Committee Transcript 1991-Aug-07 | Legislative Assembly of Ontario

The Vice-Chair: The committee will come to order. The business of the committee today is to conduct public hearings on Bill 121. The first presentation today will be by the Fair Rental Policy Organization of Ontario; Philip Dewan, president. Perhaps you would like to take your places at the table and introduce yourselves and your organization for the purposes of Hansard. You have half an hour to make your presentation.

Mr Dewan: Actually one of our directors, Florence Geneen, is going to start things off here.

Ms Geneen: My name is Florence Geneen. I am a member of the board of the Fair Rental Policy Organization of Ontario, the largest association of private apartment owners, managers and lending institutions. We represent about 200,000 apartment units across the province.

Let me introduce my associates. Gregory McConnell is a rent control consultant, lawyer and past rent control administrator in Washington, DC, and Berkeley, California. Mr McConnell's background in rent control administration in one of America's most stringent rent control regimes and his more recent work with small property owners give him insight into both sides of the rent control debate. He is especially concerned about the effects of rent controls on poor and moderate income families and minorities.

Peter Sailins is chairman of the department of urban affairs and planning at Hunter College in New York. Mr Sailins is a noted author who specializes in housing policy. His books include The Ecology of Housing Destruction, Housing America's Poor, and the forthcoming Scarcity by Design, which details the politics of rent regulation and explores how strict rent controls in reality help high-income tenants, not needy ones.

I am sure you recognize Philip Dewan, president of Fair Rental. Later on we will all address your questions.

There is a very specific reason we have invited Mr McConnell and Mr Sailins to share our time today. Fair Rental has tried on numerous occasions to warn government officials of the negative fallout of strict rent controls. We have done so in presentations, in meetings and in three written briefs submitted in the last 10 months. We have also participated in public consultations.

For the record, we have been virtually ignored and stereotyped in the most pejorative terms and we have had to deal with constant misrepresentation of fact. Here is one example. Just last week during these hearings, a tenant group stated that Bill 4 and Bill 121 were essential because tenant incomes were rising much less quickly than rents. This line was eagerly picked up by government members, but no one bothered to check the statement's validity. The information is simply wrong. CMHC statistics show that in Toronto during the late 1980s tenant incomes increased 54% more than rents. Specifically, from 1987 to 1989 tenant incomes rose about 10% while rents rose 6.5%.

We have invited our guests here today in one last attempt to bring a little reality to what to date has been a debate based on myth and on fantasy. Mr McConnell and Mr Sailins will give you a glimpse of Ontario's rental future through the eyes of people who have lived it. The picture they paint is not pretty.

Let me quickly summarize Fair Rental's thoughts on the proposed Bill 121. Then, following our guests' presentations, Mr Dewan will outline nine significant flaws of the legislation and answer your questions.

Quite simply, as we have said countless times since June 6, Bill 121 is a death sentence for a good many private apartment owners in this province. The private sector built and now operates more than 1 million units or about 80% of all rental housing in this province. Why is this government so unwilling to create an environment that would provide incentive for the private sector to remain?

We have sections of this new bill that restrict an owner's right to repayment for capital work necessary for maintaining the integrity of a building. We have sections that disallow rent increases due to uncontrollable rises in interest rates. We have sections that reduce a large building owner's annual rent increase guideline, leaving less money for ongoing maintenance work. We have sections that enable tenants to obtain rent decreases. Is there any other example of this in any other part of the economy? We have sections that empower inspectors to seize documents, unprecedented in the business world. The list goes on.

It is impossible to tell you in one half-hour the entire horrendous impact of Bill 121, first of all, on an apartment owner's ability to operate his or her business, and more significantly, on the tenants who will be deprived of a well-maintained, affordable housing stock. Before Mr Dewan details specific problems with Bill 121 and presents some positive countersuggestions, I would like to reintroduce Mr Gregory McConnell from California.

Mr McConnell: I truly appreciate the opportunity to speak before you and to share my experiences in the field of rent control. I have a great fondness for your wonderful country. Many years ago my family had to seek refuge in this country from American racism and oppression. My grandfather founded a church in Amherst, Nova Scotia, and married my grandmother, Helen Halfkenny. As a result, many of my relatives are Canadian citizens.

I share this to let you know that my family is personally indebted to the Canadian spirit of fairness to all and protection for the oppressed. In reviewing Bill 121, I truly believe that you have the best in mind for minorities, and that you truly seek to do the right thing by way of low- to moderate-income persons. Unfortunately I have to tell you that based upon my experiences, your good intentions would not bring about a good result.

For the past 10 years, I have served as an administrator and consultant in the field of rent control. I have served as the executive assistant to the District of Columbia Rental Housing Commission, and as the executive director of the city of Berkeley rent control board. We differentiate between rent control measures. We talk in terms of restrictive rent control versus other forms. By restrictive rent control I mean that form which does not allow rents to be adjusted to market upon vacancy.

I can tell you without hesitation and without any equivocation in my mind at all that restrictive rent control does not work. In New York; Washington, DC; Cambridge, Massachusetts; Berkeley, Santa Monica and West Hollywood, California, the evidence has been conclusive. When you impose restrictive rent control, two groups suffer distinctly. Those are of course the rental property owners, and unfortunately, the intended beneficiaries who happen to be, in these cities, minorities, low- to moderate-income families, single parents with school-age children, and the elderly.

Over time, other groups begin to feel the pinch of restrictive rent control. Those groups include the support services or support industries: the carpenters, the electricians, the roofers, those people who repair the properties, normally. Finally the entire community gets involved. As the price of regulations increases, the number of rental units and the value of rental units goes down. Government must then impose other kinds of taxes to fund the regulatory process. At that time, all of your citizens are involved.

During the decade of the 1980s, the above scenario was played out over and over again in American cities. Restrictive rent control has resulted in the loss of thousands of rental units, the displacement of thousands of families, has had an adverse impact on housing opportunities for the poor and minorities, and has cost the few cities that still have such provisions millions of tax dollars for regulatory operations, and even more in lost revenue. Almost every economics scholar of note has concluded that restrictive rent control does not work, and has an impact that is exactly the reverse of that which is intended.

When we speak of the loss of rental units, we are talking about units that are lost by virtue of owners' decisions either to sell to owner-occupants, to allow the units to stand vacant and remain unavailable for rent, or merely abandonment. When we speak of the costs of the program we look at the city of Berkeley, which started its program in 1980 with a modest budget of $275,000 to regulate 28,000 units. By 1991 that budget exceeds $2 million -- actually it is $2.6 million -- and even with that astronomical increase this city recently announced it was broke and could not continue to enforce its rent control policy without assistance from the city government.

1020

Santa Monica had a similar experience. It started with a $500,000 budget in 1980 and now has a $4.5-million budget to regulate 30,000 units. I am not an economist, but someone can tell you what it might cost to regulate the two million units you have here.

More devastating and more to my point is the impact these regulations have had on the intended beneficiaries. The preambles to all of these rent control programs indicate that they are intended to maintain cultural diversity, ethnic diversity and economic diversity, and to assist the poor, the low-to-moderate income and the elderly.

When we look at the experiences in California we find that Berkeley has lost 36% of its black population since restrictive rent control was imposed. Santa Monica is experiencing a similar decline in its Hispanic population despite the fact that there have been skyrocketing increases in the number of Hispanics in the LA basin in the 1980s.

Santa Monica families with school-age children living in rent-controlled apartments have declined by some 25%, and 40% of the students at the University of California who make up the tenants in the city of Berkeley can no longer find housing. These are direct results of restrictive rent control.

Another significant adverse effect of restrictive rent control is that it either creates or makes permanent a process that I call ghettoization. In other words, once the cities become depressed, once the units deteriorate, once the work that needs to be done to maintain the properties occurs, there is no ability for the city or community to shift into a mode where repairs are made.

I look at your bill and I look at the limits and the caps that are placed on capital improvements and I say to myself: "If a property is in fact in a deteriorated state, how will the owner make repairs? How will the property ever be improved?"

There are many cities that have had problems with downturns in their economies: joblessness, homelessness, crime, drugs, etc. Some of those cities rebound. Those with restrictive rent control cannot. They cannot because there is no incentive to invest in housing. They cannot because it also has a similar spillover impact into other areas.

Housing experts in cities such as Toronto have many problems. Homelessness is an embarrassment to any civilized people. Indeed, young men and women are endangered not only due to homelessness, but to crime, drugs, unemployment, inadequate educational opportunities, and the AIDS epidemic, which is on the rise.

This is a time, I think, when leaders should come forward with bold new suggestions, new opportunities. It is not a time for political expediency. We all know that rent control has a way of almost guaranteeing votes for politicians, but we also know that it has a way of actually hurting those people whom it was intended to help.

I think it is a time now when the leaders should come forward and show some bold, aggressive programs which will turn the tide. Instead of continuing to allow units and properties to deteriorate, create jobs, restore these properties, create better educational opportunities. As opposed to paying a lesser rent, I do believe that most people would rather have better jobs so that they could pay a higher rent.

Ms Geneen: Thank you, Gregory. Now let me reintroduce Mr Peter Sailins from New York.

Mr Sailins: It is a great privilege to be invited to address this body. We in the United States always see Canada as North America's bastion of civility and rationality and apt to make more intelligent public policy choices than we do in the United States. So I hope that is going to be true in this case as well.

I have been asked to comment on the proposed changes in Ontario's system of rent regulation. I base my comments on my familiarity with the operation of rent regulation systems in New York and other US cities, as well as an understanding of the economic literature on the subject, both with respect to theory and empirical research. Of course, the North American city with the longest continuous experience of rent control is New York. We have had rent control, essentially, for half a century, which I think is more than any other place in the United States.

I have reviewed the materials describing Ontario's existing and proposed rent regulations and I am struck by how similar, indeed identical, are the issues and arguments being raised to those that are raised in New York and other US cities.

The arguments centre on the fairness, essentially, to tenants or to landlords of several standard features, existing or proposed, that are common to all rent regulation systems which set, for example, the size or basis of annual as-of-right rent increases, the justifications for larger than as-of-right increases based on higher than anticipated operating costs or the need for capital improvements, and penalties in the form of rent reductions or freezes for building code violations, which in your parlance are called work orders. Distinctions that place components of the rental stock outside the jurisdiction of rent regulation are under different rules, and always looming in the background are restrictions on the conversion of rental apartments to ownership status.

The best way to evaluate the impact of any changes in such features in a rent regulation system of the sort being proposed in Ontario's Rent Control Act, 1991 is to see whether they increase or reduce the stringency of the system as measured by the resulting differences, the gap between potential market and actual regulated rent levels, and also to see whether changes in these features increase the perverse incentives or disincentives for the behaviour of landlords or tenants.

Most people who have studied or administered rent regulation are well aware of the way in which rent regulation can distort housing markets. Mr McConnell mentioned, actually, very specific instances of these things. Let me just quickly recap them in economic jargon. The most serious, really, is the misallocation of the housing market. The longer rent regulations are in place, the less rational is the relationship between apartment rent levels and, for example, the income of tenants, the relationship of rent levels and the size of apartments, and the relationship of rent levels and the quality and location of apartments, because after a while we see affluent households paying less in rent than poorer ones, smaller households living in large apartments while larger households have to live in small ones, identical apartments renting for widely varying rents, and high-quality, well-located apartments renting for less than lower-quality, poorly located ones.

In addition to these misallocation effects, the other major distortion of the housing market involves disinvestment in rental housing, disinvestment as evidenced in lower levels of maintenance of the existing stock and a decline in new rental housing production. These disinvestment effects are the result of the downward capitalization: the reduction in the value of rental housing that results from the regulations.

The combined impact of the misallocation effects and the disinvestment effects is to make rental housing scarcer. The increased scarcity creates the potential for high rents at the margin of the rental stock. The margin is either the residuum of unregulated rental housing or the black market.

The point of my recapping these familiar distortions is to note that these distortions are greater the more stringent the regulatory system. Most of the changes being proposed in Ontario's 1991 Rent Control Act are in the direction of making the province's present system more stringent, thus potentially increasing both the misallocation and the disinvestment effects.

Experience in New York and other cities shows that the misallocation and disinvestment effects most harm the very people that government housing policy seeks to help. When rental apartments are scarce it is lower-income families that have the greatest difficulty finding apartments. The larger apartments and the better-located apartments, especially, are inevitably pre-empted by the well-to-do and the well educated, because they move less often and have better information and contacts.

It is lower-income families that will experience the greatest deterioration in their apartments and buildings, because the long-term reduction in property values will most affect their neighbourhoods and because they will be least able to offset deterioration with expenditures of their own. It is lower-income families who will be most likely to pay the higher marginal rents in the black market or in the unregulated sector.

1030

The 1991 act tries to plug some of these disinvestment loopholes -- which, by the way, is an obvious recognition of the disinvestment risk -- by provisions that punish owners for code violations or for neglect of the capital plant. Those kinds of provisions, which are present in ordinances in the United States, do little to retard disinvestment. They only create perverse incentives: for example, for owners not even to consider making capital improvements lest the very application for rent increase be deemed a tacit admission of neglect; for tenants to exacerbate dwelling-unit deficiencies to trigger rent reductions or freezes that would be based on code violations. In fact, looking at the whole set of provisions, the proposed changes are almost designed to ensure that rental housing ownership will be financially and administratively unattractive for all but those who cannot escape rental housing ownership.

I will conclude by noting that Toronto is still a fairly young and very attractive city, and I am sure the rest of the province is as well. Because your rental housing stock is not very old, the advocates for stringent rent regulation may feel that your housing market will be uniquely immune from the well-documented impact of rent regulation in New York and other long-regulated US and foreign cities.

Perhaps such advocates cannot even envision the concrete form that a stringent rent regulation system's misallocation and disinvestment will take. Let me warn you that the impact of stringent regulation will be felt, and more quickly than you may think, and the resulting inequity and scarcity and decline in housing quality will sooner or later give rise to second thoughts. But, as in New York, once the system is politically entrenched there will be no turning back. This is not the kind of policy you can very easily rescind once it is long established.

Ms Geneen: Thank you, Peter and thank you, Gregory. Now let me introduce Philip Dewan, president of Fair Rental Policy Organization of Ontario.

The Vice-Chair: I would remind you that you have eight minutes left.

Mr Dewan: Right. I am going to speak for two minutes, if I can, and just very briefly touch on a couple of major points with Bill 121 itself.

We have given you a fairly encyclopaedic documentation of the major issues we raise with the bill and our recommendations as to what can be done to correct them. I would like to stress that one of the biggest concerns for us is the cumulative impact of all of those changes that are included in the bill -- not just each individual measure, which can be debated on its own, but when you lump them all together and try to look at the effect of that on the operating income of the building and what that means in terms of being able to finance capital work, which is a concern for everyone in the room, you can reach some very startling conclusions.

I would just go through, very briefly, some of the major points and not even touch on all the ones that are there. We would be more than willing to meet with the minister and the committee and individual members of the committee at any time to elaborate on the concerns and answer any questions of the details in the brief.

First of all, the rent-reduction provisions that are in the legislation are one of the less well-known factors in terms of the public debate that are of particular concern. When we talk to the financial institutions, for instance, about the ability to borrow to do the work here, one of their great concerns is that there is no way now, under these proposals, to guarantee the rent roll of the building, to know how much money you are going to be able to get back and provide some surety to the bank so that you can go and get the loan to do the work. We think that to make it workable there has to be some re-examination of those provisions, definitions of things like inadequate maintenance so that people know clearly what they are dealing with, and some penalties in there to make sure they are not frivolous claims launched for rent reductions.

The reduction in the annual guideline is obviously another factor that is of real concern. The 50% number that is being suggested now for larger buildings -- 50% of the inflation and operating costs -- is something that does not seem to have a great deal of statistical basis behind it. We hired a chartered accounting firm to do a survey of about 40,000 units in our membership to see what the actual operating cost experience was and came out with some numbers substantially different, averaging about 58%, and they range from mid-60% for the older stock to about 55% on average for the newer buildings. That is something that I think you have to take into account when you look at this: either an average that is sufficient to allow all buildings to get the work done or, if you are going to look at giving different operating cost amounts, then you should look at that on the basis of age, which is really the distinguishing factor, rather than any further attempt to divide on size of buildings.

The recommendations cover a lot of the other areas; the importance of the 2% reduction that is being taken off the top on the guideline and how that makes it virtually impossible, in many cases, to finance capital. There is material appended here referring, again, to the stance of the financial institutions and what that is going to mean to their ability to lend, and we encourage you to call people like the Canadian Bankers Association indirectly and hear from them their comments about the impact of Bill 121.

The allowance for the increase above the guidelines: We think the documentation in the brief clearly shows that 3% is not going to be sufficient to finance the work. We have appended the interim study of the city of Toronto's apartment conservation report, which shows that for the majority of the 1950s and 1960s buildings, you are looking at an average across the board of at least 16% to do all the work that is required in the next fairly short while to keep those buildings habitable or up to the standard they deserve. Again, we encourage you to question those people directly on their results. They are not coming from landlords. This is a report done for the city of Toronto by engineers who I think will be before you today, who are not exactly a pro-landlord group. I think the numbers speak for themselves.

The transitional provisions for the people caught by Bill 4 are certainly inadequate. When Mr Cooke was minister, he promised there would be fair treatment for those people and that the dollars that were spent in 1989-90 on capital work, totally according to the law, would be fairly recognized when the new legislation came out. People now are getting back 30%, 40% and in some cases 20% of that. In some cases they are getting nothing at all if they did the work in 1989. That is definitely not fair treatment.

We have suggestions relating to work orders and ways they can ensure that only meaningful work orders can trigger a rent penalty, and there is reasonable time to ensure that the landlord has an opportunity to correct them before a penalty can kick in.

We have talked about the inadequacy of the five-year exemption. Clearly it is not going to mean any new buildings coming into the stock. Again, that is documented.

Finally, some of the other certainties relating to what is to come in the regulations: If we are going to deal with this bill and talk about it meaningfully, we have to know whether there are going to be changes in the amortization tables, because that has a huge impact on whether or not you can finance work. We have to know exactly what is meant by some of the very nebulous wordings in the bill relating to inadequate maintenance or neglect and so on.

That is a very brief synopsis of some of our concerns. As I say, you have all the documentation there. I encourage you all to read it and get back to us if you have any questions and we will try to answer what we can this morning. Thank you.

The Vice-Chair: I would like to acknowledge the presence of the Minister of Housing, who is here this morning, and congratulate her on her appointment. Continuing, we have about three minutes, and a minute for the official opposition.

Ms Poole: Thank you, Mr Chair. In one minute, I would like to reserve my question to our two guests from the United States, Mr McConnell and Mr Sailins. You have talked about how restrictive rent controls do not work and your concern that there is no incentive for investment. Given the fact that in many centres in Ontario we still have quite a low vacancy rate, if we were to introduce legislation to change our system to be less restrictive, how could you set up a mechanism to protect tenants until such time as the housing supply was built up and sufficient incentives were given to create this housing? How do you do the two things at one time so that can work?

Mr McConnell: In Berkeley we are apparently working on an initiative we hope to introduce to the voters which would have a combination of vacancy decontrol, that is, allowing rents to rise upon vacancy, coupled with either a tax which would be a subsidy on the vacancy increases, which would go into a housing trust fund to assist low- to moderate-income tenants, or some guaranteed set-aside, or a combination of the two.

I think you are quite right. You do need to have something put on the table to assist low- to moderate-income tenants --

1040

The Vice-Chair: Thank you, Mr O'Connell. Mr Tilson from the Progressive Conservative Party.

Mr Tilson: I ask either of our American guests to respond to this, Mr Sailins or Mr McConnell. I would like to hear your thoughts specifically with respect to municipalities that have encountered the rent control disasters you have talked about, and you have talked about how some of the cities are having very serious financial difficulties. How often does a municipality end up taking over buildings as a result of rent control?

Mr Sailins: New York City took over hundreds of thousands of dwelling units in the latter 1970s mainly as a result of tax foreclosure actions resulting from owner abandonment. Even though there are a lot of complex forces in New York that contribute to that abandonment, rent regulation clearly was one of the major factors. So the city of New York has owned hundreds of thousands of dwellings and spent literally billions of dollars renovating those apartments once it has inherited them.

The Vice-Chair: Mr Duignan from the New Democratic Party.

Mr Duignan: Thank you very much, especially our guests from the United States, for coming up and making a presentation here today.

Our party has always fought for the protection of tenants. We believe Bill 121 keeps our promise to the tenants of this province as well as being fair to the landlords. You may not be aware that we also have a large component of non-profit and co-op housing in this province and that we have undertaken to construct some 35,000 units over the next 12 to 18 months.

A lot of talk has gone on here this morning about what has happened to the rental stock in New York or Berkeley, for example, but what about the large American cities that do not have any rent controls, such as Detroit? How would you explain the difference?

Mr Sailins: In the work I have done, the major comparative city I have used to contrast to New York is Chicago. Chicago, I think, is a much more apt comparison to New York than Detroit in terms of size, its large commercial base and so forth. In almost every index of housing quality and housing availability, Chicago has performed much, much better than New York because of its deregulated housing.

Ms Poole: On a point of order, Mr Chair: We have two expert witnesses here from the United States, and I think we would be remiss as a committee if we did not take advantage of the testimony they could give to us. If it is convenient for our two witnesses, I ask that the committee extend its hearings from 12 to 12:30 so that we can continue asking questions and getting the benefit of their expertise and advice.

The Vice-Chair: As you know, the Chair is at the will of the committee. My instructions are to keep things moving along expeditiously, but if the committee wishes to make that motion, then of course --

Mr Sola: I so move.

The Vice-Chair: Mr Sola has moved that we extend the hearings from 12 to 12:30. Discussion?

Mr Tilson: Certainly these two gentlemen are eminently qualified, from the record they have presented to us, and obviously they have a lot to tell us. With all due respect to our American guests, so often, in many of our social problems, we should be learning more from their errors. Obviously they have some errors to tell us, and I think the few seconds or moments they have are hardly sufficient time to allow them to elaborate on some of those areas. I wholeheartedly support the Liberal motion.

Ms Poole: Mr Chair, it is obvious, from some of the comments our expert witnesses have made, that they have information they could share with us. For instance, I think Mr McConnell made references to the housing trust, a guaranteed set-aside. I would like to know how those work. By the same token, I would like to learn more about what Mr Sailins said about comparisons between various American cities. If the government members vote against this motion, then I think they are clearly indicating they have their minds made up and do not want any further information or facts to interfere with the decision they --

Mr Duignan: What about tenant groups that want some extra time?

Ms Poole: We can ask them questions about how to protect the tenants at the same time --

The Vice-Chair: One at a time.

Ms Poole: We can ask them questions about how to protect tenants at the same time as we can benefit the housing industry.

Ms Harrington: We certainly appreciate the intent of the motion. Certainly we want to look at and explore as many avenues as possible but, as everyone knows, this committee is on a very tight schedule. In fact, at 6 o'clock tonight we have to catch a plane very quickly to Sudbury.

Ms Poole: What has that got to do with between 12 and 12:30?

Mr Abel: We have other commitments.

Ms Harrington: If there are members of this committee who wish to meet with these guests, anyone would be free to do that. Five or six months ago we had two experts from out of the country here whom we were invited to come and hear. I have even received and read a book from a writer from New York City about the problems in that city. Over the course of the last six or eight months we have had the opportunity to investigate these things. If anyone from the committee wishes to hear further from these gentlemen, they are completely open to do that.

The Vice-Chair: Thank you, Ms Harrington. I think that we have heard from each party.

Ms Poole: I have an amendment to the motion, Mr Chair.

The Vice-Chair: Ms Poole moves that from 12 to 12:30 any members of the committee who wish to attend to hear the two witnesses be free to do so and that Hansard be provided for this.

Mr Duignan: No.

The Vice-Chair: Ms Poole, do you wish to speak to your amendment?

Ms Poole: I think it stands on its own. Whether they agree to the amendment or not, that is the one, with Mr Sola's consent as a friendly amendment, I am proposing to make. They can be free to vote against it and show they have no interest in learning about this subject.

Mr Tilson: This government continually has been claiming that it is prepared to listen to and work with business. Here we have a business group that has come forward with issues that have been raised in other jurisdictions, and I think it is imperative for us to hear their comments. I think the amendment by Ms Poole is reasonable, and hopefully the government will reconsider its position.

Mr Mammoliti: I think it would be a little unfair to ignore my commitments. It would be a little unfair for Ms Poole to put this amendment forth, simply because a lot of us cannot make it and we are a part of this committee. We would like to contribute and hear at first hand what people have to say and perhaps ask questions. If some of us cannot make it, it is a little unfair for Ms Poole to put this amendment forth.

Actually, I am a little shocked that Ms Poole would do this at this particular time, knowing there is a batch of people here waiting to be heard and waiting for us to listen to them. I suggest we just drop this matter and continue with the agenda.

The Vice-Chair: I think all parties have spoken to the amendment and to the motion. In the interest of time we should call the question.

Mr Tilson: Recorded vote.

The Vice-Chair: Recorded vote. One second while we get a clerk.

The committee divided on Mr Sola's motion, as amended by Ms Poole, which was negatived on the following vote:

Ayes -- 4

Murdoch, B., Poole, Sola, Tilson.

Nays -- 6

Abel, Duignan, Hansen, Harrington, Mammoliti, Winninger.

1050

ANTRIM TENANTS ASSOCIATION

The Vice-Chair: The next presentation is from Antrim Tenants Association, Jim King, president. Mr King, please come forward.

Interjections.

The Vice-Chair: Children. Order. We have a presenter here in front of us.

Mr Mammoliti: Why have you not listened to the tenants?

Mr Sola: We have, much more than you have.

The Vice-Chair: Mr Mammoliti, Mr Sola.

Welcome to the committee, Mr King. The committee has allotted 15 minutes for your presentation. You may use that 15 minutes as you wish; however, the committee does like to have some opportunity to ask questions and to hear your comments. Those are the ground rules. You have 15 minutes, if you would identify yourself for the purposes of Hansard.

Mr King: My name is James King. I am the president of the Antrim Tenants Association, which is in Scarborough. I am also one of the founding members of the Scarborough Tenants Alliance and an active participant in some of the recent activities that have taken place there.

