Committee Transcript 1991-Aug-19 | Legislative Assembly of Ontario

The Acting Chair (Mr Mahoney): Can we call the committee to order, please? We have a briefing from the Ministry of Housing which was scheduled to be one hour. We have now been briefed for the first 15 minutes of that one hour and I would ask whether we could try to do it in 45 minutes so we can keep the committee on schedule. Welcome, and just begin whenever you are ready.

Ms Beaumont: I think what we were going to be doing today was to follow up on the briefing we gave to the committee a little while ago and respond to the committee's questions. Ms Poole, I know, said she had 14 questions for us at the end of the last presentation.

The Acting Chair: Fourteen? I will go and get a coffee while she is asking.

Ms Poole: That was only at the end of the last presentation. I have a few more since then. Perhaps my first question should be to the ministry, to ask what the status is of the five requests I have made to date. On August 1, I asked for a definition of "neglect and inadequate maintenance." I asked for an explanation of why a cost-no-longer-borne provision is not in Bill 121. I asked if you could have an opinion on property taxes being separated from the rent, as has been suggested by several presenters. I asked for confirmation that capital expenditures under Bill 121 rules will apply for the transition period, June 6 to proclamation, which seems to be silent in the act.

Then up in Sudbury I asked for one additional item of information. I asked if the ministry would give us a sample calculation of what the guideline amount in 1995 would be, based on a 44% increase in hydro from 1992 to 1994 and a 10% municipal tax increase per year, plus whatever you might project as reasonable for annual increases for heating and water, and give us a calculation as to what the guideline amount would be under those circumstances. I wonder if any of that material is ready or if you could comment on what is.

Ms Parrish: This is going to give people the impression the ministry operates under the last-in-first-out approach of accounting, because we can respond to your last two, and then I might just go back and revisit the first three, because I think some of them we can respond to. I am sorry I did not completely follow every question. You talk faster than I think. I guess that would not surprise anyone.

I would like to speak very briefly to the issue of June 6, and maybe I will just explain what the problem is for other people who may have forgotten what the issue was. There is some concern that the way the bill is drafted, it is very clear what the rules are for transitional capital and it is very clear that after the Rent Control Act, Bill 121, is proclaimed, the new rules apply. There are quite a few people who say: "What happens between June 6, when the bill was introduced, and when the bill was passed? Are those treated under the same rule as the transition group or are they treated under the same rule as Bill 121?"

Our lawyers have been looking at that and we talked to legislative counsel. The strictly legal view is that it is clear in the statute that the Bill 121 rules apply to capital repairs in the post-June 6 period. However, if there is an anxiety that it is unclear and people would like that reassurance, there is no harm in amending the bill, because that is the ministry's policy. However, it is legislative counsel's view that it is quite clear Bill 121 rules apply beyond June 6, but there is often a reassurance element that might be appropriate. Because this is important, it might be appropriate to clarify it. However, from a strictly legal viewpoint, that is what the law is.

Ms Poole: That is good. I think that will be of assurance to the concrete restoration association, which is the group that initially brought it to my attention. They are saying that landlords are saying to them that unless they have the assurance they will be covered from June 6 to proclamation day, they will not go ahead and do these necessary repairs.

Ms Parrish: They have voiced the same concern to the ministry.

Ms Poole: That is good.

Mr Tilson: Before you leave that, can I ask a supplementary? When you indicate that you would be trying to recover, with respect to the transition period, all pre-June 6 periods -- I may have given the wrong date. The date says January 1, 1990.

Ms Parrish: To June 6, 1991. That is the transition period.

Mr Tilson: That is correct. I am just interested in your statement that you wanted to catch all situations that were created, I suppose, as a result of retroactivity. There are clearly some areas that have come before this committee in the Bill 4 hearings and in these hearings of people who were doing work back in 1989. Would you recommend that period be included as well?

Ms Parrish: Ms Poole is dealing with a narrower question, which is what happens to those capital repairs which occur after June 6, 1991, but before Bill 121 is proclaimed.

Mr Tilson: I understand that.

Ms Parrish: The second thing you are asking me is an issue that several presenters have raised with this committee, which is whether the January date is the right date for the transition group. I cannot say the ministry has a position on that. I think we are listening to what people have to say. We have had some meetings with groups and we have asked them what they think a reasonable period is. Bear in mind that under the current system, landlords had to apply within a certain period notwithstanding, so it would be unfair to actually create more rights than they would have had anyway because for some reason they did not apply for years and years. The question is, what group of people is realistically affected? That is an open issue. We are still looking at that.

