renovations.
The question is, if our customers are not to pay their fair share for these improvements in a measured manner and over time, then who is? Government? All taxpayers? We do not think that the Ontario government is in any position to come up with the $10 billion needed to bring Ontario's apartments up to today's standards, particularly in light of the economy.
Those benefiting from the service should pay their fair share for the required improvements. But we do not think tenants should be expected to pay for this in one lump sum, either. Rather, the only way to ensure the work is done is to engage in a moderate and planned program of major renovation which sees rent increases kept at reasonable levels throughout the period. That is a prudent business approach and an approach which our members adhere to under the terms of Bill 51.
This work cannot be ignored or the very people who government is attempting to serve through its proposed new legislation will be the ones who are hurt, both in the short term and in the long term.
Let me explain. Freezing the rental industry's ability to do capital expenditures through Bill 4, even for a period of six months to a year, will seriously hurt tenants. Rental owners and investors and those who loan money to make major improvements to buildings already have gone back to the drawing board to rethink their plans for the future. Bill 4 in its present form has already caused work stoppages throughout the industry.
Please do not be under the impression that once the so-called permanent legislation is in place that this work will resume. It would be folly for you to be under that impression. It will take a great deal of time for people to understand what is to happen next, to replan their programs and to make a decision as to whether to commit to gradual restoration again or not.
The threat of future change, future intervention and future disruption will be a very significant factor in making that decision. So even though our members, who in some respects are the old guard of apartment business, want to serve our customers to the best of our ability, we are being compelled to rethink our entire approach to our business because of Bill 4. As well, it is conceivable that lending institutions will withdraw from our sector altogether, thus depriving us of the needed funds to undertake the work in the first place. Let me be clear: I am not here to complain about the lot of landlords. I am simply here to caution about the lot of tenants and the impact that this current course of action will have on tenants, our customers.
Now I want to turn to the related issue of the retroactive provisions of this legislation and the effective date of 1 October 1990.
You will hear from many witnesses about the impact that this legislation will have on them. Small and large landlords who obeyed the spirit and letter of the law now find themselves in very difficult, if not catastrophic, financial situations. Rather than give you example after example of the financial harm being done, we simply want to make a broader appeal to you on the basis of fairness. We say to you who are legislators that it is incumbent upon you to ensure that the laws of this land are applied with a sense of justice and fairness, real and perceived to all, regardless of circumstances. We have no argument with your desire to protect tenants and in that sense we have no argument with your motivation at all. We do, however, see that the way in which you are proceeding is resulting in a fundamental injustice.
Some of you may well quote back to me examples of tenants who are facing large rent increases and are in serious financial jeopardy. For those situations, we say to you, address them squarely and with reason to come to a form of response to assist those people. By the same token, we appeal to you to have consideration for those in business who have obeyed the law and find themselves in jeopardy today as a result of the current proposed legislation.
Please bear the principle of fairness in mind and look to the needs of all Ontario, or as the Premier said on the night that he was elected, "govern for all Ontarians."
A related and very important part to this issue of fairness is the impact you are having on businessmen and women across the province and their attitude towards the rental industry. I alluded to this above. Make no mistake: If the legislative environment in Ontario was fair to all sides, then there would be significant private-sector construction of new rental units.
It is true that the private sector withdrew from the rental construction because of the imposition of rent review. It is also true that the industry, to a large extent, switched over to condominium construction, seeking safety in individually titled units.
Not all those condominiums had to be built as condominiums. They could have been private rentals, increasing the supply and the vacancy rate throughout the province. But investors reacted to the legislative environment and so today we have low vacancy rates.
For those who maintain that private development would not have taken place because of high land costs and other factors, we say to you that you are wrong. The private sector would have responded with construction of rental units and would like to in the future. Do not underestimate the ingenuity and drive of Ontario's businessmen and women if given a fair chance to compete.
Sadly, the fear that drove industry to the condominium market and away from private rentals has been proven to be real time and again, first with the passage of Bill 51, then with the revisions to Bill 51 and now with Bill 4 and the prospect of yet another massive change to come. The impact of legislative change on the businessman or woman's approach to his or her job is very real. By and large, the businessman or woman simply wants a relatively predictable environment in which to function. They will take their chances with interest rates, the demand for their product and so on. What they cannot account for are the vagaries of government intervention. In the rental sector, this has been particularly true. Their caution, even their suspicion of government, has been demonstrated over the past decade.
All Ontario has suffered as a result, to a greater or lesser extent. First, you have tight vacancy rates which drive up the cost of housing. Second, the cost of housing indirectly drives up the cost of labour, and the cost of housing itself can discourage some from making needed new investments in plants or equipment in certain areas of the province. Third, of course, there is a requirement for government to move aggressively into housing business in the absence of the private sector.
Thus we have seen the Homes Now program; thus we are hearing about new plans for more non-profit and co-op construction. This costs billions of dollars a year in borrowed money and over $1 billion a year in operating costs for subsidies. That money could be better applied to other pressing needs -- hospitals, schools, pollution abatement -- if only the private sector were allowed to play a meaningful role in the new rental construction again.
I am not bringing a message today, as the Minister of Housing said, that the sky is going to fall. Far from it. In terms of the new private sector rental accommodation, the sky fell some years ago.
Ironically, this legislation comes at a time when confidence to re-enter the private rental market was re-emerging, and in fact the marketplace itself was showing signs very recently of working again. The thousands of new condominium rental units that have been coming on to the market during the past year, have been driving rental prices down at the high end. Some owners report that tenants paying $600 to $700 a month are now reaching up to these lower-priced new condominium rental units with their attractive amenities and paying $800 to $900 a month. As a result, vacancies are occurring in the rental apartment sector. I might add that in speaking to some of our members, we have in post-1976 buildings vacancy rates as high as 4% to 5% today. As opposed to increasing rents even with the statutory increase, rents are being held or being lowered today in those buildings.
While this market blip may continue as more condominium units are completed, it will not last, but it is evidence yet again that the market can work to restrain prices and it is certainly evidence that the private sector can supply and indeed oversupply the market with housing when the demand is there.
I will conclude my remarks now with some suggestions for the future. Before I do, however, I make one last appeal for a co-operative partnership among our industry, tenants and government to address the problems of high increases and yet the need for capital improvements and new supply. This seems to be the fervent wish that all politicians and industry talk about, but we are rarely permitted to act upon our wishes.
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A start could be made with this bill. A start could be made by abandoning the freeze legislation altogether and moving on to the permanent legislation as soon as possible. Government could, during this period, address individual cases of large rent increases on a case-by-case basis. Even a more realistic cap could be contemplated for orders in the stream now. Industry could continue on, knowing that another change was coming yet participating together with tenants and others in its design.
Our major recommendation to you is to adjust this legislation. If, however, politics dictate that this bill must go forward as is, then we strongly urge you to amend it to ensure that needed capital expenditures are included even in the freeze period. Perhaps this can be done by including needed capital improvements as eligible for pass-through in the way so-called extraordinary operating costs are to be allowed.
Committee members, I urge you not to stop these repairs as our industry may never recover from the blow and may never be able to serve its customers, the tenants of Ontario, properly in the years to come, regardless of the ultimate form of permanent legislation that eventually becomes law in this province.
Mr Turnbull: Were you here during the last witness's presentation?
Mr Hendler: Yes, I was.
Mr Turnbull: He was asked during questioning how much rental units could be built for today. He suggested that it is possible that for $100,000, including land, one could build a rental unit. Do you concur with that?
Mr Hendler: I am sorry, but I cannot concur with that because I do not have the information. I do not know. Had I known that question would be asked, I probably could have checked through our own company to find out what it would cost to build a rental unit today.
Mr Turnbull: Perhaps I will address it to Mr Kells.
Mr Kells: We take our advice from our apartment folk and --
Mr Turnbull: Could you possibly send that to us in writing? Do you feel it is reasonable that the government should participate in a shelter subsidy program?
Mr Hendler: I think that there definitely should be a shelter program. I have seen it work on some of our buildings where we have housing that is subsidized by the various regional governments or regional areas. The tenant pays based on his ability to pay. If it comes to a point where the price of rental accommodation has gone sky-high, then I think it should be done on that basis. Therefore, those people who are living in rent-controlled units today paying $500 a month and earning $60,000 and $100,000 a year would have to pay the market rents of apartments as opposed to somebody who is earning $20,000 a year and is not able to pay $700 or $800 a month rent.
Mr Turnbull: It is my observation that some of the tenants who have brought stories to this commission have had some very heart-rending stories. Certainly, the Conservative Party is extremely sympathetic to ensuring that the right of affordable, clean and safe housing is available to everybody. But we have had vastly conflicting testimony. We have had people who were complaining they were paying $450 a month who admitted they were paying less than 30% of their gross income, and still were complaining about the need to put Bill 4 through. On the other hand, we have people who apparently are paying close to $1,000 for their room, which apparently is a single room and the landlord cut a hole through the ceiling to get heat through.
It seems to me that these are vastly different cases. Would you think that it is reasonable to suggest that the present use of funds by the Ministry of Housing is inappropriate? I would like to quote something that came up in the last session of the Legislature.
The Ministry of Housing announced that it was going to give a subsidy which divided by the number of subsidized units in a co-op that was to be constructed in Scarborough. It was equivalent, if you were to give that money to all of those people subsidized, to their having a mortgage completely paid for to cover the $245,000 unit. Do you think that is an appropriate use of government funds or do you think it should be better spread across the province to people truly in need?
Mr Hendler: I think that funds should definitely be spread across the province to people who are truly in need. If my memory serves me correctly, I think there have been some economic studies done, and please do not quote me because I am not 100% sure; however, I recollect that when it comes to people who cannot afford rents and are below a certain income limit, I believe it is about 10% or 15% but I am not sure. I do not have those facts, but I believe it was a study done by Professor Larry Smith and that he quoted those figures, but I am not sure.
Mr Turnbull: Can you just look at this for a moment. Would you tell me what that is.
Mr Hendler: One penny.
Mr Turnbull: Would you turn it over?
Mr Hendler: It is still one penny.
Mr Turnbull: What are on the two sides? Would you describe what are on the two sides of the coin?
Mr Hendler: One is the Queen and one is the maple leaf.
Mr Turnbull: One of the things that is frustrating me in these hearings is that our friends on the other side of the tables here -- and they are our friends, believe it or not; we may seem a little bit agitated in these discussions but there is no malice, I assure you. We have the difficulty of trying to make sure that both sides are fairly heard, but at the same time that everybody recognizes that there are legitimate arguments to both sides and that we have to have logical legislation which recognizes those two things and does not harm either side. That is the whole thrust of my questioning about shelter subsidies as opposed to the shotgun approach.
Let me change my line of questioning. Are you aware of landlords who are in danger of losing their homes because their mortgaging cannot be replaced?
Mr Hendler: Personally, no. Our association is landlords, as I stated in our brief, who have been around for an awful long time. We have not bought or sold units. We were in the process of developing units and building them for our own keeping. Many of us are our own managers. We do not hire third-party managers. It could be an average landlord -- 6,000 or 7,000 suites apiece -- who has been in the business for a long time and the units are now anywhere from 15, 25 or 30 years old, anywhere from that gamut, and require a lot of repairs and maintenance.
I heard somebody talking about a reserve. Well, no reserve was put aside 25 years ago. Nobody thought we were going to have to replace our underground garages 25 years ago either.
Mr Turnbull: Was there any legal provision to put a reserve away?
Mr Hendler: No.
Mr Turnbull: If you had been allowed a certain amount of extra funds each year, would you have been prepared to put a fund away?
Mr Hendler: I think that back in the early 1970s the answer would probably be no, because the vacancy rate was so high that people were just trying to rent their apartments. The market was determining what the rents would be. Today if you look at the newspaper you see ads where you are getting two months free rent, one month free rent or: "Come and talk to us. We're willing to negotiate." That is what the situation was years ago, so how could you add something to your rents when you had to get whatever you could in order to fill up your building, and sometimes filling up your building meant that you were taking a loss position, both cash flow and financial loss.
Mr Kells: If I may, the economics of rent control in 1975 changed the whole equation. In other words, people had to deal with the marketplace prior to 1975. After rent controls came into being, then the economics of it changed dramatically. It never quite caught up to that.
Mr Turnbull: Quite so. It was not the lack of wanting that fund; it was just a question of the economics. There was no profit when rent controls came in and it has just continued on as that.
Mr Kells: It is just hypothetical, but if you had no rent controls and you had the marketplace to decide, if you did not have a decent building, you would not have any tenants. Somebody else would be building rental accommodation and would take those tenants.
Mr Mammoliti: Mr Turnbull, I am glad to see that you can afford a penny. There are a lot of tenants out there who certainly cannot take a penny out of their pocket because of the rents they are subject to.
Mr Turnbull: Landlords will not be able to afford it either.
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Mr Mammoliti: I am assuming this is a newsletter or --
Mr Kells: I publish that weekly.
Mr Mammoliti: This particular one that is attached to your presentation says, "Julie Davis, secretary-treasurer of the Ontario Federation of Labour, is quoted in regard to the landlord association claims that thousands of jobs will be lost because of the cessation of renovation work on buildings as: `We've yet to see any evidence of the kind of dislocation they're talking about. When tenants pay rent, some [of it] is supposed to go to the maintenance and upkeep of buildings. So if jobs are lost, I think it's the responsibility of the landlords, rather than the legislation.'"
Then you go on by saying that you can be sure that "the type of jobs that are lost are by people not affiliated with the big OFL; they're mostly small contractors with non-union employees. So it would appear that they don't count with union bureaucrats."
I have been asking a number of questions this week with regard to the fact that tenants cannot afford the rents and we have heard consistently that perhaps it is the government's responsibility to help those tenants out with their rents. I would say to you, do you not think that landlords should take the responsibility when it comes to the fact that they cannot afford renovations?
Mr Kells: I am not sure if I understand your question, given the lead-in.
Mr Mammoliti: I am simply saying --
Mr Kells: Landlords can afford the renovations if they follow the terms of Bill 51. Are you suggesting that landlords can afford major renovations if you have a 2% or a 3% cap?
Mr Mammoliti: No. I am suggesting that perhaps a landlord should look into the building before he invests in that building and then if there are problems with that building not to put it on the shoulders of the tenants.
Mr Hendler: We are not looking at landlords who have bought the building. We are dealing with our group, our landlords --
Mr Mammoliti: I am asking you a question.
Mr Tilson: Give him a chance to answer.
Mr Hendler: We have built these buildings over a number of years and these buildings are still in our portfolio, and they are a major amount of work. Now, Bill 51 recognized the fact that major renovations have to take place. You also have in your regulations with regard to Bill 51 amortization tables over the number of years, the number of items, etc, etc. You also have an item in Bill 51 called "costs no longer borne," so that if these costs are going to be done, they are only going to be done once, and that is it in the lifetime of a building. So that is taken care of because these costs were not anticipated years and years ago, nowhere near these types of costs, nowhere near these types of things. By the same token, we also did -- if the marketplace situation was such, it would be completely different.
Ms Harrington: How nice to meet you, Mr Kells. I do read your monthly or weekly bulletins. Is it in fact weekly?
Mr Kells: Weekly.
Ms Harrington: Oh, all right. I only get the copy at the Ministry of Housing but I do find it very interesting reading.
Mr Kells: Actually, I send them to your office, my dear, but I guess you will catch up with them eventually.
Ms Harrington: They are not getting through to me, I guess.
I understand your need for predictability in business and that is why we want, as a government, to get on very quickly, as quickly as possible to the long-term legislation. What we are looking for is your expertise and your help in this discussion paper, or as it has been called, the green paper, which will be available very soon. We want you to be part of those options that we are going to be offering to you as to what you think is best.
Let me ask you a couple of questions. Do you feel, either of you, that housing is a right?
Mr Kells: Yes. I think the Conservative government enunciated that a long time ago. Housing is a right.
Ms Harrington: Okay. Do you feel that primarily apartments are in fact homes as opposed to investments?
Mr Kells: Oh, yes. Wherever you live is your home.