First of all, let me apologize. I have no colleagues or consultants to introduce. Unfortunately, I cannot afford them. Like most tenants, we cannot afford to hire lawyers and consultants to do our work for us. The previous presenters complained of not being able to point out all their concerns in their short 30 minutes. Being also interested in striving to eliminate the folly and fantasy of submissions, as they suggested we have heard in the past, I regret that I have only 15 minutes to point out some of the fallacies in the presentation they just made.

That aside, I also would like to suggest to Ms Poole that as a tenant living here in Ontario, as well as having a mother who is a tenant in your riding, I too am uniquely qualified to offer insight as to what might be involved in tenant legislation. I think all of the interested parties should be offered that same opportunity and I look forward to hearing your motion at the end of my presentation.

I will try to keep my comments brief, if I can. I do not have a prepared statement, so you do not have it in front of you, but I have done a lot of work in this area. Not being a consultant, not doing this full-time, I am taking the day off work and losing a bit of money for doing this, as opposed to being paid and coming from another country to help carry someone's agenda. All I have to gain by this is a reasonable rent and doing what is right, as opposed to my financial interest in helping my business and that sort of thing.

I want to point out a couple of weaknesses in the previous presentation before I get to my own direct point that I prepared.

Number one, everything I heard works on the assumption that landlords are just barely getting by now and there is not a penny in those rents that can go to anything but expenses. I suggest that is not only a misrepresentation of the truth but quite seriously an error. I think if we had the opportunity to receive facts and figures from landlords, if they were willing to open their books and present some of that information and let us have a look at what the reality of their financial situation is, we might find those are more interesting facts and figures than the studies and comparisons done in the United States, where special interest groups are able to choose their own comparison and choose the sections of the facts and figures they wish to compare and present.

We are talking a lot about disinvestment. We expect to see a lot of disinvestment because of some of these changes that are proposed. I suggest there is enough profit and enough interest in the Ontario housing market that we will not see the disinvestment because the profit is there.

I have, unlike the previous presenter, brought some documentation of my particular situation at Antrim and my particular landlord, who last summer did $1.3-million worth of repairs to the building and applied for a 24%-plus rent increase. Their submission, their cost-revenue statement to the rent review board, outlined that the $1.3 million came from personal funds and borrowing was not necessary. This same landlord has just built a rather large condominium complex at the Don Valley Parkway and Eglinton Avenue and has a rather large housing complex that has just been built up in Thornhill. They spent this $1.3 million out of their own pocket without any borrowing required, and when they suggest to me that it is more fair for the largely retired tenants in my building to fund these expenditures and to pay for the maintenance and improvements on their investment, I have a hard time feeling sorry for them. I am sorry, my heart does not bleed.

I have to get in one last thing before I get into the meat of this. I am trying to move very quickly. I heard CMHC figures quoted as to the difference between rent increases and income increases. Unfortunately, the figures that are commonly quoted from the CMHC do not include in the neighbourhood of 150,000 decisions on rent increases dating back to 1988 which have still not been made. Those figures quite clearly -- if I am aware of it, I am sure they must be aware of it -- are not really representative of the whole picture.

Let me get into the specifics of why I planned to be here and what I wanted to touch on. In talking with tenants, real tenants here in Toronto and in Scarborough and in surrounding areas, not in New York and Bel Air and wherever these other places are that were mentioned, their top three concerns came out after seeing this new bill. I wanted to present those because we too have some concerns about the new bill. We support the effort of trying to make some improvements. I think it is a good step. Unfortunately, I do not think the improvements that most of the tenants wanted to see are there. I think there is still some tuning to be done.

I think the assumption that the tenants are interested, number one, in eliminating high rent increases is a fallacy. I think if you ask most tenants, they are interested in eliminating unfair rent increases. There is a significant difference between the two. High rent increases are these unusual, unique situations. We hear of 100% rent increases and that sort of thing, which are not the norm. If you talk to the normal tenant, the average person, the vast majority of tenants have seen their rent increases take place because of capital expenditures. That is where the vast majority of the people have been hit with rent increases, not on these unusual marble lobbies and what have you. I think the concentration on that point has taken away from what the real facts are.

The suggestion that most tenants make is that we want to eliminate the unfair rent increases, not just the high ones. Three per cent is an unfair rent increase if (a) you cannot afford it or (b) you have already contributed more than your fair share to the operation of the building. I think it is a pretty simple concept and I do not think it takes a consultant from California to grasp it. This is unfair versus limiting. I think it is like suggesting that key money, because it is not fair, should be capped at, say, $500 a unit, that is a reasonable cap to expect to put on key money. If it is unfair, it is unfair. You should not cap it, you should eliminate it. I think it is a pretty obvious point.

One of the previous presenters suggested that we are looking for bold new suggestions. I think there are not any bold new suggestions. There is just the same old one that has been sitting in front of us all the time and somehow it keeps getting passed over. I was pleased to hear in his answer to one of the questions that he suggested himself a fund, a holding back of moneys, providing for those kind of rent increases. I would be willing to grant him one point: I do not think the present bill is going to allow for all of the capital work that needs to be done on buildings, if you include maintaining and improving buildings. I do not see it in this bill. My concern is that I do not see it in my pocket and I do not see it in the pockets of my neighbours in the apartment buildings either. With regard to the suggestion that raising rents is somehow going to help poor people, you can talk that one to death, but it just does not fly. The simple fact of the matter is that the money is there. It has been there for a long time. It is in the rents.

Previous bills and this proposed bill have made allowances for capital expenditure money. We talk about 1% or 2%. That is no longer 1% or 2%. In 1986 it was 1%; now it is 7% or somewhere thereabouts. Approximately $50 of my rent goes every month -- not in the past. The money is gone. Let's not go after it. Let's talk about next month when I pay my rent. Are we going to ask landlords to fairly take that portion of the rent which is designated for capital expenditures and allocate it to capital expenditures? It seems like a simple concept. This is capital expenditure money; spend it on capital expenditures. I do not see that provision in the new bill either. If he makes an application, he has to spend his 2%. No consideration is given to the fact that that is 2% per year compounded. These same businessmen are making a lot of money on the compounding interest of their investment and yet somehow seem ignorant of the fact that 2% per year does not equal 2%. It compounds. We are now talking, five, six, seven, eight years down the road, of 15%, 20% and 25% of our rent being money allocated to capital expenditures but not required to be spent there. I think that is a serious point we have missed in what is happening with this new legislation.

1100

We too have more facts and figures and more information we would be thrilled to discuss with anyone. We have had considerable consultation with many members. I recognize a number of people here we have passed this information on to in the past and we would really like to see this seriously considered, not just passed over.

The number two item that comes up when you talk to real tenants is "cost no longer borne." Again, it seems like such a simple concept, that if it costs $100,000 to fix that boiler, when you get paid back $100,000 you are paid back. The rent should not continue to be at a higher rate. What we are talking about now is rents that have all kinds of costs built in which are pocketed profit. You cannot call it anything else. Where can that money be going? It was necessary back then to repair the boiler. It is still in there now and the landlords are taking that money home. No one takes that into consideration.

We start talking about disinvestment. They are not going to disinvest because that money is compounding every year. That profit is being multiplied by the guideline, plus potentially 3% or more. The situation is that there is plenty of interest in the housing market here. I think that is not going to be a concern at all, but the costs no longer borne should be reversed. Let's undo the errors of the past, or at the very least let's not compound them and continue to do it. Let's make allowance so that if we are passing through costs of any kind, they be finite and they end at some point and not be profit for ever.

Third is a big item, enforcement. I have not heard it mentioned by anyone at any time during any of this process. Let me take this a little step further, because we have talked about municipal guidelines for heat and hot water and that sort of thing, property standards, but we have not taken that a step further. The ministry presently, to my understanding, and excuse me if I am not completely up on all the facts, has an enforcement branch whose primary function is to address key money. I do not know if that is its primary function, but that is the way it works, to address key money, and that is often difficult to get something to happen as well.

What we have right now is a situation where many tenants in this city are undergoing harassment. I myself have two eviction proceedings against me: one for the heinous crime of having a dishwasher, the second for the heinous crime of posting notices in my building. As president of the tenants association, I guess I should not post notices to inform tenants of meetings. These two applications are both presently outstanding against me and I have to be in court next month to defend myself on both. I do not suspect there will be much chance of them being successful on either, but there is another day off work, more harassment, expense of a lawyer, etc. It is this kind of activity that is taking place against many tenants all over the province on a regular basis, and there is no one you can go to.

If your car were broken into and you were required to investigate, find all the information, locate the criminal, find the products of the crime, hire a lawyer, prosecute, file the charges, go through all those steps, we would be living in a zoo because cars would be robbed all the time. Somehow in tenant matters you are expected to investigate, find the proof, lay the charges, hire the lawyer and do all that sort of work. That, to me, seems obviously very unreasonable.

What we need to do is empower and enlarge the investigations branch so that it can go out and do some real enforcement. Certainly being harassed and threatened by a landlord is at least as frightening and at least as bad a crime as charging money for an apartment or for not providing the proper level of building code inspections and that sort of thing. I think that is an area that really should be attended to as well.

Those are the three main points I wanted to get across and I hope they will be looked at a little bit more seriously than they have in the past, because I think those are the areas that are seriously lacking in this new bill. I am short of time, so I will leave the remainder of the time for some questions, if someone wants to bounce them off me. Again, I apologize for not having my consultants to prompt me, but I will do my best.

The Vice-Chair: Mr Tilson, for a minute.

Mr Tilson: Sir, you are obviously a tenants' advocate and certainly the tenants need advocates like yourself to stand up for their rights. There are obviously two sides to a coin. This committee and many members of the committee get letters constantly and I just picked one at random. I do not even know if this individual is coming to the committee. This is an individual from Acton. He talks about how new accommodation simply is not going to be built. I will read you just one paragraph and ask that you give your comments as to what a tenant should do.

The Vice-Chair: Mr Tilson, if you read one paragraph --

Mr Tilson: It is three lines. "With the present rent control legislation in Bills 4 and 121, no businessman would be foolish enough to invest in the lower-priced residential rental business. Its one-sidedness, complexity and poor financial return would scare any clear-thinking person away." What do we tell tenants when landlord after landlord is saying those sorts of things?

Mr King: My answer to that would be that I see there is a lot of profit in rental housing. I have see my landlord's lovely condominiums -- I cannot afford to buy one -- which have been financed by rental accommodation. I see the beautiful houses up in Thornhill that have also been financed by rental accommodation. I also see that the new Bill 121 allows for a period without rent control when you build new apartments. In my mind, that would suggest it would be a good idea to create new accommodation, rather than just buy and flip and speculate on existing accommodation, which I suppose is what we all want to encourage.

Ms Harrington: Under our legislation we are very much interested in the issue of maintenance, which I believe is one of your concerns. I also want to tell you -- maybe I should have tried to explain this to the previous delegation -- that the intent of this legislation is to bring a balance to the relationship between tenants and landlords, which is exactly what you are talking about. You have not felt able or empowered to deal with your situation. The question I have for you is that under the previous legislation, the Residential Rent Regulation Act, if it had still been in effect at this time, what would your rent increase have been this year?

Mr King: My rent increase this year would have been 24% effective March 1.

Ms Harrington: And what was it this year?

Mr King: It was 5.4%.

Mr Sola: Sir, if I understood you correctly, I think you did not regard rent control to be a disincentive to maintain properties. I think the people before you said the government itself must have recognized that Bill 121 would be a disincentive for reinvestment in properties, because why else would it put in the legislation penalties for not keeping properties up to standard? I would like to get your comments on that, please.

Mr King: Two comments on that: First, I would like to correct you; I did not suggest rent control was or was not going to be a disincentive to investment. What I have suggested is that Bill 121 as it stands could be a disincentive. However, if you add to it my suggestion that we have a capital reserve fund that is going to fund the improvements, I do not see the disincentive there.

Second, I would suggest that we are fond of talking about ghettoization. I hear my friends from the United States suggesting that removing rent controls somehow is going to keep fair rents for low-income people. I listened carefully and I did not see where the logic came in that statement. We see ghettoization in a lot of other cities that do not have rent controls. I think it is a process of a lot of other social problems and not of rent control itself.

The Vice-Chair: Thank you, Mr King, we appreciate your presentation. The committee will now move on to the next presentation.

Mr Tilson: Mr Chair, before you proceed, two presenters ago, the Fair Rental group, we received a statement from Mr McConnell. I wonder if Mr Sailins's presentation was printed for us.

The Vice-Chair: The clerk tells me it was not.

1110

RUSTOM SATCHU
JIM MCKINLAY

The Vice-Chair: Good morning, Mr Satchu. You have been here monitoring the proceedings so you know the way this works. You have 15 minutes to make your presentation. Perhaps you would introduce yourself and your colleague and any organization you might represent for the purposes of Hansard.

Mr Satchu: Before I start I am just wondering whether this is in order, with Mr Mammoliti's interest in not being able to be here between 12 and 12:30 and with Ms Harrington's discussion about being here for the previous two experts who had come here before. In fact she was the only person gracious enough to come to that from the NDP side of the floor. Is it possible to give up my time to allow for these people, who obviously have so much to say on behalf of tenants, to have question time? I have worked long and hard on this, and with the minister present as well I am willing to give up my time for that purpose.

The Vice-Chair: Only if the committee instructs me that way. Do we have unanimous consent?

Mr Duignan: No.

The Vice-Chair: Mr Satchu, you may proceed.

Mr Satchu: My name is Rustom Satchu and I am speaking on my own behalf. I am accompanied by my associate, Jim McKinlay. I came to Canada from Kenya in 1976 and became a Canadian citizen in 1982. I have been active since 1980 in real estate, specializing in apartment buildings. I am also actively involved as a director in two industry groups, the Fair Rental Policy Organization and the AFFORD group, the Association for Furthering Ontario's Rental Development. This latter group warned investors last November in the Wall Street Journal, "Beware of Ontario."

This warning in my view applies doubly today. Ontario is in deep trouble because of the ruinous policies of this government towards business, not just in the rental housing field but in many other fields too. These include trucking, auto insurance and private day care, among others. This is only year one of the NDP government. What other sectors of business are to be sacrificed over the next four years? In other words, who is next, the banks, the steel industry? Please let us know. After the experience of this year, the business community has absolutely no confidence in this government, and let that be totally clear.

I believe that housing, health and education are basic rights which should be guaranteed to every citizen in genuine need, and provided where necessary by government. This is a government responsibility shared by all taxpayers on an equal basis. One of the greatest sins of rent control is it forces rental investors to carry this burden entirely themselves.

The first thing I want to talk about is a serious public scandal; that is, the great, gross falsehoods perpetrated by the Premier and David Cooke, the former Minister of Housing. It is the astounding campaign of misrepresentations, claiming all kinds of widespread abuses under the prior regime of rent controls in order to mislead the public about the need for a radical tightening of controls through Bill 121. There are six main points here.

1. This is the claim of widespread incidence of high rent increases. That is false. Mr Rae and Mr Cooke keep referring to 50% and 100% increases, when in fact only one tenant in 14,000 rental households had a rent increase of 100% in a year. These are the Ministry of Housing's own figures as shown in appendix 1 attached hereto.

2. They constantly refer to generally unaffordable rent levels. It is false, false, false because the average rent in Toronto, the most expensive market in the province, is only $634 a month. These are CMHC figures as shown in appendix 2. The bottom line is that Ontario housing is affordable.

3. Mr Rae and Mr Cooke keep referring to widespread speculative flipping, that is, multiple resales of apartment buildings. That is the entire basis and justification for eliminating the financial loss provision that allows landlords to increase rents where they do not cover expenses. Again, it is false. Toronto city council did a study in 1989 that proved conclusively that there was in fact very little flipping in Toronto over the previous nine years; in other words, more misinformation from Messrs Rae and Cooke.

4. Messrs Rae and Cooke keep talking about rental profits -- I apologize to the new minister for keeping on talking about Mr Cooke here -- being high and rental investors as well-off people. Again, it is wrong. It is a fabrication to justify this bill as a means of reducing rental earnings. The fact is that three professional reports by the most reputable experts prove conclusively that rental profits are chronically lower than almost all other businesses. Each of these reports was commissioned by the government itself. Why do Messrs Rae and Cooke not read them and stop making up falsehoods?

5. The next falsehood I would like to cite is a truly sickening one; that is, the chronic denials by Mr Cooke that the new rules would cause a drastic drop in apartment values, wiping out the savings of tens of thousands of mainly small rental investors. It has already happened. Apartment values have already dropped abut 30%.

It is interesting to note that contrary to Mr Cooke's denials, this is in fact one of Premier Rae's prime objectives, as outlined in his secret agenda. In the Tenants' Bulletin published by the Federation of Metro Tenants' Associations, Premier Rae said, and I quote for the 15th time: "You make it less profitable for people to own it. I would bring in a very rigid, tough system of rent review. Simple. Eliminate the exceptions and loopholes. There will be a huge squawk from the speculative community" -- that is the landlords, the people who have kept the affordable housing -- "and you say to them, if you're unhappy, we'll buy you out." I wish that would happen.

6. Minister Cooke and other NDP stalwarts consistently point to the Vancouver experience since decontrol in 1983 as a demonstration that a free market rental housing economy does not work. They cite a few unrepresentative years of tight vacancies. I have attached, as appendix 3, data that conclusively prove the contrary.

First, according to CMHC, Vancouver has long had slightly cheaper rents than Toronto since it decontrolled in 1983, decontrolled rents in a major city at less than controlled rents in Toronto. Second, it was when BC decontrolled in 1983 that Vancouver vacancies shot up threefold and remained reasonably high for most years thereafter. At the present time, the vacancy rate stands at 2.3%.

When taken together, these various misrepresentations are a serious scandal because they are the main basis for Bill 121. In other words, the bill is entirely based on fabrication.

The most fundamental policy issue of integrity for Mr Cooke and the Rae government should be the basic question of rent control itself and whether controls should be scrapped. Messrs Rae and Cooke are poorly serving tenants, who have the most to lose, by adamantly refusing even to consider this fundamental issue, and this goes for the two other sides here as well, previous governments.

This is despite the overwhelming evidence of grave harm wrought by rent controls, already well established in Ontario. These are the same results so well documented in the international experience. New York, for example, is currently facing a $3-billion budget deficit made up largely of its unsuccessful efforts to undo the city's rent control slums.

Ontario is one of the few remaining provinces in Canada, and even in the western world, which still has rent controls in place. While the rest of the world is loosening controls, Ontario is busy putting in place the strictest and the most unworkable controls of the hemisphere. I would like to challenge that in the question period, I hope.

It is also a fact that none of the international leading economists, not a single Nobel laureate, has anything but unanimous condemnation of rent controls as a public policy because of the grave harm they bring to tenants and the shelter economy.

Obviously this government has a clear duty in the public interest of tenants, landlords, and indeed all taxpayers, to at least look at this basic issue of the bottom line, the cost-benefit of rent control, something that has never been done in the 15-year history of rent control in Ontario.

Just last month, a special US federal commission issued its report -- I am going to make this available to the clerk -- to President Bush on regulatory barriers to affordable housing. The cover page of the report is attached hereto as appendix 4 and a copy of the full report has been given to the clerk of the committee.

I suggest that every member of this government get a copy of this very important report. Why? Because this report proves conclusively that government, not private landlords and developers, is the principal cause of unaffordable housing. For example, restrictive zoning, complex building permit systems, excessive development charges and rent control. The commission believes this so strongly that it proposed federal funds be withheld from any state that does not have a barrier removal program including decontrol of rental housing.

Finally I want to talk about Sweden, the much-vaunted rent control success story constantly cited by Premier Rae, Cooke and other NDP stalwarts. But ladies and gentlemen, they have it all wrong. Last March, the AFFORD group invited one of Sweden's most eminent housing authorities to come to Toronto to explain the situation in Sweden.

We invited Minister Cooke and all members of the standing committee on general government to hear his expert views, but only one of the NDP members took advantage of this important opportunity. It was a heaven-sent opportunity to get the true facts about Sweden, rather than what the NDP has been spouting for years about the so-called Swedish model as a rent control success story.

1120

Sweden dropped Ontario-type rigid rent controls in 1975 as a demonstrated disaster, moving to a much looser system based mainly on a system of landlord-tenant-negotiated rents. If Rae and the NDP want to follow the Swedish model, they would have to scrap Ontario's current system of rent control, a move I would strongly recommend.

In conclusion, various governments since 1975 have brought in stricter and stricter rent controls. Bill 121, the NDP's new rent control proposal, will likely break the backs of the private landlords and drive many into bankruptcy.

Private rental housing works. It is affordable and it pays for itself, costing a mere 18% of tenant income. How the western world would love to be in this scenario.

Public housing does not work and is horrendously expensive. The government wants to build 40,000 non-profit units at a capital cost of at least $4 billion added straight on to the debt of Ontario.

Reducing values and incentives for private landlords, who have provided 85% of Ontario's rental housing stock, will mean no further private investment and more public housing. Can we really afford the horrendous cost of government mismanagement of our rental housing economy?

There are real solutions, of course, and once again they are presented in appendix 5.

Ms Harrington: At the beginning you were generous enough to offer your time to someone else, and I wanted to tell you that I value your presentation, and the rest of the people on the agenda too. That is why we did not go for your suggestion. But maybe now I should have changed my mind.

I wanted to tell you that the reason we are getting into this is stability. We want tenants to know what their rents are going to be, and there is something else involved in this too. It is a power imbalance between tenants and landlords. We believe that if we can empower people to feel that housing is their human right and that landlords and tenants can deal with each other on a more equal basis, just like men and women can deal with each other on a more equal basis, then this will strengthen our whole society.

We believe that landlords should be able to make a fair profit in this province, and many of them over the past years, as you have just said in this presentation, have lived within the regulation and have had no problem; they are not gouging. Those are the people we want, and they will remain in this system. We want more of those people in Ontario and we want the system to work with your help.

Mr Satchu: The only thing is, I think what you are misunderstanding is the effect, and this is why it is so sad that you will not listen to experts. You yourselves have no experience in this field. I do not know how many of you have actually owned any rental housing or how many of you have actually produced a job, but I think both those things are necessary to understand the problems that exist here. You perfectly well know that there are people who are losing money every year without fail. There are people, landlords, who are writing a cheque every month to support tenants' rents.

Ms Harrington: And there are very many others who are not.

Mr Satchu: Agreed, but why --

The Vice-Chair: Thank you. Mr Tilson.

Mr Tilson: I am glad you mentioned British Columbia, because the socialists of course always say that deregulation will not work and look at British Columbia. Would you elaborate further on your comments?

Mr Satchu: I am going to ask Jim to do it.

Mr McKinlay: Back in January or February when we were going through this process the AFFORD group made a presentation. In response to that presentation Mr Drainville quoted some statistics that I thought were somewhat fascinating. Typically, he chose to cite statistics that were unrepresentative of approximately a 10-year history of decontrol in Vancouver, and he quite conveniently chose statistics that reflected a tight market.

There is no question that Vancouver did go through a period of time where it had a tight market. Everything has an economic cycle where things are a loose market and they come right back around to a tight market.

He cited examples of 17% to 60% --

The Vice-Chair: Thank you. Ms Poole.

Ms Poole: Thank you for your presentation. Your presentation is based on the premise that rent controls must be removed to revive the housing market and to make sure that it expands and grows and flourishes over the coming years, but the government has made it very clear it does not intend to scrap Bill 121. Given that fact, what one factor in Bill 121 do you think has to be changed most?

Mr Satchu: I am sorry. The reason for talking about the removal of rent controls -- I do not expect that to be done tomorrow, nor may it be healthy just immediately. It may need some years. But the interest is because I think it is in the interest of tenants' rights, and what Bill 121 is saying is totally contrary to tenants. I think rent controls have led to inadequate maintenance and have led to neglect because there has not been the money to serve it. Now we are going to say: "We've shoved you with rent controls for 15 years. On top of it we're going to make sure the maintenance and everything else is to be done as if there was a free market." This is the lunacy of this sort of thinking, which has gone ahead in Santa Monica, in Berkeley. We have had the results of exactly those sort of areas, and we are going to do it again. It is almost as if we do not want to learn.

The Vice-Chair: Thank you, Mr Satchu. Thank you for your presentation.

COUNCIL OF ONTARIO CONSTRUCTION ASSOCIATIONS

The Vice-Chair: The next presentation will be made by the Council of Ontario Construction Associations. Good morning, gentlemen. If you would introduce yourselves for the purpose of Hansard and identify the organization then you have 15 minutes to make your presentation. The committee always appreciates a few minutes to ask some questions.

Mr Surplis: My name is David Surplis. I am president of the Council of Ontario Construction Associations. With me is Gerald R. Genge, an engineer with Morrison Hershfield, who will be actually making most of the presentation this morning. We are going to have a bit of a departure for you here. We are not really going to talk about social policy. We want to talk about something that we feel has been somewhat ignored or missed in the discussions to this point and that is the actual state of buildings, rental housing, in Ontario and the costs associated with maintaining, restoring and preserving those buildings.

The council -- COCA, as we are called -- is an organization representing 49 construction associations, everything from heavy construction to repair and restoration and everything in between. In good days we represented about 49,000 construction companies. Now that is down about 20% in the last couple of years because of the inflationary cycle and so on. We also know, though, that unemployment in the workforce in construction is running about the same, 18% to 20%, which is horrendously high and very hard on the workforce.

One of the areas where there has been a marked and unexpected decrease in activity and work is residential apartment restoration, rehabilitation and repair. Despite what Mr Cooke thought, we are definite in our views that this work stopped with the introduction of Bill 4. He says it is Mulroney and high inflation and so on. We do not deny that all those things had to do with it, but it is an interesting coincidence that almost all of the concrete restoration stopped as of the introduction of Bill 4. That concerns us.

We would like to point out that rehabilitation and repair are normally very steady, predictable forms of employment. They are not so any more. We are concerned that there is apprehension out there in the investment community, the ownership community, where they are simply not hiring our workers, our companies, to do the work. That is a fact. We are not speculating any more as to the reason. We are just pointing out that there is very high unemployment. There is very little work being done in restoration and rehabilitation of apartments and it desperately needs to be done.

In brief, we are here to point out today that a great deal of money is required to preserve even the basic health and safety requirements of residents in older buildings. The deterioration of buildings is not always evident to anyone other than a trained engineer, but it is inexorable. It does not stop with the introduction of legislation. Repair and rehabilitation work simply has to be undertaken to restore and then preserve the current stock of buildings. That work is extensive and expensive, and allowance must be made to pay for it.