Mr Tilson: Mr Chair, on a point of procedure, is this Ms Poole's day? Are we going through the full 14 questions or are we going to alternate between parties?

The Acting Chair: How many questions do we have to go through? No, we will alternate fairly. There is still lots of time left. You just used some of yours.

Mr Tilson: I appreciate that you would say that too, Mr Chair.

Ms Poole: I am perfectly happy if we want to divide up the time by caucus or however.

The Acting Chair: We have 45 minutes; that would be 15 minutes each. See how I figured that out.

Ms Poole: We have a very smart Chair in there today.

I guess the second one you were going to comment on is the calculation for 1995.

Ms Parrish: Yes. We have some material. I did not quite pick up exactly the assumptions you wanted, and ours may not be quite right, but I think they are close. What we assumed, as follows, was that municipal taxes would rise on average 9%, which is a fairly high increase but not out of the ballpark; higher than this year. Electricity, 15%. We then said that earnings, which is one of the factors, is likely to rise by 5.1%. Then we said everything else was likely to rise by inflation generally, which is 3.7%. We just used that as a kind of forecast. It is actually higher than the federal forecasts but in line with the Ontario budget forecasts. So there is no magic in terms of what assumptions we have.

We regularized the waiting; that is a somewhat technical explanation. Essentially, we went back to 1987 and we said, "What were the waits then?" Otherwise we would have to guess what they would be in the future. That is a fairly technical thing and does not have a big impact.

Essentially what happens then is, if Bill 121 remains unchanged and these things come to pass, the large-building guideline in 1993 would be about 5.3% and the small-building guideline about 6.4%. In 1994 it would be 5.4% or 5.5% and the smaller buildings at 6.6%; in 1995, 5.3% and 6.4%, in that neighbourhood.

That assumes that your assumptions about the level of electrical and municipal tax increases are true and that all those other assumptions are true. It also assumes nothing will change in the way the guideline is calculated at all. As you know, that is something the ministry has already indicated it is going to do some consultation on, whether the guideline itself should be amended and so on. It gives you an idea, in the ballpark.

Obviously, one of the biggest factors, because it represents a fairly large proportion of any rent increase, is where municipal taxes go in the province. That is clearly a fairly significant factor because the overall building operating cost index component is almost 40%. I guess between about 35% and 40% is municipal taxes. If municipal taxes rise in a high way, then you will have a higher number. If municipal taxes are lower, you will have a lower number.

Mr Turnbull: You are mentioning municipal taxes, but as you know, there is a real possibility we may see the imposition of market value reassessment in Metropolitan Toronto. Most other areas of the province already have this. We could see an unusually large tax hike in Metro Toronto in isolation from the rest of the province. It seems to me, if you have this in your building operating cost index formula, because you are averaging it, you will be giving extra money to all the buildings outside of Metro and not enough money in Metro. If the landlords in Metro go after an increase, it will deplete the amount of money available for renovation; I am talking about over the regular guideline. Is that not correct?

Ms Parrish: What will happen in the world of market assessment is something I am almost, sensibly, somewhat reluctant to speculate on.

Mr Turnbull: Would that not be correct, if that set of circumstances happened?

Ms Parrish: I guess I would start back at the very beginning and say, is it likely that as a result of market value assessment, you would have disproportionately high increases in rental buildings in Toronto? I do not think actually there is very much evidence that would be the case. I think the contrary is the case, that many rental buildings will actually have a decrease in rent, but it depends on how they do market value assessment. That is why it is very hard to say.

The indication is, by and large, that depending on how you did market value assessment, tenants might benefit, but I think the wider question you are asking is really a question we have to look at in the regulations, and that is really whether the way we pick the factors in the guideline are completely appropriate and fair. There is no doubt that because Metro is big it has a disproportionate impact on the guidelines, so whether it goes up too high, or down too low, for that matter, it has this disproportionate effect. Then one has to say, is that right or fair to regions outside Metro? I do not know the answer. I think you are right in saying if that phenomenon occurs, it is happening today, where Metro has a disproportionate effect. Is that a good thing to continue in the future? I honestly do not know the answer to that. There are some people who say we should move to a Canada-wide average for property taxes or some other approach to property taxes. Those are all things that might be looked at in the regulations. I think you have identified a real problem.