Mr Hendler: To the individual tenant, his home is his castle, no question about it, and many of our owners, landlords who own the buildings, recognize that and nobody gets thrown out of an apartment building as long as he pays his rent. Even if they complain that something is wrong and the landlord has to come and fix it, they do not get thrown out because of that. We have in some of our buildings some long-standing tenants, and I say that the majority of tenants, 98% of them, are excellent tenants. It is like a bushel of apples. You have one apple that is rotten and the perception is that the whole bushel is rotten. Well, we do not take that perception of all our tenants. We know that some are bad.
Ms Harrington: I do not have much time, but let me just get into some of the very basic stuff. Since we agree that housing is a right and that tenants and everyone in general should look at apartments as homes -- that is what they are -- and not just as investments -- the people who own these buildings are investing. It is a long-term thing. Why would they be doing that if they could get better money in Treasury bills or in the marketplace?
Mr Kells: You are asking for a rather definitive answer to a hypothetical question. It depends on when they bought the building, what their economic situation is, any number of things.
Ms Harrington: What I am getting at is that there is a lot of equity in buildings. We as home owners understand that. That is a great investment for us. We must realize that these apartment owners have equity and that is very important in the long run. As home owners, they should be maintaining their buildings. We have a sense of pride in home ownership, and I think since you are long-term landlords, you are coming from that direction.
Mr Kells: Absolutely.
Ms Harrington: I just want to say that we want to work with you.
Mr Hendler: Just to add maintenance and repairs, when we talk about maintenance and repairs, the majority of our members in our association have kept their apartments in a good state of maintenance, in a good state of repair, totally ongoing. We have a code of ethics which we adhere to. Our own company, as well, spends thousands of dollars on maintenance and repairs. However, there comes a time when the roof goes. There comes a time when the caulking deteriorates because of weather or whatever. There comes a time when the bricks fall. There comes a time when all these things happen.
Ms Poole: I would like a point of clarification to begin with. Are we going to ask Mr Turnbull's skill-testing question with the penny of every presenter before it answers questions or is it just this particular group?
Mr Kells: I am not too sure if any of our group would be up to the answer.
Ms Poole: I was not sure whether they were chosen because of their particular skills or whether we should be asking every time.
Mr Hendler: I do not know.
Interjection.
Mr Hendler: It is still right over there.
Mr Kells: We thought it was a trick question.
Ms Poole: I guess you are not the greedy landlords. You did not pocket the penny.
Mr Hendler: No, I did not pocket the penny. Far from it.
Ms Poole: I believe you were here for the latter part of the previous presentation. I had asked a question to Mr Every which he did not actually have an opportunity to respond to because of the time allowance. That was relating to the prudent home owner theory, which is that a prudent landlord should put aside from the rents sufficient money to take care of major repairs and capital expenditures the same as a prudent home owner would. Would you like to discuss with us, as major landlords and knowing very intimately what your economic circumstances are, what you think about this theory and whether in fact it holds up in reality?
Mr Hendler: Being in both situations as a tenant and a home owner, over my period of a number of years of owning a home I have yet to think of putting away a reserve fund for replacement of something in my home. I do not think any home owner in the country does that. There may be the odd one; I should not say "any." It is highly improbable that you would get a home owner who would put away money for his home, for replacement of his furnace. He will do it as it comes necessary and he will either have the funds in some savings account where he is earning interest with the money or he will go out and borrow the money from the bank and pay it off, as he has to do it.
Today you go out and buy a house and people have mortgages and they are just about mortgaged right up to the hilt. So how are you going to take an extra $3,000 or $1,000 a year and put it away in a bank account when: "I can hardly make your mortgage payments. I'll worry about that 10 years from now when maybe my income will be substantially greater than it is today and I won't have this tight situation that I'm in now." You cannot compare the two. I do not know how you would compare the two.
Ms Poole: I am finding a little difficulty comparing them myself. I would anticipate that for a large multi-residential building, the types of major capital expenditures you would have would be significantly different than what you would have in a single-family dwelling. I do not think you have too much in the way of underground parking garage corrosion; I do not think you have balcony deterioration; a lot of the contracting of the cement, which means that you need new masonry done. Those are the major types of expenses in a large apartment building that you would not experience as a home owner. I also understand, from statistics that were provided to us via a study commissioned by the Ministry of Housing several years ago, that the equity for apartment buildings is much lower than that of a single-family dwelling, that the equity is rising in the latter case at a much greater percentage.
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Mr Hendler: I am just going from somebody whom many years ago I asked why he was building apartment buildings, and I am going back into the 1960s, and this was in the province of Quebec, where I was living at the time. He was building it not in the city of Montreal but in the city of Sherbrooke. He built 40- or 50-unit apartment buildings and he kept on building one at a time. I said, "What are you doing with it?" He said, "I make a certain amount of profit here and I put it in here and I build the next one and then I build the next one and then I build the next one." So I said: "Tell me something. You're not really making that much more money and you could be investing your money somewhere else." He said. "I'm doing it for the long-term growth." Again, he was doing it for long-term growth over a period of years.
You have a situation where a private developer or a private owner built an apartment building 55 years ago. He may have two apartment buildings of 300 or 400 suites. We are not talking about thousands of suites. He has built it and he has had it for the last 30 years. Now he has nobody to take care of it. He is getting on in age. He wants to take his money out so he can plan his estate. Nobody wants to look after the apartment buildings the way he did, nobody wants to deal with the tenants the way he did, so he wants to sell it. So what is the value? Bill 4 will kill the value of that apartment building. And he has been a long-term landlord, a prudent landlord, not gouging, a fair landlord, and he wants to sell it to somebody. He wants his fair dollar or his fair return on his investment that he made 35 years ago. That is all he is asking for.
Ms Poole: We have had several small landlords presenting to us who have been on the verge of bankruptcy, are losing their retirement savings because of the retroactivity clause, and they have been quite upset by it to the point where they broke down in committee and cried. Can you please tell us what the impact would be, on the long-term larger landlord, of the retroactivity?
Mr Hendler: I do not think that it would put many of the long-term landlords into bankruptcy. However, it does affect their cash flows, their future expenditures. They will have to cut back somewhere, because the banks will not lend them money to the extent that they would in the future. They are going to have to cut back. Somewhere they are going to have to cut back in order to be able to pay the cash flow that they have spent. We are talking about buildings that have been under rent control since -- pre-1975 buildings; we are not talking about post-1976 buildings.
I have a situation in my own portfolio, a building where there is a $250 spread between the maximum rent allowed and the current rent that I am getting. I do not think in my lifetime I will ever see this building achieve maximum as it progresses with the 5.4% increases. So regardless of what is going to happen, those buildings will -- still, market will dictate what it is all about.
Ms Poole: One final question. If Bill 4 goes through in its present form without amendment, will you put that one penny you have into major repairs or capital expenditures during the course of the moratorium?
Mr Hendler: Well, if my roof is leaking and I have 10 apartments on a floor with water coming in, I will certainly have to do it, but if I can patch it for one little penny here today and I know it is going to have to be replaced maybe next year or the year after I will wait.
In some of our buildings, I was preparing a five-year plan to do capital expenditures in a building that is some 15 years old. I was going to do it over a period of five years to phase it in, not to affect rents to a great extent and not to increase rents in one lump sum. As a landlord, in certain areas we have gone into one rent review proposition and we told the tenants that we would not increase the rents more than 15% in any given year, regardless of what amount of increase we got from the government.
Ms Poole: That would be taking advantage of the multi-year plan John Sweeney brought in last year.
The Chair: I want to thank the presenters for coming before us. The information was valuable.
Mr Hendler: Thank you very much.
Mr Kells: Good to see you again, Mr Chairman.
LANDLORD SELF HELP CENTRE
The Chair: We are just going to need a couple of seconds to set up the overhead for the next presenter. While that is happening, we are going to distribute some information. We have two or three pieces of information we are going to give to the committee. I requested some further research from the legislative research department, and that is more or less an add-on to the information I had requested and distributed earlier to the committee. We also have a letter from the minister that we are distributing and another document referring to the presenters who are before us.
I believe the presenters have been here for a short period of time. You have watched the operation of the committee. Are you familiar with the way we operate? You have been allocated 40 minutes, 20 minutes for your presentation. We would ask you to introduce the main spokesman and all of the people who are with you and their positions within your organization for the record, please.
Mr Libman: My name is Peter Libman and I am the chairman of the board of directors of Landlord Self Help Centre. To my right is Rob Herman, who is the treasurer. Susan Young is the co-ordinator of the clinic and a staff employee. To my left is Derek Lobo, who is not a member of the clinic but he is a small landlord. He was not given time himself to make a presentation so our clinic has given him some of our time to make his presentation within our 40-minute allotment.
There was a comment by the last presenters about the fact that they represented the large landlords. Our clinic represents small landlords. The typical person who comes into our clinic has less than four units and is occupying one of the units himself or herself. Our clinic deals with about 18,000 small landlords each year and we have four staff employees. Our clinic is primarily funded by the Ontario legal aid system and we have been in operation for 15 years.
I define "small" in terms of our clinic. There is an additional qualification for our clinic. The people who come in must also meet a financial guideline that is imposed on us by legal aid. We do not have a staff lawyer. We can only provide summary advice for the people who come into our clinic. We obviously cannot represent them in court because we do not have a staff lawyer.
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Susan Young, whom I introduced, is the co-ordinator of the clinic. She is going to answer any of the tricky questions you have about the clinic. She is sitting off to the side because she hopes you have no questions.
As chairman of the board, I am actually a lawyer in my real life specializing in family law. I am a volunteer. I have been on the board of directors of the clinic for 14 years. All the board members are volunteers. I am neither a landlord nor a tenant myself. I own a house in North York in the riding of one of the members who is not in the room right now. I was also a member of the RRAC, the Rent Review Advisory Committee, which you have heard a bit about that negotiated Bill 51. I have my autographed copy with me. I have obviously a lot of the background information as to what happened into the coming of Bill 51. I also have a master of law degree specializing in constitutional law.
Rob Herman is the treasurer and also a volunteer member of our board of directors. He is a small landlord himself and also a property manager. His company is Robinwood Management Corp Ltd. It is named after a very famous street in the centre of Toronto where we used to play ball hockey as kids.
Derek Lobo is the author of two books on the rent review system and he is also a small landlord himself.
The general position of the clinic is that we think Bill 4 is wrong. We made a presentation to the minister prior to the announcement of Bill 4 and we indicated that we thought if there was a problem, it could be better addressed by either caps or phase-ins, but certainly not with the retroactivity and the complete cancellation of the existing orders and orders that were to be phased in after 1 October.
I also feel that the bill is of doubtful constitutionality and I agree with the speaker yesterday from the Fair Rental Policy Organization of Ontario in his legal opinion. I think the other problem with the way the bill is drafted is that by voiding present valid orders, there is no mechanism for recapturing those orders if we get new legislation next year that will somehow revive all the orders that have been cancelled by this bill if this bill passes. I think there are procedural flaws in the bill itself.
I will turn to Rob Herman for his presentation.
Mr Herman: My involvement with other small property owners in the province started in 1987 when I participated in the filming of a television show, sponsored by the Ministry of Housing, called the Successful Landlord. This was a show designed to encourage landlords to improve their buildings and their tenant relations within the confines of the rent review act and the Landlord and Tenant Act.
Subsequently, I helped write three booklets and gave a number of seminars to small property owners across Ontario on a voluntary basis, targeted at improving maintenance standards and bettering landlord-tenant relations. I dedicated some of my time to this cause because I sincerely believe that the best way to maintain Ontario's aging rental stock is by providing a climate in which Ontario's property owners can embark on long-term preventive maintenance programs.
This leads to properly maintained buildings that are safe and comfortable for today's tenants and ensures their viability for future generations. Without this type of private sector involvement, Ontarians cannot possibly hope to have the supply and quality of accommodation necessary if we are to remain a healthy province. Bill 4 is totally contrary to achieving this important objective.
Let me give you an example of the difficulties many property owners are facing today. I have a small apartment building in downtown Toronto. It is 70 years old, and although the building has never had a work order against it in the 10 years I have managed it, the building systems had reached the end of their useful life. The building needed new plumbing and wiring and required some structural repairs.
For example, the building had no basement, so all the main heating pipes were just laid in the ground under the first-floor apartments. We were starting to lose pressure in the heating system so I knew it was time to replace the main heating pipes, as I had similar problems in another building where pipes were laid in the ground. The problem was that virtually every inch of flooring throughout all the apartments on the first floor would have to be torn up to get at the heating pipes. Can anyone tell me this work was caused by neglect?
This type of work is prohibited under the Rental Housing Protection Act without municipal approval, so I spent almost a year getting the necessary approval to do the work. I also applied to the Ministry of Housing for a grant under the low-rise rehabilitation program. They did an inspection of the building and I qualified for funding that partially offset the costs of the renovations.
Before I started work, I went on to get the written approval of every tenant in the building as to the proposed work plan and the rent increase. The work took a year to complete and I applied to rent review in September 1990. Now I find that due to the retroactivity of Bill 4, I will not be able to recover my expenses, despite the fact that the work was done with the consent of every tenant, the city of Toronto and the Ministry of Housing. Unless I can recover these legitimate and necessary expenses, how can I possibly maintain the rest of the units I manage?
It has also been suggested that this type of work should be financed from profit. But this building has never been to rent review before. While my expenses have risen 127% since rent controls were introduced in 1975, my income has only gone up 80% during the same period. My rents are only $350 a month. To finance the work I just completed from earnings without increasing the rents would take every dime the building could make for the next 20 years. Now, why would anybody make that kind of investment?
I recognize that there are some problems with the current rent review system, the main one being high rent increases. As I told Mr Cooke, the Minister of Housing, personally before he introduced Bill 4 into the House, why not a cap rather than force landlords out of business? All that Mr Cooke had to say to me was that they had made political promises that they intended to keep.
Mr Cooke said to you on Tuesday that rent increases of 100% to 200% cannot be tolerated. We agree, but that does not mean that you can completely disregard the $100 million to $200 million worth of capital expenditures that have been completed in Ontario during the past year. That too cannot be tolerated.
In closing, I would just like to say I truly believe that if the private sector is going to be allowed to participate in the proper maintenance of Ontario's aging rental stock, the government must immediately rethink its hard-line position and not punish us for rehabilitating our buildings.
I would like to introduce the third speaker, who is Derek Lobo. As we explained previously, he is also a small property owner and has written two books on Ontario's rent review system.
Mr Lobo: Good afternoon, everyone. I would like to tell you a story about the landlords, the tenants and the contractors of 875 Colborne Road in Sarnia, Ontario. It is not a fair story. In fact, it is a very unfair story. Fourteen working men and women, mainly steelworkers, got together to purchase 875 Colborne Road. For most of us, it was the single largest investment we ever made. It is a nice building, the kind you would like to retire to. When we bought the building, your Ministry of Housing calculated the following financial loss and it is up on the overhead. We have a $64,306-a-year financial loss. This was calculated by the Ministry of Housing with bills and invoices that we submitted to it.
In 1989 and 1990, we spent an additional $125,000 on capital expenditures in the building. The capital expenditures were not due to neglect, the kind that Mr Cooke talks about so often. After 27 years, the balconies just plain needed to be replaced. The parking lot just needed to be resurfaced. It was not due to neglect.
So I stand here today to tell you that the 14 people you call speculators are going to lose their life's savings because of Bill 4. We will receive no more rent increases for our financial loss. In fact, we will lose $64,000 per year in perpetuity because our phase-ins have been cancelled. That is $64,000 a year for ever. The income of the building is about $225,000. The $125,000 that we spent on capital expenditures is also gone.
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Many of our tenants do not know that their landlord is going bankrupt. They are in Florida right now. They will have a nice surprise waiting for them next spring when they find their landlord is a warmhearted banker. Do not dare tell me, Ms Harrington, that we made a bad business decision or that we should have set aside money for a rainy day. We made our investment and we did our capital expenditures under the laws of the land, and like in most western democracies we expected to be treated with fairness and with honesty. But the NDP government chose retroactive legislation which unfairly destroyed our investment.
Oh, yes, I said I would talk about our contractor, a young man named Mark who is painting our building unit by unit. He is now out of work. Sarnia is near Minister Cooke's riding. Maybe Mark can go see the Minister of Housing and the Housing minister can tell him about the social benefits of Bill 4 as he points him to the nearest food bank.