1130

It appears to us, for instance, that essential work on older buildings in the Toronto area will generate costs far in excess of the allowance proposed in Bill 121. The work desperately needs to be done -- we are just talking about basic safety work -- but how can it be done if there is not an adequate cash flow? We are concerned that rent regulation take into account the basic physical facts about the nature, extent and cost of maintaining the stock of rental accommodation in Ontario. I do not think that has been addressed adequately, at least to this point.

To that end, we are pleased to have with us today Gerald R. Genge, who is vice-president, technical services for the firm of Morrison Hershfield, consulting engineers. Mr Genge has been engaged in an extensive study on the conservation of apartment buildings for the city of Toronto. You heard it referred to before. We have appended it for you. Mr Genge will go through the salient points. Unfortunately, as we all know, time is short, but he will do his best, and we will certainly entertain questions. I would add that we are available, as everyone else has said, for further consultation. We will present you with any written material, whatever you would like, afterwards. With that I will turn you over to Gerry Genge.

Mr Genge: Thank you very much. I am not personally representing COCA. I am merely here as somebody who has been involved in a technical study to have a look at the condition of the buildings, in particular the condition of the buildings in the city of Toronto. The city of Toronto occupies probably about two thirds of the apartment housing stock that we have in Ontario, so it is a pretty good sampling.

The concern over the condition of private rental apartments in Toronto initiated this study to determine the viability of modifying or adding an existing housing standards bylaw to cause the building owners to initiate rehabilitation and repair in a planned, organized and proactive manner. This appeared to be necessary as the current processes in place are inadequate for that purpose. Just by driving around town having a look at the condition of buildings, you can see evidence to that effect. The high-rise apartment stock continues to advance further into disrepair, elements of the principal building systems continue to deteriorate and the quality of life in the subject buildings continues to degenerate.

Our study team is addressing the technical and costing issues, the policy development and planning issues and legal issues in order to assess the feasibility of an apartment conservation program. Morrison Hershfield Ltd, my firm, is addressing the technical needs and timing for rehabilitation and conservation, the associated costs and thus the impact on the funds required on an annual basis.

The cost data for building repair follow directly from the type of repair and the extent of the repair required. Thus the building characterization became a key initial stage in developing this feasibility study. Building characterization for the population of private apartments in Toronto ended up being, through a process of analysis that we performed, fairly well defined by the decade in which the building was constructed. Buildings in the 1950s, buildings in the 1960s, buildings in the 1970s and buildings in the 1980s can be characterized as a typical building. For instance, a building in the 1950s is approximately seven storeys, it has about 67 units in it, has a one-level, probably above-grade parking garage, a certain type of windows, a certain type of mechanical system. As a result of that sort of knowledge we were able to project costs for buildings of that decade. That was similarly done for all of the decades in the city of Toronto.

As we began developing the cost data, it became apparent that things were getting expensive and that a staged program of implementation of any sort of conservation plan would be required to make it affordable. It seemed to best address the needs to do the work related to life safety as a first priority. Our program, as we propose it, is a three-stage one. The details of the program are not critical here, but the costs are the salient points. The initial stage would address life safety, the second stage would address the building condition and the third stage would maintain the building in good condition.

In the handout in exhibit 3, which is between pages 10 and 11, there is a description of the construction history for the apartments in the city of Toronto. The construction history is quite interesting. Most of the buildings that we have in the city of Toronto, in fact 70% of the buildings we have in the city of Toronto, predate 1970. That makes these buildings between 20 and 35 or more years old, and these are buildings which are in dire need of work.

Between pages 14 and 15 in exhibit 4 there is a summary of the cost to implement the program as described in the attachment. It is important to note that the cost for getting buildings into a sufficiently suitable condition are significant. Over the first nine years, as the existing buildings are staged into the program, the total one-time costs to owners are calculated to be $293 million. These are 1991 dollars. That is considerably more than the ongoing costs for what we have called stage 3 or ongoing conservation, which is about $39 million per year. So we are looking at about a seven-to-one factor of costs which are required essentially now, at least within the next decade, to bring buildings up to a state of repair where they are able to be conserved rather than continually approached in a reactive manner, in a replacement as you have to do it type of mode, as in closing down a parking garage because it cannot be used or shutting off the balconies or special-assessing somehow the tenants. That number, $293 million, would equate roughly to about $630,000 per building, which would be the kind of number we would be looking at per building to do the restoration work.

The kind of restoration work we are looking at here I think needs to be addressed quickly. What we are including in it is the structure itself, the roofs, the cladding, the windows, the balconies, elevators, the mechanical and electrical systems, the fire and life safety systems. We are not including in our evaluations here, in our costing, things such as landscaping or finishes or appliances or flooring or routine cleaning. So our study is looking at the condition of the elements which are necessary to conserve the fabric of the building, and these costs we are finding are very high.

Exhibit 5 in the handout gives an idea of the type of rent increases that would be applicable should a conservation plan such as the one we propose come into effect. From the 1950s and 1960s, to enter stage 1, which is just to address the life safety issues of buildings of those vintages, we are looking at an increment in the existing rents of 10% to 13%. That includes two components of the cost. That includes the ongoing maintenance cost and it includes the cost to bring them up to a state of repair where you can do conservation. Those costs, I should make clear, for doing the initial startup work have already been amortized over a 15-year period. So it is not the $293 million all in one year. They have been amortized over a 10-year period.

If I can make one final comment here, all I would like to see come of this bill is something that would enable the buildings in their condition to be repaired. As I drove down from north Toronto today, I was looking at the buildings on the Don Valley Parkway, and just about every one that I drove by, I could see work that was required to improve the fabric of the building. These are bits of work that are required not because the building is cosmetically unacceptable, aesthetically not pleasing, but to prevent things like water penetration, and deterioration of exterior cladding and to repair roofs.

I will open it up now to questions if there are some.

Ms Poole: Thank you for your presentation today. I find it extremely helpful, particularly the study you have enclosed, with some fairly pertinent details.

I am looking at exhibit 5, which is the projected conservation cost and impact, based on the 15-year amortization, 1950s buildings. You are saying stage 3, so is that meant to be a three-year period?

Mr Genge: In the handout -- back to exhibit 2, which is just prior to page 10 -- there is a detailed description of how each of the decades of buildings would be introduced into the program. It takes a bit of study to come to grips with the chart, but for the buildings which are introduced from the 1950s -- we are looking at the white block at the bottom and the shaded block just above that -- you can see that the buildings which would enter into stage 3 for the 1950s would be entering at year 7 and year 9 of the program. Buildings which enter into that stage 3 have already undergone the initial startup costs.

Mr Tilson: You have painted a pretty grim picture as far as the safety of the housing stock of this province is concerned. By implication, you are saying Bill 121 will not address that crisis. What will happen as a result of Bill 121?

Mr Genge: I cannot comment on the bill itself. The reason for my presence here is just to bring to the committee's attention the condition of the existing housing stock.

Ms Harrington: I just wanted to comment briefly that I would like to ask our staff to go through all these details that you have given us, which is certainly valuable information, and if a program for rehabilitation of buildings has to be dealt with, then certainly we have to look at how to accommodate this.

I had asked staff for an example of how work would be done on a building and I have received a very interesting example of how to finance a roof within the guideline and I would like to submit this to the committee as a whole. It does not directly apply, but it is one example of how substantial work can be done on a small rent within the guideline.

The Vice-Chair: Thank you for your presentation. It has been most informative.

The clerk will distribute Ms Harrington's information as soon as she can get copies. Thank you, Ms Harrington.

1140

CO-OPERATIVE HOUSING ASSOCIATION OF ONTARIO

The Vice-Chair: The next presenter will be the Co-operative Housing Association of Ontario, if you would come forward, please. Good morning. We appreciate your presence. If you would introduce yourself, identify your organization for the purpose of our Hansard. You have 15 minutes. The committee always appreciates some time to have a conversation with you.

Mr Morris: My name is Bill Morris. I am the manager of government affairs with the Co-operative Housing Association of Ontario. Thank you for taking the time to hear us today.

We at the co-operative housing association find ourselves I suppose in a somewhat unique position in that although we are not directly involved in the rental housing market, we are certainly involved peripherally in that we are a large and growing part of the overall housing market. My comments are going to be rather general in terms of the direction of the legislation, rather than pertaining specifically to specific clauses of the legislation.

If I can, I would put forward the proposition that any rent regulation system should have as its primary objective consumer protection, and the consumers I speak of here of course are the tenants who live in the housing. What we have had in this province is a history of rent regulation since the mid 1970s, first introduced by the Davis government. That history has been marked by a system that, although it has changed over the years, has really remained much the same. It is based on a cost pass-through system that sets out a basic guideline, and then for extraordinary costs, capital expenditures and financing changes landlords are free to apply for increases above the guideline. That system has been in place, and my estimation of the current system that is being proposed is that it retains much of that basis. It retains a cost pass-through system and attempts to eliminate the excesses of the previous legislation by capping the amount that can be passed through in any one year.

I think it is important, though, to set a bit of context when we talk about regulation, because I think that for the most part, the relationship we have attempted to establish has been one which has attempted to balance interests, balance the interests of tenants who require protection because they are facing an affordability crunch. Tenants find themselves in a unique position, given that someone else owns their homes, so their security of tenure is directly tied to one of two things, either their ability to compete within the marketplace or the benevolence of their landlord, that is, in the absence of regulation.

However, we live in a society and a marketplace that I would say is typified by a couple of other factors. I think those changes are important to recognize when we contemplate what kind of regulation we are going to have within the rental market.

First of all, I would put forward another proposition, and that is that the rental housing market is largely a residual rental housing market that we have today, the private rental housing market. I guess there is some debate as to why it is a residual system. We have heard some people today put forward the position that it is a residual system largely because of the regulation that exists, and if only government would get off our backs and deregulate, things would be fine and the marketplace would take care of itself. I am afraid that view in fact misrepresents the economic realities of Ontario and the economic realities of building housing.

We in the non-profit sector build housing every day. The costs are no mystery. We use the same private sector building firms to produce our housing as would private rental housing producers. We have to meet the same building code requirements. We have to go through the same frustratingly slow zoning process in order to produce our housing. The real culprit here, I am afraid, is not regulation, it is cost. What we have witnessed during the 1980s has been a very rapid escalation in the cost of doing business, that is, the cost of producing housing.

The sad reality is that the cost of producing housing is not reflected within the amount that can be afforded by tenants in Ontario today. That is the crux of the problem. The crux of the problem is an affordability gap. It has little to do with regulation. Regulation affects it, but it is not the core problem. As I say, I think that is an important context to bear in mind.

I will also mention, just in terms of context so you will know where we are coming from, co-op housing, non-profit co-operatives, are not regulated by this legislation. That is because residents in non-profit co-operatives set their own rents. They determine democratically each year the level of rent increase for themselves and therefore are exempt from the legislation.

I will point out, however, that we are not unaffected by rent legislation. Our bridge subsidy withdrawal formulas use the old building operating cost index and residential complex cost index formulas that were found in the predecessor legislation as the basis for the bridge subsidy withdrawal formula. Incidentally, they also use that formula as the basis for determining the rate at which our subsidies are repaid to the government.

The second point where we come in contact with rent regulation is that we, as I say, do work within that broader marketplace and are affected by changes within that marketplace. When we see a tight rental market, we feel it very quickly in the growth of our waiting lists. The kind of pressure that is put on our housing stock as a result of the pressure on the rental housing stock is immediate.

I think the challenge that is really before us is responding to the changes within the marketplace and building a regulatory environment and indeed a housing policy framework in which we can respond to those changes. I believe the legislation that is proposed essentially tinkers with the previous system. As I say, it gets rid of the main problems that tenants were facing in terms of high rent increases by limiting them. However, I think it misses the boat on a couple of key issues.

First of all, as has been pointed out by others, I do not feel that the enriched guideline or the level of increase that is allowable under this legislation is going to protect the long-term physical viability of our rental housing stock. I think there are three priority groups, communities of interest, that have to be looked out for when we design rental legislation: First of all I put tenants; second I put the public; and third I put the owners of the properties. I do so because I feel tenants are the most vulnerable, and second, I feel the public has a long-term interest in that we have invested heavily through both the tax system and direct subsidy programs within our private rental stock.

1150

The other area of public interest within that is that we have direct expenditures we are now experiencing. In terms of supplying new housing, that has a direct relationship with whether our housing stock remains viable. I think the issue of retaining the long-term viability is key and that this legislation misses the mark in doing so.

We were disappointed to see that the legislation was not more ambitious in terms of breaking new ground. We would have liked to see the introduction of some type of capital replacement reserve system as is used in condominiums and in the non-profit sector. I think inevitably it will have to be introduced because essentially all we are doing is buying time with this legislation. It does not change the basic relationships that exist. It does not do a lot to address the long-term viability. Again, relying on a municipal inspection process, we have witnessed that in the past as not being a very effective means of ensuring long-term viability.

In terms of looking at a longer-term vision, again viewing the current rental housing market, I think the private rental housing market as residual is key in that it allows us then to work towards trying to see what kind of transitional period we are in and what kind of housing market we are heading to. I suggest and have suggested in the past that essentially we are looking at a transitional market in which the private rental housing stock will shrink and the non-profit housing sector becomes essentially the heir apparent to the private rental housing industry. That is the case in terms of production today, and I suspect that trend will continue in terms of the holding of property.

If we are to work in that direction, I think it is important to recognize the needs of tenants to be protected in terms of affordability, to protect the long-term viability of that housing stock and provide an adequate avenue so that housing stock essentially can be moved from private hands into the hands of the people living in it, the tenants who live in that property.

A couple of years ago, Mike Breaugh, who was then the NDP Housing critic, introduced a bill to provide for a right of first refusal for tenants when property was being proposed for sale. I think such legislation would be a good idea and a good addition to a larger housing policy framework. I will leave my comments at that and open it up for questions.

Mr B. Murdoch: From your presentation I seem to get that you are against this bill, that you think it should be more restrictive and that you feel maybe all housing in Ontario should be looked after by the government. Is that what I am getting from you?

Mr Morris: No, I think you misunderstand me. You have to understand that the co-op housing movement is both a criticism of the private sector and a criticism of government in terms of the way it is run. It is public housing stock. We run our own housing in the co-op housing movement.

Mr Tilson: You are also subsidized.

Mr Morris: So is the private sector, Mr Tilson, very heavily.

Mr B. Murdoch: It is?

Mr Morris: It is indeed.

Mr B. Murdoch: Do you mean that if I build a home, I will be subsidized?

Mr Morris: You will certainly be subsidized when you go to get your capital return on that, will you not? Will you pay income tax on that capital gain? Not a bit.

Mr B. Murdoch: Probably.

Mr Morris: No, you will not.

Mr B. Murdoch: Oh good, I will get you to help me --

Mr Tilson: There is no capital gain with respect to --

Mr Morris: I do not want to get argumentative.

Mr B. Murdoch: I just wonder what you want to do here.

Mr Morris: I just want to be clear we are not talking about a government-controlled system when we talk about a non-profit sector. We are talking about an independent third sector that is independent from government.

Second, in terms of the restrictive nature of legislation, no, I am not suggesting legislation that is more restrictive. In fact, I am suggesting legislation that is as restrictive as it is currently but that proposes a different framework in terms of the way we treat capital expenditures, and one that would ensure those capital expenditures get made.

Quite frankly, even our past system, under which I witnessed very significant rent increases in the private sector when I worked for the Federation of Metro Tenants' Association, did not ensure the long-term viability of the housing stock. It was up to the individual landlord to ensure that happened. In some cases it did and in some cases it did not.

Mr B. Murdoch: So it would be fair to say we should scrap --

The Vice-Chair: Thank you, Mr Murdoch. Mr Duignan, our resident expert on co-ops.

Mr Duignan: Thank you, Mr Chairman, I would not quite say that. It was nice to see you again, Bill, and nice to meet some old colleagues.

However, some of my more right-wing Tory colleagues across the way indicated that if you decontrolled completely and turned it over to the private sector, you would have all the affordable housing you could want, and at the same time eliminate the non-profit and co-op sector -- because basically the money that has been paid out to build these units is too costly to taxpayers; it is not efficient -- and at the same time, to pick up on that, introduce a subsidy program of which one study alone this year puts a minimum cost of $1.2 billion in that particular problem, an extra expense to the taxpayer. Do you agree with that statement?

Mr Morris: The interesting thing is that it points up the contradiction. A shelter allowance program, of course, simply recognizes what I am suggesting is the case within the rental housing market, that the consumers cannot afford the product. If that is the case, why are we subsidizing the private sector? Why would we propose to subsidize the private sector? I do not believe that is a good answer.

First of all, the amount spent on non-profit housing compared to any shelter allowance program that would have any degree of universality pales in comparison. Second, to assume we would have deregulation within a shelter allowance program is stretching it a bit. Let's face it, even the doctors are regulated in terms of the fees they charge. No government is going to look at a system where it is footing the bill and not having any control over that. You would still have to have a regulatory system.

Where we have regulation we are going to have regulation. I suspect that if we deregulate, essentially all we are doing is abdicating our responsibility in terms of housing, plain and simple.

Ms Poole: Welcome to the committee, Bill. I want to explore your comments about non-profit housing co-ops and the fact that they are exempted from this legislation as they have been from previous legislation and the fact that you are supporting that concept.

I have two questions about that. First of all, the reason you have given for this is that the members of the co-operative determine in a very democratic way what the rent increases are going to be, what the expenses are, that type of thing. Therefore, since they have had a hand in it, they should not be subject to the same legislation.

Mr Morris: They are the authors of their own misfortune.

Ms Poole: They are the authors of their own fortune or misfortune.

If you are looking at the private sector, let's say you had a building in London, Ontario the last time and they actually sent a petition to our committee and they had 56 units, the residents of the building unanimously wanted the landlord to do this work, the landlord did it and then he got caught under Bill 4 and they were objecting. If you have situations where the landlord and the tenants are in concurrence and there is no harassment and there are no allegations of any impropriety, do you see that those agreements should be allowed to exist under this legislation?

Mr Morris: I propose a system that would not have a pass-through, so no, I disagree with the substance of it. I would not head in that direction.

Second, in my years at the federation I witnessed a number of occasions where landlords claimed they had the concurrence of their tenants, and I can remember some in your riding. I rarely found it to be the case. I rarely found that the bargaining was a bargaining of equals. It was a bargaining of strength where one party had an awful lot of control and the other did not. I am afraid the negotiation of any contract is only good where the bargaining parties are on an equal footing. I do not believe that is the case in a landlord-and-tenant relationship. I do not believe it is the case, simply because you are dealing with a tight rental market and with people who have a housing need, that --

Ms Poole: One sentence, a yes or no answer?

The Vice-Chair: No. Thank you, Mr Morris. We appreciated your presentation.

1200

W J HOLDINGS LTD

The Vice-Chair: Mr Sam Grossman of W J Holdings Ltd. Mr Grossman, welcome to the committee. You have been here and seen our proceedings. You have 15 minutes to make your presentation. If you can reserve a few of those minutes for questions and answers, that is appreciated. Would you identify yourself and the company you represent for the purposes of Hansard and then begin.

Mr Grossman: Good morning, barely, and thank you for allowing me the opportunity to speak. My name is Sam Grossman. I am the executive vice-president of W J Holdings Ltd. First of all, I would like to tell you a short synopsis of our company.

We are long-term landlords. We have been in the business of building, owning and managing our own apartment buildings throughout Metropolitan Toronto for the past 30 years now. We are not flippers. We are not speculators. We have not sold any buildings yet. Until recently, we have taken pride in all aspects of our buildings: the pride of ownership and the upkeep of our buildings. We feel we have very good tenant relationships, and we have excellent relations with our numerous employees and tradespeople.

One of the major ways in which we have successfully maintained our buildings over a 30-year period is by the utilization of our own maintenance crew. We feel we have a very good group of plumbers, electricians, mechanics, carpenters and labourers. They have done an effective job for us, but no one is perfect. Although this is not normally a cause for concern, it has become one for us now. The onerous provisions of Bill 121 dealing with areas of neglect, the blocking of rent increases, outstanding work orders and disallowances of rent increases have now made any lack of perfection a major problem for us.

Under this legislation, a single disturbed or unreasonable tenant or rent control employee, even if acting in an entirely frivolous manner may, under the provisions of this bill, wreak financial havoc in a building with hundreds of satisfied tenants. It appears to us as though the most horrendous parts of this legislation were designed to deal specifically with those few well-publicized landlords who regularly engage in abusive business practices.

However, we do not feel it is fair to tar a whole industry with the same brush, especially since our industry comprises largely long-term owners and managers like ourselves. Since we think this bill uses a bomb to kill a fly, it has severe repercussions to all landlords, including ourselves. We predict that, rather than focusing primarily on effective maintenance, management's major focus will now be directed to protecting itself against unreasonable tenant claims under Bill 121.

For us, this may result in jobs lost for our employees. The reason for this is not because we do not like them any more, but it may be safer for us, under this type of legislation, to simply contract for all building maintenance with outside contractors, who would then be required to indemnify us against any losses relating to their neglect. I am talking specifically about losses in the form of blocked rent increases under this bill. We are certain this would result in higher costs, less efficiency and a poorer quality of maintenance.

Our recommendations on this bill, to prevent this from happening, would be: first, a reasonable procedure for dismissing frivolous claims prior to issuing any orders; second, a proper appeal procedure against any unreasonable orders, including court appeals, and not blocking or staying rent increases pending such proceedings; further, any work orders should be time-sensitive to the nature of the work required and provide for reasonable extensions due to unforeseen circumstances; finally, if we want this legislation to work, we need a clear and objective definition of the term "neglect" as it applies to maintenance.

The second section of my submissions deals with the specific Bill 4 freeze on capital, and the so-called fair transition rules that are proposed under Bill 121. At the time that Bill 4, this shocking, possibly illegal and certainly totally one-sided and unfair piece of legislation was passed we were in the midst of a capital repair program on four buildings. Two buildings are located in Scarborough, one in Toronto and the other in North York.

The program I am talking about was planned and commenced in stages dating back as early as 1988. Spending on the four buildings in this phase of the program totalled approximately $3.7 million. Most of this amount was concentrated in the following necessary areas: replacement of deteriorated balcony railings; replacement of leaky, drafty single-glazed windows with new double-glazed windows; restoration and waterproofing of delaminated concrete in underground parking garages; updating of building fire protection and life safety alarm system; and installation of aluminum siding to prevent water damage to the building.

This work probably employed a total of approximately 100 workers for roughly six months. Under the rent review rules at the time this work was planned and commenced, we would have received a return of $527,000 a year on our $3.7-million investment and this would have commenced January 1991. Bill 4 resulted in a zero return for 1991 and increased our costs by approximately $450,000 in interest charges on the debt we had incurred to do the work.

Bill 121, which we were told would be fair to business people like ourselves who complained about being frozen by Bill 4, would yield the following result on our $3.7-million outlay. Commencing probably around mid-1992, we would receive an annual return of $197,000 on our debt, which was originally $3.7 million in 1990 and would have grown to approximately $4.38 million with the additional interest costs by that time. Thus, our allowance under the so-called fair Bill 121 would not cover even 50% of the interest charges on this debt, let alone the principal figure. However, in mid-1993 we would begin receiving an additional annual return of approximately $88,000, being the second year of the phase-in under Bill 121, so that our total return in 1993 would be $285,000 on an investment which by that time would be in excess of $4.5 million and growing.

These types of provision in this legislation would be certain insolvency for these buildings, because the annual return would nowhere near cover even the financing costs on the investment. Obviously, under this scenario we will never do capitals, nor employ workmen as we did previously. Even if we wished to do so, the economics of the situation would make it impossible to obtain the necessary funds.

Therefore, we urge you to consider the following changes to Bill 121. This is all in the area of so-called transitional capital.

1. Transitional capital should be considered under the laws of the old Bill 51, which was the legislation in effect when this work was planned and performed.

2. This means that rather than the proposed 2% penalty deduction on capital allowances, there would only be a one-time 1% deduction.

3. To help ease the impact of any large pass-through on transitional capitals, we suggest the cap be increased from the proposed 3% and two-year maximum to 5% annually until fully implemented.

I would like to now deal with the treatment of new capital under this legislation.

As explained earlier, the proposed rules fail to provide for a sufficient return on investment to enable the necessary funds to be raised in order to perform any capital work required.

This situation becomes even more critical when we keep in mind the age of much of our housing stock. As you have heard earlier today, the city of Toronto has issued statements that billions of dollars will be required to preserve the city's aging housing stock. However, combined with this problem, we feel, is a unique economic opportunity. Right now, there are significant numbers of unemployed tradespeople who are prepared to work at very competitive prices. You have also heard about this earlier today. However, this situation will not continue for ever.

It is clear that our industry requires incentives to perform the necessary capital work now. It is equally clear that the capital disincentives proposed in Bill 121 will result in this opportunity being lost for ever. Therefore, we would like to propose the following changes as incentives to perform new capital now.

First, eliminate the 2% penalty deduction from capital allowances carried forward, with a one-time-only 1% deduction. The 2% is illogical. As the previous minister has stated, it is for sundry capitals. This has the effect on carry-forward awards of eliminating the 2% available for sundry capitals in the carry-forward year.

Second, the 3% cap allowance in each of two years should be changed to provide for as many years as are required to enable the justified allowance to be fully phased in.

Third, the 3% cap allowance referred to for necessary capitals should be exclusive from any extraordinary operating cost increases or any capital work classified as a retrofit item. If there are justified allowances granted for these items, they should be passed through over and above the allowance for necessary capitals.

Extraordinary operating cost increases have absolutely nothing to do with capital work. As businessmen, we are outraged and insulted by a totally unfair attempt to lump them together in this bill. Similarly, a retrofit item is one in which we are required to perform capital type of work solely because a legislative body requires a change to be made in the building. Such changes are totally beyond our control and, since they are unanticipated, cannot be either planned or budgeted for.

Implementation of these three items would help stimulate the necessary work to get done quickly at reasonable prices, while helping to justify the required investment.

