Editors Note: These changes being proposed were shelved by the Ontario Minister of Municipal Affairs and Housing, Kathleen Wynne. In 2013, for the Liberal Party of Ontario leadership race, Kathleen Wynne, now Ontario Premier Wynne, received a donation of $20,000 from the Federation of Rental Housing Providers of Ontario who were against any changes.
These changes were really needed by Ontario tenants due to rapidly rising rents resulting from the Ontario Liberals breaking their 2003 election promise to end the Conservative government's policy of vacancy decontrols which allows landlords to increase rents as much as they want when tenants move out or are diven out by bad landlords.
Rental cap questioned by industry:
Proposed changes to rent increase guideline has rental providers concerned about future
Brown, Jennifer. Toronto Star [Toronto, Ont] 17 Dec 2011: CL.4
The province of Ontario is looking at a new way to handle annual rent increases, but a group representing rental property owners says it has concerns they were not consulted and the policy could hurt their ability to maintain their buildings.
The Federation of Rental-housing Providers of Ontario (FRPO) has asked for an emergency meeting with Premier Dalton McGuinty and Kathleen Wynne, the Minister of Municipal Affairs and Housing, to address their concerns.
Legislation introduced Dec. 6 would, if passed, ensure that the annual Rent Increase Guideline is capped at 2.5 per cent, with an aim, says the Ministry of Housing, of protecting tenants and families.
The proposed changes would also ensure that the annual rent increase never falls below 1 per cent. In recent years, landlord and property managers have had concerns that the annual increase has not come close to covering their increased costs of maintenance and other expenses.
The ministry argues that tenants would benefit from greater certainty that would ensure affordable and stable rents.
For landlords, the province says "this would ensure a fair return so they can properly maintain rental properties."
The guideline would continue to be based on the Ontario Consumer Price Index (CPI) and the guideline for 2012 is 3.1 per cent. If passed, the new guideline formula would take effect starting in 2013.
But FRPO says it wants a chance to provide input before the bill is passed.
"We were not consulted in any way before the bill was drafted," says Alan Weinbaum, FRPO chair and principal with WJ Properties. Weinbaum's company has buildings throughout the GTA, most built between 1960 and 1975.
"We are a major stakeholder affected by this bill and if we had been consulted we would have been able to get a better understanding of the problem the government is trying to solve.
"In particular, we would have been able to give the minister information on the impact inflation has had on our industry over the past 15 years and the future impacts it will have, particularly as most economists are predicting we are entering a period of high inflation."
By creating a cap on revenues, Weinbaum says it would effectively create a ticking time bomb.
"We see already for 2013 that the CPI is in the area of 3 per cent and this is still considered a low inflation period because interest rates are so low," he says, adding that could change quickly in the next few years.
"How are we going to deal with this when we have a cap of 2.5 per cent on our rents and there is no cap on our costs?
"We have had a concern about inflation on our industry for some time because our operating incomes have been eroding since the late '90s.
"We were trying to make it work under the current system, but it was still a matter of concern. A hard cap that doesn't match the consumer price index creates a greater concern for us."
Weinbaum argues landlords and property managers are already seeing this impact because in 2011 the guideline was 0.7 per cent. However, adding the HST this year meant that on average, landlords' costs went up 7 per cent.
And that is why FRPO has requested a meeting with the government.
"What we're hoping for is a chance to meet with the minister and advise the government of our position and give her the information we have," he says.
FRPO suggests that the rent cap policy could cause damage to the housing industry, including over 30,000 jobs in the building and repair trades.
"We understand the government's efforts to mitigate price volatility, but setting an arbitrary price ceiling fails to recognize that housing industry costs, like repairs and maintenance, are not subject to any price caps," says Vince Brescia, FRPO president and CEO.
"The government is unilaterally imposing a cap without any discussion with an entire industry and is initiating a policy that will be particularly devastating for small landlords."
According to data provided by the Canadian Mortgage and Housing Corp., when adjusted for inflation, average rents in Ontario are actually dropping in real terms, from $883 a month in 2002 to $841 a month in 2010 (in 2002 constant dollars).
FRPO says the proposed legislation will make it even more difficult to cover the costs of building maintenance.
Landlords are concerned that arbitrary price caps could replicate the housing market conditions seen in Ontario during the 1970s, when fixed rent controls were out of step with rising housing costs.
FRPO will also be discussing the proposed changes with its 2,200 members across the province and encouraging them to contact their local MPPs and building trades members in their communities to discuss the economic risks this bill creates.
Go back to the West Lodge (Toronto) Tenants Association home page.