Last Saturday I sat in the office of the Minister of Labour, the Honourable Bob Mackenzie, and today I sit before Minister Cooke's standing committee. I have a great respect for both these men, but both men made the following statement, which I put on the overhead. What they said was that construction worker layoffs were related to the recession rather than the new rent control legislation. That is baloney. Personally, I think Minister Cooke should be fired for that statement. It is irresponsible.
Here is the real story. The Toronto Star: "Thank you, Mr Rae. Your proposed rent control laws may have saved me $25 per month on my rent. Unfortunately, as a direct result of this act, I lost my job," signed Joe Walsh, Pat O'Flaherty, Steve Olmstead, Bill McPhee, Ernie Lancusco, Mike Schuster and Jose Louie Sousa of RAM Restoration.
Here is the real story. The Concrete Restoration Association of Ontario: "Rent controls crush the concrete restoration industry in Ontario." I have circled the section there that says 414 jobs were lost directly because of Bill 4. I would like you to tell me how much money the provincial government has to spend to create 414 jobs. Why are these men and women paying the price for Dave Cooke's ideology?
More jobs lost: Day Restorations, 7 of 35 workers laid off; Oxford Window Manufacturing, 9 of 12 workers laid off; Regal Aluminum, 108 of 200 workers laid off. How much proof do you need? There are 108 jobs lost directly because of Bill 4. It is almost immoral. Shame on you, NDP, for destroying jobs. Shame on you for putting people out of work. Shame on you for misleading the public like this. Shame on you, shame on you, shame on you.
The Chair: Order. I have allowed you a lot of latitude.
[Interruption]
The Chair: Order. I am going to have order in the committee or we will suspend the hearings until we can get order. Another outburst from the people sitting here and we will empty the room.
Mr Lobo: These are the newspaper ads that I have cut out of the paper for the last couple of months. They sort of confirm that job losses are related to Bill 4 very clearly. Next slide, please.
This is an article from the Toronto Star from this Saturday. The Premier said to the business community in Toronto that the Ontario government is not going to stand by and allow jobs to be lost in a recession. There seems to be a communication problem with the Premier's office and the Minister of Housing. The Honourable David Cooke's legislation is slashing jobs left, right and centre; the Premier says his priority is saving jobs.
Finally, I would like you to tell me of the social benefit of this legislation. Some of the 14 owners who are going to lose their life savings have already told me that they have to postpone their retirement and work two extra years in the steel mill because of Bill 4. Where is the social benefit to losing your life savings? The tenants are now going to have Montreal Trust as their landlord. Where is the social benefit in that? Our contractor, where is the social benefit for him?
I would just like to conclude by saying that one of the ways you judge a democracy is by the way it treats its minorities and sincerely, I mean this, the NDP has a fine record on minority rights. You have introduced legislation on native land claims and I commend you on that. You have introduced legislation for homosexual and lesbian partners of government employees. They now get full benefits. I commend you on that. But landlords are a minority too. Big landlords and small landlords, rich landlords and poor, we deserve to be treated justly. Landlords are a tiny minority in this province. The tenants have an overwhelming majority. I think in a true democracy you do not sacrifice the minority just to appease the majority.
The Chair: Sir, you have three minutes left for your presentation, if you wish to use it.
Mr Libman: Maybe we can add three minutes on to the questions or comments.
The Chair: You want to add it to the questions?
Mrs Y. O'Neill: Could we have those slides on hard copy?
Mr Lobo: We can provide those.
The Chair: Can we have them presented to the clerk and we will have them distributed for you.
Mr Turnbull: Mr Chairman, could we have this removed so that I can see the deputants?
The Chair: Yes. I was just going to mention that. Mr Mammoliti.
Mr Mammoliti: Sir, you mentioned earlier that you had to reface your parking lot in the building. Did I understand that correctly?
Mr Lobo: That is correct.
Mr Mammoliti: You said that it was not out of neglect, that it was wear and tear.
Mr Lobo: Yes, sir. The government tells us that parking lots have a life of 10 years. I believe the parking lot was considerably older than 10 years.
Mr Mammoliti: You said that it was not out of neglect.
Mr Lobo: Yes, sir.
Mr Mammoliti: Can you tell me how much you have spent on patchwork and waterproofing in the past 10 years in the building?
Mr Lobo: Yes. I think every year about $1,000 was spent on waterproofing. That would be both for the surface of the building and the parking lot, but I think that would be reasonable, yes. This idea of neglect is very ambiguous. What is neglect? You have to define it very carefully. Maybe a work order might be neglect.
Mr Mammoliti: That is what I am getting at. If you have not done that maintenance every year, then I would say that it is out of neglect that you had to reface that parking lot. If you can sit here and honestly say that every year you have done your best to patch that driveway and to take the proper maintenance required, then I commend you for that and I say to you that you are right, that the time has elapsed. It is out of wear and tear and it had to be refaced. If you can honestly say that you have taken the steps for preventive maintenance, then again I commend you on that.
Mr Lobo: I think that your argument is a little bit absurd.
Mr Mammoliti: It is not an argument. I am commending you.
Mr Lobo: Your comment is a little absurd because you assume that you can continually patch something. There is a practical limit to owning an apartment building. There is a practical limit to how you repair a driveway. You can do certain repairs, but the time comes when you replace it. We are not digging up good asphalt and we are not mistreating our asphalt either. It is just plain time to repair the asphalt. You have to just understand that. It is not difficult to understand, but you have to want to listen to that answer.
Mr Mammoliti: Sir, I am commending you.
Mr Drainville: I would like to make a couple of preparatory comments, if I might. I guess the first preparatory comment is that there is a great deal of shame in the province, sir, and that shame is through many buildings in the province that are not kept up. I do not accuse you of that, because I do not know what your buildings are like, but I can say that in the submissions that have been made before this standing committee -- and I might add in that context that this is not Minister Cooke's standing committee. This is a standing committee of the Legislature of Ontario with representatives of all parties.
You also indicated some comments about the democratic system and what is fair or not. Sir, you are before this committee and we have the opportunity to listen to what you have to say and it indicates our openness and our willingness to hear you, even though I must say that some of the comments you have made I find highly offensive.
Let me give you a case, sir, and that is the case that most people who live in society today have increases in the cost of living of maybe 4.5% or 5%. What justification can you make for those tenants receiving increases of 10%, 20% or 30%? Those are increases that we have seen right across the board in many of the submissions that have been made here at this committee. We are not talking either about one-year increases. We are talking about those kinds of increases very often over a repetition of years. What I say to you, sir, is what kind of justification can you make when people in our society who are tenants are only getting an increase of 5% in their pay and yet they have to pay out 10%, 15%, 20%, 25% to landlords, sometimes not for one year but for many years?
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Mr Herman: May I respond to that? You seem to be forgetting that since 1975, as I said in my speech, my expenses went up 120%; my income only went up 80%. My rents are only $350 a month. All the tenants agreed to the increase. Nobody objected.
Mr Drainville: I am saying to you that there are tenants who have come here to this standing committee who have not agreed to the increases, who have not agreed to the work that has been done on their building and many of them are on fixed incomes who cannot afford to pay that kind of increase. You say that it is justifiable that landlords be allowed to do that. That is fair enough, sir. It is just that we have a very big difference of opinion in terms of what should be allowable.
Mr Lobo: Can I respond to your question, sir?
Mr Drainville: By all means.
Mr Lobo: I will do them in order. First of all, if you have not accused me of anything, why are you punishing me with Bill 4? Second, you said that you found some of my comments --
Mr Drainville: Your name was not on our mind when we brought Bill 4 to the Legislature.
Mr Lobo: But you caught me in your web and I did get punished.
Second, you found some of the things I said highly offensive. I found Bill 4 highly offensive and I found some of the things that Minister Cooke has said about landlords highly offensive.
Last, about the rent increases, the average rent increase in the province of Ontario is 11%. That means some were above and some were below. We are talking about the political realities of that. The politicians in this province have made rents a political issue. When I sit in the constituency office I hear the phone ring and I hear tenants complain about their rent. When the price of gas goes up or the price of some other commodity goes up, the phone does not ring, because that is not a political issue. You people have made it a political issue and that is why it is a problem. If we did not have rent controls in this province --
Mr Drainville: Sir --
Mr Lobo: Just hear me out for a moment. If we did not have rent controls in this province, if rents went up 11%, I bet you your phones would not be ringing, but you guys have made it a political issue and it is only that in Ontario.
Mr Drainville: You have made your point and I have to say that in terms of how we have approached Bill 4 and the legislation that we are going to be bringing in, that is utter nonsense. We have not made this a political issue. It has been an issue in Ontario for many, many years.
Mr Lobo: The government has made it an issue.
Mr Drainville: If you would come here, sir, every day and spend time here when the tenants are giving their briefs and listen to the kinds of stories that they have been giving to the standing committee, you would see that as well.
Ms Harrington: Thank you for coming, Mr Herman and Mr Lobo. You mentioned minorities and I would just like to say that, yes, landlords are minorities and what we are trying to do is restore some kind of balance in the province of Ontario with regard to the rights of tenants and landlords. We want to restore a balance. The whole issue of fairness that you are stating is our issue as well. I would like to say that it has not been fair in the province of Ontario. If you would like to compare, say, the number of buildings lost to their owners as compared to the number of apartment homes lost to their residents, then you will see the type of fairness that we are dealing with.
I would just like to end by saying that this process is open to you in finalizing the long-term legislation and we would like that to be open to you, both of you.
Ms Poole: I would like to thank you for your presentation today. Unlike the members opposite, I did not find your presentation offensive. I found that you spoke with passion and conviction, but I do not necessarily think that those are bad things.
The case you mentioned of the 14 steelworkers who have been caught with the retroactivity provisions, you alluded to the fact that the financial institution would be taking over the building. Is this in fact the case that it is going to mean such a financial penalty that your 14 friends will not be able to maintain the building, will not be able to hold on to the ownership and will surrender it?
Mr Lobo: Yes. It is actually 13 friends and me. You have to look at sort of in the cold, white light of reality that this building is going to lose $64,000 per year and the NDP government is going to be in power for the next five years. That is well over $300,000 that we are going to lose on this building. When we look at it in that light, it just does not make sense to own it. I hope that you can just see that. We are going to have to walk away from the building. We do not have $300,000. We are not going to get our phase-in orders. Yes, we are going to lose the building.
Ms Poole: I happen to have a building in my riding which some two years ago faced financial difficulties and the landlord went into bankruptcy. It was taken over by the financial institution. The city of Toronto has liens on it. I have had nothing but daily headaches from that building. If the tenants have to undergo situations like this where the bankers take over the building instead of landlords operating the building, I can assure you, members of the NDP, that tenants are not going to look favourably on this Bill 4 any more than the landlords or the investors or the renovators or those who have lost their jobs.
I had a couple of other questions, but I think Mr Brown actually had some as well.
Mr Brown: There has been some discussion at this committee regarding flipping. You bought this building recently. Do you know when the last sale of this building was before your purchase?
Mr Lobo: Yes, actually I do. We bought the building in June 1989. The sale before that was in 1981, but something very interesting happened. When I met the tenants, the tenants said, "You guys keep flipping that building over and over again." What happened was the building was owned by people out of the country. They changed property managers about four times and unfortunately the cheque had to be made out to someone else, so somehow they got caught up in the idea of flipping. You have to be very careful when you use this term "flipping." I have never heard anyone in the government define "flipping," yet I hear Premier Rae say "flip after flip." You have to define it first. If you sell a building after 10 years, is it a flip? No. But to answer your question, it was nine years the previous owners owned it.
Mr Brown: In your experience, and I am addressing this to the whole group, I am not sure who would answer, but in your group where you have a lot of small landlords seeking advice, how many of them would you think might be in some kind of flip situation where they have bought it recently and it has been turned over a number of times? Is that something you see?
Mr Lobo: In the portfolio that I manage there has not been a sale in the 10 years that I have managed the company.
Mr Brown: I see. So at least in the small landlord sector you do not see it as something that is prevalent. I also have great difficulty in defining "flip." I do not know what the government talks about when it talks about "flip." I do not have any idea, I do not think anybody does, in what they really mean. We have no idea on this side what they are talking about and therefore nobody knows whether it is increasing or decreasing, because they do not want to define it for us.
I am wondering, what about economic eviction? We hear quite a bit about economic eviction. Obviously you deal with landlords. What kind of turnovers are there in your buildings? Is it because of economic factors that people are put on the streets, so to speak, something that is a very difficult problem?
Mr Lobo: In the building that I was talking about the average one-bedroom rent before was $390. The rent increase that we asked for, which we are now not going to get, would have brought the rent to $468. We have a Christmas party in the lobby each year and when we met with our tenants, one of the things that we tried to bring across to them was that if anyone was going to have a particular economic problem, to write us and please outline it. None of them wrote to us. Some of them moved. I do not know whether they had an economic problem or not, but none of them wrote to us.
I am not saying all landlords do that. It is the first time I have ever done that in one of our buildings. But we did do it and they did not complain. A funny thing happened. We have a lot of post-dated rent cheques now for $468, the higher amount, and the tenants are in Florida and we cannot give it back to them, so we have to cash the higher cheque. Bill 4 has taken away our rent increase.
Mr Brown: Maybe you could just elaborate a little bit for me on this self-help landlord group. Tell us your main functions and what the main problems are you face with the group.
Mr Lobo: As I indicated before, we are funded by legal aid. We provide assistance to small landlords who come to the clinic. Out of the 65 clinics that are funded by legal aid, we are the only clinic that assists landlords. All the other clinics assist tenants or deal with other speciality problems.
The major problem we deal with is problems between landlords and tenants over non-payment of rent, noise, dogs, pets and that kind of thing. But we also now have the problem, because of the rent control and this particular bill, of people who have to do repairs, because it is their own house, they are living there themselves, and they were expecting to be able to apply to get that given back to them over a number of years through the existing legislation and now cannot do it. They have the real difficulty, because they were expecting to go to the bank and, on the basis of the legislation, borrow the money, and now the banks are saying, "You can't have the money because you can't pass it on."
Those are the major things we do at the clinic. We do not have a staff lawyer. We are one of the very few clinics in Ontario that does not have a staff lawyer so we do not actually go to court for people who come in. We just provide advice to them and we manage to deal with 18,000 a year.
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Mrs Y. O'Neill: I am sorry I was not here at the very beginning. I would just like, if I have a second, to have that last statement you made regarding the fact that you cannot cash the cheques explained a little bit better.
Mr Lobo: Yes, we had proposed a higher rent increase, $468, as of 1 November. Many of our tenants give us post-dated cheques because they go away for the winter. They gave us the rent we asked for, but then Bill 4 came out and now we have to reduce the rent back to the old amount plus just the guideline, so it is almost ironic that we are sitting here holding these cheques for higher amounts and the tenants really have to pay lower amounts.
Mrs Y. O'Neill: You would base those amounts on orders that you had?
Mr Lobo: No, they were proposed amounts. But it takes a long time to get the order, unfortunately, and the tenant has the option of paying the proposed amount or the old rent plus the guideline.
Mr Tilson: I have two questions, one for the first speaker, Mr Libman. You have had some experience in law, it appears.
Mr Libman: A few years' worth.
Mr Tilson: You have made some comments which I happen to agree with, that the legislation is probably of doubtful constitutionality. I would like to ask you a question about a subject which I do not know whether you have directed your thinking to, and that is misrepresentation.
I am thinking specifically of an individual, for example, who goes to a building inspector to put up a building. The building inspector from whatever municipality says, "You've got to do this, this and this." The individual does it, finds out it is wrong, and there are judicial decisions that I know of at least where that building inspector or the municipality has been held liable.
I do not know of any similar legislation against the province of Ontario, but obviously the existing legislation probably stemmed from the accord in 1985, with the approval of both parties, even though I think everybody agrees now that it did not work. Here we have an individual such as yourself, Mr Herman, who followed the law, did as he thought the law was and we have a government suddenly coming along and saying it is not going to uphold the law. In fact, it is going to change the law, even though he honoured the law.
My question to you is, and it is probably unfair but I will ask you anyway, whether you think, using the same comparison of the building inspector, there is any type of misrepresentation on the part of this government if Bill 4 is passed.