Finally, what would be the aftermath of Bill 121? As reasonable business people who have been in this business for 30 years now, we ask ourselves what could be accomplished by a piece of legislation which, in its present form, is so unfair, unreasonable, unworkable and unmanageable. As we have demonstrated in our example earlier with the capital done on our buildings, it would ultimately drive all owners out of the business, the weakest ones first, the stronger ones later. Eventually none of us would be able to finance our businesses. The province would likely wind up running all buildings. What would this accomplish?

Let's look at the record. We have provided a vital product for the past 30 years in a reasonable and efficient manner. This legislation assumes our tenants need protection -- of a most unfair and severe nature -- against our unreasonably high costs of providing this service. In section 2 of my presentation, I discussed the $3.7-million capital spent in four of our buildings and the fact that this bill would cause us to lose about $200,000 per year on that investment. I have shown in this our current rent ranges in those four buildings, which average anywhere from $610 to $685 per month for a two-bedroom apartment. This is what you would be legislating against.

Now let's compare the government-run record. I have shown some comparable ranges for government-run buildings as obtained from Cityhome. What you are legislating for if you want to take these buildings is an average of $200 to $300 per month in higher rents.

In conclusion, I urge you to please try to think open-mindedly about whether this is what you really want and about who will really be helped from this.

1210

Mr Winninger: You have factored out the annual return of $197,000 on your debt which would be provided for under our proposed legislation. I do not know whether that includes the 2% for sundry capitals that you would be given each year under the guideline, but even if it does not, I suggest to you that the rent increase which is allowed you, the 3% cap in the first year and again in the second year of carryover, is going to be included in the annual base rent and will be indexed accordingly, even under the normal guideline, from year to year.

Surely you are recovering a very large part of your costs if we amortize these repairs and replacements over, say, 15 or 20 years. You are going to recover the lion's share of your costs, because it is already factored into the base rent after the second year of carryover and indexed annually.

Mr Grossman: That is incorrect. I am recovering nothing. As I pointed out, the initial financing costs of this investment are at least going to be $200,000 over and above whatever rent increases I get back. Even with the indexing you are talking about, the indexing on a $200,000 allowance would be somewhere roughly in the neighbourhood of maybe $5,000 or $6,000 per year. How am I ever going to recoup the principal, never mind the interest costs?

Mr Winninger: I am suggesting to you that you can recoup the principal.

Mr Sola: On page 1 of your brief recommendation (a) states, "A reasonable procedure for dismissing frivolous claims prior to issuing any orders." Do you have any idea how this would be accomplished? I think that is a very good suggestion.

Mr Grossman: First of all, if one single tenant in a building makes a complaint which is not supported by any other tenants or only a few other tenants, I think there should be -- there are certain items which can obviously border on frivolous, like a dirty pool or something which a few people complain about, or a lightbulb missing somewhere. I think in these cases there has to be some procedure whereby there has to be a certain minimum number of people who are supporting that claim before an order is issued which can block a rent increase. We are not saying that the complaint cannot be issued, but we are talking about a serious matter here. In a 200-suite building, we are talking about blocking maybe $10,000 worth of rent increases because a tenant complains that a lightbulb is missing or because the lobby floor is dirty.

Mr Tilson: Thanks for your proposed amendments or your thoughts on amendments, specifically page 4. The only time you mention the word "neglect" is that you do not know what it means. I agree with you; I do not know what it means either. But I wonder if you have any thoughts on this whole issue of neglect. If you make an application for a capital expenditure, some tenant can say there is neglect and your rent in fact could be reduced. Do you have any thoughts on that subject?

Mr Grossman: Yes. By "neglect" we are really talking about a neglect in adhering to whatever the standards of maintenance are. That brings us back to the same problem with defining standards of maintenance. Under the previous government we had a committee of landlords and tenants who were working jointly together to develop and define proper standards of maintenance as they should pertain to apartment buildings. I feel this committee should be brought back into force. They should agree together jointly between landlords and tenants as to what represents fair standards of maintenance within apartment buildings.

The Vice-Chair: Thank you, Mr Grossman, for your presentation today.

Before we proceed with the final presentation, the clerk will give us some information about travelling this afternoon.

Clerk of the Committee: Those of you who are going to Sudbury this afternoon, there will be airport taxis outside the main door at the main lobby at 5:30. I suggest that you bring whatever bags you have with you this afternoon and I will arrange for the room next door to be available for you to put them in. The other suggestion I have is that we start immediately at 2 o'clock so that we finish on time and are able to make the plane.

Mr Tilson: I know you are pressed for time, but issues are raised by delegations. As a new member of the Legislature, I have no idea what the committee that Mr Grossman just referred to is. I am wondering if the staff could provide us with information on that.

The Vice-Chair: Is someone here from the staff who could provide that information to Mr Tilson?

Mr Irwin: I am Terry Irwin, a senior policy adviser with the ministry. I believe Mr Grossman was referring to the Residential Rental Standards Board. Bill 121 makes provisions for incorporating some of those functions within the new rent control system.

1220

KLAUS VOGEL

The Vice-Chair: The final presentation of the morning is from Klaus Vogel. As you know, sir, you have 15 minutes to make your presentation. I advise you to reserve some of your time for conversation with the committee about that presentation. Would you introduce yourself and any organization you may be representing for the purposes of Hansard.

Mr Vogel: I thank you for the opportunity to let me speak to you. My name is Klaus Vogel. I came to Ontario in 1971, almost exactly 20 years ago. I am a Canadian citizen and have lived in Toronto since my arrival. I was sent to Canada by a related family to look after their real estate investments, which at the time, 1971, included 1,400 rental apartments in Ontario. This portfolio was enlarged to over 6,000 suites in subsequent years. None of the buildings was ever sold.

In 1983 I started my own company which, together with European and Canadian partners, invests in real estate in Ontario and southern California. We own, among office buildings, shopping centres and industrial buildings, over 4,000 rental suites in Ontario. We are also long-term investors.

Before I came to Canada from Germany, as my accent probably told you, I participated in a large-scale research project as a specialist in international law and international politics. The project was funded by the Volkswagen Foundation and co-ordinated by Sir Ralph Dahrendorf, who later became head of the London School of Economics. Part of our research entailed the analysis of legislative processes from inception to implementation, such as what we are witnessing here, with the objective of discovering which groups influenced the outcome of the process and what methods of persuasion were used.

It is particularly with these eyes that I looked at and followed the introduction and passing process of Bill 4 and now the proposed Bill 121.

When you read and study the transcripts of the Bill 4 hearings, which I did, word for word, it becomes very evident and clear that the hearing process was ineffective because the NDP members were not prepared to open their minds, not even for purposes of discussion, to any proposal that did correspond to their initial position. It appears to me that you were not prepared to listen, to learn, to improve, to modify and to fine-tune the legislation. To even the best argument you either responded with complete disinterest or broad stereotypes.

Let me give you, the NDP members of this committee, three examples where I cannot understand why your minds do not force you to open up and at least follow through with a thought process.

1. When in 1975 the NDP, together with the Conservative Party, introduced rent control, a system was chosen that did not directly help the tenants in need, but sprinkled the benefits of artificially low rents over everybody, whether in need or not. There are still, today, thousands of tenants who cannot afford their rents and would need help, and there is still a larger number of well-heeled tenants where the only remaining thing they cannot afford is to give up the cheap apartment they are living in. The statistics are available to prove this situation.

Neither Bill 4 nor Bill 121 helps tenants who cannot afford their rent today. However, these laws certainly improve and cement the favourable position of the more affluent tenants whose inalienable right it seems to be to pay a lesser and lesser percentage of their incomes as rent. I cannot understand why, of all the parties, the NDP would want to sustain this fundamental flaw in the Ontario rent control system.

2. During the years of rent control, many buildings experienced different fates, as we all know. It is not uncommon that completely identical buildings standing beside each other have rent differences of 70% to 100%, which in itself does not give great credit to the Ontario rent control system. There have been a great number of landlords who for whatever reasons chose not to take advantage of the possibilities to increase rents above the guidelines. These are many of the owners of older buildings, where rents are still below or around $500 per month.

You would expect that these owners would be regarded by the NDP as good and responsible landlords. However, exactly these responsible landlords are the ones penalized most by Bills 4 and 121. As a show of thanks for tenant-friendly behaviour, Bill 4 wiped between 25% and 50% off the value of their buildings. Bill 121 will wipe out their cash flow. Older buildings with low rents have a higher than 50% operating expense ratio to income. It is closer to 60% to 70%. Older buildings also need more capital improvements. Bill 121's rent index formula is a recipe for illiquidity in these buildings.

I ask the NDP members, do you not see the gross unfairness of what you have done? Why is it that you lost the ability to differentiate?

3. The third area where I could not understand why you, the NDP members, completely closed your minds, is the introduction of retroactive legislation in Bill 4, which now is maintained in Bill 121. There the impact and fallout goes far beyond the interest of tenants and landlords.

Let me use a simple example for what you did. You tell your son that he has to be back in the evenings by 11 pm. If he is not, you will deduct $5 from his allowance. Your son abides by the rule. At the next payment date for the allowance, you tell him that you have deducted $15. He says, "I was always punctual." You tell him, "Yes, but for the last three days I retroactively changed the curfew from 11 to 10 pm."

In doing so, have you not lost your credibility, trust and your right to educate?

What you retroactively introduced in Bill 4 is no different. In a state ruled by the law, and Ontario used to be such a place, one of the fundamental principles is that the state that demands obedience to the law gives its law-abiding citizens the security of the validity of the law. By passing retroactive legislation you have violated and broken the trust between state and citizens. Your retroactive legislation had a tremendous damaging international fallout for Ontario.

Let me read you excerpts from letters that were written to the NDP government, to various ministries, to Mr Rae and to Mr Cooke at the time by international businessmen and investors.

I am quoting from Dr Huth, who lives in Hamburg. He is an international lawyer who advises North American companies on investments in Europe and, vice-versa, European companies on investments in North America. He is referring to the retroactive legislation, and I am quoting:

"I have discussed this incident with businessmen and friends investing all over the world and did not encounter any remotely comparable situation. In no First World country was a segment of the business community ever confronted with such blatant breach of trust.

"I really do wonder whether it is possible to introduce such retroactive legislation. In all EEC countries it would be against the Constitution and would be an illegal act for Parliament to pass.

"I cannot understand how, in a state ruled by law, one of the fundamental principles of law can be violated.

"We feel here, a government can only then demand from its citizens to abide by the law if in return the government gives its citizens the security and the trust in the validity of the existing law.

"I can assure you that the German investment community is much concerned whether Ontario remains a province ruled by the law or not.

"And you know as much as I, how long it takes to build up a positive investment relationship and how quickly it can be destroyed. The damage is already there."

Dr Jörn Kreke, chairman of the largest specialty retail chain in Europe and member of an economic advisory committee to the government in Germany:

"I find it incredible that the Ontario government is considering a retroactive change of existing law. This surely seems to be a breach of good faith! I am convinced that any retroactive legislation will have a serious negative effect in the international business community and will lead to a reduction of foreign investment in Canada."

Jahr Group is a large publishing concern, Hamburg, Germany. Mr Jahr Sr, who was persecuted by the Nazis, was the first one to obtain a licence to print a newspaper from the Allies after the Second World War. Quote:

"We are an international investment firm with industrial and real estate investments in Europe, the USA and Canada. We are affected by the retroactivity aspect of your proposed Bill 4. The new legislation would severely affect the profitability of our real estate projects in Ontario. These investments have been made in trust and reliance on existing and valid Ontario law. In all our worldwide dealings, we have never encountered such a radical violation of the basic principles of law.

"The introduction of such retroactive legislation sends a clear signal to the international business community: You cannot rely on today's law in Ontario because it might be changed three years from now retroactively."

Werner Otto, who was also persecuted by the Nazis, founded in the meantime what is the largest mail order business in the world. He invested first in Canada in 1962. Quote:

"Quite frankly, I cannot believe that a highly industrialized country like Canada, which is trying to attract foreign investment, would actually take such a step which severely affects all investors who made their investments relying on the existing legal situation. Undoubtedly, such retroactive enactment would destroy the confidence of all investors -- not only in real estate -- for a long time."

Can you imagine how I feel as a proud Ontarian receiving and reading such letters? I am not suggesting that you, the NDP, abandon your promise to help tenants in financial need, but I also know there are less damaging and better and more sophisticated ways to achieve this. You, the NDP, in my opinion have not been prepared to explore these alternative solutions. Why? What is it that prevents you from doing so? Why is this committee so ineffective? Listening to, reading and analysing your statements I have only one conclusion: You nurse a simplistic stereotype image of residential landlords. You really suffer from a landlord phobia.

Your Bills 4 and 121 ooze hate, mistrust and revenge. They use undifferentiated sledgehammer methods and show the clear intent to destroy an industry. In order to achieve this, you do not hesitate to apply methods that shatter the fundamental principles of a state ruled by the law and that damage Ontario's reputation as a good and stable place to do business.

1230

How is it that when it comes to Ontario's rent control you cannot see the forest for the trees, and that when your colleague Mr Pilkey's Ministry of Industry, Trade and Technology analyses another country everything seems so simple and so clear? I received this brochure recently, "Germany Reunified -- New Opportunities for Ontario Firms," dated March 1991, and I would like to quote from that. Of course, housing is one of the great opportunities. Why? This is the quote:

"One of the most acute infrastructure problems facing eastern Germany is the housing shortage. In Leipzig alone it is estimated that there is a shortage of 50,000 houses, 30,000 of which are needed immediately. The opportunity reflects both an insufficient supply of new units as well as the continuing deterioration of the existing housing stock. Housing builders in the GDR had little incentive to renovate due to highly subsidized rents."

Two paragraphs farther down:

"In response, the government" -- the Ontario government -- "has offered some assistance programs to support private spending on renovations and construction," which means I can obtain Ontario money to fix up east German apartment buildings. I am coming back to the quote now, "In total, it is estimated that development of the eastern German housing stock will require investments of DM230 billion."

After reading this, I am speechless. Thank you for listening to me.

Mr Sola: I think page 6 is devastating in your summary. Your statement, "Your Bills 4 and 121 ooze hate, mistrust and revenge," I think says it all. Yet I find it surprising that in the brochure you received they can see what subsidized rents and rent control have done in eastern Germany, yet are trying to bring that system here. Do you have any comment on that?

Mr Vogel: I cannot explain it by logic. I only can explain it that so many NDP members who were in areas like Parkdale and know what has happened there have really emotionally an aversion against landlords here. It is relatively simple to analyse. Certainly there is no spirit here in this committee to try to work something out which works for everybody. I could not believe it that when somebody offered his time, we would not be prepared to listen to experts coming from the United States. Why do we not work together and try to resolve something?

Mr Tilson: This legislation has introduced a new concept I am not aware of, which very few jurisdictions have, and that is the whole subject of search and seizure. I do not know whether you have given any thought to that. I think it is in part IV of the bill. Do you have any thoughts on that whole concept of the search and seizure proposal?

Mr Vogel: Yes. I feel we are confronted with such mistrust -- we have been running these apartments for years and years and no big complaints. It is just because a small group has misused legislation that was, of course, imperfect, because it is impossible to make perfect rent review legislation. But that is why I referred to apartment buildings standing side by side, being of identical size with the identical number of suites, and one which has been sold and gone several times to rent review has very high rents and the other one has very low rents. Of course, it is hard for tenants if they cannot control what is happening to their building, but I do not think this legislation is going to help the tenants who cannot afford it today. There has to be a different system.

The Chair: Thank you. Mr Winninger.

Mr Winninger: Mr Vogel, if indeed your views are representative of the landlord community, I regret this negative impression that our government is somehow a draconian force in your lives. I am particularly surprised that you would complain about retroactivity of this legislation. No one from the landlord community complained when the RRRA was proclaimed at the end of 1986, and it was retroactive right back to July 1985. We never heard any complaints about it then.

This government, I think, has been particularly sensitive in the way it has put forward Bill 121 because it provides for transitional provisions that would allow capital costs up to the 3% cap that were incurred right back to January 1, 1990. I think there has been more regard shown and more consideration shown for the landlords than was the case when the RRRA was proclaimed retroactively to the serious detriment of the tenants.

Mr Vogel: Can I have one moment to ask you to just forget the content, that we are dealing here with rent review. It is the principle, that introducing negative retroactive legislation is just something which in every civilized country is unconstitutional. We will see whether it is unconstitutional here. I can tell you it definitely is unconstitutional in any of the western European countries.

Mr Winninger: Why were you not complaining about that in 1986 when Bill 51 was proclaimed?

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

I remind committee members that we have a very busy afternoon. It is my intention or the Chairman's intention to start precisely at 2 o'clock. As you see, we have lost 35 minutes this morning. We cannot afford to have that happen this afternoon.

The committee recessed at 1236.

AFTERNOON SITTING

The committee resumed at 1400.

FEDERATION OF NORTH YORK TENANTS ASSOCIATIONS

The Vice-Chair: Good afternoon. We continue the work of the committee hearings on Bill 121.

Our first presentation for this afternoon will be from the Federation of North York Tenants Associations. Sir, would you come and sit at the table and identify yourself for the purposes of Hansard and your position within the organization. You have 15 minutes to make the presentation to this committee, and it is appreciated if you leave a little bit of that time for questions and answers with the committee. Welcome here this afternoon.

Mr Gosschalk: Where is everybody else?

The Vice-Chair: They will be here. If you would begin, please.

Mr Gosschalk: My name is Bob Gosschalk. I am president of the Federation of North York Tenants Associations, which was founded on March 4, 1991, in the city of North York. It is a non-profit Ontario corporation which is about to receive its letters patent within a few weeks.

The Federation of North York Tenants Associations was founded by a group of prominent executives of tenants associations located in the city of North York, because the need for a strong, politically independent, well-organized and effective umbrella organization in the city of North York was long overdue. Because of very limited time allowed to us, I would like to start our presentation now by suggesting that the NDP has made a remarkable attempt to avoid the original promises it made to the tenants of the province of Ontario.

This new Bill 121 is indeed a compromise which indicates that the socialist government of Ontario has abdicated its total responsibility to the tenants of Ontario. In An Agenda for People, the NDP campaign document, it was stated that New Democrats would bring in rent control. There would be only one increase per year based on inflation. Excuse me, sir, I am not going to go on with this gentleman talking.

The Vice-Chair: Just continue, sir.

Mr Gosschalk: He is not paying attention to me. There would be no extra bonuses to landlords for capital or financing costs. The NDP document stated, "It's simple, it's fair and it avoids the bureaucracy which has frustrated both tenants and small landlords." This time I agree with Ms Poole, "It is quite clear that this legislation is not their campaign promise."

In spite of the many good points in this legislation, it leads us to believe that we just cannot trust any government politician when it comes to making good on campaign promises. The Minister of Housing appears to have had no intention to honour his promises to the hundreds of thousands of tenants in Ontario. One wonders what the next government will promise in order to get the votes from the Ontario tenants.

The most objectionable aspects of this proposed legislation are:

1. The 3% additional cap over and above the annual guideline, which would result in landlords receiving an annual increase of at least 8.4% each, which can then be compounded for each following year.

2. Amounts allowed for capital expenditures to be stretched over more than one or two years, depending on the size of the apartment building.

3. This bill does not contain definite provisions for a reserve fund to force the landlord to set aside money to take care of capital expenditures. Instead, the tenant has to make, upon application by the landlord, an annual additional payment to finance the business of the landlord, who in a majority of cases has been negligent during the past number of years to properly maintain his assets.

4. This act does not protect tenants living in Ontario Housing Corp rental units. The NDP government apparently believes in tenant discrimination.

5. Bill 121 does not provide a time limit. Hearings can drag on for a long time. Also, because of lack of personnel and the incompetent bureaucrats, hearings take a long time to start. The results are that in the case of a decision made against tenants dating back a long time, the amounts of money payable to the landlord could be financially disastrous for many tenants, even if these payments, as now indicated in the legislation, are stretched over a 12-month period.

6. The question of the ability, integrity and work experience of the rent officers comes to the fore when this Bill 121 puts so much power into the hands of one person without recourse.

7. In Bill 121 there is no recognition or legal definition of a tenants association or its agent or legal counsel representing member residents of an apartment building or buildings so that tenants can be better represented at local rent review offices, the divisional Court or with senior rent review officials.

8. In the case of a landlord applying for rent increases, there are no provisions for the legal costs involved by the tenants, especially when a tenant affected by an order of a rent officer or the director may appeal the order to the Divisional Court, but only on a question of law.

9. There are no provisions made in Bill 121 for appeal hearings. This bill sets out terms which cannot be appealed, and in our opinion this is, to say the least, very undemocratic.

10. There is no provision that tenants must have the right of access to engineers' reports, inspection reports and all other documents that pertain to an application by the landlord for an increase to cover capital expenditures.

11. Subsection 20(5) allows a rent officer to calculate interest rates on a capital expenditure, regardless of whether the expenditure is financed by borrowing, by the landlord's own funds or by both. We question the ability of the rent officer to make this determination and also the arbitrary contents of this ruling.

This proposed rent control legislation is certainly not what we had expected to receive from the Minister of Housing after all the time and effort that many tenant associations had put into their representations with respect to Bill 4. It was obvious that the minister and his staff already had made up their minds when they introduced the green paper in February 1991 and the standing committee on Bill 4 was still hearing representations from both the tenants and landlords.

The fact that there is no longer an appeal unless it is to the Divisional Court on a matter of law only is disgraceful. Either the tenant can choose an administrative tribunal or a hearing, but there is only one level without that avenue of appeal. Again, we must agree with Dianne Poole. This is a victory for the bureaucrats at the Ministry of Housing. In their effort to "streamline" the process, they rejected one tenet of democratic government to deny that type of appeal.

No person in his right mind is going to choose an arbitrary decision from a government bureaucrat over a public hearing where all parties can be heard and a democratic decision can be made by a panel of three commissioners. The dictatorial aspects of this proposal are frightening and without a proper appeal process. We are certain that politics will pay a large part in the decision-making process, regardless of which political party is in power.

We agree again with Dianne Poole -- and I am sorry she is not here; I disagreed with her the last time -- when she says "I do not think that it is going to be good for tenants or landlords and I do not think it is going to be good for the process. I think there is somewhat of a conflict of interest in having Ministry of Housing bureaucrats decide everything." It is wrong.

Another very important matter is that the rent officer who makes the decisions is not obligated to give written reasons. We would like to be entitled to know the reasons why a decision has been made, on what grounds and to what extent. If the Honourable David Cooke or the new minister of today says tenants need protection, that is what we are looking for.

We also insist that if appeals to the Divisional Court are to be made on matters of law only, which we strongly object to, then this part of Bill 121 should be extended to having appeals based on fact as well.

There are other aspects of this bill which we strongly object to, but our time is up. Hopefully someone else will cover those areas. May I thank you very much for inviting us to this important meeting.

Mr Tilson: Thank you for your presentation. I would like you to comment with respect to the bureaucracy that you anticipate this legislation will put forward. Obviously, you are not the first who has raised the issue of no appeal with respect to matters of fact and only with respect to law, but not just that, the filling out of the volume of forms, the knowing of the little rules which have yet to be explained to us for definitions and those sorts of things. I predict that a whole new class of advisers --

Mr Gosschalk: What is your question, sir?

Mr Tilson: Would you comment with respect to the bureaucracy on whether or not tenants and landlords will be able to simply manage the bureaucracy of this system?

Mr Gosschalk: I doubt it. Our experience over the last seven years -- in my case, I represent the largest tenants' association in North York, the St Andrews Tenants Association, with over 800 members. We are incorporated. The new federation we formed last March is to act as an umbrella for all the tenant associations in North York hopefully.

The experience of myself and other presidents is that we have run into a tremendous mountain of bureaucratic paperwork and indecisions, but also we have had decisions made by rent control officers which later on -- in fact we have a case right now, which I cannot discuss here, where they made a terrible mistake. The decision was made, the landlord has already made -- it is a financial situation. If we add any more bureaucrats to this, we will go crazy.

1410

The Chair: The answer is, there is lots of paperwork.

Mr Gosschalk: Yes.

The Chair: Thank you. Next questioner, Ms Poole or Mr Brown.

Mr Gosschalk: You missed my notes. I can give you more of those.

Ms Poole: I apologize for that. I tried to cram too many meetings into the lunch hour.

Welcome to the committee, Mr Gosschalk. I am just looking through your brief, and you have a number of comments here about the hearings and the appeal process. Quite frankly, I agree wholeheartedly with what you have said. What do you suggest would be meaningful to allow tenants participation and the right to decide whether they will participate in the hearing and also the appeals process?

Mr Gosschalk: The first thing is that. I would like to Ms Harrington to hear this. We have gone through previous meetings. There is no mention in the act, no official recognition of a tenants' association, period. In other words, we have no legal right in the act. You go through the act, and I have it here, and find it. There is no definition of what a tenants association is all about and who should represent tenants if tenants wish to be represented. It is very important. You have had all kinds of tenants' associations coming before your committee for Bill 4 and this one, and maybe others, I do not know. Mr Chairman, how can you recognize a tenants' association when it is not recognized legally by the government?

Ms Harrington: I would like to tell you that we have gone to the wall for tenants. We have gone as far as we can go. This is the best legislation ever for tenants.

Mr Gosschalk: But you do not mention --

Ms Harrington: Tenants' groups have told us this, over and over. I would like to say that we need help with refining this legislation, and that is why we have asked you to come. Your concern with the hearings is certainly something that we want to look at in depth, and in fact we had a meeting this morning with our ministry people discussing the hearings process. We are going to go into detail with that. We also announced in June a program called Partners in Housing where money is given out for tenants' advocates, for tenants' groups, to enable them, to empower them to speak out and be part of the process in Ontario.

Mr Gosschalk: It is not in the act, and that is what we need.

Ms Harrington: No, I did not say that it was in the act --

Mr Gosschalk: Oh.

Ms Harrington: It was announced by the minister in June.

Mr Gosschalk: Yes, but you see the problem is this, we are asked here, and whoever else is here, I am going to be back here really in about 10 minutes. I came down here especially to bring this to your attention. Unless you put that in the act, what is happening two years from now, three years from now?

Ms Harrington: I understand your concern, but --

Mr Gosschalk: Politicians come and go. We have had three parties that I have looked at, and we may go back through the whole circle again. Who knows? We know, so --

Ms Harrington: I did say very clearly that we are here to empower tenants, and that answers your question.