The Acting Chair: Do any members of the government have questions at this time, or do you want to hold?

Ms Harrington: I will hold.

The Acting Chair: Okay. Ms Poole, if you want to carry on.

Ms Poole: Pursuing the matter of the guideline, for large buildings it is 50% of the rent control index plus 2%, and for smaller buildings two thirds of the rent control index plus 2%. So we are using the figure of 50% in one instance and 66.6% for the other. There was a reference in your earlier comments when you made your presentation about a study that showed the range would be 40% to 50% for inflationary impact. The landlords' group, the Fair Rental Policy Organization of Ontario, has estimated a 58% average. I am just wondering why there would be such a large discrepancy in what we are hearing, and perhaps you could tell us a little bit more about this study and whether we could have access to it.

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Ms Parrish: Unless I am mistaken, I think we have already tabled that study. It is called the Market Economic Rent Gap in Ontario, dated April 22, 1991, prepared by Royal LePage. I think it is table 4.3, called "Revenue Expense." The Chair is signalling that yes, we did table that.

That material indicates that the proportion of expenses or operating costs as a percentage of revenue has risen. For example, in 1975 it was 39%; 1980 was 41%; 1985 was 50%; 1989 was 46%, and 1991 was 51%.

There certainly are variations, that is true. I actually have not seen the study that FRPO has referred to. I would be glad to look at it. I can only speculate as to why their study is different. They may be dealing with a different sample. They could be dealing with different assumptions. One thing you learn in the world of statistics is that there are lots of different reasons. All I could say at this point is that I would be glad to contact my colleagues at FRPO. I am sure they would give us their study. We can look at it and tell you why it is we think the LePage study and the FRPO study have different numbers, if that is satisfactory.

Ms Poole: That would be fine. I would appreciate that. I have to go back to my place.

The Acting Chair: Do you want to see if there are others and come back?

Ms Poole: Sure, whatever.

The Acting Chair: I am attempting to ensure that the government members and the third party members have equal opportunity here. If you do not have any questions, we will carry on.

Ms Harrington: I do not have any at the moment. Mr Tilson can go first.

The Acting Chair: All right. Mr Tilson, in the strict watching of the clock, you and Mr Turnbull used up about six minutes of your 15 in your supplementary questions. If you want to take some time now, then we can come back to Ms Poole, who still has a couple of moments left.

Mr Tilson: The question I have has surfaced with many people before the committee, and that is that they do not know what a lot of words mean in the act: "amortization periods" -- you do not know when they are going to be available -- "neglect," "necessary." There is a whole slew of words. I could spend 15 minutes talking about them.

I assume your answer is going to be, "Oh, well, there will be regulations which will come forward." If I am correct in that assumption, would you be prepared to provide us with your draft regulations that we could consider prior to our going through the clause-by-clause section of this bill?

Ms Parrish: One of the things that has come out quite often in the presentations is the amortization table issue. I think the Minister of Housing, Ms Gigantes, was at one of the presentations where that issue came up and she directed us to go ahead and prepare our staff work for consultation on the amortization table. I am not exactly sure when you will be in clause-by-clause review, but we expect to be in a position to release our study on amortization tables and what we are thinking of doing for consultation purposes probably within the next two weeks or so. Obviously to release every single regulation under the statute would -- I just do not think we could do the work that quickly, but I think what we are looking at are the key regulations that people need to understand Bill 121, such as the guideline, such as the amortization tables.

Mr Tilson: I think if we can get the amortization tables prior to clause-by-clause, that would certainly be useful. But the other thing that would be useful -- for example, section 15. I suspect our party will be putting forward a number of proposed amendments for the committee's consideration, and to deal intelligently with those amendments or to deal intelligently with section 15 as it stands, it seems to me we must know what a number of words mean in that section.

I am just picking that at random. I do not mean for you to dwell on section 15, but the word "necessary," for example, is used; the word "neglect" is used; "system" and "thing" are used, words such as that. I assume that somewhere along the line regulations would be prepared on those subjects as to what that specific terminology means. I would hope that you will have draft regulations for our consideration of terminology throughout the act that you intend to put forward in due course.

The Acting Chair: I think the answer was that they will be done as quickly as possible and will be provided to the committee as they are ready. Is that fair?