Mr Libman: I actually tried the argument out on Tuesday on a judge in family court. I told him I was going to make this presentation and I presented the scenario where you applied under Bill 51, you got an order, perhaps approved by court if it went that far, and now the government has proposed another bill that basically cancels that order, even though it has been approved by the ministry, by the hearings board and then by the court.
He unequivocally said: "That can't be. That can't be right." He volunteered the information that that would be unconstitutional, and I agree. I do not think that where you apply under the existing law, you get an order perhaps approved by the court or not, the government can then pass another bill and say, "By the way, that order is now void." It may not be misrepresentation but certainly it is reliance upon the law at the time.
Mr Tilson: I submit that the government may be responsible for his damages.
Mr Libman: The lawyers will have a lot of fun with that.
Mr Tilson: There is no question and we hope the government will come to its senses. I hope Minister Dave is listening.
The second question I have is to Mr Lobo. The minister has stated in the House the main reason he is passing this legislation, and this question was raised before with respect to flipping and luxury renovations. That seems to be the main reason, at least from his comments in the House. You have indicated, of course, that that is just not the case, but I would like you to elaborate some more on that subject.
Mr Lobo: Yes, I think when Minister Cooke brought in Bill 4, he said it was to stabilize the market. That assumes the market was unstable. He used probably three reasons, the first being 150% rent increases. The gentleman from AFFORD, I think, talked about that quite well. They just do not exist. The solution was simply that he needed a cap.
Then he talked about luxury renovations. Again, the solution is extremely simple: Define a luxury renovation and do not give the landlord a rent increase for the luxury renovation. He did not need to be a rocket scientist to figure out that solution and he did not need Bill 4.
Finally, flipping: If the government would define flipping, we could give them a solution.
We did not need Bill 4. We had three problems that he defined, and all three were solvable. Bill 4 was brought and covered the whole province.
Mr Turnbull: Mr Lobo, in regard to the group of people who invested in this particular building that you described, the 14 people, what was the largest amount of equity that anybody put in?
Mr Lobo: Forty thousand dollars.
Mr Turnbull: Did that represent in many cases their life savings?
Mr Lobo: Yes indeed.
Mr Turnbull: Is there any doubt in your mind that if they had thought that they were acting illegally they would not have gone into it?
Mr Lobo: Absolutely. Most of us wish we had not made the investment.
Mr Turnbull: So you would not make that investment today?
Mr Lobo: Definitely not.
Mr Turnbull: If this bill passes, do you foresee any private citizens investing in real estate in this province, in residential real estate?
Mr Lobo: I know of very few sales of apartment buildings since 6 September.
Mr Turnbull: Would you agree with the numbers that have been batted around in these hearings that probably something in the order of 25% has been reduced from the value of buildings as a result of Bill 4?
Mr Lobo: Yes, depending on the locality. But yes, 25% might be a reasonable number for the province.
Mr Turnbull: Would it be reasonable to say that many buildings are financed to the extent of, say, 75% or sometimes more?
Mr Lobo: I believe 75% to 85% would be the standard for a sale in the province.
Mr Turnbull: It has been asserted by the NDP that the reason that people will accept very low returns on their investment is due to the phenomenal capital increase. Is it possible to have capital increase without the flow-through of the financial loss clause?
Mr Lobo: No, it is not.
Mr Turnbull: You are saying to me that the argument that the NDP is making that the offset to the very low income that the people are making after several years is only possible as long as you allow that financial loss?
Mr Lobo: Yes, and I think what they are trying to say is you make the money on your sale.
Mr Turnbull: Yes.
Mr Lobo: It is like sort of telling a farmer, "Don't make any money now farming, but when you sell the farm, you'll make a lot of money." That just does not seem to make any sense.
Mr Turnbull: It appears to be a 20% increase that you applied for, from $390 to $468. Is that right?
Mr Lobo: Yes, sir.
Mr Turnbull: Can you tell me what you did with that?
Mr Lobo: Yes. Of the $125,000, balconies were the major cost of about $60,000. We put in a new security system for the benefit of the tenants; we put in new emergency lighting; we replaced the windows on the top floors, as they tend to get draughty; we did the driveway, and we did light fixtures and painting of suites.
Mr Turnbull: Were any of these items, first, ones that could have been saved if there had not been neglect? Is there any suggestion of neglect?
Mr Lobo: Well, you can subscribe to Mr Mammoliti's theory of driveways. I do not. But no, it was not due to neglect. The building was 27 years old.
Mr Turnbull: Quite so. And was there anything of a luxury nature in it?
Mr Lobo: Absolutely not.
Mr Turnbull: So you are saying that your people bought it legitimately, within the framework of the law, they invested their life savings, they did not do any luxury renovations and still they are faced with losing their life savings?
Mr Lobo: That is a very succinct and accurate description of what our investors face.
Mr Turnbull: Thank you,Mr Lobo.
Mr Tilson: One question. I do not know what your experience is with investors. I am thinking specifically of the banks and the trust companies. The government is saying that the reason that the banks and the trust companies are not going to finance the landlords is not because of Bill 4 but because of the collapse of the real estate market and because of a recession. Do you have any thoughts on that?
Mr Lobo: Yes, I sure do. The apartment building industry is outside of the mainstream of the economic ups and downs of this province. Rent controls made sure of that. Incomes are controlled. You cannot charge the market rent. Because of rent controls, you have taken the apartment stock out of the main economic flow and you have put it over here. Had we not had Bill 4, there would not have been a reduction in the value of apartment buildings. You do not need to be an economist to know that.
The Vice-Chair: Thank you very much for your presentation. I am sure the committee found it extraordinarily interesting.
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Mrs Y. O'Neill: Mr Chairman, before we have the next presenter, may I ask some direction from you? We have received a letter from the Minister of Housing and I do have some further questions. Although I think he has tried to be helpful, I have two very specific questions that I would like to place about this letter. Would you give me some instructions as to when you would like me to do that?
The Vice-Chair: Would you like your questions on the record, Mrs O'Neill?
Mrs Y. O'Neill: Yes, I would.
The Vice-Chair: In the interest of the presenters, it might be wise to do this following the presentations today. Would that be satisfactory?
Mrs Y. O'Neill: I am asking for direction.
The Vice-Chair: I think that would be accommodating to everyone.
Mrs Y. O'Neill: As long as you or the Chairman do not forget.
The Vice-Chair: I am sure you will remind the Chairman if I am not here.
RAM RESTORATION
The Vice-Chair: Our next presentation is from RAM Restoration, John Makuch. Welcome to the committee, sir. If you would introduce yourself and explain your position in the organization, you have 20 minutes, 10 minutes to be spent on the formal presentation.
Mr Makuch: My name is John Makuch. I represent RAM Restoration. I am president of that company. I am here today speaking on behalf of my partners and past and present employees.
Good afternoon, Mr Chairman and members of the committee. I am president of a medium-sized company specializing in concrete rehabilitation of balcony slabs, underground parking garages, brick repairs and structural deficiencies.
My partners and I started our company in September 1986. The first year we did all the administration and labour ourselves. We based our company on honesty, integrity and quality workmanship. In the year that followed we increased our labour force to eight and steadily gained a reputation in the industry as a company that cared about its customers and its employees.
In year three we had to turn down work, as we could not find enough people to employ. We still had a very good year and felt the worst was over and we were now on our way to becoming a success. The word "success" for us, however, did not mean big salaries, fancy cars and luxurious vacations. We did all the things that we felt smart businessmen should do. We reinvested our money into the company for equipment so we could become more efficient and make work safer for our employees, because not that long ago we were in their shoes, or should I say, in their work boots.
Please do not misunderstand me, Mr Chairman and members of the committee. Things were not always rosy. As with any business, there were always ups and downs. There were many times that, due to cash-flow problems, my partners and I went without so our men could be paid.
We also took pride in the fact that with our success we could do more for our community by giving to charities and supporting groups that were less fortunate. We supported the Oakville-Trafalgar Lions Club, which runs a summer camp for the blind and donates money to a number of different individuals who need help. We also sponsored junior T-ball teams two years running and took an active role in the coaching of these children. This to us was success. This made us proud. But the most important thing to us was the fact that we employed people and gave them a future and something they could be proud of.
We are now entering the end of our fourth year and it too was successful. We managed to double our staff and at one point held 35 people in our employ, and 30 out of the 35 are renters.
The company was, and I stress the word "was," on a steady upward climb. It had accomplished what we had set out to do. Our clients were pleased with our service and our quality in the field. They were impressed with the conscientious behaviour of our crews while on their sites. This was reflected in discussions and negotiations regarding upcoming projects in 1991 totalling approximately $2 million.
As of 30 August 1990 everything was looking pretty good for my two partners and I. We started to make plans to hire more staff in anticipation of the upcoming year. We had just signed a contract for a job in Hamilton for approximately $200,000. It was to start 15 September 1990 and would have employed seven people for four months. We were a little puzzled at all this good fortune, because we were aware that we were heading into or were already into a recession, but talking to our clients, it became clear that this work would proceed regardless.
You can imagine our excitement, Mr Chairman and members of the committee, at the outcome of this information. It would mean that we could employ tradesmen and labourers laid off from other industries that were directly affected by this recession. One major problem was now behind us. We knew we would be able to find the extra employees we would need to execute the upcoming projects.
Then, on the morning of 13 September 1990, I received a fax from one of my clients and this is what it said:
"Mr John Makuch, RAM Restoration...Dear Mr Makuch:
"Re: 140 Robinson Street Hamilton -- Parking Garage:
"Due to the recent provincial election and to recent information which has come to my attention in respect to the new government's plan concerning rent controls, we must postpone all work contemplated for 140 Robinson Street, Hamilton, Ontario."
I do not follow politics that closely and, to tell you the truth, I did not know at that time the NDP policy on rent control, but after a lengthy conversation with this client, I had a pretty good idea. Our company and all of our employees were in serious trouble.
Over the next four weeks our worst fears came true. All negotiations had ceased and any talk of upcoming projects had come to an abrupt halt. The feedback was all the same: "If we can't recover costs, how can we proceed with major repairs?" The 1991 season, which had looked so promising, had become a nightmare. Instead of hiring, we were cutting staff. Other companies we knew were in the same situation. All this, and the new government had not even made a statement at this point, but it was soon to come. Wednesday 22 November the knockout blow was delivered, and since that day it has only got worse.
Our company's workforce has declined steadily to seven. There are no jobs pending and no talk of any work coming up, all this before Christmas. I have spent the last four weeks calling consulting firms and engineering companies, and when I ask them if they are in the building consulting business, they say sarcastically, "We used to be."
As you can see, this legislation is affecting more than just the restoration and renovation industries. I wonder if any of you have had to ever look at someone in the eye and tell him he no longer has a job, when that someone you know has a family. How do you think it feels when he asks you, "What am I going to do now?" and you do not have an answer? It becomes much harder when it is not your fault, when you know you have done everything you can to secure contracts so he can keep working.
There is one task still left that will be harder than this, however. I have to tell my family that soon I may be out of work. I am going to have to look at the faces of my children while we move out of our home. As I said earlier, I did not take a large salary and I do not have a large bank account to draw from. If our company goes bankrupt, I may have enough money to last six weeks and then I will be a renter too.
This proposed legislation, in my opinion, is totally one-sided. There must be another way to protect the tenants of this province without sacrificing hundreds of businesses and thousands of jobs.
Do they not understand that the safety of the tenants is at stake? I know. I have seen structures in this city that will not last more than two years. I am not talking about countertops, plumbing fixtures or the painting of hallways for aesthetic reasons. I am talking about the structural integrity of the buildings. Does someone have to get hurt or even die before this government will admit that this legislation was and is a mistake?
The new government was elected by the people for the people. They said time after time that they were for the working man and that they were going to show the people of this province that they would make a difference. All they have shown my partners and I and the people who used to work for us is that they are a bunch of hypocrites.
They have also shown me that they are discriminating against the landlords of this province. They say a few have spoiled it for the rest, they say landlords are raising rents 100% and 150% and make it sound as though all landlords are at fault when their own figures show this is not true. They must be either exaggerating or lying Which one is it? It does not matter. They are both wrong.
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The Chair: Sir, thank you very much for your presentation. We will start our questioning. I believe Mr Turnbull is first.
Mr Turnbull: In your estimation of the work that you undertake, could you tell us whether any of it is due to neglect and lack of repair by the landlord?
Mr Makuch: No.
Mr Turnbull: So it is of a nature that it is just simply the age of the building?
Mr Makuch: I would say that neglect probably leans more towards the inside of the units. You cannot neglect a balcony. There is only so much you can do to it. You cannot neglect an underground parking garage that was built in 1965 or 1970.
Mr Turnbull: The effect, as I understand it, is that water mixed with salt leaches into the rebar and then there is a spouting between the cement and the rebar and it becomes structurally unsound. Is that correct?
Mr Makuch: That is correct. The salt that we use on our roads is carried in by the vehicles. It puddles and runs into the concrete through cracks or just is absorbed by the concrete itself.
Mr Turnbull: Certainly not a fault of the landlord?
Mr Makuch: No.
Mr Turnbull: Okay. Is it something we could have foreseen at the time?
Mr Makuch: I think that the gentleman who spoke earlier today may have made it clear that at the time of constructing these buildings no one was aware of this problem. No one knew that this was going to happen. Now there are steps that can be taken, but only in the buildings which are being constructed now, and as we know, there are not too many of those.
Mr Turnbull: If you were having to fix an underground parking garage of, let's say, a 100-unit apartment building, typically what might be the bill if it was a significant problem.
Mr Makuch: It could cost anywhere from $250,000 to $500,000, and depending on the structural damage, how bad it was, it could cost even upwards to $1 million.
Mr Turnbull: So it could be in the order of 30% to 50% of the original cost of the building?
Mr Makuch: No doubt about it.
Mr Turnbull: Okay. Is it value? I mean, once having done this, is it something which is going to last for a good number of years?
Mr Makuch: Yes, it will. There are steps that are taken now. Any rebar that is corroded beyond a certain percentage is replaced now by Teflon-coated or epoxy-coated steel, and once the concrete is put back into place there are certain steps which are taken to protect the concrete to keep water from penetrating the slab. There are various steps that can be taken.
Mr Turnbull: Let me ask you, how many years did you say you have been in business?
Mr Makuch: I have been in the restoration business for 17 years and I have been in business with my partners for ourselves for the last five.
Mr Turnbull: Five years, okay. Now, when you bought your equipment were you buying new equipment?
Mr Makuch: Yes.
Mr Turnbull: Were you immediately putting money aside into a fund to replace that equipment?
Mr Makuch: No.
Mr Turnbull: Could you have afforded to have done that?
Mr Makuch: I doubt it.
Mr Turnbull: So the suggestion that somehow the landlords, having started a business with a building, magically would have had some extra funds to put away is a fallacy?
Mr Makuch: I think it is kind of silly because if we did not know back then, when these buildings were constructed, what was going to happen to them -- I am sure that if the builders and landlords knew, they may have, but they had no idea that 20 years from then we would be facing problems like this.
Mr Turnbull: What would you say to the government? I mean, we have the problem on this side of trying to explain to our friends in the government that we recognize they have very little business experience and come from union backgrounds or social worker backgrounds, and that is good, that is to be commended, but they do not have the experience of business to be able to understand how you --
Ms M. Ward: I object.
The Chair: Do you have a point of order?
Ms M. Ward: I think Mr Turnbull should find out where we come from before he makes such broad statements.
The Chair: That is not a point of order. It is certainly a point of privilege.
Ms M. Ward: It is a point of privilege, then. I do not believe you have, obviously by your statement, determined that.
Mr Turnbull: I withdraw it, Ms Ward. Let me put it another way.
The Chair: The matter has been withdrawn.
Mr Turnbull: How would you advise the government as to how you can tackle this very difficult problem, that undoubtedly some tenants are facing, as we have heard, economic eviction, and yet at the same time we are draining the ability of landlords to be able to do capital repairs. What would your advice be?
Mr Makuch: Well, I am not an expert on this issue, but after all the work disappeared and our company is in the position that it is in, you can bet I was on the phone trying to find out from some of my clients: "What is it going to take for you to start these projects again? What is it you need?" The norm and the talk seemed to be, first of all: "Kill Bill 4. There's no way any of this will go ahead."