The Chair: Thank you for your presentation. Your 15 minutes is now concluded, and we will have to call the next presenter.

Mr Gosschalk: Thank you, Mr Chairman.

CHAIM SHAINHOUSE

The Chair: Chaim Shainhouse. Good afternoon. We will be following the same procedure: 15 minutes for your presentation and you can withhold some time, if you like, for questions and answers.

Mr Shainhouse: My name is Chaim Shainhouse. My office telephone number is 769-4158 and I give you that freely hoping that maybe afterwards I can have the pleasure of someone calling me to get some further detail. I have not had the pleasure of being here the number of days that you have been or listening to any other speakers. I have been busy filling out a lot of paperwork for the rent review that has been in existence. I have been doing this for probably 15 years, and the past several years I have been busy working on rent review applications. That is not my profession. My main business is probably management, but always involved in that is rent review and doing all the paperwork involved.

As the previous speaker mentioned, we are now the third government involved in rent review. My complaint is not rent review per se. I live in an apartment and I can afford a house. The apartment is cheap. I have two apartments, as a matter of fact. When the one next to me became available I took it, it was so cheap. I have 2,000 square feet. I pay $1,100 a month, and for me that is well within my income stream. I may be one of those who are benefiting by the legislation, but I do not think that is the issue.

Even though I am benefiting, I am a firm believer that there is a strong benefit to rent control, because obviously a large percentage of the population has difficulty with increased rents. To give them support, some type of rent control or rent review is beneficial.

However, the problems obviously have been spoken of before: the paperwork involved, the changing of the government, the changing of legislation. My problem that I have with rent review as a landlord or property manager, call it what you will, is that we do not know what to do. Every time we do something, the government changes the legislation.

That would not be so bad -- and let me give you an example. If I park my car outside, I will get a $10 ticket. As a matter of fact, I could not find a place to park here so I had to park in the press gallery. I made a little notation I am up here presenting for a few minutes. I may get a ticket. I know that. It will cost me $20. That is part of life.

Statutes in this province are such that to create a proper society we have to have laws so there is no anarchy. If I break the law, usually I know what the penalty will be. If I am a polluter and I dump my whatever I dump, my waste, in the wrong area, I may get a $10,000 fine, I may go to jail for two years, but I know that. I will not get life imprisonment and I will not get the death penalty. I know that. Why do I say that? It is simply that the way society works, one has to know how to conduct oneself.

We have a building in London, Ontario. We have three buildings. Our family took over these buildings in approximately 1975. They did not take them because they bought them; they gave a mortgage and they ended up taking the property back. The building was built in 1969, taken back in 1975, and it was a disaster. For the next 10 or 12 years they were busy pumping money into it. They were spending an average of $400 or $500 a suite just to maintain it. I am sure you are all well aware of costs of renovations, and in a building $500 or $600 per suite of renovations 10 years ago was a lot of money, four years ago it was a lot of money, three years ago it was a lot of money. We have been spending that for the past 15 years and we have not got anywhere, because the building was built to such shoddy standards, we do not know how the municipality allowed the building to be built. We ended up with the building under foreclosure and we are stuck with it and we have to live with what we have.

Throughout these many years -- as a matter of fact, there was one gentlemen -- I will not mention his name. He is now in federal politics. He used our building as a stepping stone to get elected. He kept saying, "This is the building, the lousy landlord, lousy everything." It was unbelievable and he used it and everyone knows that. The newspapers use this building as their headlines all the time.

We have three buildings here. In one of the buildings, one of the meters broke. We had a surplus in the account with Union Gas for two of the buildings, and the third one where the meter broke, they came back and asked us for some money. We said, "Excuse me, we don't owe it to you." They came back, and not only did they ask for the money, they asked for a deposit of $10,000. We said: "What are you talking about? We don't owe any money." They shut off the gas on all three buildings. Two had a surplus, one there was a dispute; they shut the heating off. Big headlines in the newspaper, "Slum Landlords Don't Pay Their Bills."

We can live with that. We can live with all those sorts of things. We have a bad reputation in those buildings. That's life. Anyway, the inspectors are on us all this time, and all power to them; they want the buildings improved.

Finally we started improving the building, approximately three years ago. We brought in a roofer. The roofer had some family problems or whatever, and the day he started doing the roof, there was a heavy rainstorm, a flood. The building got flooded. We had to evacuate the building. The city would not let us rent, would not let us do anything. They walked in there with a 30-page work order and in every apartment, everything under the sun was labelled.

We had to basically renovate the whole building. In one of the handouts I gave, which either you will get shortly or -- I do not think it was given to you yet.

Ms Poole: Is this the one?

Mr Shainhouse: No, that is not it. I just gave it to the lady a few minutes ago.

In there it will show you three things. One of them will show you an application made to rent review in approximately October 1989. The second one will show you the second application, the same building, for July 31, 1990. There were more than two applications. We have gone to rent review for many years in other buildings. Always it has been the case as we have made the application, usually in six months, five months, a year, they would ask us to provide the submissions.

1420

For some reason, with this one they told us: "You didn't put your submissions along with your applications. We're denying your application because you didn't give it in the time frame." First time in all these years, okay? But they told us: "Because you haven't finished the project" -- we are talking a $600,000 or $700,000 job -- "when you finish the job, you can make the submission. Then you will get the money." The building was empty, let me tell you, and we did not kick anybody out. They all moved out. Tenants moved out.

Most of the job was done around the spring or summer of 1990. So while we wanted to finish the last few jobs -- it may be part of my fault; I did not have a chance to put in the application in May or in June. I put the application in July 31. The first effective date was November 1, 1990. Very nice, no problem.

During the interim, of course, the NDP government got elected and passed retroactive legislation and that is why I am here. I am not here to fight legislation. If they want to limit 3% here or 4% here or no extra capital expenses, fine. If you want to pass that legislation, you are in power, whoever you are. There is the opposition, and if they want to fight, that is fine. I may be against it or for it. That is not the issue. The issue is, I have to live with legislation. I have to know how to conduct my life.

I was told, "If you do this you will get so-and-so." The municipal government was on our backs. We were getting fines. We were before the court, everything. We spent $700,000 or $800,000. If you should have a chance to look at the submission, maybe a little later, you will see we did not put marble, we did not put fancy stoves, we did not put fancy refrigerators, we did not put $1,000 fixtures in.

We were asking to raise the rent for a two-bedroom from approximately $425 to $525. Possibly with the money we spent we could have got $900, I do not know. But in London, Ontario, we have in this building -- we finished this building last September -- 54 units in one of the three buildings. We have 12 vacancies still. As a matter of fact, it was 18 vacancies and 6 are rented for September, and a lot of them are students -- 12 vacancies, $525, everything included, for a two-bedroom apartment. The one-bedrooms are $475. Now they are $435 because we have vacancies there. We cannot rent them. We cannot get a phenomenal dollar. We were not asking phenomenal dollars; $525 is what we were asking for.

Now it is all illegal. It is all "illegal," and I use that word in quotations, because the concept of illegal is -- I mean, what the government is doing is immoral. Retroactive legislation is not fair. If you want to pass Bill 4, if you want to pass whatever you call legislation, no problem. Do not make it retroactive. If you want to pass it for the future, fine. I will live with it, I will know what I can do. I have two more buildings the government wants me to fix up. Fine. I will live within the legislation. I will do what it tells me to do.

We have spent $800,000. These buildings are owned by retired people. There was a $1.9-million mortgage with the Bank of Montreal. The Bank of Montreal in August 1990 called the loan. They do not like the people. They do not like the buildings. They cannot get their rents. They called the loan. The owners had to go to various properties they own, had to mortgage them, had to take the cash that they live on to use that to pay for the renovations, to use that to get a mortgage on this property. Now they have no cash flow, because of retroactive legislation. They are retired, they have families. It is not fair. It is simply not fair.

There are two other things I want to mention -- and I could harp on this for a long time; I can give you specific examples -- but I am telling you, $425 to $525 for a renovated unit: new carpet, new kitchen, new washroom, new roof, new windows. The whole hall was redone, the whole building has new pipes, new hot water, new cold water. You name it, it was done to the building. It has a new entrance. It is a three-storey walkup. We put in a security entrance for the people, put in new mailboxes inside the unit. We gave them a beautiful lobby, new doors, new fire exits, everything new, and $525 is all we are asking. We cannot get it. We are back to $425. Fine, you will tell me I will get myself 3% if I want to go in 1992 for stuff we did in 1989 and 1990. The revenue in this building is $200,000, 3% is $6,000. That does not cover the interest on the interest we have paid on the money for two or three years.

What else is this government doing for us? Now we are talking about other things. Let me tell you something. In the handout you are going to be given an assessment on another building. This building is in Briar Hill. Briar Hill is in Toronto, the Forest Hill area, lovely area. The people pay $1,000 a month for their apartments. Some of the wealthiest children from the wealthiest families in Canada live in this building, or have lived in this building until they bought their houses or built their houses. I do not think these people have problems paying the rents, though today, mind you, we are having problems even with the lawyers and doctors in the building because of this situation.

We have gone to rent review a number of times. We have renovated the buildings as tenants wanted, because when we went to rent review four years ago, one of the council ladies -- I cannot remember her name offhand -- went and brought in the city and got 27 work orders on a luxury building. They went to every socket to find if it was working. I had no problem with that. We went and fixed everything and went to rent review. Fine. Rent review gives us the raise. Thank you very much.

You have another department called the Assessment Review Board, an assessment department. Do you know what they went and did? They said: "Aha, you raised your rents. It's true you had more expenses, it's true you spent $500,000 renovating it, but you raised your rents. Therefore, the building is worth more money," and they raised the assessment.

What you are going to get before you in a few moments is going to show that this building went to the Ontario Municipal Board in 1986, I believe, and the assessment was reduced from $490,000 to $470,000 by the lower board and the OMB confirmed it. We wanted to get it lower, but they confirmed it.

Three years later, because we had gone to rent review, the Assessment Review Board came back to our building and said, "Aha, your rents went up because you had a rent review decision," and raised our assessment to $510,000. We are paying $2,800 per suite -- that is bachelors, one-bedrooms, two-bedrooms and a few three-bedrooms -- in taxes. Our assessment is double everyone in the area. There are 50 apartments in the area and there are maybe one or two which are close to us. I did not bring all the numbers, but I can do that if asked. We are paying $2800 a suite. I am not talking about a house, I am not talking about a mansion, I am talking about an apartment. We are paying $240 a month just for taxes.

We went to rent review and we said, "Fine, we can live with the $470,000 assessment." They did this because we went and got an increase because of rent review; they now go and raise our taxes on us. We now have to pay $30,000 more in taxes this year. We are now going to rent review to get this increase in our taxes. That is not fair, $2,800.

How do they assess our building? They do not assess it on the size of the suite. They do not assess it on what you get in amenities. My parking is the same as the parking across the road, but he says to me, "You're getting $50, he's getting $43; yours is worth 20% more." Our building was built 15 years after theirs. Our costs were more. It does not make the building worth any more, it just means it cost more, and the bottom line is still the bottom line, assessment.

Last but not least, we have a building in Hamilton, a beautiful building, renovated. We spent $75,000 of government money under the residential rehabilitation assistance program to renovate this building, along with $100,000 of our own money. We got the RRAP grant because we did not want to raise the rent so much. The government gave us the money and we used it. We did not have to take the RRAP grant. After we had the RRAP grant, we could have refused it and rent review would have given us the full increase. We said: "No, we've got the money. Why should tenants have to pay for it?"

The tenants are appealing all the decisions we have had under form 3 applications for rebates. They are stating we did not give them this form, we did not give them that form. Fine, they are entitled to do that. We have for you a list of approximately 16 tenants who are getting legal aid. Legal aid is paying for all these tenants to apply for form 3 and to fight us in rent review. I am not getting paid for this. The government is paying, helping legal aid to give them money, and legal aid is now helping the tenants to fight us. They are getting paid all the money they have under their tickets, and I am spending hours and hours on this thing, having to fight every application individually.

Three areas we are fighting: the retroactivity of the law, which is completely amoral and immoral; the assessment review, which no one is talking about, which is going after those people applying to rent review and killing them and making them go again and again; and again, you are having a government agency -- legal aid is not a government agency, but it is funded strongly by the government, and it is fighting us. So we are fighting with another government department. It is not fair, and I am just a small guy.

The Chair: Thank you. We have time for one short question.

Ms Harrington: I wanted to let you know that we are looking at the bigger picture with regard to housing in Ontario right now, beyond rent control. We have a working paper out called A Housing Strategy for Ontario, and part of that is considering the problem of municipal taxation. One of the suggestions I have heard is that tenants should pay their taxes directly.

Mr Shainhouse: Excellent suggestion.

Ms Harrington: We are going to be looking at various other things.

Mr Tilson: You are quite clear in your submission. It could not be any clearer. Our party put forward an area in the Bill 4 hearings which we probably will put forward again, and that is what we call the democracy clause. Where tenants and landlords agree on something, is there any reason why they cannot do it? In other words, if a capital expenditure that is needed for a particular building results in a rent that is higher than the cap that is being suggested, is there anything wrong with that? Do you have any thoughts on that subject?

1430

Mr Shainhouse: The problem again is majority. The problem with that is, how are you going to get the tenants all to agree? You will have some who will not agree. If you work on a majority, the same problem exists: What if some tenants cannot afford it? I think if it was in the legislation allowing for individual tenants to do it, which is one way to go -- and I do agree with some of the things the NDP are talking about. They want to limit certain types of capital expenditures. But it really depends on the type of building.

I do agree that if the tenants and landlord can come to terms, obviously that is a fantastic idea. We have tried it in one of our buildings. By the way, in one of those buildings we put marble in.

Mr Tilson: I am sorry?

Mr Shainhouse: You know, the marble they talked about. We are one of them.

Ms Poole: I just want to comment on your point about the assessment and the Assessment Review Board and the Ministry of Revenue. You are absolutely right; it is exactly what is happening. It is a catch-22 situation. When there is a rent increase, then the Ministry of Revenue is having the building reassessed, which leads to another rent increase. It is a vicious circle. You might be interested that I raised this in the Legislature this spring. The response I got from the Ministry of Revenue was that it is not happening. But the city of Toronto is taking up the cause and is going to be fighting the provincial government on this to get those rules changed.

Mr Shainhouse: I am taking it to a higher court. That is exactly what the lawyer said to me, that because we went to rent review the revenue was higher, irrespective of costs. They only use revenue in apartments. Everywhere else they use costs, the bottom line. That is the rule.

HIGH PARK TENANTS' ASSOCIATION

The Chair: The next presenter is the High Park Tenants' Association. You have 15 minutes for your presentation.

Ms Lisboa: The High Park Tenants' Association, referred to later as HPTA, represents 2,647 units. We thank this committee for giving us the opportunity to present our views and suggestions on the Rent Control Act. We are addressing this act in a very personal way because we have been adversely affected by the act.

We are in favour of rent controls at this time because, if it were not for rent controls, only the affluent would be able to continue to reside in our area. Is it a prerogative of the affluent alone to reside in such areas? We feel this is not right and that is one of the reasons why we are here.

In the old act there were several grey areas which left the decision entirely to the discretion of the rent review official. We are of the opinion that these grey areas should be eliminated by substituting the word "shall" for "may" in many cases. A good example of this is subsection 89(1) on page 49, line 4.

We respectfully recommend that on page 6, "services and facilities" include item (j), which is "superintendent." In most rental buildings, a superintendent is responsible for all the day-to-day maintenance.

Section 15 on page 17 would be greatly facilitated by a structural engineering report which must be updated every 10 or 15 years. This establishes history and a basis for the verification of landlords' requests for capital expenditures. It also provides a way of maintaining good buildings in our province.

In the same context, we would like to draw the attention of this committee to the fact that such increases should be set up as a separate bookkeeping entry rather than as part of the basic rent. Taking our complex as an example, we have been charged finance charges of 5% each year for four years until the loss was wiped out for some of the buildings. However, tenants are continuing to pay at a compounded rate for those losses, even though the losses are now non-existent, simply because those finance charges have been added to the base rent.

On page 4, you will notice that I have done an actual calculation. The first one is where the finance charge is added to the base rent and continued through the years. At the end of four years, the base rent has gone from $600 to $873. If it were computed the way we have done it, by leaving the finance charge as a separate charge to be wiped out year by year and thereafter no longer on the books, then the base rent of that apartment over four years would go from $600 to $724 per month. Total finance charges passed through for those four years are $1,572 per unit which had a rent of $600.

Another major part of the rent is made up of property taxes. Using the tenants in our complex as an example, we know that less than 1% would know what the property taxes are for their apartments. It is time that governments should be made accountable for the taxes collected. One way of doing this would be to show the property taxes separate from the base rent of an apartment. Thus, every increase in property taxes would be clearly shown as a tax increase and not as a rent increase.

We therefore submit that the act clearly state that any definition of rent be broken down into these three main components: (1) landlord's charge for rental premises; (2) municipality's charge for property taxes; (3) temporary allowances, such as capital expenditure, finance charges, etc.

Section 25, page 24, deals with inadequate maintenance. However, nowhere in the act is "inadequate maintenance" or "neglect" defined. We are of the opinion that this should be rectified rather than leaving it to the discretion of the individual rent officer.

Subsection 30(4) on page 27 states that interest shall be paid. It should be expanded to specify that the interest payable should be effective from the date the overpayment was first made.

Most of the findings and orders must be dealt with by the ministry, as opposed to a court of law, to help those tenants where affordability governs the submission of an appeal.

The act must require that landlords declare all revenue as income. Since our buildings changed hands, we have had a satellite for cellular phones installed on the roof of one of the buildings. There is a video machine rental installed in the basement of this same building. Our laundry machines used to bring in considerable income for the landlords when it cost 75 cents for the washer and 25 cents for half an hour of drying time. The washers now cost $1.50 and the dryers cost a minimum of $1 per hour. We have been told that the cost is high because of the commission that has to be paid to the landlords. All these commissions must be considered as revenue. Most recently, a tuck shop has been installed in one of the other buildings, and we sincerely hope that this act will enable us to monitor all charges for hydro, garbage disposal, etc, of this commercial unit. These charges must not be passed through to the residential units.

The apartments are not getting adequate heat since the landlords gave the heating contract to a company that has a computerized heating system. In view of the fact that we have a lot of seniors and, in the last four years, families with a number of small children, many residents are using heaters to survive the winters. This results in higher hydro costs. In such cases the act must guarantee adequate heating, with enforceable penalties issued by the ministry or the municipality. If landlords apply for an increase above the guideline because of higher hydro costs, such increases must be denied if tenants can prove lack of adequate heat on cold days.

Subsection 50(2) says, "The rent officer shall require that the person be substituted or added as a party to the proceeding"; subsection 50(4) says, "The rent officer shall require that the person be removed as a party to the proceeding." Neither of the subsections mentions the criteria or just cause why the parties should be replaced or removed other than a rent officer's belief that this should be done. We would like to see a more definitive reason for replacement or removal rather than such dictatorial actions.

Section 54 enables a rent officer to direct that an application be amended. Should any changes be made to an application, all affected parties must be made aware of the changes.

In subsection 57(2), we would like to see "forty days" changed to "sixty days." The reason for this is because a number of people might be away, particularly the people who deal with these kinds of matters. I think it is only fair to give everyone enough time to be able to respond to these things.

Section 58 empowers a rent officer to abridge time. We are opposed to abridgement in view of the fact that to date we have required all the time we can get and more to formulate a proper response.

Under subsections 63(2) and (3), we would like to see these time frames extended to 60 days for the same reason as referred to in subsection 57(2). Under subsection 66(3), any evidence obtained under subsection (2), whether it be oral or written, must be brought to the attention of the other party. Clause 76(2)(a), "forty days" should be changed to "sixty days" to be consistent with subsection 57(2) and subsections 63(2) and (3).

1440

At this time, we would like to get back to property taxes and the discrimination exercised by this act against tenants versus home owners. As we mentioned briefly before, tenants are not aware how much of their rent goes towards property taxes. I do not pay for something unless I know what I am getting and for how much. Why should it be any different for any taxes, property or otherwise? Rents are increased by a given percentage. However, every time the rent goes up by four, five or ten percentage points, so do the property taxes.

This gives rise to a fundamental inequity that is a burden borne only by tenants. We would also like to bring to your attention at this time that tenants in high-rise rental do not get or require the same services as needed by single homes. It is unthinkable that the act should continue to perpetuate such discrimination in our democratic society.

In conclusion, we would like to state that we will be submitting a more detailed brief. This brief that is coming has resulted from meetings with a number of tenants' associations and a consensus of the tenants' associations of both 320 Lonsdale Road and 1500 Bathurst Street. Thank you.

The Chair: Thank you. We have time for one question per party. Ms Poole.

Ms Poole: Jan, thank you for your presentation. I particularly appreciate how specific you have been and I think you have made a number of excellent suggestions not only for time frames, but also for what may be termed as some loopholes in the act.

You have talked a bit about the time frame for administrative reviews and hearings. I wonder if you would touch on the appeal process, whether there are any changes from what is recommended in the act to what you would like to see.

Ms Lisboa: Yes, there are. For example, the landlord has a certain period of time in which to submit his application and then the tenant has a certain amount of time in which to appeal that or respond to it. Sometimes there may be an expenditure that was not accounted for in the original when the tenant saw it which may still be admissible by the rent officer to go on to those files. In that case we feel it should be mandatory that the other party, whether it be the landlord or the tenant, be made aware that this is going to be added to those papers.

Ms Harrington: I did not catch your name.

Ms Lisboa: Janet Lisboa. I am president of the High Park Tenants' Association.

Ms Harrington: The first thing I want to do is to thank the tenants for providing us with this lovely brief, which obviously came out of your pockets, and all the time that went into looking at every section and subsection. I appreciate it.

Correct me if I am wrong, but if I got this right, your first comment was that if it were not for legislation like this, people would not be able to reside in your community.

Ms Lisboa: That is correct. I can prove it to you, because right up to two years ago you could not find one apartment vacant in our residential complex, which is made up of 10 high-rise buildings and 36 town houses. Today, when a tenant leaves a town house or a three-bedroom, sometimes a two-bedroom or sometimes even a bachelor apartment, that apartment stays vacant for one month to a year. What is the point in going for a higher increase if your apartments are going to sit vacant? I do not see any point in it. I just see a reason for throwing some tenants out. That is what I see behind it.

Mr Tilson: Following along with the discrepancy between incomes, assuming one can define --

Ms Lisboa: It is not a discrepancy, Mr Tilson; it is a configuration.

Mr Tilson: All right. Assuming one can define the definition of luxury apartments, should there be rent controls on luxury apartments?

Ms Lisboa: Ours are not luxury apartments. Look at the vacancy rate today. It has gone up, so those who can afford luxury apartments will go to luxury apartments. If they cannot afford them, they will sit vacant.

Mr Tilson: So what are you saying, that there should or should not be rent controls on luxury apartments?

Ms Lisboa: I think we should have rent controls for everything, until the vacancy rate improves far more than it is now.

The Chair: The question has been answered. Thank you very much for your presentation. Time has expired.

SAM CANCILLA

The Chair: We have to move on to the next presenter, Sam Cancilla. Mr Cancilla, we will be following the same procedure -- 15 minutes. You can withhold some time for questions.

Mr Cancilla: I have come down from Barrie. Thank you for allowing me to speak to you. I am a merchant in Barrie and I do not represent anyone really, other than my wife and myself. I am not a corporate body or a corporate number. I just speak for my wife and myself.

My wife and I have resided in Barrie all of our lives. We own an 11-unit apartment building in Barrie and I think we do a pretty good job of looking after our tenants and our building.

We rent our apartments for $361 for a one-bedroom and $410 for a two-bedroom. This includes heat, water and parking. Most units have balconies. These rents are about half what the market rents in Barrie are. Incidentally, they are about $371 a month less than what the Barrie Municipal Non-Profit Housing Corp charges for similar accommodation across the street. Those are their market-rent units.

When we bought our building, the vendor charged us the fair market price and agreed to take back a first mortgage at approximately 6.75% interest. At that time, we were advised by the provincial rent review office that when our mortgage came due in five years we would be allowed to adjust rents to cover any increased debt costs due to any higher interest rate. My wife and I then invested our life savings in the project, hoping that for our old age we would have some security and at least a minimal return on our investment.

If Bill 121, as written, becomes law, we will lose our building and our life savings invested in it.

In Bill 121 there is no provision for increased debt costs due to higher interest rates. Even Bill 4 had that provision in there. There was some allowance for higher interest. If we assume that our 6.75% mortgage comes up for renewal in five years at, say, 10%, which would be a conservative figure, we would require an extra $16,000 from the building to cover only first-mortgage debt service. Where would the money come from? We could not handle that debt and we would lose the building.

Bill 121 has to be altered to provide honest landlords with the opportunity to at least be able to pay their mortgage costs. Mortgages are an essential part of most apartment buildings, as small as we are. They are as relevant to operating expenses as heat, hydro, taxes and insurance. You must give consideration to the issue of financial costs. The inherent spirit of any law should be fair play and justice for all. Bill 121, as it stands, will deal a devastating blow to virtually every small building owner who will be required to seek financing renewal.

Regrettably, I trusted government publications. I have them all here and I will give them to you as exhibits. This is all the information that was given to me at the local rent review office. I will not bore you with all the details, but it says very clearly in here that your financing costs will be an allowable expense. I have those as exhibits. I am sure the province has plenty of them. I will give them to you.

Regrettably, I trusted the government. I trusted the publications and I trusted the government personnel when I sought advice prior to purchasing the building.

1450

Your Bill 121, as it stands, will serve no one. It will chase the last honest landlord from the rental accommodation market, leaving a problem compounded by a poor piece of legislation.

In closing, I am going to make one final statement. I have lived in Ontario all of my life. I guess all the time in your business life you are always thinking maybe you could get scammed by a guy selling boiler room stock, maybe you could get scammed by buying property in Florida. I never thought for a moment I had to watch out for my provincial government. What it has done to my wife and me is jeopardize our lives. We are saying now that in five years' or four years' time, when our mortgage comes due, we will not be able to get enough rent even to pay that interest. My tenants are enjoying rents now at half the rate. Should they not be required within five years to at least pull up their socks a little bit so that I can pay the mortgage? That is what Bill 121 is doing to us.