Ms Parrish: The direction the minister has given us is for us to be very consultative and to give the information as much as possible. We have not, in all honesty, completely identified all of the areas that are appropriate for definition by regulation, and that is partly because that is information we get through the hearings. In some cases it has not always been what we expected. For example, in section 15 it very clearly says it is necessary to do X, Y and Z, so I would think that strictly from a drafting viewpoint, that word is defined. It is "necessary" for this; whereas "neglect," I think, is an area that you could either allow to develop on the basis of case law as cases come forward or define by regulation.

The Acting Chair: Could I help, though, without getting into defining all of the regulations and the definitions here today. The question really is, as I understand it, are you going to be in a position to present the committee with all of that work prior to our doing clause-by-clause?

Ms Parrish: I think it is unlikely; not all the work.

Mr Tilson: That does make it very difficult. I would ask if you would consider that with the minister and the parliamentary assistant, because otherwise, I can tell you, our party will consider putting forth amendment after amendment as to what we perceive the words to mean. How can you intelligently deal with a bill when you do not know what the words mean?

Interjection: We do it all the time.

Mr Tilson: I suppose my second question is, we asked for information, which members of the Liberal Party asked for as well, and that was the apparent conflict of policy between the Ministry of Housing and the Ministry of Energy -- I am thinking specifically of conservation issues -- and your staff was to get back to us on that subject.

Ms Beaumont: What we had undertaken to do was to investigate any comments we may have received from the Ministry of Energy on the proposals in the legislation. Were we able to table any material with the committee on that?

Ms Parrish: We are not able to table any of the material because it is related to cabinet documents.

Mr Tilson: What? I am sorry?

Ms Parrish: The material relates to cabinet documents; therefore the Freedom of Information and Protection of Privacy Act prohibits me from releasing that information.

Mr Tilson: Are you telling me that it is impossible for members from the Ministry of Energy, staff members or even political members of the Ministry of Energy, to come and discuss policies that the Ministry of Housing is going to be putting forward?

Ms Parrish: No, sir. All I am saying is that the only written material we have on file is in response to a cabinet submission. There is certainly nothing to prevent the ministry from saying what it wants to say.

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Mr Tilson: I will leave that one for the moment, if that is the response of staff, Mr Chair.

The other issue I raised, if staff could get back to me on it, was a question with respect to rooming houses and the subject of large units versus small units and the difficulty of rooming houses being classified as large units when perhaps they should be small units.

Ms Beaumont: Really, what has been spelled out in Bill 121 is a division of the rental stock into the large and the small. Rooming houses, as such, vary from a very few large rooming houses to a large number of rooming houses with a relatively small number of units. You have in the city of Toronto certainly a very few rooming houses with 20 units contained within them, but also large numbers of rooming houses with less than six units.

Mr Tilson: I am aware of those facts, but the question was that there appears to me, and I assume you will agree, areas where there is conflict. In other words, where there are rooming houses, generally the units are smaller than perhaps apartment units and there are more of them in the building. Therefore they can be caught in the large-building category, when perhaps they should be in the small-building category.

Ms Beaumont: I think however one makes the division, if you are going to subdivide the rental stock in any way, whether it be on the basis of size, type of construction, age, there are going to be situations where you are going to have individual properties that do not fit neatly into any of these categories. If you look at the rooming houses in the city of Toronto -- and we have taken a look at some in connection with work we did with the Rupert Hotel Coalition -- there are rooming houses with a large number of units. There are factors that apply in those situations that do not apply in many other situations with purpose-built rental housing. This in itself could make for some differences in the operating costs of those buildings.

Mr Tilson: My question was, should there be a separate section for rooming houses in the bill?

Ms Beaumont: We have not brought it into the bill. It is certainly something that could be considered if it were raised at clause-by-clause.

Ms Harrington: When this bill was formulated, the guideline was adjusted from two thirds of the BOCI down to half. Can you tell me why that went that way?

Ms Parrish: The information we had was that it was not generally the case that the ratio between operating expenses and rents was 66%. That is, generally landlords received $100 worth of rent and spent $50 or less on operating costs. Now, that is not universally the case because --

Ms Harrington: You were quoting some figures.

Ms Parrish: Yes, and we have a study from Royal LePage that shows the numbers have never been as high as two thirds. As a result, what has tended to happen on average is that there has been some overcompensation in the base rent increase that tenants have paid and landlords have got.