Mr Turnbull: Let's assume that if Bill 4 is enacted in its present form, even if there is provision in the permanent legislation for capital costs to flow through to tenants, do you think landlords will quickly have enough confidence in the government that it will not retroactively take that provision away?
Mr Makuch: No, sir. If Bill 4 does pass, even if the government does work hard to get this thing rectified and does not use up the two-year period, one year is too long. There will be companies out there, mine and other ones, that just will not make it. I know that there are landlords -- I have been here for the last three days to become accustomed to what I would be up against today, and I saw a gentleman break down and weep at this table. I am sure that he will not last a year. If one company goes bankrupt and we lose one job, if one landlord loses his life's savings, it is too costly.
Mr Turnbull: How would you help those people who are being pushed out of their homes through economic hardship? Is it government's responsibility?
Mr Makuch: I think so, yes. If renters do not have a roof over their head, then I think it is up to the government to subsidize them. That is what they are there for. It is not up to the landlords and it is not up to me.
Mr Tilson: I do not know what it is going to take for the government, for Premier Bob and for Minister Dave, to understand the horror stories that are going on in this province.
The Chair: The time has expired.
Mr Tilson: We are having people going down the tubes. The province is going down the tubes. It is time to listen.
The Chair: Thank you very much.
Mr Mammoliti: It is coming to a point where I know what Mr Tilson is going to say every time he opens his mouth. I would like to ask you, is it 17 years you are in the business?
Mr Makuch: Yes, 17 years.
Mr Mammoliti: In those 17 years I am sure that you have had your share of property managers who for some reason or another, after you have investigated a potential job, after you have given them an estimate, did not want to do the work. Am I safe in saying that in those 17 years you have never walked away from a property manager who has said to you, "No, I do not believe you," or, "I am not going to do that particular work that you are saying is required"? You never walked away shaking your head, saying: "I wonder why? I mean, that's so important for him or her to do, and they do not want to do it"? You have never, ever come across that scenario?
Mr Makuch: No. I heard you say earlier today that you are from the labour industry, so you must know that three quotations are always given. They ask for your opinion, your expertise, on all these quotations, and sometimes the opinion varies as to what caused the problem or the method to fix it. I have heard them complain a lot about how much it costs, but I have never heard them say, "No, I am not going to do this work."
Mr Mammoliti: Are you saying to me that after you have given the quotation you never go back to see whether the work has been completed or who has done the work?
Mr Makuch: I will sometimes follow up to see who got the quotation, who is doing the work and if the work has proceeded. Most times somebody else has got the work and the work has proceeded.
Mr Mammoliti: Let's go back to my original question. I asked you whether or not, after you have recommended something be done, a property manager has said no to you, "I'm not going to do it." In 17 years, are you telling me that has never happened?
Mr Makuch: Are you asking me if I have lost a contract to another company?
Mr Mammoliti: No.
Mr Makuch: Then what are you asking me?
The Chair: We are relating to Bill 4, as I was instructed to remind the committee.
Mr Mammoliti: He is not answering my question.
Mr Makuch: I do not think he is making himself clear.
Mr Mammoliti: The question I am asking you is this: After you recommended a certain job be done, have you ever run into the situation where a property manager has said: "No, I do not want to do that particular job. I do not want that done on our premises"?
Mr Makuch: No.
Mr Mammoliti: You have never run into that situation?
Mr Makuch: No.
Ms Harrington: The type of work you do is restoration. Is it basically the same as the other company earlier this afternoon?
Mr Makuch: Yes, we are involved in exterior wall surfaces, some roofing and underground parking garages.
Ms Harrington: Okay. Well, then I would say to you that the work you are doing is absolutely necessary. It is important and it should definitely be ongoing.
Mr Makuch: If I may add, I wish it would continue.
Ms Harrington: Right. And --
Mr Makuch: It is not.
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Ms Harrington: There is only one point where we differ. I think we would agree that it does not happen overnight that this work needs doing; it is an ongoing thing. Now, we would agree that all of a sudden in this particular year, every building does not happen to need this type of restoration work.
Mr Makuch: Not every building, no.
Ms Harrington: Right.
Mr Makuch: Some need more than others and some need different things.
Ms Harrington: Certainly. This is an ongoing problem; right.
Mr Makuch: Some of it is due to environmental conditions, as you heard earlier today, and some of it is due to poor construction in the 1960s and the 1970s.
Ms Harrington: I see, which may be 20 years later, that at this particular time we may have a bulge in the amount that needs doing, which is unfortunate.
Mr Makuch: Yes, maybe at that particular time they did not have the right anchor bolts or the anchor bolts just do not last. Now we can use stainless steel, we can galvanize --
Ms Harrington: Okay, but the person who owns this building that needs this work is in there for the long term. They are in there also with the equity in that building. They do not want to see this building destroyed, and according to law they have to keep this building in a state of good repair. I do not know all the details, but that is the way it has to be, whether or not they get the money from the rent control regulation.
All I am saying is that we agree that this work has to be done and that this is common knowledge. The only place where we differ is where this money comes from. It does not necessarily have to come in this particular way that they have been doing it with the RRRA for the last five years. They have to do it another way.
Mrs Y. O'Neill: I am very pleased that Mr Makuch came before us. I find this brief very unfortunate and I am moved by it. When I see that only 7 out of 35 employees remain --
Mr Makuch: That was only the 35 employees we had on staff. That did not take into consideration the extra staff we would have been hiring to take care of a lot of the upcoming work.
Mrs Y. O'Neill: Thank you for your clarification. You say you have been in this business for 17 years and --
Mr Makuch: Seventeen years. I started off as a labourer in this business 17 years ago.
Mrs Y. O'Neill: You have been an owner for five. You obviously made a very difficult decision five years ago to take some risks and to make some investments in the province and to help those labourers whom you felt had the skills that were needed. As I said earlier, I understand this submission, because I have experienced it very close to my own home. We now have a situation where you cannot continue and to me this is certainly more than regrettable.
I am very pleased that you submitted one of your -- I do not know whether you call it a work order or an invoice or an estimate.
Mr Makuch: That is a contract, a signed contract.
Mrs Y. O'Neill: Okay, because I noticed in two places, and I cannot say I have read every single word of it, that you have given advice to your property manager that this method you are suggesting would be cheaper than and just as effective as, and in two places you have made that statement.
Mr Makuch: Yes.
Mrs Y. O'Neill: So I feel that you are certainly not, and I do not like terms, but you are not a gouger; you are an honest businessman with efficiencies. You have also obviously done some retraining, because these are relatively new technologies that are being applied.
Mr Makuch: We are constantly retraining our personnel and training new personnel.
Mrs Y. O'Neill: This is what I find difficult, because these are the kinds of partnerships that I feel government should be involved in. I feel that without these kinds of partnerships we are not going to be a very progressive province. I hope that in some way you will get re-established. I certainly hope that we can have some amendments to this bill. I hope that we can restore the confidence of the people who now are not proceeding. You have asked them for answers. I do think Bill 4 has made a crucial change in the thinking of many people. Please continue to work with those of us who believe in the same things you do.
Ms Poole: Thank you, Mr Makuch, for coming before us today. If you were feeling confused by one of the previous member's questions, please do not take it personally. There were quite a few of us who were confused.
Mr Makuch: I noticed that.
Ms Poole: I just wanted you to feel a little better about that. There are a couple of things I want to explore with you. Leaving aside those that you planned to hire if your other contract had gone through, your workforce has gone from 35 to 7. Were any of those jobs lost as a result of the recession or were they all strictly because of Bill 4?
Mr Makuch: Strictly because of Bill 4. There were no jobs lost in our company due to the recession. As I stated in my speech, we were looking forward to hiring more staff in 1991. We had one contract signed, as you can see, that would probably have taken place and been finished in 1990, but the 1991 season was looking as though it would be our best ever.
Ms Poole: I have one other matter.
The Chair: Very short.
Ms Poole: Okay. Ms Harrington was saying that the landlord is responsible for keeping the building in a good state of repair, and therefore if the work has to be done, if it is crucial for the safety of the tenants, then it must be done and he is responsible for doing it whether or not he or she has the money. Would you give us an estimate of what it costs to do, for instance, an underground parking garage rehabilitation. Give me the smallest job you have ever done and the largest job, or the largest job you know of, the cost in those terms and tell me whether you would think it reasonable that a landlord would have to be responsible for paying that out of his own pocket whether or not he or she has it.
Mr Makuch: The smallest job we have probably done is to come in and fix a few parking bays. That may be two stalls where cars park. That may cost anywhere from $1,000 to $1,500 to $2,000. The largest job that we have been involved with was $450,000 and that was a total removal of a whole suspended slab. That means the floor and the ceiling that split the garage into an upper and a lower level was completely removed and new steel replaced, formed and then poured with new concrete.
The Chair: Thank you very much for your presentation today and for working with the committee.
ASSOCIATION OF CANADIAN REAL ESTATE SYNDICATORS
The Chair: The next presenter is the organization referred to as the Association of Canadian Real Estate Syndicators. Please come forward and take a seat. If you have seen the proceedings this afternoon, you will know that we have allotted your organization 40 minutes, 20 minutes for your presentation and a further 20 minutes for questions from the committee members. We would ask that you identify yourself and the position that you hold with the organization, and the floor is yours.
Mr Nairne: My name is Michael Nairne. I am president of the Association of Canadian Real Estate Syndicators. My apologies for not having a written submission for you. I was only notified of our appearance here late Tuesday and was out of town until this morning and, I think like many of us, spent a relatively long night watching the television.
Our association represents builders, security firms, financial institutions, property management companies and professional firms involved in the creation, marketing and management of real estate investments to Canadian investors. In essence, through the securitization of real estate, we make real estate investments in either the form of a condominium unit or a partnership or undivided interest in a large building available in affordable unit sizes to individual Canadian investors.
Our investors, in other words, are consumers of financial products here in Ontario. They represent a broad section of the middle class -- teachers, nurses, policemen, public service, business owners, professionals and even politicians.
I am actually here not representing our industry; I am actually here representing those consumers. Their motivations in investing in real estate are really no different from people investing in their registered retirement savings plans. They are looking to provide for real capital growth after inflation to help fund their retirements. It is part of building a quality of life for them.
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In Ontario in the residential sector over the past 10 years, it is these investors who have dominantly been responsible for the funding of the bulk of new condominium rental projects. By condominium rental projects I mean projects that are built from scratch as condominiums but where from day one the entirety of those buildings through the syndication process are actually leased out and rented out. Individual investors own condominium units within it that are in turn leased. The advantage to the investor is that he is able to participate in a large project with active management in place and passively deal with his investment.
These investors are neither flippers nor speculators. The expected holding horizon for these investments is five, 10, 15 years or even longer. Their yield expectations are not exorbitant, typically in the midteens, several points higher than GICs and competitive with other growth investments such as equities.
It is the billions -- by our calculation it could be as much as $4 billion to $5 billion over the past five years -- that these Ontarians have invested in the residential rental sector over the past five years in this province that allowed our rental housing sector to expand to accommodate the incredible growth of this province. It is their capital, their retirement moneys, which financed the creation of thousands of jobs in the construction, building materials, finance and real estate industries. It is the levies that were paid on their projects which have financed new schools, roads, the very infrastructure of our communities. Absent these investors and a rental housing crisis of unheard-of proportions would have occurred. In fact, with the recent economic downturn, the sheer quantity of rental condominium units built has created an excess supply at the top half of the rental market.
Rents are falling in the $500 to $1,000 range for most rental projects in this province. Discounts and giveaways prevail. A competitive market is creating choice and economies for tenants. For the investors, however, it is a different story. Given high capital costs and high interest rates, these projects typically lose money in their initial years of operation. An oversupplied market is increasing these losses today. Rents already economic have become punitively so.
The only bright light, however, was that under the previous rent review system rent increases above normal were allowed to recoup such losses. Let me make it plain. By "above normal" I mean 8% to 10% annual increases, not huge, double-digit jumps, but increases that over time allowed an individual to turn an uneconomic investment into an economic investment.
Unfortunately, we must now advise these investors, consumers of financial products here in Ontario, that the government intends to eliminate this provision. Rent increases will be set at uneconomic levels regardless of loss. With a government on record to replace the review system with one of controls, with a history of temporary rent relief becoming permanent, the interim nature of this move is debatable. In any event, investors will not believe it. This shaken confidence will rapidly be replaced by financial distress and disbelief as the rental market improves as we go through the upside of a cycle during the early 1990s. If they remain locked into economic losses rather than returns, investors will uniformly be selling and abandoning this area just as private capital is required for new units. Some, unfortunately, in the process may even face foreclosures and bankruptcies.
In this process, we as a society will all be losers. Investors who would prefer to invest at home here in Ontario will be putting their money into new real estate projects in Alberta, Texas or Florida. Globalization has created horrendous competitive choice for capital. The government, facing increasingly constrained resources, cannot afford to replace all this private capital. The money is simply not there. Waiting lists will grow, not decrease. Construction, real estate, finance and other jobs will be created elsewhere, not in Ontario. With insufficient rental accommodation, home ownership prices will be forced up as people are pushed out of a rental market. The biggest losers will be the very constituents our society needs to help the most, the permanently poor tenant, the physically or mentally handicapped individual with special housing needs, the aged with special housing needs. Our limited public resources must be directed at them. Let private capital house the tenants who have the capability, the maturity and the capacity to act as discriminating consumers as adults. They do not need your help.
Gentlemen, the rent review system that was in place was certainly not perfect, but it was, in a poor fashion, working. It afforded consumers protection and opportunity: for consumers of rental housing, protection against sudden, arbitrary and huge rent increases; for consumers of residential rental investments, the investors, it afforded them the opportunity over the long run to pursue fair and reasonable returns on their investments.
In the final analysis, the measures now proposed by the NDP government, the elimination of rent increases to compensate for financial losses and capital expenditures will drastically penalize the consumer of financial investments in favour of the consumer of rental housing. The negotiated balance of the rent review system will be lost. The sad truth is that this is poor economics, but even worse, and worst of all coming from an NDP government, it is poor ethics. Amazingly, four years from now, when this government is seeking re-election and then sitting on top of our next rental housing crisis, it will have turned out to be very poor politics.
The Chair: Sir, thank you very much for your presentation.
Ms Poole: As far as the real estate syndicators, you obviously have your concerns about this bill and the impact in many ways. Would you like to expand on what is going to happen as far as future investment?
Mr Nairne: The current supply, and it depends on what demographic model you need, but we could be facing the need for 25,000 to 30,000 to 35,000 new units each year. It could be expenditures in the order of $3 billion a year in this province. If you look over the history of this industry you will find that private capital -- first it was institutional capital in the 1970s that basically left the business, the large companies like Cadillac Fairview. Virtually all companies, with the exception of Bramalea, sold off their portfolios. They have a responsibility to their shareholders and that responsibility is to seek improved capital returns. Most of the insurance companies that used to be equity players also left the business because of the politics associated with rental housing. The small or medium developers who stepped in in the 1970s left in the 1980s until the onset of the new rent review system.
What stepped into the gap was the syndication process, which is a fancy name for takinglarge projects, breaking them down into affordable sizes and having individuals buy these. These are all sold by way of security, cleared through securities commissions or by private offer. That capital has now been placed in and it is really the only reason, frankly, that the Liberal government was able to avert a huge rental crisis at the top end of the market. We know we have one at the bottom end with the poor, but now we are talking about the 70% of Ontarians who can afford rental housing.
Because these investments initially lose money in their early years of operation and because right now the market is at a low point, the impact of really constraining rents to the statutory limits will put a person into a financial penalty box. As retail investors -- it is funny, I was reviewing one of the NDP's new bills on financial disclosure -- we will be having to tell these people that frankly these are not good investments. The result will be that with the new disclosure we will have to say, "Invest in an area where you can earn a proper competitive return," so private capital will leave the business. If the government has the capacity financially to step in and efficiently provide all the rental housing required in this province, by all means say you are going to do that if you can, because that will be the net effect.
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Ms Poole: You mentioned in your presentation about investment moving outside Ontario to Alberta and various other provinces and outside Canada. Do you have any sort of log of cases where you know already that investors have pulled out or have told you that they definitely will be pulling out?