Again, I am not a corporate number. I am sorry I do not have a fancy handout for you. What else can I tell you?

Mr Tilson: Sir, we have had a number of witnesses come before us and tell us they will have difficulty getting financing for new capital expenditures, but what I understand you are saying is that you anticipate having difficulty with the bank renewing your mortgage, if interest rates go up, because of Bill 121. Is that what you are saying?

Mr Cancilla: Sir, I do not quarrel with your decisions on capital expenses. I am saying that when my mortgage comes due on the building, I am not going to be allowed to charge enough rent to pay my mortgage interest, my first mortgage. The building is gone.

Mr Tilson: Have you had any discussions with your banking officials, whom you deal with in your banking, as to what their position will be on the renewal of your mortgage?

Mr Cancilla: Yes, I have. If there is no financial statement to back up the mortgage, they will not lend me the money, quite simply, if I do not get enough rent.

Mr Tilson: You mean they will not renew the mortgage? Because that is a whole new issue.

Mr Cancilla: No, no. The mortgage I have now is with the original vendor.

Mr Tilson: Will he renew the mortgage?

Mr Cancilla: No, I do not believe so.

Mr Tilson: Thank you. Those are my questions.

The Chair: We have a couple of extra minutes with this presenter.

Mr Brown: I think the financing problem is one that is obvious to at least all of us on this side of the room, but I would like to pursue with you another question, and that is the question of building size. As you know, Bill 121 differentiates on the basis of whether you own a building that is over six units or under six units. We have been trying to get some rationale from the government on why this differentiation. Most of us believe that if you are going to differentiate, the shape of the building and the age of the building should be the reason. Could you tell me how this will affect you, the reduced rate, vis-à-vis somebody with a six-unit building?

Mr Cancilla: I do not think it is going to help me, sir. I have 11 units and I do not think it is going to help me at all. All I want from you is just some assurance that in four years from now I can charge enough rent to pay my mortgage. That is all I want to do. I do not want to fix anything up, but I do not want to cheat anybody. I just do not want to lose my life savings.

Mr Brown: Those are all the questions I have. Thank you.

Ms Harrington: Our government, with regard to proposing Bill 121, looked at the different necessities that small landlords had and some of the increased costs that small landlords had. I think we have shown a flexibility in our guideline, but as you know, it is only up to six units. Now that is something we are looking at as well, whether or not the definition of small building should be, say, 12 or something like that, because of the higher cost.

The other thing we are also considering is your problem of interest rate changes, so that is something we are interested to hear from you about. You are saying that when you bought it, you were passing your financing costs through to your tenants and this is the problem with stopping this now?

Mr Cancilla: No, madam. When I purchased the building, I knew the rents were low and the lady who was selling it to me knew the rents were low. It was an estate. She said: "Fine, Sam. I'll give you a five-year mortgage at 6.75%." That was fine. The tenants would enjoy rent at about half for five years. I had no problem with that. It is just that with the way Bill 121 reads now, in year 5 I will not be able to adjust my rents, and if I have to pay 10% I guess I should be saying to you, "You guarantee me my mortgage at 6.75% and I will leave my rents like they are for ever."

Ms Harrington: I think you can understand from our point of view as well that what we want across Ontario is stability for the tenants, so they will not have the uncertainty of not knowing what they are facing next year or next month, because the apartment is their home and this is the situation you have run into.

Mr Cancilla: I understand that wholeheartedly, but I guess my problem is, what is going to happen when I lose the building? Who is going to take it over?

Mr Tilson: Premier Bob.

Mr Winninger: I have two brief issues I would like to raise with you. First, right now you are enjoying an interest rate that is well below market rate, so you are actually benefiting right now from the vendor-takeback mortgages.

Mr Cancilla: My tenants.

Mr Winninger: If the mortgage rate goes up when you are called upon to renew it, the higher interest rate will be balanced out by the lower interest rate you are enjoying now.

The other point is a more fundamental point. When you purchase that building from a vendor you want to pass through your financing costs, but if after five years the equity in the property doubles, the tenants never derive any benefit from that, having borne the full cost of your financing. How do you reconcile that?

Mr Cancilla: First of all, sir, I am going to tell you that if Bill 121 goes through as written, I will have no equity in that building. That building will be a liability. No one will want to buy it. Who is going to buy it if you cannot even finance it? Who is going to buy it if you cannot make enough from the rents to pay the interest?

Mr Winninger: That is what you are speculating on.

Mr Cancilla: There is no equity. When you only allow increases for municipal taxes, for heat, for lights and water, there is nothing in there. I cannot attack my principal. I will not be able to pay a penny off on my principal for five years. I am not even worried about that. Just let me pay my interest.

Mr Winninger: When is the five years up?

Mr Cancilla: About three years from now. I am on pins and needles.

Mr Winninger: Yes. None of us can foretell the future, can we?

Mr Cancilla: Well, I can when I read Bill 121, because it says in there I cannot deduct my interest costs. So you have set my future for me. If that goes through as written, you have wiped out my life savings.

Mr Winninger: In your opinion, at this moment.

Mr Cancilla: I am sorry, I am not talking opinions. I do not want to argue with you.

The Chair: Mr Cancilla, I wanted to ask you -- maybe I missed it -- what was the value of the building when you bought it?

Mr Cancilla: It was about $44,000 to $45,000 a unit.

The Chair: Times 11?

Mr Cancilla: Yes.

The Chair: What was your down payment on it?

Mr Cancilla: It was $50,000.

The Chair: That was your life savings?

Mr Cancilla: Yes.

The Chair: I see. I am assuming that if you had kept your life savings in the bank and bought Canada savings bonds, you would be getting 10% or 10.75%, maybe, if you are lucky, 11% return without worrying about what was going to happen three years from now?

Mr Cancilla: Easily.

Mr Mammoliti: What is it worth now?

Mr Cancilla: This gentleman asked me what it is worth now. It is probably worth less. It is probably worth --

The Chair: He is out of order.

Mr Cancilla: I am sorry.

The Chair: Thank you for your presentation, Mr Cancilla.

Mr Cancilla: Thank you for hearing me.

1500

ONTARIO OWNED-HOME LEASED-LOT FEDERATION

The Chair: The next presentation is from the Ontario Owned-Home Leased-Lot Federation, Phyllis Baker. You have 15 minutes for your presentation. You can save time for questions and answers if you wish. We need you and your guest to introduce yourselves for the official record.

Mrs Baker: My co-presenter or support is Ruth Hinkley, who is a member of the federation from Wilmot Creek.

The members of the Ontario Owned-Home Leased-Lot Federation welcome this opportunity to speak to you on many of our concerns. We are hopeful that our comments will be considered when you make your report to the Legislature.

The Ontario Owned-Home Leased-Lot Federation was founded in 1988 as a means of addressing concerns expressed by purchasers in adult lifestyle communities where a permanent structure is built on leased land. The purchasers entered into a 21-year lease less one day with the landlord-developer.

Permission for development of these sites was given by the municipalities after the developer submitted a site plan, thereby avoiding the requirements for a plan of subdivision as required by subsection 49(3) of the Planning Act.

At the present time, nine home owner associations with a membership of approximately 4,500 retired persons and those planning for retirement belong to the federation. The board of directors comprises two representatives elected by each member association as well as a chairman and a secretary-treasurer.

Since its inception, federation members have communicated with federal, provincial and municipal governments on a variety of issues including the classification of home-owned leased-lot communities, assessments and taxation -- in most of our communities this is an ongoing situation vis-à-vis the Assessment Review Board and also the Ontario Municipal Board -- rent review, leases and property standards.

The federation agrees that many sections of Bill 121 do apply to tenants in home-owned leased-lot communities. However, there has been no attempt to recognize the review of these communities by the interministerial liaison committee set up in 1990 under the Ministry of Housing with representation from other ministries. As well, the bill does not reflect the comments on page 68 of the consultation paper, Rent Control Issues and Options, in relation to the coverage of such communities under the Rental Housing Protection Act.

Further comments on the bill are as follows: In part I we will comment on those sections of Bill 121 that need clarification and possibly amendments. In part II, we will address situations and problems particular to this type of community and offer some alternatives.

Classification: For some time we have had problems with the designations "mobile home" and "mobile home park" and would prefer the designation "home-owned leased-lot." Previously the federation had suggested the term "planned retirement community." However, many communities now in existence or on stream are designated for families and young adults as an affordable type of housing. The term "home-owned leased-lot" refers to a type of housing development where one owns a dwelling unit, usually mobile, site-built or modular. Rent is paid to the landlord-developer for the land on which the home is situated.

None of these homes are easily mobile in the true sense of the word, as they are intended to be fixed, permanent and year-round homes. The units are fixed to the land with a pod, cement block or poured cement foundation. They comply with building codes and are equipped with underground services. The houses are marketed as offering a lifestyle and are seen as an alternative to conventional types of housing. The purchase may include services and amenities such as swimming, tennis, golf, sauna, spa, etc.

The federation respectfully suggests that consideration be given to an appropriate definition for this type of home and community.

The federation supports section 6, which reads:

"A landlord shall not increase the rent charged for a rental unit unless at least 12 months have elapsed,

"(a) since the date of the last increase for that rental unit; or

"(b) if there has been no such rent increase, since the day the rental unit was rented for the first time."

There have been abuses in the past whereby purchasers have purchased in August, September and October, and then on November 1 received a notice of a rental increase to be effective February 1.

Extraordinary operating costs, capital expenditure and increases over the guideline: The federation accepts the fact that increases in operating costs for taxes, hydro, water and heating may occur from time to time. We feel these costs should be covered by the yearly allowable percentage increase, but there may be exceptions.

A particular concern of the federation is that landlord-developers do not totally separate operating and maintenance costs from land acquisition, construction and sales operation costs. Most parks receive, after a long period of time, an item called a cost maintenance statement. We have much difficulty getting the landlord to explain some of the items and the costs for the items, and with the advent of rent review of course they refuse to answer our questions.

The rights of landlords to phase in increased costs of 3% above the guideline in each of two or three subsequent years will cause hardship for residents as they would be facing increases of 8% to 9% for each year. I would ask, please, that the committee clarify this for us.

With regard to consent to capital expenditures, we would question whether the consent is by all tenants, one tenant or a percentage of the tenants in leased-land communities. We would appreciate clarification.

The amount of interest charged by landlord-developers to tenants as part of the maintenance costs is causing tenants to question business practices of the landlord. Many leased-land communities are totally owned by family members, and concern has been expressed whether these dealings have been at arm's length.

Specific concerns of home-owned leased-lot communities standards: The compliance and approval process under the Planning Act does not apply to communities such as ours. In some instances poor design, use of substandard material and mediocre workmanship result in increased maintenance cost. One landlord to our knowledge is in violation of standards and occupancy from the township. Not all municipalities have a property standards bylaw and those that do, do not always enforce them.

We recommend that legislation be enacted to impose obligations on the landlord-developer to maintain facilities and services to the level originally contracted for and to provide more suitable remedies to tenants, rather than having to initiate individual lawsuits against the developer, and these are increasing as time goes on. Also, require developers to meet municipal construction standards at the outset to reduce the inevitable deterioration and resultant cost of maintenance which is passed on to the residents.

Conversion: There is no protection against conversion in communities where the resident owns the dwelling and leases the land. There is a documented case in Chatham where this has actually happened. The federation recommends inclusion in the Rental Housing Protection Act of such protection.

Withdrawal of services: The federation has received many reports of withdrawal by the landlord of services specified in the lease, such as clubrooms have been closed, shuffleboard courts are closed, garbage pickup has been discontinued, etc.

Many other concerns have been submitted to the interministerial committee. We are hopeful that the committee's report will be forthcoming to the appropriate ministers in the near future and that the recommendations will be considered when permanent legislation is enacted.

In conclusion, we express again the federation's appreciation for the opportunity to speak to the issue of rent control.

I might add, as you can see from this, we are a little different to apartments and town house complexes.

Ms Harrington: I would like to start off by saying that we can assure you that your type of housing is an option we want to preserve in Ontario. It is a choice that is important to have and I hope you enjoy living there.

Mrs Baker: We do, most of the time.

Ms Harrington: We want to preserve that. What we recognize is the many problems and pressures of development that have come because of the high cost of land in various parts of Ontario, and the problem of conversion. There is that temptation then to take that land and do other things with it which will give more money.

What you have already quoted in your submission here is that the interministerial committee is still working on that. We will not get a report back probably until September or so. At that point, we will then be taking that report and dealing with all those issues and seeing how it might fit in with this legislation.

As it stands, what we have done is continued the way it has been with protection for the rents you are charged.

My question to you is, how would you like to see this legislation changed?

Mrs Baker: In the permanent legislation, certainly to include the classification particular to our -- as I said in this we have difficulty with "mobile home" and "mobile home park." This has been a major --

Ms Harrington: I think that will be changed.

Mrs Baker: I am very disappointed that we are not going to have any input and that the report of the interministerial committee has now been again delayed. I understand that since it is an internal document, if the ministers involved do not wish to make it public, we will not have an opportunity to discuss this. I feel we should have some input, some knowledge of what has been recommended at some point, the sooner the better really, in order to respond to it.

Ms Harrington: I guess we will just have to let you know as soon as it is available. Okay?

1510

Mr Tilson: This is a subject of course that was raised in the Bill 4 hearings. Obviously we heard views from different sides at that stage, from the owners and from the people who are using the facilities. Quite clearly, as you have stated, your facility is quite different than an apartment building because in the apartment building, if you have problems, you always have the option to leave and go to another apartment building. In your particular case, if you have problems, they are going to result in a great deal of expense in your moving.

Mrs Baker: The problem is resale because there is a restriction in the leases now as to resale.

Mr Tilson: I am referring specifically to the mobile home.

Mrs Baker: Yes.

Mr Tilson: I do not even know how you would move those things. I imagine the cost would be quite considerable if you decided to move to another site.

We raised this issue, of course, in the Bill 4 hearings and we got the same answer that I assume you are getting, that there is an interministerial committee proceeding on it. In my view, this whole subject is outside the purview of this whole area and should be dealt with on its own merits in a different piece of legislation.

Mrs Baker: This has been ongoing, Mr Tilson, for the last three years. We have met here at Queen's Park with various people, and certainly when Mr Owen was member for Simcoe Centre he presented a private member's bill in the House.

Mr Tilson: That is my very point, and I would hope that this committee would bring forward its results soon, and further, that you would have an opportunity to make presentation to that committee.

Ms Poole: I can certainly verify that Mr Owen pursued your cause quite vigorously. I think I sat on three different committees where he brought the whole issue to us for discussion, so I hope it will be resolved soon.

By the way, I really appreciate what you have said today, because it has given us a better idea -- I will not call them "mobile homes;" it is "home-owned leased-lot"?

Mrs Baker: Home-owned leased-lot, yes.

Ms Poole: We will have to get a little phrase to cover that. I appreciate your presentation, but there was one thing I was going to ask you about. With regard to consent for capital expenditures, you had a question of clarification as to whether consent is by all tenants, one tenant, a percentage of tenants.

Mrs Baker: Yes.

Ms Poole: It is my understanding that section 17 of the act, which refers to consent, only refers to a tenant's own unit, for instance, if they were going to have en suite work just in their unit that did not affect any other unit in an apartment building. I am not sure, since your landlord does not have anything to do with repairs in the unit per se, whether it would even apply to your particular situation. We will ask the ministry for clarification, but that is my initial reading of it.

Mrs Baker: That the land is considered the unit.

Ms Poole: Yes, the land is. So if the landlord did repairs to the land, but say your plumbing broke, the landlord --

Mrs Baker: That is your own problem.

Ms Poole: That is your own problem, and section 17, the way I read it, is only for en suite repairs within the unit, like within the building itself.

Mrs Baker: I see, so that would not --

Ms Poole: So it may not apply, but we will ask for clarification on your behalf from the ministry.

Mrs Baker: Also, the proposal was made that the landlords could phase in increased costs above the 3% over a period of time.

The Vice-Chair: Thank you very much, Ms Poole, and thank you for coming today and making your presentation to the committee.

Ms Poole: Mr Chair, since the ministry representatives are here right now, could we just ask them if they could either give a verbal clarification or in writing?

The Vice-Chair: Yes.

Ms Parrish: Ms Poole, I am Colleen Parrish.

Your interpretation is correct. There are two kinds of capital repairs. Those that have to meet those tests about whether they are necessary for this, that and the other thing, if they do not meet the necessary test, then the tenant must consent and it only affects the actual unit. So in your case it would only be the land. I am not too sure what kind of repairs might be involved in that situation, but I suppose if you wanted to do major landscaping or something that is not necessary, or whatever, that would be the only thing. Otherwise they have to meet the tests that it is necessary or that it is for energy conservation or whatever.

Mrs Baker: There was a proposal in one park where they were going to be putting in new sewage and water pipes and they would be possibly going on to the land that is rented by individuals.

Ms Parrish: They would have to meet the tests in the statute that they were necessary to meet health and safety standards, for instance, or whatever.

Mrs Baker: Oh, I see.

IB AMONSEN

The Vice-Chair: The next presentation will be by Ib Amonsen. Good afternoon, sir. For the purposes of Hansard, if you would introduce yourself and any organization you may represent. You have 15 minutes. The committee appreciates if you reserve some time for a conversation with them.

Mr Amonsen: My name is Ib Amonsen. I own a small apartment building on Bloor Street at High Park. I am also on the board of the Multiple Dwelling Standards Association, the oldest landlords' organization of any major size in Ontario.

Before I start my presentation, so you know where I am coming from and what I am directing my submission to, I do not mind to circulate this picture of the building I own together with my wife, to give you some idea of it.

So you have some idea of what kind of landlord I am, the last two tenants left me a letter. One of them, he left December 17, 1990, wrote me the letter and he says, "Dear Ib," and about them moving to Ottawa, and he finished off with saying: "Both Cassie and I have very much enjoyed living in the sunny south and have only the best things to say about both our apartment and the property management. We wish both you and your family all the best in the future. Sincerely, Ted McLellan."

Another couple who just left me also bought a house. That was in July, and they wrote to me and my wife: "Dear Ib and Marlene, just a short note to say thank you. The past three and a half years have been a pleasure living in a clean, safe and lovingly cared-for building. Ib, a landlord such as yourself is a rarity these days. Our new address is" -- such and such -- "Please call us if you need to reach us. Thanks again. Bob and Judy Harvey."

You have a copy of my submission and then there is an additional back page to it. I do not know if you want to circulate that. I was told you wanted 25 copies. I do not know who wants to distribute it; it is here if need be.

You have the tables provided by the Ontario government itself in the green paper, as you all recall, that we received a few months ago -- this one here. They were very nice to supply us with it as it made it possible for me to make the calculations, which came out very interesting: that the average apartment in Ontario was now 19.5% behind the rate of inflation in its rent.

The next page of my submission is regarding the city of Toronto Non-Profit Housing Corp figures for its older apartment buildings. There are four of them available. The rest of them I was not able to use, or they were smaller buildings, or they were new ones.

What you can read out of that is that their operating costs are astoundingly high in comparison to the yearly annual rent increase permitted by the Ontario government for similar buildings in private enterprise. There is a supporting document from where those figures were taken from Cityhome. They were very nice to provide me with that. We have some more papers if you want to have some more information to back up those figures. I have them with me.

1520

Then you have my summary from that submission, and this was all left with David Cooke personally, and I discussed it with him, so he is well familiar with it. He will no longer be our Minister of Housing soon, but that's life.

What I really had great concern about was that here we have, through Ontario, buildings of different vintage. It is a known fact that you cannot look after an old building at the same cost as the cost to look after a building that is five, 10, 15 years old. The costs are substantially higher. I still recall the Premier some years ago saying at a meeting that he could not see how they could make legislation based on size of buildings. My suggestion to you here is, perhaps you can do it according to the age. I think it has much greater justification.

I found it very interesting that the Minister of Housing was not able to, at an earlier meeting, tell us how you are going to deal with all the rental condos. Are they going to be dealt with in a smaller category or in a larger category? As far as I can submit to you, their building maintenance costs are practically negligible. So why should they be granted a higher increase than the ones who own buildings with tremendous maintenance costs?

My last page I would like to read to you, and that is saying pretty well what these figures supplied by the government tell us. Quite the opposite to what Joyce Hall and some members from the Federation of Metro Tenants' Associations claim, what private apartment owners have been subjected to, by these people, is a very successful campaign using figures from extreme cases taken from a very small minority of apartment buildings in an attempt to destroy the credibility of all landlords. The government's own figures contradict the position that they have taken.

The proposed rent control bill with its housing police measures, such as being able to seize all documents of an apartment owner with no return provisions of the documents, can make it nearly impossible for owners to ever get any increase above the annual government-permitted rent increases, since the fact is that more than 95% of all apartment buildings and houses, both privately and publicly owned, can be subject to work orders being issued by building inspectors for the most minor problems, such as a drainpipe has been replaced and not repainted. One of our members was subjected to that not too long ago.

The bill gives no consideration to the loss of purchasing power of my capital invested 20 to 25 years ago, for which I then, at that time, could have bought 13 average houses in my area of Toronto. If I sold the building today I would only be able, after paying capital gains, etc, to buy four or five houses with the remaining capital, which also happens to be my future pension fund and the only pension fund I have.

The proposed bill gives no consideration to the additional maintenance costs of an old building, and I am going to give you some rundown from my own building. For the past three years I have spent about $50,000 to repair the roof, parapet wall and chimneys on a 14-suite building. I am in the process of rebuilding the 12 balconies at estimates of $8,000 to $12,000 each. Those old wooden balconies do not come cheap. My four plumbing stacks are soon due for replacement after 70 years at about $30,000 to $40,000 each. I just finished spending about $30,000 on upgrading one apartment without compensation in higher rent, thanks to Bill 4. I have easily $100,000 worth of work outstanding, beside the mentioned items, on such things as compliance with new safety regulations and wiring, etc, but after spending 25% to 30% of the yearly gross rental on building maintenance over the past 10 years I can only afford to do so much a year, and this is with a small remaining mortgage to look after, with small payments, after owning the building for more than 25 years.

In essence, what these tables of government figures support is that many apartment buildings in Ontario with seven or more units now have average rents nearly 20% below the rate of inflation compounded since 1975, with an accumulated rent deficiency of about $15,000 each, and that many 50-year-old or older buildings in Toronto have average rents 55% below the rate of inflation for the break-even point for operating costs, compounded since 1975.

With an accumulated rent deficiency of more than $40,000 for each unit, no owner of a 50-year-old building can, under normal accounting principles, keep up a building under the proposed legislation. If any more liberal rent increases should be granted, they should be to the old buildings and not to new rental condos with very low maintenance costs.

As I mentioned earlier, the Premier said at a public meeting where I was present that he could not see different legislation for rental housing based on size. I hope he can see it based on building age.

The Chair: Thank you. We have time for one round of questions. The Liberals are first.

Ms Poole: Thank you for providing the committee with these statistics today. Of particular interest are the statistics related to Cityhome and the annual rent increases over the last 10 years. This relates back to the fact that most of these buildings from Cityhome are again older buildings.

Mr Amonsen: Yes, I took them as examples because that is what I was comparing to make the case for 50-year and older buildings.

Ms Poole: We had previously talked a number of times in this committee -- I had mentioned it in my opening statement but also presenters have made the same comment -- that it makes more sense to do it by age of building as opposed to the size of the units. If there is a differentiation in the guideline amount, though that is not sufficient to upgrade these buildings, what way would you differentiate with the way they deal with capital for older buildings and newer buildings?

Mr Amonsen: I do not really know how to answer you with this. I can only go back to my own building. I am in a situation where I expect they might put a historic designation on me in the next 10 years. My suggestion there would be that if you want to put a historic designation on any building, there should automatically be a reduction in real estate taxes, for example, it is 50%, subject to that this owner, whoever it is, should prove to the municipality that he has spent an equal amount in capital improvements on the building to preserve it.

Ms Harrington: It sounds like a novel idea to me. I believe my colleague has a question.

Mr Duignan: Thank you for coming here today and making a presentation. You have offered some suggestions here and we will certainly review them and take a good look at them seriously, because other people making presentations offer similar suggestions, and again I wish to thank you for coming along here today and making your presentation.

Mr Tilson: I get the impression that it is most unlikely that you will be getting into substantial capital improvements of your building if this legislation is passed and if it continues.

Mr Amonsen: That also happens to be my home. I figure that perhaps after four or five years we might get relief, so I am not going to let it deteriorate. I will carry on in the hope that we will see greener days one day, that we will perhaps see more reasonable legislation that could take care of it. I am rather stubborn. I have been at it now for more than 25 years, so I am not going to change for all that, as you probably saw from the letters from the tenants.

Mr Tilson: That gets to my real question. I think it is wonderful that you can receive complimentary letters. However, just listening to you talk, are you likely to get those types of letters if you, and I am saying "you" as a small landlord, perhaps do not improve the building as you normally would under previous legislation?

Mr Amonsen: Of course not. There is no way you could. Fortunately, you know, we have practically no mortgage on the building, having owned it that long. I have more leeway than most landlords. I am one of the privileged few who can do a little more than most can.

Mr Tilson: Of course the government will say you have got lots of money to improve your buildings.

Mr Amonsen: Right. It is my pension funds, and as you have heard lately, a lot of unions complain over pension funds where they use the surplus of them. I find myself in the situation that my pension fund is 40% of what it was 25 years ago. That is the way the government put me in.

The Chair: Thank you for your presentation, sir. Time has expired.

1530

PARC IX TENANTS ASSOCIATION

The Chair: The next presenter is Martin O'Connell. We have 15 minutes for your presentation, Mr O'Connell, and you can reserve some time for questions and answers. I think you have some idea of how it works.

Mr O'Connell: Mr Chair and honourable members, I am speaking as the chair of the Parc IX Tenants Association, 9 Deer Park Crescent in Toronto, whose members are residents of an apartment building of some 93 rental units. I have been here before and some of the points have been covered in the past, but I want to reiterate them.

We thank you for the opportunity to submit views on a specific aspect, and I am touching only on one aspect, of the Rent Control Act, namely, the need to deal with a particular feature ignored in the previous act and ignored in the act now before us. This feature is known as costs no longer borne by the landlord, costs which none the less, because they get embedded in the base rent, constitute a permanent rent increase borne by tenants. Capital expenditures eligible for increases above the guideline are the focus of our submission to you because they will go on being paid year after year in rents long after retired as costs of the landlord.

The practice of continuing to pay increased rents for retired capital costs became established in previous review legislation. To the present government's discredit, it is asking the Legislature to enact once again this patently unfair practice. We as tenants appeal to the committee not to report the hearings until they can recommend amendments to the Legislature.

Paying rent increases for capital costs eligible for increases beyond the guideline when they have in fact been paid off works a cumulative financial hardship on tenants, cumulative because these fixed and unchanging costs of the landlord are escalated by each guideline increase. They never are taken out of the base rent. Future capital costs are piled on top of past capital costs. They grow in size though fixed in amount and in cases paid off.

Costs no longer borne are more than a cumulative financial hardship for tenants; they generate in tenants a sense that the government has loaded the dice against them. Tenants feel a clear and measurable injustice has been imposed on them without a base in reason or equity or common sense, and this by their government. The law has arbitrarily locked them into this inequity. Previous laws did the same. In effect, I think it is not too much to say that the law confiscates tenant income to grossly overreimburse landlords for fixed amounts of capital costs that the tenants know they will have fully reimbursed at the end of normal amortization periods by rent increases above the guideline.

Repeated repayment cycles in rental units for capital costs no longer borne are the source of another evil. These cycles act as perverse, cumulative, built-in escalators of housing costs generally. This evil is already at work. As amortization periods for large capital expenditures during the 1980s come to an end, rents will not be reduced to make room for new capital expenditures. New expenditure cycles will fall on top of continuing former ones. The effect is an inflation of rent, induced in part by rent control. It follows that paying in ever-repeating cycles for capital costs that are no longer borne pushes affordable housing ever farther away from people in ever-higher-income brackets.

There are several ways to amend the act to remove the inequity we describe. One way, and perhaps the least effective, is to amend section 23 and add a new section 26.1 to permit a tenant to apply for a rent reduction, which in effect would affect the whole building, when the costs of eligible capital expenditures which were the subject of increases above the guideline have in fact been terminated. In these cases, at the time the rent officer determines the date and maximum rent for each rental unit, which he does in section 20, the officer should be required to identify the eligible capital cost component and determine and order the date and amount of a downward adjustment of the maximum rent when the cost becomes no longer borne.

This is not the best solution because it puts the onus on a tenant to initiate an action which should be automatic and, unless the tenant is advised fully by the ministry of the date and amounts involved, is subject to tenants losing track with the passage of time and to confusion with respect to complex rules.

A better way is to provide for an automatic adjustment of maximum rents when eligible capital costs are no longer borne by the landlord, and dates and amounts are predetermined and notified to both parties. The framework for doing this is there in part I, sections 13 to 29. We trust the will is also there to amend the act to take capital costs no longer borne out of the base rent.

We believe the administrative burden of an automatic system would be much less than that of a tenant application system which requires offices and substantially larger staff across the province. The automatic system is based on straightforward principles and calculations. It can be operated within the rent registry and lends itself to the cost savings of computerization.

At the time of the interim legislation, the Parc IX tenants proposed an amendment to achieve the ends we still pursue. We gained the impression then and after that the government would look seriously at removing this unfair burden on tenants obliged to pay for costs no longer borne. We were dismayed to find that the intention is to continue this perverse practice. We appeal to the committee strongly to recommend its end.

The Chair: Thank you, Mr O'Connell. We have time for questions.

Mr Tilson: I guess the difficulty I have with what you are saying -- I understand what you are saying. In other words, you are saying that if you have an increase for a new roof, after that period of time it is amortized to pay for that, perhaps the rent should go back to the way it was before the application is made. I assume that would be a reasonable comparison.

Mr O'Connell: That is right.

Mr Tilson: The difficulty I have with that is that you say it is an evil, and it may or may not be an evil. I have heard this argument before. Maybe it was even you that made it when you were in Bill 4 hearings. The difficulty I have with it is enforcing it. I foresee a vast bureaucracy, because each individual unit, each individual building, would have to be looked at. In other words, I groan, quite frankly, at the bureaucracy that is going to be created by a rent registration, and by your own admission, there would be more bureaucracy added on to that. Do you fear an increase of bureaucracy with your proposal?

1540

Mr O'Connell: Of course, but I think it can be too readily exaggerated. When you look at the other side, and I distributed a handwritten set of tables, look at the cost to the tenants of not having that bureaucracy in place and the injustice that they feel. It is common sense, if you had an identifiable cost with the roof, that when you have paid it off, it is no longer there, but it is. I think with computerization and the fact that the registry is already there, perhaps capital costs should not ever go into the base rent. Keep a separate account and work them that way.

Ms Poole: Thank you for your presentation, Mr O'Connell. You have again given us some good food for thought.

By the way, I agree with you that it does not need to be a needless bureaucracy. Right now the ministry has on computer every rent review decision, and it would be easy enough to have a file-forward mechanism which would call forward in 10 years those buildings where the capital expenditures had been paid off and to send out notices.

But I wanted to ask you about the fact that in order to do what you want to do with costs no longer borne, they would have to be taken out of the base rents. We had a presentation by the High Park Tenants' Association earlier which suggested that each rent should be broken into three components: First is the landlord's charge for the rental premises, which would be subject to the guideline; second, the municipal taxes, which the landlord would pay but that would go up or down and the increases or decreases would be handled by the tenants through their rent; and the third she has called temporary allowances, such as capital expenditures, finance charges, etc. I asked her about costs no longer borne, whether that is where that would go. It would be a separate charge. So the landlord would break it down, but that would mean that it would be easily taken out.

I have been very confusing, but I hope you understand what I mean.

Mr O'Connell: No, it is okay. I think in answer, if I may say so, it would make sense that wherever there are costs above the guideline, tenants have a right to know what it went for and when it should come out. The other capital expenditures or maintenance within the guideline need not be separated, in my view. It is when you get over the guideline we want to know how it is being handled, and we believe it is not handled well.

Ms Harrington: Thank you very much, Mr O'Connell. What you say sounds extremely reasonable and understandable. Unfortunately, our staff are telling us that it is quite complex. There is some mechanism in the legislation now that when the amortization period is over they will not give another increase for the same type of thing unless the original has been taken out. So the problem is in tracking it for many years. But as Ms Poole mentioned, with computers and that, things may be possible.

I also wanted to go back to what Ms Poole mentioned about having separate charges, one for taxes, one for the premises and one for temporary charges, which is what we are talking about here. That is something that sounded very interesting to me as well that I think we should be looking at.

The one question I have for you is that in your statement you say that tenants have grossly overreimbursed landlords, and another line here is that there has been a cumulative financial hardship on tenants. What would you say to the landlords we have just heard this afternoon and this morning? Were you here for any of the presentations?

Mr O'Connell: Just the last one.

Ms Harrington: They said: "We need money for maintenance. We can't keep these buildings. They're going to be falling down around us."

Mr O'Connell: First I would like to suggest to the committee -- I will get to your question; I am coming there -- that it ask the ministry to supply it with explanatory tables illustrating what happens in the amortization of capital costs with various examples. I am sorry. The temporary costs, yes, I think should be handled separately.

Ms Harrington: But do you not think the landlords, if you were having a discussion or conversation with them --

Mr O'Connell: I have a very clear conception of what I would say to landlords: Can you defend publicly or in front of the Legislature being paid again for that which you have been paid for? No, they cannot.

The Chair: Thank you for your presentation, Mr O'Connell. Our time for your presentation has expired.

DONALD FOX

The Chair: The next presenter is Donald Fox. We will be following the same procedure, Mr Fox: 15 minutes for your presentation, with questions and answers if we have time.

Mr Fox: My name is Donald Fox of Oshawa. I have a small fourplex there.

Before rent review in 1975 in Ontario, many landlords housed existing tenants in comfortable, carefully and thoughtfully maintained apartments without leases, the reputation of the landlord and tenant being sufficient to cement the relationship. If repairs were required, dialogue developed to the mutual satisfaction of both. Usually rent increases were modest to reflect low property taxes, water, sewer, heat and hydro. Maintenance was simple. A telephone call brought skilled help promptly at modest fees. Some tenants spent their entire adult years under the shelter of caring landlords. Apartments were plentiful. Pride kept the apartments in good repair. Joy kept the landlords working. This well-groomed business was to be the landlord's source of income in retirement years.

What changed this? Why did this working solution have to be controlled by rent review? It is in the landlords' interests to have good tenants. It is in the tenants' interests to have good landlords. It is in the tenants' interests to have buildings in good repair. It is in the landlords' interests to have buildings in good repair. Capital was preserved. Capital was used conservatively and handed down through the generations. The knowledge and skills of the building trade were handed on down through generations. The nation benefited. Leases were not required. Lawyers were not necessary. Government legislation was not needed. Common sense was the guideline.

Why does adversarial confrontation replace the handshake today? Why cannot trust be our byword? Why cannot honour replace references? Why cannot tenants take the same personal interest in their dwelling as responsible citizens? Why cannot diligence replace government rent regulation? Why cannot co-operation replace lawyers? Why does government legislation have to be so complicated that even with the assistance of four chartered accountants and four graduate lawyers, a working knowledge is difficult to reach?

Shocked am I that retroactive legislation forced some landlords into bankruptcy when they were, in all honesty, following previous legislation of government. Where is justice? During my entire lifetime I have looked toward the Ontario Legislature for fair play and justice. What is to be gained by bankrupting landlords?

To be a competent landlord, one needs to be versed in myriad skills: finance, accounting, electrical, plumbing, carpentry, gardening, cleaning, public relations, roofing, bricklaying, heating, plastering, flooring, interior decorating, painting, sheetmetal work, morality, drainage and paving. How are you going to keep in and attract gifted landlords to this industry with stressful and expensive adversarial confrontation? Today it takes all of one's wits to survive in the marketplace. Skilled help is hard to find. Affordable help is hard to keep. Why compound problems by placing the landlord in a legal straitjacket? Why not congratulate those landlords who achieve meritorious service? Why should this business be so regulated that unsuspecting landlords have insufficient cash flow to compete in the marketplace? Why should our buildings have insufficient cash flow that they look like something the cat dragged in? What is wrong with books showing a profit?

Is not the real problem in Ontario today that development has proceeded without a sufficient tax base to provide services, that work of equal value, OHIP, bilingualism, dual education systems, multiculturalism and an extremely expensive social assistance program are straining the tax system to the limit? One gets the impression that the purpose of rent regulation is to employ the legal profession and a bureaucracy of civil servants. If these professions have affordable rental accommodation as their interest, why do they not volunteer their services to the rental industry? Why cannot tenants volunteer their time, skills and energy to improve their lot?

1550

We are taxed to death. We are overregulated. We face deeply rising taxes and utility costs. We need favourable circumstances to preserve our aging stock. Buildings built in the 1920s and 1930s cannot compete with low-maintenance, high-rise glass-and-aluminium structures. Will you not preserve our past? Will you not attract our young into an honourable industry? Will you direct our taxes, not into rent review but into housing? Will you not be good stewards of rental accommodation?

Since the age of five I have never stopped going to school. I do not need government regulations to run my building. My eyes, my ears, my hands, my nose, my expertise and my intelligence regulate my building. Why fix something that is not broken? Why place all landlords under this legislation? Many landlords do not need this legislation. Many tenants do not need this legislation.

In 1985, the very best contractor was found to waterproof my building at a cost of $15,000. This labour-intensive operation would have been a calamity had I not had the foresight to watch with diligence the day-by-day operations to discover that the weeping tiles, which had three tons of newly spread gravel on top of them, were erroneously running up a seven-inch slope. When I drew this to the attention of the contractor, he did not show up. When this was drawn to the attention of the labourers, they argued for two hours that I was wrong, yet my local alderman had witnessed my measurements.

In the spring of 1991, the previously contracted roofer was reluctant to come on my property because the last landlord had gone bankrupt and could not pay him. Yet, in spite of spending months searching for the best available roofer, five nails were left protruding through the shingles and two shingles were torn. This is today's marketplace.

With God's help, please preserve our industry. My health, my wealth, my job and my pension have all been thrown at my building in an effort to save it. Early retirement was forced on me because the strain of working in the community and maintaining my property was too much. My reduced pension is just above survival if my 1983 Rabbit car expenses are kept to a minimum. When I went to the doctor to complain that I was awakened in the night -- I screamed for help -- he told me the screams were caused by Bill 51.

Mr Tilson: Great speech. I must say that we in our party have asked the same questions. The socialists will respond by saying that you, being a landlord, are letting your buildings run down and you are hoarding vast amounts of money at the expense of the tenants. What is your response to that?

Mr Fox: It is very sad for people to think that way. I grew up in the city of Oshawa and I used to deliver papers from age six up to many of these apartment buildings. They were very, very lovely buildings and today it is sad to see these. Mine does not fit in that category. I have kept mine up. What worries me is who is going to look after it when I am gone. I do not see anybody coming along who will put his heart and soul into it as I have. That worries me because I have fought all my life to hand this on in good repair to the next generation.

In my building it is the handshake that counts. It is not leases. It is not government regulations. If you have something to say you talk it over with the tenant to the mutual satisfaction of both. When a tenant in my back apartment was hit by the recession, I said, "Why don't you speak to the landlord, and I'm the landlord." He said, "Yes?" and I said, "Your rent is reduced immediately," and that is all there was to it.

Ms Harrington: It certainly sounds as if we need a lot more people like you around who are willing to deal fairly and honestly with people and face to face. Unfortunately, that has not been the case and that is why there is the legislation. As you say, you were awakened in the night because of Bill 51. I am sure lots of tenants were too. We are trying to get a fair legislation in place which can enable landlords to make a fair profit and living from their industry and which entitles tenants to have a living with respect. That is what we are trying to aim for here.

Mr Fox: Thank you. In our building we try to have family values. We try to operate like one family under the same roof. That is my goal.

ARLINGTON PARK ESTATES (1989) LTD

Mr Hacohen: My name is Joseph Hacohen. I am representing the owners of an apartment building in Mississauga. The purpose of my coming here is to show the committee, members of Parliament and the public the hardships we suffer as a result of Bill 4 and the continued suffering as a result of Bill 121, which has been introduced.

I will briefly tell you the story of this building, the current situation and what the future extends for us. We bought the building in 1989. It is an 8-unit apartment building. It was planned that this would be a long-term investment. Funds were used out of the equity on homes of the owners, pensions and purely as an investment.

Prior to purchasing the building we checked the income on the property. Rents were extremely low at the time, which was good. We based our income on a letter which was sent from the government, showing the rents charged to the tenants were legal. After purchasing the building we applied for a rent increase, and we were surprised when we received a letter from the government that an error had been made and that the rent charged is an illegal rent. There are some legal complications because of that which may take many years to recover. However, we suffer further losses now, as we had to pay back rents to the tenants because the legal rent became illegal.

Our income has been reduced by 10%. We have received an order from the government to repay the rents and we have received an order which gave us 5% phase-in on top of the guidelines for the next few years. We have received two phase-ins. One was implemented and the second one was voided and cancelled because of Bill 4.

During the period of Bill 4, we have been promised by the government that there will be a new, fair legislation for the tenants and for the landlords. In our case, and I presume in many of the landlords' cases, the guidelines do not even cover the raise in expenses. I am not even talking about capital expenditures; I am just talking about paying the bills.

As far as the future for our case, it is very simple. In the new government of Ontario, if it will get its way, there will be no future for us. We have made a good business decision; we have consulted lawyers; we have consulted accountants but, due to an error made by the government the first time, we are suffering losses. Then with the new laws that are coming in, we will never be able even to cover our expenses. I am not discussing the possibility of making money. That seems to be unacceptable these days.

We hope the government will consider the possibility of allowing financial losses. In our specific case there are tenants who are paying under $300 a month in rents. This is unheard-of. Our costs are much higher than the rents and we are not charging high amounts to the tenants.

Many of our tenants have told us that living in our building is like living for free. Our average rent in the building is $450. Our costs are $650 per suite. I would like to know, if I offered to sell any member of this committee a $100 bill for $66, whether they would refuse it. I do not think so.

1600

We have a suggestion that we have mentioned on many occasions in front of committees and in letters to the Minister of Housing, that in cases where the rent charged is below market value or it has followed depressed trends, an adjustment should be made. We have suggested that upon a tenant vacating his apartment, a new market level approach would be used and the new tenants would be charged the market value. In this way the old tenant does not suffer, and the new tenant would be expected to pay market rents, as the tenant would expect, to begin with. Considering the vacancy rates these days, no landlord will overcharge. Therefore, if the market level is charged, it will be a reasonable one.

In conclusion, I am only asking for a specific area provision for financial loss where market level rents are much higher than the rent charged. Many of our tenants have even agreed to pay higher rents, as long as all of them will pay it. Some tenants came along and said: "We are paying under $300 a month. We will pay you more. We know we can cover your expenses."

In our case, I do not think we will be able to hold the building for much longer. Our mortgage is coming up for renewal in 1992. No institution will give us a new mortgage. The institutions will have to take over. They will not even be able to sell the building for the price of the mortgages. It seems the situation is hopeless. The only hope we have is that the government will consider a provision for the area we have requested.

By this time next year, if the government gets its way, we will not own the building. That may not interfere with the life of the NDP government; however, it will destroy the lives of a few families. Some members of the families have suggested that if the building goes, we go with the building. Maybe we will give the government a show and I will end my debt. The only thing I will say is that I hope we will not have to get to that situation.

Ms Harrington: I think you have tried to explain a lot about the situation, but could you very briefly say how you got into this kind of mess?

Mr Hacohen: Very simply it was a pure business decision. We purchased a building based on income. Because of the government, their income has been reduced by 10%, which is very major.

Ms Harrington: You said the income was reduced by 10%?

Mr Hacohen: Yes. We purchased a building based on a letter sent from the Minister of Housing showing us all rents were legal. Then the government came in and said, "Sorry, we have made a mistake." This mistake is costing us money.

Ms Harrington: I wonder if the people from the ministry would like to comment on this particular situation.

Mr Hacohen: There is a saying in law --

The Chair: Is there anyone from the ministry who can comment on this, please?

Ms Parrish: I am sorry. I am not personally familiar with this property. We will have to look into it further. I am not familiar with the situation at this time.

The Chair: Can I ask a question? If the gentleman has information on ministry letterhead that gives him certain specific information and he makes a business decision on that, and then we find out that the information on the ministry letterhead is incorrect, is the ministry not somewhat responsible?

Ms Parrish: I really cannot comment on a hypothetical question. I have to look at the actual situation. I would also say that I am not disbelieving this gentleman by any means; I am just saying I cannot comment on a situation I do not know anything about.

I would say that there have been instances where the ministry has been sued in the past related to rent levels filed in the registry. As you can appreciate, if this is one of these cases, I do not think it is appropriate that I should be commenting if it is before the courts. I can only undertake to look into the matter, sir.

Mr Mammoliti: Just a note for the record: I am certainly concerned about this particular case. I would like to find out as much as possible as well. I will be looking forward --

Mr Hacohen: I thought I have given you the information in the past.

Mr Mammoliti: If the ministry has given you a letter, I would certainly like to find out more about it myself. I am looking forward to the ministry giving us the information.

Mr Tilson: I too am disturbed. I do recall your coming to my office and explaining it. I assume you have also told other members of the legislature your problem. I quite agree with the remarks of other members that if there has been an error made, hopefully an exception to the rule will be made. I guess you have gone one step further and I appreciate your offer of a suggestion.

You certainly have your own personal story to tell and I am disturbed by some of your latter remarks. I hope I did not interpret them incorrectly, but I find that really disturbs me. However, on the whole subject of chronically depressed rents, there has been no initiative by the government to bring up rents such as yours. No tenant in his right mind is ever going to leave your building. That is the sad part of it. You have offered one solution. That might work, but I doubt if it would because it would pay tenants to stay there.

Mr Hacohen: It has been used in the United States, specifically in New York. When a tenant moves out, the new tenant will pay market value.

Mr Tilson: A subtenant would or would not be allowed?

Mr Hacohen: A subtenant is a new tenant.

Mr Tilson: A subtenant is a new tenant. I hope this committee does not allow this issue to die. The whole subject of chronically depressed rents is one subject, but surely now that this matter has been drawn to our attention -- obviously the government, the parliamentary assistant has expressed an interest, and hopefully she will pursue it with this committee.

Mr Hacohen: I have mentioned this subject in front of previous committees and they have been very sympathetic towards this idea, but I have never seen it anywhere. It is never raised in Parliament, never raised in Bill 4 or Bill 121, nowhere.

Mr Brown: I obviously am also concerned. I would like to suggest that the ministry provide the committee with a response some time during the next hearings week. In that way, we put some pressure on the ministry to respond within a reasonable time frame. I hope they could do that and respond to the committee so that we would have the full facts, and if necessary we could hear it in camera if it is a problem.

I am new to rent control, at least I was before Bill 4, and one of the things that strikes me is that rent control is about rates, about increases. It has nothing whatever to do with value, zero, nothing, nada. It has to do with how much percentage increase you have, but it does not have anything to do with what the accommodation is worth. I think you are a case in point. Could you tell me, within your building, is there rent equalization? Do the same units get the same rent or is there a problem with that also?

Mr Hacohen: It is not a problem; it is a joke. I have tenants paying for one-bedroom more than tenants are paying for two-bedrooms. In reality, most of my one-bedrooms are higher than the two-bedrooms. You tell me the logic in that.

Mr Brown: You would suggest that the government address that issue in this bill.

Mr Hacohen: They should.

Mr Brown: I think that they should too.

Mr Hacohen: I have made many requests to the government. I have written many letters to the Minister of Housing. Yes, he replied: "I received your letter. Thank you." But he has never addressed any of the issues I have discussed with him; not even one.

Mr Brown: At some point, I would really like from the government an explanation why rent equalization, which is revenue-neutral, is not being addressed in this legislation. It is patently absurd for the government not to address that issue.

Mr Hacohen: I have one last comment, if it is possible. With regard to Mr Tilson's remark, we feel, as the owners, absolutely hopeless. We are being stabbed in the back, stabbed in the front, stabbed on the sides. If we have to do something drastic, we might have to do it. What else would you do? If you were in our shoes, and you were going to lose your lifetime's savings, which includes your family's, your grandfather's, everybody's lifetime savings, what would you do? I would like to know.

1610

JEANNE BERGER

The Chair: The next presenter is Jeanne Berger. You have 15 minutes for your presentation, and you can withhold some time for questions.

Ms Berger: My presentation today to this standing committee on general government relates to Bill 121, Rent Control Act, and its flaws, vagaries and inadequacies. I voted for the NDP based on its election platform regarding rent control, only to discover that after the election the said bill was revised, undoubtedly due to pressure from landlords. I am here as a tenant, and on behalf of the other tenants of 11 Shallmar Boulevard, who are already paying a 100% rent increase in the last four years since our present landlord, Beaux Properties International, bought this building. I realize he obtained these exorbitant increases in the Liberal government period, but your bill will allow a maximum increase of 25% over the next three years. Tenants simply cannot afford this.

First, I wish to know from you, and I quote from Zanana Akande's, my MPP's, letter of June 1991, "Landlords will be provided with enough money to ensure their buildings are maintained," from where is this money coming? Second, even with a 100% increase my building is deteriorating rapidly and so I note Ms Akande's paragraph, "...the need to prevent landlords from allowing their buildings to deteriorate, and that is why the bill contains provisions that will make sure buildings get the repair they need, and further, if any work order exists against a building, the rents will not be allowed to increase at all, not even by the guideline."

A magnanimous statement considering we have work orders that took six months to complete in our building. Also in this vein, Dave Cooke, in his recent publication, mentions stricter penalties for owners who ignore work orders. What are these penalties? How in God's name are you going to police and enforce all of the above when anyone connected with rent control and/or review and appeal takes for ever to render a decision? A point in fact: Just yesterday, August 6, 1991, we, the tenants at 11 Shallmar Boulevard, received a Mrs Stanwick's decision on our dispute and appeal held on December 13, 1990. A mere eight months of waiting, and then of course in the landlord's favour.

Third, Ms Akande states, "Tenants are protected against landlords doing unnecessary renovations." How are we protected? He does not exactly ask for our permission.

Fourth, another question arises from the Ministry of Housing. Their newsletter prints, "If a landlord applies for a larger increase than guideline, the ministry considers if there has been an increase or decrease in the cost of loans or mortgages." Most landlords have accountants and lawyers who are expertly versed in loopholes to hide any and all necessary facts.

I reiterate, is your government and bill competent enough to enforce your well-intended changes and give us a rent system we can count on? Ms Gigantes, I wish you luck, and in turn, we tenants.

Ms Poole: Thank you for your comments. I would like to follow up on one of the comments you made about the work orders and the difficulty in enforcing them. You live in the city of Toronto. How have you seen the inspectors dealing with work orders? Do you find they are fairly prompt in coming to review the work and putting --

Ms Berger: The inspectors are prompt in coming. The superintendent and the landlord are very unprompt in doing anything. I have a letter with me on one in particular. It took six months for this particular work order to be complied with.

Ms Poole: The complaint I have had from city of Toronto inspectors, from the couple I have talked to, is that they say they do not have enough power of enforcement themselves, that the landlord might even deny them access to see certain things, and it is difficult for them. Have you or your tenants' association had any problem with this type of thing, where the inspectors themselves are saying they do not have the powers they would like to enforce?

Ms Berger: Never. The health inspector has been out there probably just as recently as last week. He told the super and I guess the super just laughed it off or whatever.

Ms Poole: Would you like to see province-wide minimum standards that the municipalities are obligated to enforce?

Ms Berger: Minimum standards of what?

Ms Poole: For maintenance of the buildings.

Ms Berger: Minimum? Of course not. I would like to see maximum.

Ms Poole: I guess that is the thing everybody would like to see, maximum application, but we are saying that municipalities at least have to follow certain rules. Right now it is the onus of every municipality to set its own bylaws and standards, so some municipalities are more strict than others.

Ms Berger: I think it should be universal, if that is what you are asking me. I am just a tenant who is so fed up with this whole system, but I do not know the ins and outs of all this political mayhem.

Ms Poole: All you know is that you are not getting action?

Ms Berger: You got it, and I think you have to do something. This is ridiculous: 100% in four years. I have the figures to back it up.