Mr Nairne: I think people are watching pending what the NDP are prepared to do with this. If they go ahead with this, at the meetings we have had, the bulk of our members are going to really be redirecting investment focus to other investments, bonds, equities, real estate elsewhere and we will likely be advising our clients to sell off current holdings and redirect their capital elsewhere.
This is their retirement money. This is the money that you or any of us have accumulated over our life to provide for our retirement. It is incumbent on us to have them properly manage it. We owe them, as consumers of financial products and advice, ethical and honest answers to their questions.
Ms Poole: One last quick question and then I believe Mrs O'Neill has one. The government has said this is interim legislation and that it plans to try to bring in its long-term legislation very quickly, possibly as soon as a year but certainly within a two-year period. Is it your estimation that, if Bill 4 remains in its present form, it will be difficult to attract investment back to the rental market simply because they have lost their faith in government and in the credibility of government and they are afraid that the rules will change once again?
Mr Nairne: In the area of rehabilitation, and some of our members do that although a lesser proportion, I would say it will be a long time coming. The next housing crisis, because the market is cyclical, will not be solved by private capital.
In the other sector, again the confidence will take time to rebuild. The unfortunate reality of all this is that the interim measures have rarely ever been sorted out to provide real solutions.
The solutions I have heard being proposed here in terms of overall cap limits, defining a luxury renovation, the things that can specifically be directed to collect the problems that are publicly shown, those are the ones that should be implemented right away because the job loss, the financial distress, the disallocation, we are now in a competitive world and a competitive world allocates its resources fairly.
The problem with this is that we all end up as losers. It is only an abundant society that can help the disadvantaged. My fear is that it is going to be the erosion of that abundance that is going to leave us with fewer options in the future, not more.
Mrs Y. O'Neill: I was very pleased with the way you began because I think it is not generally known that over half the people in the province of Ontario do not have a pension plan other than the regular federal pension plan. Most of these people have not worked their lives under collective agreements. They have owned a small business or they have worked in a small business or they are in occupations that do not generally have a pension plan built in. I do not think that is generally understood.
I think everyone in this province, however, has a right to provide for their old age or for times when they may not be able to work as they are working when they are fully employed. You made that very clear, that this is about the same thing as any investment would be, such as a registered retirement savings plan or a pension fund. This is the way many people look upon real estate investment, and we have had them come before us for sure.
That is my comment about what you said and I am glad you brought it to the forefront of your presentation.
I am wondering if you have any individuals and/or groups you can relate to us who have had, recently, since the legislation was presented on 28 November, discussions with either trust companies or bankers and have found that they are not as welcome as they were before this legislation.
Mr Nairne: Anybody who is involved in residential rental housing is now facing a real inability to get financing. These institutions are large. There is a need for funding for new development in Alberta today. If I can place my mortgage on a new Alberta rental project without concerns of loss or arbitrary shifting in government regulation, philosophy and approach, I will do it.
Mobile capital is a reality of the world because that is our accumulative as people's savings and they attempt to find places where it is going to provide an adequate return.
Mr Tilson: Just a brief comment and then Mr Turnbull will ask some questions. I do not know how many stories from people like Mr Makuch and Mr Nairne it is going to take to convince you people that this bill is going to cause this province economic disaster. The sooner you withdraw it the better.
Mr Duignan: I did not know you were going to say that.
Mr Turnbull: Thank you for the very good presentation. I have to compliment you on the fact that you did not have a prepared presentation and you were able to speak so fluently on this matter. Could you tell me how many condominium units this vehicle for investment has provided in Ontario for the last five years?
Mr Nairne: There are two levels of condominium investment. One is where an individual builds a condominium building and individual investors just on their own accord go out and buy and rent. That is one whole group that is to a certain degree trapped, certainly, by this change.
The second is where a company undertakes and builds a whole project for a group of investors, each owning those units. That is the typical syndication process.
I know that in the city of Toronto it has been between 3,000 to 6,000 units a year for the past five years. I know there have been similar amounts of building. It has made all the difference between a shortage in the $500 to $1,200 range and the capacity to house those people.
Mr Turnbull: Would you say that was probably the determining factor in changing the vacancy rate from 0.02% to 1%?
Mr Nairne: Absolutely. Now the problem coming is that if that capital leaves, that is the last capital. The institutional capital has left the business. The corporate capital has left the business. If the retail capital leaves the business, it will be entirely up to the public purse and that becomes a matter for you to take up with your Treasurer. They have found in other economies, unfortunately, in society that it just does not work.
The second travesty of all this is that if people at the top end cannot find rental housing they begin holding on to it, and when they hold on to it the persons who get pushed out at the bottom are all those who are disadvantaged. What concerns me really the most is that some of them -- certainly the motivations of the NDP in terms of certain isolated instances point to where there need to be remedies to the current system.
Mr Turnbull: Could you tell me, among the investors you have, you alluded to the fact that on average the yield expectation was in the teens. I presume that does not refer to the first year of ownership. That is an average, is it?
Mr Nairne: That is an average over the life.
Mr Turnbull: What is a typical lifespan of such an investment?
Mr Nairne: A typical building holding period would be eight to 10 years.
Mr Turnbull: Certainly it is not as mobile as investment in other vehicles.
Mr Nairne: It is not liquid, no, it is not.
Mr Turnbull: Yields in the teens would be fairly conservative compared with other vehicles of investment.
Mr Nairne: They are competitive with other growth instruments, but if they were any less there would be no capital flowing into the sector at all.
Mr Turnbull: Do you have any indication as to how many Ontario citizens have put their life's savings into this kind of investment?
Mr Nairne: I think you could be talking in the order of maybe 50,000 Ontarians. These individuals are all passive investments. They have bought a security interest. They do not see themselves as landlords. They see themselves as investors, just the same way that a person invests in a guaranteed investment certificate, which is in turn let out in a mortgage and does not see himself as a mortgage holder.
Mr Turnbull: Are there any of them you would define as being gouging, greedy landlords?
Mr Nairne: Absolutely not. A lot of them are tenants themselves.
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Mr Turnbull: I have observed in the underground parking garages of some of these condominium buildings that are rented out that there seems to be some awfully expensive cars among the people who are renting them.
Mr Nairne: Yes, and we have done surveys in certain buildings, but the average income profile would be between $40,000 and $80,000 for most of these buildings.
Mr Turnbull: Did you see any reason to give those people any breaks from the landlord?
Mr Nairne: Number one, most of them are transient renters, corporate relocations. Many times they are moving out to buy a house. They have high capacity to pay and frankly, by suppressing rents for them, you end up driving up restaurant receipts and lowering housing for the poor and disadvantaged. It becomes that misallocation of resources that in its extreme is portrayed by the Soviet Union today.
Mr Turnbull: Would it be reasonable to say that some, and I am only saying some of these tenants, are paying more in lease payments for their fancy cars than the rent they are paying for the unit?
Mr Nairne: Yes, in fact I had friends of mine, one who is a lawyer and the other is an actuarial, and it worked out their rent bill was 6% of their gross income.
Mr Turnbull: Are these people that we should be targeting for bills to help them?
Mr Nairne: I certainly would not if my objective was to help the disadvantaged. I would take our limited resources and help them.
Mr Turnbull: When your investors dispose of their investment after, say, eight years, do they pay tax on their capital gain?
Mr Nairne: Yes, they do. There is tax on the capital gain, there is recapture of any deductions they have had.
Mr Turnbull: What rate would they typically pay?
Mr Nairne: They will typically be paying at the 50% per cent rate. It is like an RRSP. All you do is you are able to defer some taxes.
Mr Turnbull: So about 50% of their gain is going into the province and into the federal government.
Mr Nairne: Oh, absolutely.
Mr Turnbull: The federal government and the provincial government have not participated in the risk, but the government has participated in the gain to the 50%. Is that correct?
Mr Nairne: That is how our society works.
Mr Duignan: A comment to Mr Tilson: We made a commitment during the election campaign to introduce rent controls to protect the tenants of this province. We are living up to that commitment under Bill 4, make no mistake about that.
Thank you for making a presentation here today. I would like to ask you a question. The first $100,000 in capital gain is tax-free. Correct?
Mr Nairne: Currently yes, unless you have a cumulative net investment loss problem.
Mr Duignan: But the first $100,000 is tax-free.
Mr Nairne: Yes, it is.
Ms Poole: Mr Chair, just on a point of information, when Mr Duignan just made the statement he did that you were going to bring in rent control and you were going to keep your promise with this legislation, does that mean you are unwilling to accept any amendments or to consider any amendments and we may as well all pack up and go home right now?
Mrs Y. O'Neill: It sounds like it.
Mr Abel: Of course not.
Mr Duignan: I will not deter from the principle of the bill. A question: When a landlord regenerates his building through capital improvements and after you finish that work in the building, is the value of the building increased?
Mr Nairne: If a landlord improves the building?
Mr Duignan: Yes.
Mr Nairne: Not recently.
Mr Duignan: That is not the question.
Mr Nairne: Real estate moves through cycles. There are capitalization shifts, there are competitive interest rates. I can improve a building in 1989 and be a loser or a winner in 1990. There is risk in this business.
Mr Duignan: But generally, though, the value of the building is increased.
Mr Nairne: Yes.
Mr Duignan: Who gets the benefit of the increased value if the building is sold?
Mr Nairne: The owner of the building.
Mr Duignan: And should that person not be the one who pays for those renovations in the first place?
Mr Nairne: No, he should not.
Mr Duignan: Why not?
Mr Nairne: One of the fallacies of the ownership-versus-rent comparison is the fact that the tenant does not tie up capital in the project. In fact, one of the debates in the financial planning community is, is an individual better off taking his capital and putting it in other growth instruments and just renting, versus owning? Therefore, in economic terms the individual who is providing the product is being paid a price for it and is looking for a return. Otherwise, he is not going to provide the service. That is the reality.
Mr Duignan: So the reality is that the tenant pays for his investment.
Mr Nairne: The tenant pays the price --
Mr Duignan: -- of his investment.
Mr Nairne: By that analogy, I currently have large interests in a lot of milk with the number of kids I have; I have interests in dairies.
Mr Duignan: It is not a comparison.
Mr Nairne: I mean, one is a consumer, the other is a producer.
Mr Duignan: You talked about, for example, "Let the private sector look after housing."
Mr Nairne: No, I did not. I made a specific reference to large interests in a lot of milk. With the number of kids I have, I have interests in dairies. One is a consumer, the other is a producer.
Mr Duignan: You talked about, for example, let the private sector look after housing.
Mr Nairne: No, I did not. I made a specific reference -- and this is really a point of ethics and consideration -- that the government has a very real role to the structural poor, the disadvantaged. There are those who need assistance in this society. I am saying if a government chooses to enact legislation that treats tenants as a homogeneous group, 70% of whom do not need help, you are distributing that resource over a larger group and underscoring the assistance you can give the truly needy. That is the travesty.
Mr Duignan: Let's look at the benefit of British Columbia's decontrol of the rent control system. It has got to the point that actually, in August 1989, the city of Vancouver had to impose a $1,000 tax per unit just to make sure that there is some rental stock available, plus the fact that private rental starts as a proportion of total starts in British Columbia declined from 47% in 1982 to 5% in 1988. So what would be different in Ontario?
Mr Nairne: We have already just discussed how in Ontario it is already different. Rents are falling in the $500 to $1,200 part of the market, private capital. They are about to fall a year or a year and a half from now in Alberta. Real estate is cyclical. One of the reasons it has become tragically political is that when rents go up 13% in times of shortage, it is a political football. When they drop, as they are today at the top end of the market, when oversupply occurs, the tenant reaps the benefit. What we as a society have to do is find ways of depoliticizing the issue, properly allocating our resources and really helping the disadvantaged.
Mr Duignan: That is hopefully what the intent of the permanent legislation will do.
Mr Nairne: All I can tell you is that you are not going about it the right way. If you were, I would be here applauding you. I am only looking for fair and competitive returns for investors, nothing more. I have to compete with guaranteed investment certificates to attract capital. If I cannot compete, I am going to tell investors to put their money elsewhere. Those are the facts.
Ms M. Ward: I wanted to ask you some questions about condominiums. You said you represent the individual investor, so I assume there is someone else up there through whom those individual investors deal.
Mr Nairne: I am speaking symbolically in the sense that we have fiduciary obligations to our clients in this business.
Ms M. Ward: A lot of people bought condominiums when market prices were rising and are now stuck. As speculators, they purchased condominiums in the hope of flipping them. I am using that verboten word. But you are also dealing with the individual units such as I described, someone buying an individual condominium, and your groups also build actual condominiums. Did I understand you correctly?
Mr Nairne: Most of the rental projects that you see leasing today, for example, Mississauga Square One, the entire building is going rental but there will be 180 individual owners, each owning a specific unit. But they pool their rents and expenses, they hire a manager. They are doing everything collectively and they have bought an interest in what is now legally a security as opposed to real property.
Ms M. Ward: Was that the original intent, to build it and rent it, or was it built originally for sale purposes and now you cannot sell?
Mr Nairne: Build and rent. I will give you an example. In 1983 we built and leased up a 180-suite project in Etobicoke. It leased up very nicely. Nearly half those units are still available in the rental pool, despite the fact that any investor could have sold out at the top of the market with a healthy gain. A lot of people have made long-term commitments in these investments.
Ms M. Ward: But is it intended to stay as a rental building and not be sold as condominiums, or is that up in the air?
Mr Nairne: Many of them sell to the tenants. Longer term, some of the people move into them themselves, because it is their retirement housing. They are looking to fix the cost today. Number two is, what we really need is mobile housing. There is no problem with condominiums that are being rented being sold to home owners, because when home owners need a lot of units, all of a sudden they are available at a lower cost. The key is to keep on building enough so that you have lots of choice and availability in that market. That is what will seize up under this act, unfortunately.
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Ms Harrington: Thank you very much. I think you have made your position very clear and I think we all understand from our own backgrounds that people are looking for investments and that this is one avenue that people go.
I wanted to make clear to you what this government is trying to do. We have a system in this province which we have inherited which we feel is not working. A lot of people are telling us that from all sides. We are trying to somehow bring some fairness to the system and some balance, and what we have found is that the balance has been going one way.
[Failure of sound system]
Ms Harrington: That is our motivation. I would just like to ask you one question. Do you feel that apartment homes are primarily homes or investments?
Mr Nairne: Do you mean condominiums or rental apartments?
Ms Harrington: Rental units. Are they primarily homes or investments?
Mr Nairne: For 70% of the populace, they are a transient good that I buy as I am going through the chain of my own housing; for 30% they are a permanent housing necessity thrust on them, and from the owner's perspective they are an investment.
Ms Harrington: I would suggest that more than 30% need them as homes.
The Chair: Thank you, Ms Harrington. Michael, thank you for coming, we appreciated your presentation.
TOWER HILL EAST TENANTS' ASSOCIATION
The Chair: We are now down to our last presenter, Tower Hill East Tenants' Association. Frances Rose. Frances, you have been allocated 20 minutes, 10 minutes for your presentation and 10 for the questions. I would ask you to introduce yourself for the record, and anyone who is with you, and whatever positions they hold within the organization. The floor is yours.
Mrs Rose: My name is Frances Rose and I am a director of the Tower Hill East Tenants' Association. With me are Ben Fiber, our president, and Ken Pulkonik, our treasurer.
Our presentation today is brief. It deals with the problems we have experienced in our apartment building, problems that I am sure are typical of those experienced by other tenants in other buildings of similar size and age.
The Tower Hill East Tenants' Association represents the tenants of Tower Hill East, an apartment building located at 330 Spadina Road, Toronto. There are 132 units in the building, which range in size from small bachelor apartments to luxury suites. The building is approximately 23 years old. Among its tenants are many senior citizens on fixed incomes, a number of whom have been occupying their units since the building's construction.
In the late 1970s when the Residential Premises Rent Review Act was in effect, our rents were increased according to government guidelines, although in a large number of cases our landlord added on additional annual sums for tax and maintenance escalation. Then in 1980 units paying monthly rents of $750 or more were removed from the protection of the act. Rents were immediately increased, some by as much as 40%, for those units affected. These incredible rent increases continued, not just for the one year but for several years in a row until the new Residential Rent Regulation Act came into effect in 1986, which limited uncontested rent increases to 4% for that year. Our landlord responded by demanding a 12% increase from each tenant as his or her lease came up for renewal.