Ms Poole: Yours is an older building, is it not?

Ms Berger: It is approximately 30 years old, but there was a new landlord in April 1987.

Ms Harrington: Thank you for coming, Ms Berger. Have you had a chance this afternoon to be with us a little and listen to the previous presenter?

Ms Berger: Unfortunately not. I had to leave my children to come here, in order to pay my 100% increased rent.

Ms Harrington: I understand fully. It would certainly be a wonderful experience for everyone to sit through the afternoon and hear exactly what the landlords have to say.

Ms Berger: But no one forced them to buy the buildings to begin with.

Ms Harrington: We understand. The message that is coming through loud and clear is that you are totally fed up with the system and what is needed is some kind of working relationship between tenants and the owners of their buildings and the government, so that we are all in this together. You want a meaningful, significant change, and that is why we are here, to bring that about.

It is very difficult, let me tell you. If you had heard the person just before you, you would understand they are saying, "How can we run this building? We are not getting the increases," and they are very genuine about it. We have to take into account your point of view and their point of view, and make sure that maintenance is enforced, that these buildings are kept in good condition. Exactly what Ms Akande has said in her mailout to you is what we are trying to do. Maintenance: What else were you concerned about in her letter?

Ms Berger: Where is the money coming from that the landlords are going to be provided with to ensure their buildings are maintained? Where is that coming from? My taxes, your taxes?

Ms Harrington: In the legislation, we have said there is 2% within the guideline amount each year for capital repairs, and certain things which are extraordinary operating costs or an increase in taxes, this type of thing, can be an additional 3%. The reality is that we are saying let's have good maintenance and have a cap at a total of around 8%. That is where the money is coming from.

Ms Berger: But how are you going to enforce all these penalties you people write about in your various publications? How are you going to do all that? I just finished telling you that it took --

Ms Harrington: I really do not think it has been seriously attempted before, and we are going to do it. If we cannot do it, then no one can.

Ms Berger: As I said to you, it took eight months for this last appeal. I could have had -- never mind.

The Chair: I have a couple of short questions, as we have an extra minute or two. You mentioned that building was awarded a 100% increase.

Ms Berger: Yes. I have the figures.

The Chair: That is over a three-year period?

Ms Berger: Four.

The Chair: Over a four-year period. Are there average rents or are the rents in every unit --

Ms Berger: They were average. When he bought the building in April 1987, I was paying approximately $425. It is now up to $805.

The Chair: So it has gone from $425 to $805. What kind of unit is that?

Ms Berger: One-bedroom.

The Chair: Are there two-bedroom and three-bedroom units?

Ms Berger: Two-bedrooms are up to about $900. There are no three-bedrooms. There are only 78 units in the building.

The Chair: Out of curiosity, are there other buildings in the near vicinity?

Ms Berger: Yes. The whole street is apartments, Shallmar Boulevard running from Bathurst to Mayfair; there are at least seven apartment buildings on that block.

The Chair: Have other buildings in the near vicinity --

Ms Berger: Not like that.

The Chair: They have not had increases like that.

Ms Berger: No way.

The Chair: Are the rents, similar in your building to the other buildings? Would you consider them to be similar?

Ms Berger: I would say ours is higher, considering that the one next door to us is exactly the same. It is not in that category. The one to the right of us is more luxurious and it is less money. But everybody has a different landlord.

The Chair: I could not quite understand earlier. Do you think this dramatic increase came about because there was a change in the ownership? Is that what happened?

Ms Berger: In 1987 Roy Birnboim, Beaux Properties International, bought the building.

The Chair: Had there been a change in ownership previously?

Ms Berger: Yes, but it was always okay. It went from Cadillac to Metropolitan Trust or whatever. I have been there about 25 years. I have been through more supers than I can count.

The Chair: Have you seen any discernible increase in the quality of the building?

Ms Berger: It has right down. We phone the landlord every day that the smell is like some River Street tenement, from the garbage. The super thinks it is all very funny. There is lots of deterioration. I could go on. I could give it to you in detail, but I do not know whether you have the time.

The Chair: I think you have explained it very well. Thank you for your presentation.

Ms Berger: You are welcome.

1620

MATTHEW ROCK

The Chair: The next presenter is Matt Rock. We will be following the same procedure, Mr Rock. I noted that you were watching. You have about 15 minutes, and that includes questions.

Mr Rock: My name is Matthew Rock. I would like to thank you for the opportunity to speak here today. I am very proud of what I do. Six years ago I purchased a small, six-unit apartment building in Whitby. The building was not well managed or cared for at the time. My wife and I moved into the building and began looking after all the management and maintenance ourselves, as we could not afford to pay other people to do this work for us.

We totally renovated all the units inside and out, relandscaped the exterior of the building, built new balconies, put new soffits and fascias on the building, etc. Prior to doing all of this work there were lots of complaints from the neighbours about the building and the quality of tenants. After doing all this work we were granted a modest rent increase above the guideline. The tenants were quite happy to pay the increase, as they had benefited from the improvements. Also, the neighbours as they walked by would stop and congratulate us on what a fine job we had done. We are very proud to do this improvement to our community. All we were trying to do was provide our tenants with a good accommodation for a reasonable return on our long-term investment, which, by the way, has taken six years just to get to a break-even point, and also to improve the community. We are proud of what we have accomplished through our hard work and sacrifice and dedication.

Purchasing the six-unit building was no short-term investment. We want to provide future security for ourselves and for our children. We did not want to depend on other people or the government to take care of us in our old age.

In October 1989 we started working on the purchase of a 30-year-old building in the northwest Oshawa area, consisting of 11 two-bedroom apartments. This building again required some work and proper management, which we knew we could do over a period of time. We purchased the building for $60,000 per unit, totaling $660,000, a very reasonable price compared to what the government spends on housing, which I understand is around $150,000 per unit. The rents in this building are very depressed and range from $356 monthly to $422 monthly, averaging $409 per month.

The building was taken to rent review and was allowed a modest increase of 5% on top of the guideline for financial loss, which would take 10 years just to get to a break-even position. We knew this was a long-term investment and wanted to do the same procedure on this building in Oshawa as we had done before on the six-unit building and knew we would be able to accomplish this with the legislation which was in place prior to the NDP.

The tenants agreed that they did not mind paying a 5% increase above the guideline to enable improvements to be made to the property, and they realized that the upkeep on the building could not be maintained with such a low income coming in to support the building. The rents have been frozen with only the guideline increase of 5.4% allowed, as the NDP has taken away the phase-in of 5% on top of the guideline which was lawfully granted by the previous government. The rents now range from $415 monthly to $492 monthly, averaging $472 a month in the building.

The average rent in Oshawa for a bachelor unit is $488 and a one-bedroom average price in Oshawa is $546 monthly. A two-bedroom average in Oshawa is $607 monthly. So you can see we are well below the average rent, by $135 for a two-bedroom unit in the Oshawa area.

We remortgaged our other property to put down 25% on the purchase of this building, which was $165,000 plus closing costs of almost $20,000. The building has a 75% first mortgage of $495,000 at a high interest rate of 14% because of it being a high-ratio mortgage with low income. After mortgage expenses, taxes, heat, hydro, maintenance, insurance and management of the building are taken away from the monthly income, we are losing over $4,000 per month on the average. If we are not able to recapture this loss over a period of time, we will never be able to maintain or improve the property and we will lose the property or go bankrupt in the process.

I trusted the government; I even work for a company that financially supports the NDP government from the union dues I pay. I believed they were for working-class people, but now I know they are not to be trusted as they want to force people out of Ontario or have them all on welfare.

I am a fighter. I work two jobs plus manage and try to maintain my investments. I am only getting three hours' sleep per day on the average and have no family life or relaxation time. If this keeps up, I will lose everything, including my family.

If I sign a contract and later change my mind or any terms of the contract, I would quite likely be fined heavily or punished or even sent to jail, but the government seems to be able to do as it pleases, with no consideration for the hardships its unrealistic ideas place on hardworking people of this province.

The government seems to be unaccountable for its actions no matter how devastating their effect. If you wanted to bring in new rules, you should not have forced them retroactively on people who were going by the rules that were in place prior to the NDP government. I see no allowance in Bill 121 for these people. How do you think we can survive with this legislation? It will not help the tenants who need the help; it will only protect the tenants who do not need the protection. A lot of tenants live better and make more money than their landlords do, and they are tenants because they want to be tenants; they do not want to be bothered cutting grass or maintaining a home.

Bill 121 says you can get a 3% increase above the guideline for capital expenditures. On my building in Oshawa, that would only be approximately $14 per month or approximately $170 per year. What can you improve or repair on an apartment building just with this amount of money? The tradesman costs $40 to $50 per hour just for wages without materials. Tell me, how do you expect me to survive? I have had this building for sale for a few months, as soon as I realized how dangerous Bill 121 would be, at a reduced price and even with allowing a vendor-takeback mortgage with no payments and no interest. If I am able to sell this property I will probably lose more than $300,000, which will put me into bankruptcy.

Bill 121 is an open invitation for tenants to beat up on their landlords. For example, the harassment charge is totally ridiculous, as it will serve to drive a wedge between the landlords and their tenants and there is no protection for the landlord against the unscrupulous tenant. Also, letting the tenants dictate to the landlord what repairs or improvements should be done when they have no qualifications, no ownership in the building and no obligation to stay on in the building as a tenant -- what right do they have to make long-term decisions that will affect generations of tenants to come?

The item dealing with inadequate maintenance leaves the door wide open for the unscrupulous tenant to claim inadequate maintenance for just about anything to get a rent reduction. What is the definition of "inadequate maintenance" anyway? Could it be defined as a simple little thing such as a lightbulb needing changing?

The item classifying our building as a large building receiving reduced guideline increases further penalizes us and causes us further financial hardship, making the system even more confusing for tenants and landlords. When a landlord makes an application for a rent increase under Bill 121, he runs the risk of receiving a rent decrease because of the vagueness of the legislation. The complicated legislation of Bill 121 makes it necessary to hire professionals just to understand whether you will get an increase or a decrease, further adding to the financial loss.

Why should tenants be protected from GST? We have to pay GST on everything we buy, including the utilities. Home owners are not exempted from GST either, nor is anyone else, so why should tenants be treated so royally?

It would be a lot cheaper for the government to subsidize the tenants who require assistance and let the market look after itself. Supply and demand would set the price, and if the landlord did not keep his building maintained, it would sit vacant. The shortage of housing would be solved if you got rid of rent controls completely.

I am pleading with you to please reconsider and make these changes to the Bill 121 legislation, not just because I have a specific interest here, but because I sincerely believe that this government and legislation will breed a society of people who cannot think or do anything for themselves and it will be sure to break the spirits of those who have tried to better themselves, only to be slapped in the face. Is this the kind of society we all want? Thank you for your time.

1630

Mr Winninger: You certainly covered a lot of points in your presentation, and we only have time to deal with a few here today. You indicated that when you purchased your second building, you anticipated a 5% increase above the guideline to enable improvements to be made. Is that correct?

Mr Rock: That is correct.

Mr Winninger: I hope you understand that under Bill 121, if you can tie those improvements to the criteria for capital improvements where they are necessary for the building, you can pass that through to a cap of 3% and then another 3% in the second year, which would mean you could get up to 6% in addition to the guideline over the two years, which would exceed your expectation when you purchased this property. I do not see how Bill 121 would prevent or deter you from carrying through on the capital improvements.

I think, though, that your second argument related to financial loss, did it not, where you are paying a 14% mortgage and you are concerned you would not be able to pass through those financing costs? You do not indicate in the earlier part of your presentation that you were looking for more than a 5% increase over guideline. I do not see how this legislation prevents that from happening if you can justify your capital improvements.

Mr Rock: You are saying that you can get 6% over two years. From my understanding, you have to spend at least 10% just to get the 6%. I was at a meeting with a lawyer the other day and he told me that we have to spend at least 10% to get the 6%, which is 3% each year, and then they can claim that there is inadequate maintenance and the increase may be disqualified and rent rolled back even farther; you get 0% or less, even. The 5% was very modest increases above the guideline. My rents are so depressed to start with, in the area a bachelor unit rents for more than what my building renews rents for. So how do they expect me to do anything? The tenants were even asking me, "Why are they even rolling rents back on the building?" They want the building fixed up, and how can I do it if they are not going to allow me to pass through anything on it?

Mr Winninger: All I can say is there is a provision for pass-through.

Mr Rock: And it is so vague it can be easily -- we counted on 5% above the guideline at least per year, and you are saying we can only get 3%, and then they will probably erode that away --

Mr Winninger: I am sorry to interrupt. How many consecutive years did you expect to get 5% above the guideline?

Mr Rock: There is a sheet attachment showing what the rent review had ordered and the pass-through. It would take up to 10 years just to get to a break-even position with the financial loss.

Mr Winninger: So you were going to increase the rent each year by guideline plus 5%.

Mr Rock: It was taken to rent review and ordered a 5% phase-in above the guideline until financial break-even point, and that would take 10 years to do that. In the meantime, we were going to fix up the building by doing some capital expenditures the second and third year. Our plan was to bring it back up to the standard it should have been. The tenants wanted it fixed up, and it would have been good for the community, the tenants would have won; everybody would have won. We were doing it long term. We were not doing a short-term flip or anything. We plan on holding on to the property for years and years, 15, 20, 30 years type of thing.

Mr Winninger: How would your tenants be expected to afford cumulative increases of 10% a year?

Mr Rock: What I am showing you here is that some of the rents there now are just barely breaking the $400 mark. The average rent in Oshawa for a two-bedroom apartment is $607 right now.

Mr Winninger: You do realize, though, that the cumulative effect of a 10% increase, let's say, each year is rather awesome for the tenant who is going to see his rents double over the next six or seven years. How many tenants can afford that?

Mr Rock: That is right, and that money was all going to be put back into the building in capital expenditure repairs.

Mr Winninger: Which you recover when you sell it.

The Chair: Thank you. I am sorry; we cannot allow any more questions. Mr Sola.

Mr Sola: Thank you for your presentation, sir, and you are about the third or fourth person who has come up with a similar horror story regarding Bill 121 today. As you have stated, you are a fighter, and it is a good thing we have people like that who will come before the committee to try and get some changes made to this legislation.

The other thing you are complaining about it is the retroactivity, and that again has been a repeated theme of most people who have had problems with this legislation.

Another thing is that there is no accommodation for depressed rents. As you say, in your building you are below the norm, yet there is no way you could recoup the investment you are making in the building to upgrade it.

You seem to have a harangue about what Bill 121 will do in regard to your relations with your tenants. Have you had any problems with your tenants up to this point in either building?

Mr Rock: No, we have always had really good working relations with our tenants, because we treat them as human beings and we try to do our best to serve them and fix and repair anything we can, but on this building now, we cannot do anything. Our expenses are going up faster than our rental income is increasing now, and there is no way we are going to be able to do the things we need to do on this building and it is going to further deteriorate.

Mr Sola: Have your tenants, since the introduction of Bill 121, changed their attitude towards you?

Mr Rock: No.

Mr Tilson: Mr Winninger made some comments which I believe, with all due respect to him, were quite simplified, because what he failed to say is that if you make application for percentage increases for capital expenditures, you run the risk of tenants, or others, making applications, for various reasons, to have your rent decreased because of some other factor. Landlord after landlord is telling me, at least, privately and at this hearing, that they have no intention of making capital expenditures, that what they will do is whatever maintenance is necessary to fight off the work order people and preclude them from being shut down, but they will take no initiative. Someone gave the example of a security system and those types of things that normally they would get into, which tenants want, but they are not going to do that. Are you one of those landlords?

Mr Rock: There is no way I can do any capital expenditures, because I am putting all my money into this building. I do not even earn enough money to make the payments on my negative cash flow on this property. That is why I am working two jobs just trying to survive, and I have my place financed for extra money to allow me some extra cash flow if I have to use that, and it is eroding away very, very fast at that. So all I can do is try to maintain things that I have to, to keep the work orders away, at this point. As I say, I have had the building on the market for sale for months now, and if I am lucky enough to sell it, it is going to be probably at a 40% reduction in price, and I will go bankrupt from that.

Mr Tilson: Of course, we have had witness after witness say to us: "Who's going to buy it? Why would anybody buy such a venture? The worst investment in this province."

Mr Rock: That is right.

Mr B. Murdoch: The government is going to buy it.

The Chair: The time has expired for your presentation, Mr Rock. Thank you for coming.

1640

SANDYCOVE ACRES HOME OWNERS' ASSOCIATION

The Chair: The last presenter for the day is Sandycove Acres. We will be following the same procedure, 15 minutes. If we have time left over from your formal presentation, we will have questions and answers.

Ms Lea: I would like to introduce my support member, Mr John Marshall, who is treasurer of the Sandycove Acres Home Owners' Association.

Our association was incorporated in 1977 as the collective voice of the residents and home owners of the Sandycove Acres planned retirement community. Currently we represent over 2,000 mostly senior home owners in about 1,150 permanently located modular or individually site-built homes in this largely self-contained community in a rural setting in the town of Innisfil. Services and recreational and social facilities are provided and maintained by the developer, Sandycove Acres Ltd, as part of the long-term leases for the sites for the individually owned homes. The first homes were purchased and occupied in 1971, with steady growth over the years to the present, with only about 15 final homes to be completed and sold. Attached as part of our background submission is a copy of a booklet describing the community and its social and recreational aspects.

This community was essentially the first planned retirement community in Ontario and is seen by the residents as a very suitable and satisfactory form of lifestyle accommodation for independent, socially active seniors or near seniors. The municipality clearly sees our community as a valuable asset, and with many of our residents having moved from Ontario urban centres on retirement, the housing squeeze in those cities has been eased.

Our comments and concerns with Bill 121 are in two general areas, namely: matters related to our situation that are not referred to or included in the proposed bill but which in our view should be covered in legislation; and specifics included in Bill 121 which we believe inadequately provide for our situation.

Bill 4 of April 1991, amending the 1986 Residential Rent Regulations Act, subsection 1(2), very clearly establishes that a rented site for a single-family dwelling is included. This confirms the pattern that had been established some years ago by administrative decision. This also clearly confirms the present legislative grouping of our type of community developments, planned retirement communities, in with mobile home parks as they exist in their various forms across the province.

We believe that this unfortunate grouping is one of the key difficulties in making appropriate provisions in a variety of legislative contexts, including Bill 121, for our type of community. Further reference to this key point will be made under the next heading.

Aspects not covered: The February 1991 consultation paper from the Minister of Housing on Rent Control Issues and Options on page 68 says, "While coverage of these communities under rent control will be continued, it was thought better to wait until the interministerial committee's report is prepared prior to moving further into the reforms needed in this area."

We submitted comments on the green paper to the minister in March and we make two comments now:

(a) This interministerial committee was established to fulfil the House resolution 6 of May 11, 1989, moved by Bruce Owen, former Liberal member for Simcoe Centre, and we quote: "that in the opinion of this House, recognizing the unique nature of owned-home leased-lot retirement communities, the government of Ontario should undertake a review of these communities that would include: the apportionment of common amenities and services; tenure arrangements, including leaseholds, life leases and condominiums; verification of maintenance and operating expenditures; contractual restriction on the right of resale of units; the absence of fiduciary regulation; the registrability of leases and the role of rent regulation for these communities."

The resolution passed unanimously. As far as we can determine, the committee report is still not available, although originally scheduled for the end of 1990. We view this report as critical and anticipate that it will recommend a variety of legislative changes.

Indicative of this, although clearly only exploratory, is the report from the legislative research service prepared for Gordon Mills, MPP, Durham East, November 1990. This report outlines a series of problem areas and possible actions related to a number of statutes.

(b) This interministerial committee was charged with looking at both mobile home parks and land-lease communities. We prefer the Ministry of Municipal Affairs' term of "planned retirement communities." The original House resolution did not call for this combined examination, and this combination review is an example of the general tendency referred to in our previous section to group together in legislation these two quite different community types.

As a specific item not included, we note that there is no rent equalization feature in this draft bill. While this is perhaps more logically a landlord concern, we note, and have no real suggestions to offer, that in our situation the current maximum rents for identical facilities and services vary widely as a function solely of the market level of land rents at the time of the original lease.

Specific Bill 121 items: Although the primary thrust of our submission is that Bill 121 fails to address many key aspects of the concerns related to our planned retirement communities pending the availability of the report from the interministerial committee, as discussed earlier, we do wish to point out some specifics.

Section 1, applicability: We note and endorse simply as a matter of uniformity the proposed inclusion in this act of those home sites previously exempt by virtue of original lessee occupancy date.

Subsections 3(5) and 3(6), new units: It would appear from clause 3(5)(b) that the landlord is being given the option on a new unit of having it free of regulation for a five-year period providing the tenant is given proper notice. This option would seem undesirable for planned retirement communities if only in the interests of consistency.

Subsections 12(1) and 12(2), rent control guidelines: While the philosophy of establishing rent control guidelines to recognize typical landlord cost increases makes sense, we submit that the normal component formulae should not apply where the landlord-paid components differ significantly from the norm. In our situation the landlord utility costs are only incidental -- the recreation buildings only -- and realty tax escalations are limited to common use land only, not the home sites themselves nor the recreation structures. Certainly the landlord's costs -- maintenance staff, etc -- will increase, but the increase is minuscule compared to the rent levels involved.

1650

Gross rent for the total residential component of the park, including land rent, common property tax escalation and maintenance and operating expense recovery, we estimate to be in the area of $4 million a year in 1991, including those homes not currently under rent control. We do not have access to precise figures.

In terms of the maintenance and operating cost incremental increase, we submit that the proper application of this component requires that it be based solely on the level of the related costs -- maintenance and operating expenses and common property realty tax escalation -- excluding the basic land rent component.

The audited statement of maintenance and operating expense, net of items not really related to maintenance and operating costs, a copy of which is attached, shows 1989 as $1,045,179 and 1990 as $1,133,419. On a per home basis, to take out the growth component, these are, 1989, $928.22 and 1990, $993.35. We estimate the common property realty tax component as $120 per home per year for 1989 and 1990. As can be seen, this expense base, for application of routine operating cost increases is less than one third of the total rent base that the draft legislation contemplates.

Paragraph 12(1)4: capital expense increment. Similarly, the 2% increment in the guideline for capital expenditures may well be appropriate for rental buildings, but it appears excessive when the landlord does not own nor maintain the actual residential buildings. In our situation, the landlord's capital costs are related solely to the recreation facilities and the common services equipment and installations. In the past, there have been differences of opinion between ourselves and our landlord regarding the proper classification of expense as operating versus capital. In any case, the 2% of gross rent compounded annually substantially exceeds the capital costs involved on a continuing basis in our situation.

Historically, the rent levels have allowed, in our type of community, for recovery of capital replacement or improvement expense. Even the major road repair project of about three years ago represents only about $35,000 per year when amortized over the supposed seven-year life of the rebuilt roads. Yet the 2% automatic capital cost increment would produce about $80,000 per year of landlord income. We submit that capital improvements done in recent years, such as work on the three recreation centres quoted in the still-pending 1987 rent increase application, are in fact much less in dollars than the logical improvement in facilities that should be expected as the capital share improvements related to the growth in the park over the nine-year period since the prior facilities improvement in 1982.

We believe that there should be no automatic capital cost increment in the rent formulae for our type of --

The Chair: Order. You have used up your 15 minutes, so what I need now is consensus from the committee to extend your time. I think we will be able to do it, because you are the last presenter of the day. Under normal circumstances, I do not think we would be able to do this. We also need consensus to allow at least one question per party. Can we proceed on that basis? Please continue.

Ms Lea: Thank you. We believe that there should be no automatic capital cost increment in the rent formulae for our type of community. Failing that, as a reasonable compromise, we suggest that the capital cost component for our type of community be calculated on the base of maintenance and operating and realty tax expense as outlined above.

On behalf of Sandycove Acres Home Owners' Association, we wish to thank you for your attention.

Ms Poole: Your presentation has made it very clear that there are major differences in the way we have to look at -- now, I have got to get this name right. We are no longer calling them mobile homes. We are calling them owned homes, leased land?

Ms Lea: Leased lot.

Ms Poole: Leased lot. I was close. I had to remember that from several hours ago. Would you favour having separate legislation to deal with your situation, as opposed to trying to make you fit the rules of this act?

Ms Lea: Yes, absolutely. Yes, that is what this interministerial meeting, committee and report were supposed to do.

Ms Harrington: Thank you, Ms Lea, for coming here, and Mr Marshall. I gather that you are in the Simcoe area, and Innisfil is just north of there. It is a beautiful area. I have definitely heard from various members of the Legislature that there are many problems in this type of community around the province. They are being subjected to many different pressures. I know in Middlesex, Irene Mathyssen has told me about some horror stories there, and I went out to Halton Hills a couple of months ago to deal with their city council on a problem they are having with a community in their area. Of course, in Niagara Falls we have our own problems. But you have very clearly shown that this legislation does not fit your situation.

Ms Lea: Yes.

Ms Harrington: That seems very clear, so we will have to deal with that when the report comes down. Unfortunately, sometimes timing just does not seem to work out correctly, and it would have been nice to have the report and then use that with the legislation. We certainly are going to deal with it, because I know it is a problem across Ontario, and I thank you for bringing your concerns here.

Mr Tilson: Has the Minister of Housing or the Ministry of Housing or any of the other ministers that are on this ministerial committee provided you with an opportunity to submit briefs such as this, which is a rather complicated issue?

Ms Lea: Yes. We started working with that interministerial group about two years ago. We attended many meetings at different locations, and they literally picked our brain as to what our wish lists were. We stipulated all of that information, and the report that I referred to that was done for Gordon Mills, the MPP, by the legislative research group, addressed a lot of those situations.

Mr Tilson: Has there been any indication as to when the interministerial committee is going to be making its report?

Ms Lea: We understand the report is completed and that it is sitting on the Minister of Housing's desk.

Mr Tilson: We are looking forward to seeing it.

The Chair: Thank you. That concludes your time for presentation this afternoon.

That concludes the list of presenters for today. I remind committee members that transportation will be available at the front doors at 5:30 to take us to the airport so we can proceed to Sudbury, and we will conclude the day's hearings in Sudbury tomorrow afternoon at approximately 4 o'clock. Thank you. See you at 5:30.

The committee adjourned at 1658.