It was at this point that we reactivated our dormant tenants' association. Approximately 85% of the tenants in our building joined and paid the annual fee of $45. The money was used to hire legal counsel to help us contest this increase. Our lawyer advised us to pay only the 4% increase until a hearing could be held and the results announced.
Two hearings before the Residential Tenancy Commission took place, one in June and the other in August of 1986. I must emphasize that at these hearings the cost revenue statement submitted by the landlord and dated 20 May 1986 shows a total revenue for 1985 as $1,487,826 against total operating costs, including management and administrative overhead, taxes and other expenses of $789,103, for a net gain of $689,723. This from just one building for just one year.
The main argument put forth by our landlord's legal counsel was that the 12% increase was needed to pay for the costs of resurfacing the concrete floor of the basement garage of our building and to erect a roof over part of the driveway. In addition, such items as wallpapering and painting the hallways, which had not been done since the building's erection, painting the balconies and stairwells, plus the cost of his legal counsel at the hearings were added. I emphasize the latter as it seems preposterous that, as tenants, we should be required to pay for the landlord's legal counsel in addition to our own. Moreover, we were being asked to subsidize the landlord by paying for items that would enhance the value of his property.
The results of the hearing were made known in March 1987. The commissioner ruled that based on the lawful rent in 1976 and the subsequent legal increases, rents being charged for many of the units were considerably higher than the lawful limits and ordered the landlord to repay approximately $250,000 to those tenants affected. In addition, he found the 12% increase excessive and ordered it reduced to approximately 7.9%.
The landlord immediately appealed, and in April 1988 the Residential Tenancy Commission reduced the number of tenants who were to be reimbursed the unlawful rents. By this time almost two years had elapsed since the original hearings in 1986. A number of tenants faced large rent accruals of up to thousands of dollars, representing the increases withheld during the period of the hearings and the appeal, and which had to be repaid immediately, causing difficulties for many tenants.
Since then, the upkeep and condition of the building has deteriorated drastically. What was once considered a luxury building is now in a state of decay and disrepair, with constant elevator breakdowns, crumbling concrete walls, threadbare hallway carpeting, rusted balcony railings and worn out and malfunctioning appliances.
We are to this day experiencing prolonged and dangerous disruption in elevator service. Some of our tenants have been confined in elevators for long periods between floors as a result of equipment failure. When this issue was raised at the 1986 hearing, we were assured that the problems would be remedied and that elevator telephones would be installed to ensure the safety of tenants. Despite further discussions, some as late as last year, nothing has been done. In fact, the quality of elevator maintenance, including cleanliness and upkeep, has deteriorated even more markedly. We have only two elevators servicing our 23-storey, 132-unit building, yet all too frequently only one elevator is in service, and when that one is being used for the delivery or removal of furniture, elevator passengers must squeeze in beside furniture, boxes and cartons, if they can get in at all.
We have also complained to no avail regarding the poor condition of the stairwells and landings in the building. These are very poorly lit and there is no supplementary source of power in the event of an emergency, as has happened on several occasions. On one such occasion, some tenants who are senior and/or infirm had to climb from 2 to 23 floors in the dark, amid falling plaster from the crumbling walls.
In addition, we are concerned with the general level of deterioration in the building. The original 23-year-old carpeting still covers the hallway floors. Not only is it dirty, unsightly and threadbare, but it is potentially dangerous inasmuch as someone could trip on its frayed seams and fall.
The balconies too are in a shabby state. They used to be painted regularly. They have not been touched since 1985, when the cost of painting them was included in the landlord's application to the Residential Tenancy Commission. The railings are rusted through -- another source of impending danger -- and large chunks of concrete from crumbling ceilings and pillars have broken away, some narrowly missing tenants.
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Also, the exterior concrete walls of the building, which originally were painted white, have never been cleaned or repainted and are dirty, peeling and crumbling, and many of the appliances in the units which are 23-plus years old do not function properly and need replacement.
Finally, because of maintenance neglect, salt accumulation is threatening the $200,000 concrete floor of the basement garage, for which we were assessed at the 1986 hearing.
What we as tenants fear is that if Bill 4 is not passed, we will have to pay for all these major expenditures by means of exorbitant increases to our rents. We believe that over the years our landlord should have set aside a part of our rents as a contingency fund to maintain the quality level of our building. We see no reason to reward the landlord for his neglect and greed or for being the source of our discomfort by forcing us to subsidize his property.
Furthermore, we believe that the province's practice of using rents as a means of reassessing an apartment building's evaluation for property taxation is unfair to tenants. Apparently, assessors target apartment buildings that have had increases above the provincial guidelines, as we had in 1986. This reassessment leads to increased property taxes that are then passed on to the tenants, so tenants are hit by double-jeopardy rent increases.
Finally, though we congratulate the government for introducing Bill 4 with its two-year moratorium limiting rent increases to specified guidelines, I want to point out that while landlords are assured of an automatic annual increase in their rental income, tenants, particularly those on fixed incomes, do not enjoy such an advantage. Their income remains static despite rises to their cost of living. Hence we wish to go on record that we regard the two-year moratorium merely as a temporary measure and are looking forward to the introduction of a fair and equitable system of rent control for Ontario, one that would assure that, among other requirements, the landlords set up an annual accumulative contingency fund for capital expenditures. Surely, with the type of income indicated earlier in this presentation, it should not be too difficult.
Mr Mammoliti: A very interesting presentation. I would like you to clarify something for me. You state, "because of maintenance neglect, salt accumulation is threatening the $200,000 concrete floor of the basement garage." Can you elaborate?
Mrs Rose: This is a pet peeve of ours.
Mr Fiber: Yes, I will elaborate on that. The subsurface and the first basement and second basement were stripped and resurfaced at a cost of approximately $200,000 in 1986-87. I have now been advised by one of the tenants in our building, who is a very well-known construction engineer, Hedley Roy, that the cracks in the surface that have developed since are of such a nature that there will be a rapid deterioration in the safety barrier underneath the asphalt if the salt continues to accumulate, and in fact there may have already been irreparable damage done to the floor.
Mr Mammoliti: How could you get rid of the salt?
Mr Fiber: Wash it away.
Mr Mammoliti: The landlord has not washed it away.
Mr Fiber: No. The garage used to be cleaned regularly with an automatic machine twice a year. It has not been touched in two years.
Ms Harrington: Thank you for coming. I want to ask you where your building is located.
Mrs Rose: Spadina Road, at the corner of St Clair, near the bridge.
Ms Harrington: A week or 10 days ago I took a tour in Parkdale, I believe it is called. I went to a huge complex called Westlodge. It sounds very familiar in some of the descriptions you gave. I was just hoping that while you are here, with the people in this room at the back, you might have a chance to dialogue with some of the landlords here so that they can see that tenants are reasonable people and that we as a government are reasonable people and that we want to set up, in the long term, some co-operation so that this system is going to work for everybody.
Mrs Rose: I want to mention something that one of the landlord representatives stated in the last hour, that he feels that tenants do not have a vested interest in their units, that they are transients. Believe me, in our building we take very much of an interest in our homes. They are our homes; we live in them. I have been living in the one I occupy for 15 years. I have invested in it in carpeting, doors I have put in, blinds and curtains. These are investments on our part too. We want to live like human beings. We are not transients coming in and running away.
Ms Harrington: Thank you very much.
Ms Poole: I would like to thank you very much for coming before us today and giving us such a very clear presentation. You did mention one point which I want to address. That is the provincial assessor's cute little trick of coming around and reassessing the apartment buildings after they had gone through a rent increase, in other words, that the tenants would have to pay the amount twice.
Mrs Rose: That is right.
Ms Poole: I just wanted to let you know that the Ministry of Revenue is aware of the concern in this regard. In fact, the city of Toronto is taking quite an active stance on it. I talked to Peter Tomlinson from the city of Toronto maybe nine months ago. They intend, I believe, to apply to the province to get this matter looked into. So there may be some relief down the line for that.
Mrs Rose: I am delighted to hear that.
Ms Poole: Thank you for coming today.
Mr Tilson: How much rent do you pay?
Mrs Rose: I do not think that is pertinent. How much does your house cost? I do not think it is pertinent, because rents in our building range from a small bachelor apartment to extensively large apartments, and I do not think it is pertinent to this hearing. That is a personal matter.
Mr Tilson: It is.
Mrs Rose: I mentioned to you what the income is to the landlord of 132,000 apartments. His income is $1,487,826. That gives you some idea of what the rent is.
Mr Tilson: Just so I have an idea not necessarily of your rent, can you tell me approximately what the rents are in that building?
Mrs Rose: I can do that. The only thing is that I have rents that go back to 1986.
Mr Pulkonik: Approximately between $400 and $4,500 per month.
Mr Tilson: Between $400 and $4,500?
Mr Pulkonik: That is right.
Mr Tilson: How many bedrooms is that on an average? Is that two bedrooms?
Mrs Rose: That is six bedrooms.
Mr Tilson: A six-bedroom for $400?
Mrs Rose: No.
Mr Pulkonik: That would be a bachelor.
Mr Tilson: Of course, and that is what I am trying to determine. Let's take a two-bedroom apartment. What is a two-bedroom apartment?
Mrs Rose: About $1,500.
Mr Fiber: I would like to correct that. There is a range of between $800 and $1,900; that is, those are the rents that were set for registration by the tribunal two years ago. Whether they have been maintained as directed by the tribunal we do not know, but that is the range.
Mr Tilson: I did not mean to insult you. I am just trying to determine the range of what type of building this is, because the description you have given is that it is almost approaching a slum. They are dangerous situations. Have you made any application to the property standards people or the health authorities? Because it does sound like a dangerous situation.
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Mr Fiber: We have been advised to do that, but we have also been advised that there are no teeth in the property standards provisions, that ultimately we would have to fall back to local enforcement and the level or degree of local enforcement under the provisions of the standards board are inadequate. That was made clear in a resolution passed at the annual meeting of the Federation of Metro Tenants' Associations a little while ago. They support stronger enforcement of these infractions.
Mr Tilson: You are the second person who has come today and told us that property standards bylaws -- one was in Hamilton and now you are telling us Toronto does not have adequate bylaws. That is what you are telling us, I gather.
Mr Fiber: No, I am saying we were advised that that was the case and that there was really no recourse, no point in turning to --
Mr Tilson: If that is true, I would like to hear more of that, because that is a serious allegation. We also have provincial property standards that are required. In fact, an amendment to one of the regulations was just passed. I would suggest that that be pursued.
The Chair: You have time for one more short question.
Mr Tilson: Would you consider proceeding to the property standards bylaw people of the city of Toronto or of the province? You have described very serious situations.
Mr Fiber: I cannot speak for the other members of the executive and I certainly cannot speak for the members in responding to that, but if we felt we really had recourse, I think we would if we really felt we did.
Mr Tilson: I would recommend you look into it.
Mrs Y. O'Neill: So would I.
The Chair: Frances, I want to thank you and your delegation for coming today. We appreciated your brief.
I would like to inform the committee that that is the end of the formal presentations for today, but we still have a little more work to do before we adjourn. I have distributed some information today, two or three pieces. One was a letter from the minister. The second document was something I had requested on my own; I thought it was interesting. I had it distributed to all the committee members. Last was the itinerary and agenda. I have asked the clerk that she place our itinerary on the calendar so we would have a better idea as to what we were doing -- when, where and the constraints on our time. I know we have wrestled with this question since the early moments of our first sitting. We are still going to have a problem with our time, who we have to hear when.
I think we should take this in some type of chronological order. I have already been put on notice by Mrs O'Neill that she wishes to talk about the minister's letter.
Mrs Y. O'Neill: I would like to draw the committee's attention to page 2 of Mr Cooke's letter. As I said earlier, I am pleased that the minister has answered my request as quickly as he has. I do find some comfort in the letter but I have quite a few questions which I think surely the whole province and the people of Ontario have. Certainly, I want to have the answers for the people in Ottawa. It says, "The communities we plan to visit" are, and Ottawa is one of those. The minister makes a statement, "We will be providing over 25,000 copies to persons who have expressed an interest in this area and to any individual or organization on request."
I would ask that the minister's office submit to this committee the plan. Are there going to be advertisements in the daily newspapers stating this? I do not know how the first 25,000 people have heard about it, unless they have heard about it just through watching our proceedings and in news reports, because as far as I know there has been no official notice of this, as we usually advertise in this Legislature, put across the province.
I want to know how people are going to be informed. As I suggested earlier, I think there should be a 1-800 number and an indication of which languages this document is going to be prepared in. If we are talking about less than a month from now, I think we should know the plan of distribution. That is my first question.
Mr Mammoliti: Can I respond, Mr Chairman, to the first suggestion?
Mrs Y. O'Neill: I am asking the minister to respond.
Mr Mammoliti: I would like to be part of this discussion, Mr Chairman, if possible.
Mrs Y. O'Neill: Okay. I am not finished, but I hope you will have your turn.
Mr Mammoliti: I do not know how you want to do this, whether you want to wait until she is finished or whether --
The Chair: It is 6:30 in the evening. We had a very, very long day yesterday. We have had another very long day today. Next week is going to be a killer week, so I am very easy to get along with. All I need is instruction from the committee as to how we want to proceed.
Mrs Y. O'Neill: I just have one more request.
The Chair: It is your committee. I need instructions. If there is consensus that we question each other as we go along, we can do that. If there is no consensus, then I have to allow Mrs O'Neill to continue to go forward.
Mr Mammoliti: That is all I am seeking.
Mrs Y. O'Neill: Mr Chairman, I am making formal requests of the minister. If there are responses to those formal requests, I am more than willing to hear them. I am expecting the clerk to do as she has done, to formally request --
The Chair: We will work for the committee. There is no doubt about it.
Mrs Y. O'Neill: Okay. So, the second question I have formally to be placed with the minister is, when will the schedule be complete with its dates and its times? I see that we have the cities picked. Could we have the dates and times upon which the three individuals mentioned will be doing the consulting in the cities? I think it is very important to give groups, most of whom are volunteers, a chance to prepare for the arrival of the minister, the parliamentary assistant and Mr Abel. Those are my two requests.
The Chair: We will get to it. Mr Mammoliti and then Mr Tilson. Mr Mammoliti, now is your chance.
Mr Mammoliti: You may rule me out of order, I really do not know.
The Chair: I have given you the floor.
Mr Mammoliti: I am just curious as to whether some of her requests, I would assume, were dealt with when we had our housekeeping meetings. I do not know. Tell me.
The Chair: Mr Mammoliti, these requests are going to be ongoing as we go through the committee stages --
Mrs Y. O'Neill: They have to go --
Mr Mammoliti: Excuse me, but I am asking the Chair.
The Chair: These requests are going to be ongoing and it would be impossible to deal with them at one particular meeting. We just received the minister's letter today. Actually, I have a number of concerns about the minister's letter, but I am the neutral Chairperson, so my concerns, I guess, are not going to be noted.
I knew this letter was going to cause questions and requests to be put by certain committee members. I knew that as soon as I saw the letter. If we receive further documentation for the committee, when we receive further information from ministry staff, that is going to cause members to want more information of a different nature and to ask questions in a different way. That is normal and we are going to have to proceed in that fashion.
Mr Mammoliti: That is fine.
Mr Tilson: I support Mrs O'Neill's requests and have a couple of other added thoughts if you as Chair are going to be either speaking to or writing to the minister. The minister when he was here indicated that this paper would be released on 18 February.
The Chair: I believe he said the week of 18 February. He may have been more specific by saying 18 February. I cannot recall.
Mr Tilson: Okay. In any event, he appears to have clarified that, or maybe he has not clarified it. That is my question. In the last paragraph on page 1 of his letter he says the discussion paper will be released during the week of 18 February.
The difficulty I have is, and I know I am repeating myself and I will continue to repeat myself, about people being able to be heard. I believe we had scheduled that week and I think the succeeding week to discuss the green paper. I guess the difficulty is that if the paper is not introduced to this committee until later on in that week, then what are we going to do during those days?
The Chair: The clerk is going to answer part of the question and then I am going to give the committee some information, which is going to further confuse everything. Go ahead.
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Clerk of the Committee: The agreement the committee had made before Christmas, when it met to organize for these hearings, was that clause-by-clause consideration of the bill would start the week of 18 February, but that when the discussion paper was introduced into the committee, those clause-by-clause considerations, if they were not completed, would be interrupted and the minister would brief the committee on the discussion paper. We would then go back to the clause-by-clause, complete it, and go on to consideration of the discussion paper. That was the decision of the committee.
The Chair: The point I was going to add, which we will be discussing in a few moments, is that even with all of the instructions I have received from the committee and with all of the juggling we have done, with all of the extended sittings, we still have more than 50 presenters who will not be heard unless we do something.
Mr Tilson: That was going to be my next question, Mr Chair. You may not wish to tell us your concerns, but I am quite free to ask you what your concerns are with this letter and I so ask you. If that is one of your concerns, I would like to hear other concerns.
The Chair: No, that was not my particular concern. I would like to give up the chair for a moment, if I can, as a member of the Legislature who is probably going to participate in the debate of this particular piece of legislation which is very, very important.
Mr Mancini: We have already realized from our presenters just how important it is and how both sides of the issue have addressed us with a lot of facts, with a great deal of emotion and all with great sincerity.
I have some concerns that we as a committee are doing this onerous work, and I believe this committee is working very, very well. We are going to interrupt our work to go into the consultation paper and then we are going to have a third body, namely, the minister, the parliamentary assistant and Mr Abel, doing what I believe an all-party committee of the Legislature should be doing.
I will not say it is offensive, but I am quite concerned that we as a committee have advertised in all of the papers and asked people to come before us. We are going to interrupt our hearings, we are going to move into a new phase and while we are in phase 2, without having completed phase 1, the minister and two other members of the assembly are moving into phase 3 and will be visiting many of the same communities we will be visiting.
I am not sure what their purposes are, but they appear to be similar to the purposes that we are working towards, and I find the whole thing rather disconcerting. I find the whole thing not to be in any type of sequence which would assist the many thousands of people who have been watching us and the hundreds of people who have appeared before us or will appear before us. Those are my major concerns.
I frankly do not know how we are going to be able to work in a healthy fashion while all this is going on. I thought that this was a matter for the Legislature and that is why we appointed an all-party committee of the Legislature, to do all of these things. Now I find that it is no longer just a matter for the Legislature, but that the minister has struck a committee of two members of the Legislature representing only one political party. Frankly, as a private member, that offends me. As the neutral Chairman of the committee it does not, but as a private member it does sincerely offend me. Those are the concerns I have.
The Vice-Chair: Thank you. Ms Harrington.
Ms Harrington: Any concerns that we have, especially as Chair of this committee, I think should be directly addressed to the minister himself. I would suggest that we ask the minister to be here as soon as possible, which would be Monday, to explain how things progress around this Legislature, because I certainly am not an expert on what has been done in the past and how things proceed.
Mr Mancini: I am not an expert either, by any means.
Ms Harrington: No, I did not suggest that.
Mr Drainville: Let's talk a little bit about this issue, which seems to be perennially being brought up by all of us. Let's be clear here. I do not want to appear in any sense to be coming on too strong on this issue, but it has been reiterated every day since we began these hearings that we have to go into looking at Bill 4 on the weeks of 18 February, 25 February and 4 March.
I am going to say this again because we have to say it again: The committee has decided that issue. Let me be very clear that we are not going to do that. We have discussed the reasons why we are not. For me to reiterate for the 50th time the viewpoint that we have put forward many times before would be ludicrous, and I am not going to take up the time of the committee to do that. You have heard the arguments. The reality is that we are not going to meet on Bill 4 in that period of time. We have given our reasons for that, and I do not think we need to give them again.
As far as accommodating every group that we possibly can, we have given as much of a carte blanche as we possibly can to the committee to sit longer hours, to sit in the evening, to sit on Mondays and, if we have to sit on Fridays, then we will sit on Fridays. But I want to be clear, Mr Chair, that we have given as much as we possibly can on this issue of the moratorium.
Further to that, as far as the government side is concerned, we say again that we understand why you have the perspective you do on the opposite side. It is because this is an opposition government reality that we are dealing with. We want to see Bill 4 out of the way as soon as possible. Bill 4 is a difficult piece of legislation, and you have pointed out the difficulties in the legislation. We are saying that we do not want the moratorium to continue, and to facilitate that, we have to move in the direction that we are going to move in, and that needs to be said.
The next thing is in terms of any hearings that the minister goes on. It is nothing new to government to have the minister going with government members, particularly in this case the parliamentary assistant, on a fact-finding tour and talking to people about the issues that surround housing policy. This is nothing new and the fact that the minister is doing that should be seen as something laudable as opposed to something that is somehow circumventing the system of this standing committee.
I do not believe that the minister is in any way taking away the rights of this committee. Although one thinks that when one is in government one does not think clearly or independently, if I thought any minister was doing that to a standing committee, whether you believe it or not, I would not accept that, because it would not be acceptable to the traditions of this place or to any parliamentary tradition. But I do not believe that that is the case.
Mr Tilson: I must say I agree wholeheartedly with Mr Mancini's comments. I am very confused about the procedure of where this committee is going. I think there is major interference on behalf of the minister. The Legislature has given second reading to Bill 4.
The green paper that has been spoken of, this is where it has surfaced. In fact, it is going to be introduced to this committee. This committee has been set up to deal with Bill 4, not any green paper, and it is very confusing to me when I see the minister in his speech making it quite clear that there is going to be another set of public hearings to deal with the green paper. That is laudable, except why in the world are we doing it now?
These hearings are set up to deal with Bill 4. The fact that the government refuses to hear 50 applicants is a terrible thing. I think that the time that is being set for this green paper should be abandoned and, if people want to come and talk to us about Bill 4, we should be able to hear them.
I quite frankly do not think that the minister should be interfering with us any more. I mean, you guys have the votes, as I have said before. You can do as you like. You talk about how a deal was struck. That was before the minister came forward and made his statement. That was before the minister came forward and gave us this letter of 17 January. There is now a new game being played.
That was before all these applications. I do not think the Minister of Housing ever dreamed that all of these applications would come to us. The fact of the matter is that people with far more experience, who have been around here a few years, have talked about how lengthy these hearings are and the great number of people we are going to be hearing, and we are still not hearing scads of people.
I wholeheartedly support the Chair. I have several other comments about other matters, but with respect to this matter that Mr Mancini has raised, I wholeheartedly support him and hope that someone can clear it up for us. Whether the minister has to come and do that -- I quite frankly do not like him interfering in our hearings, but if he has to come and do that, then that is fine. But I wholeheartedly support Mr Mancini.
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Mr Turnbull: I want to wholeheartedly support Mr Mancini as well and I want to speak specifically to the comment that Mr Drainville has just made, that this was not that the committee voted. The NDP members who are in a majority on this committee voted to stop us having any further debate on it. In the discussion period before the green paper was ever mentioned, we had allocated a period of six weeks, because I am on the subcommittee and I was here. For any suggestion that was not the case, I object to it. I want the public of Ontario to understand that, because open government is not open government unless you are honest with people.
We were allocated six weeks and then we had inserted the green paper. Now we are seeing that the green paper is being forced on us with no public discussion in this forum, and then there is a dog and pony show going to go around the province with the minister and the parliamentary assistant, yet we are not to have any public discussion of that. That is the demise of open government.
Mr Mancini: Mr Drainville, I take very sincerely what you said earlier. I believe that if you felt the committee was somehow being abused in any way, I frankly do believe that you would speak up. I do sincerely believe that.
Mr Drainville: I guarantee it.
Mr Mancini: I want to say to you today as sincerely as I can that maybe other governments have in fact in the past done what this minister plans to do; maybe they have. I guess if we were to check all the records we might find a similar situation. I cannot think of one right now, but that does not mean it did not happen or does not exist or did not happen more than once. What I am saying to you is that whether it has happened before in the past or not, that may not be a good enough reason for the minister to do what he plans to do.
Basically, from my reading of his letter, and it might be unfair to the minister because he is not here to more fully explain his letter, it appears to me that he is running parallel with the committee. We chose a number of cities to go to; he has chosen a number of cities to go to with two members of the Legislature. That is fair ball, but I think that is fair ball when you are fact-finding to do a report that you might want to send to a committee. I do not think it is fair ball when you send the bill to committee and we are trying to visit these cities, and we may or may not do something similar with the green paper or the consultation paper, depending on what the committee decides, and then all of a sudden we have the committee and two members doing almost the same thing.
I do not know. Does the minister think he will get different briefs than a legislative committee will get? Does he think people will say things to him with different nuances? Does the minister not want to involve us? I do not know. I do not think he stayed up all night and hatched this plan to subvert the committee. Maybe. I do not really think he did that but I find that sometimes when ministers -- having been a minister myself, you make a plan and you think it is great and you say, "No one can possibly be offended with this." All of a sudden you find out there is a great number of people offended.
I am willing to give the minister the benefit of the doubt. I am willing to say that he probably made these plans in good faith. Whether I am offended or not may not matter a whit. It may not matter a whit whether there are three or four of us offended. I do not know. It may all boil down to, "We're on one side and you're on the other and that is the way life is in Parliament." We are all over 18 and we can all understand that and we should all be able to accept that, if that is the reality.
I am trying, the best I can, to go through a process with all of you that is in fact meaningful, and as a member I find that the minister's letter, without having heard from him personally, takes a lot of meaning out of what we are doing.
The Vice-Chair: I still have four members on the list. Maybe if I could try to be helpful, because we have been here a long time today, I thought I heard Ms Harrington make a suggestion that the minister come on Monday. Perhaps rather than go in circles we could have the minister come on Monday, or instead of the minister, if he is unavailable --
Ms Harrington: We have a concern here. We need the concern answered. I do not think that discussing it for another 10 minutes or so is going to resolve it.
The Vice-Chair: Would we make it clear then that the minister will be invited to come before this committee at a time, I guess about 5 o'clock because that is the first moment available to the committee?
Ms Harrington: Whenever you schedule this.
The Vice-Chair: I think on Monday. The minister can come and address the points of view and the issues raised by the members, the questions the members seem to have about his letter and perhaps, if that is --
Mr Mammoliti: We agree, Mr Chairman; everybody agrees.
Mrs Y. O'Neill: That is not correct, Mr Chairman. At 5 o'clock I have people coming from a far northern community to discuss -- I made this appointment three weeks ago. They are from one of the most northerly ridings. It is on a matter that I have experience in, education. Ms Poole has the same group. We thought, because nobody can see us these days, that we could meet with them, I think it is at 5:30 or maybe it is 5 o'clock on Monday night. I cannot. They are travelling really literally hundreds and hundreds of miles.
The Vice-Chair: Then could I make the suggestion that the minister come before us as soon as possible. Would that be satisfactory?
Ms Poole: If I recollect from looking at the schedule, there were a large number of unconfirmed time slots on Monday afternoon. Has it changed now, the new improved version?
Clerk of the Committee: Yes. Where it says unconfirmed time slots, in most cases people have been offered the time. They just have not got back to us with a confirmation or they were not there and we left the time with them and are expecting them to call back. So where there are empty spots it does not necessarily mean that it is empty; it just means --
Mrs Y. O'Neill: The minister may not be available on Monday.
The Vice-Chair: Let's just leave it as at the earliest possible moment.
Mrs Y. O'Neill: Can I just make one formal request. We have 50 people now on a waiting list. I think it is important that this committee and the minister know we have another week for those ads to be out there. I hope we can have almost a daily update on how many people do not have a time slot at this moment.
The Vice-Chair: I am certain the clerk would be happy to provide that.
Mr Tilson: On a new matter, being a new member to the committee system, it is a question to the clerk on procedure. Now that we have set up new dates or made new dates available, what is the advertising procedure? When is that done?
Clerk of the Committee: It would be unusual for a committee to advertise a second time for a set of hearings. The advertisement did say "Thunder Bay, Sudbury, Ottawa and Windsor and other areas as required" I think was the wording.
Mr Tilson: So that is it as far as advertising is concerned?
Clerk of the Committee: That is correct.
Mr Tilson: What about Thunder Bay? Has Thunder Bay been cancelled? Are they going to Sudbury or coming here?
Clerk of the Committee: Yes. There were four people who were on the list for Thunder Bay. They have all been called and offered a spot in either Sudbury or Toronto.
Mr Turnbull: With respect to Hamilton, can you tell us how many applicants have been interested from Hamilton and area. I notice you have half a day blocked off somewhere for Hamilton. You have Monday afternoon, 11 February, blocked off for Hamilton.
Clerk of the Committee: I have since then received a sort of handwritten update and there are nine people currently scheduled in Hamilton. I think there are three or four we have put in calls to who have not confirmed.
Mr Tilson: So there are 12 people who are interested from the Hamilton area.
Clerk of the Committee: That is correct.
The Chair: As Chairman, I need instruction from the committee as to what we are going to tell these presenters we are not going to hear. I need some instruction. Do we prepare a form letter? Do we call them?
Mr Mammoliti: What has the clerk done in the past?
The Chair: That is a good question. What has been done in the past?
Clerk of the Committee: In the past both have been done. I think most of these people would expect a call, and I would certainly write to them if they requested it.
Mr Mammoliti: I guess that would be my suggestion then for the clerk to deal with that. Is that okay?
Mr Turnbull: With respect, there is a matter the clerk brought to my attention today, somebody who very much wants to be heard and has an area of expertise we have not heard from, and that is the mortgage broker. We have heard a lot of references to mortgages on buildings, repeatedly, and yet we have not had any witness to that effect. The clerk is aware of Darlene Stubbs and I urge that we make time available for her.
Mr Mammoliti: I think we have already discussed this.
The Chair: All I want to know is how you want us to deal with it. I did not want to come back to the committee meeting and be told that I -- Mr Brown and Mr Tilson, and then I guess we are going to call it a day.
Mr Brown: Hopefully these people who cannot be heard, if the government will not allow the time for them to be heard, will be encouraged to submit a written brief to the committee so that we can see their point of view.
The Chair: Yes, we will do that.
Mr Brown: And that the members of the committee be given the names and addresses of the groups that are so affected.
The Chair: That is fine.
Mr Tilson: My question was along the same lines.
The Chair: All right. That is how we will handle it then. Either we will tell them over the phone, or if they request a letter they will get a letter, and we will make that information Mr Brown requested available.
Mr Turnbull: I have to insist that it go on record that the NDP is blocking the introduction of evidence from a witness who wants to come forward in an area of expertise that we have not heard from at all yet.
Interjections.
Mr Abel: That is not true at all.
Mr Duignan: On a point of order. Mr Chairman: We are going to accept a brief from that particular individual, I hope, and that can be entered into evidence to this committee here. We are not denying the person an opportunity to present evidence.
Interjection: On that note, to say that we are blocking is unfair.
Ms M. Ward: Can I ask a question of the clerk? On the agenda, in some places you have "witnesses unconfirmed." In some time slots there is nothing. Is there a distinction between those two, and the first one is as you just explained to us?
Clerk of the Committee: Where it says "witnesses unconfirmed," it means for that whole block.
Ms M. Ward: That is fine. I understand that.
Clerk of the Committee: It does not mean for that time slot.
Ms M. Ward: There are also some empty slots where you do not have that showing. Does that mean those are open?
The Chair: No, they are not open.
Ms M. Ward: On 22 Tuesday --
The Chair: We are just waiting for the people to call back.
Clerk of the Committee: Tuesday the 22nd was added. Those times were added late this afternoon because now that the committee is going to London rather than Thunder Bay, we have a little bit of extra time in the afternoon. I am not certain because someone back in my office has been doing some scheduling while I have been sitting here today, so they may be witnesses unconfirmed or they may be open at this point.
Ms M. Ward: But at that point you had four empty time slots there?
Clerk of the Committee: That is right.
The Chair: Another point of order?
Ms Poole: Just a final quick point. I hope that if we do have an available time slot or a cancellation, a witness such as Mr Turnbull has would be able to be fitted in.
The Chair: Good suggestion.
Ms Poole: Everybody would be happy and nobody would think anything was unfair.
The Chair: The committee is adjourned until Monday.
The committee adjourned at 1905.