Of course, because you are dealing with an average, that means there are some landlords out there who have been paying two thirds, and 80% and maybe even 100% because of their unusual cases, but it appears that on average 50% is closer to what is happening than is 66%. It was simply done on the basis of what information existed as to what would be sort of a good adjustment for future guidelines.

Ms Harrington: So it is the one study, Royal LePage. Were there any other figures or solid evidence? Is this over a number of years?

Ms Parrish: Yes, the Royal LePage study starts, I think, in 1971 and goes forward right to 1991. I think the highest number during the entire period is 51%, and that is probably because of the GST hit which occurred in that year.

Anecdotally, as well, we do look at the proportion of units coming to rent control and just sort of see whether or not that seems to be fair. We did not do a formal study, but we did go through and sort of benchmark. Again, there is no doubt that there are individual cases of landlords who paid more, but there are also cases where landlords paid less. This is just an average over time. It is interesting because currently it is two thirds and it has been two thirds for quite a while. Even the Fair Rental Policy Organization of Ontario said that it was between 50% and 58%. I have not seen any studies that say it is two thirds, so I think the two-thirds number was a negotiated number from the Rent Review Advisory Committee. It was probably a fair enough starting point. We now know a little bit more information than we did then.

Ms Harrington: I was going to get into another area, but I think I will leave it and deal with it another time. Unless there is anyone else in the government who has questions, we will allow the other parties to have our time.

Ms Poole: We appreciate that. I am looking at the 3% cap. In any given year there cannot be an increase above the guideline more than 3%, and there are only two ways of getting this: by extraordinary operating increases or by capital expenditures. Could you explain to us what happens in the scenario where a landlord applies and receives the 3% increase for extraordinary operating but that landlord has, say, a 10% capital expenditures program in the same year? What happens to the carry-forward? Is it still only carried forward only one year, or would you allow a two-year carry-forward if the landlord has never received reimbursement for any portion of that 10%?

Ms Beaumont: The carry-forward is limited to one or two years, depending on the size of the building.

Ms Poole: But if you have not been reimbursed for any part of the capital expenditures, can you be reimbursed for that for the first time in the following year and then have a second year of carryover, or can you not apply for it if it is in a previous year?

Ms Parrish: I think I know where you are coming from. Let's suppose you make a capital expenditure in year 1, you carry forward to year 2 and you are at year 3. In year 2 you do another capital repair. You can reapply and then carry forward into year 3. So you can reapply. However, you are always capped at 3% and you are always limited by the amount of carry-forward that you have.

Ms Poole: But if you did the capital repairs in year 1, you incurred the extraordinary operating in year 1 and your extraordinary operating used up all of the 3%, can you then reapply in year 2, using that as your base year for your capital expenditures, and then have one year carry over after that?

Ms Parrish: No. You are limited by the time frame, I would assume.

Ms Poole: You certainly would be, under the current act, in the way of works.

Ms Parrish: No. You would have the one-year carry-forward, but you would not be able to pick up another. However, if you did your extraordinary operating cost increase and you had a capital repair in year 1, you get a one-year carry-forward. Then in year 2 you want to do something again but you are already against the 3% cap; you can reapply in year 2 and get a carry-forward for year 3. But you cannot adjust the time period in order to get 3% every year if in fact you have not done your capital repairs during the correct period.

Ms Poole: Rather than pursue that particular one, I would like to bring up a matter which I think is of concern to many people, both tenants and landlords, and that is the maintenance and work order provisions in sections 38 and 39. This can be a real catch-22 situation, because the way this is drafted is quite different than it was in Bill 51. Instead of just ensuring that the Bill 51 provisions were enforced, you have completely wiped them off the map and started fresh.

But one of the things, for instance, in Bill 51 was that it would have to be a substantial matter. If a lightbulb was not changed, there could not be a rent penalty. There are sort of safeguards built in with Bill 51. For instance, you can have the scenario where a building inspector would go in in November and say, "This exterior wall work needs to be done," and then he puts a work order on; 60 days later that work order expires, and yet the landlord could not have possibly done the repair because he has to wait until spring to do it. That gets into the scenario, is the inspector going to levy a work order if he thinks these provisions are so stringent and so unfair that they are not enforceable? Like I say, it becomes a catch-22 situation where everybody loses. The work does not get done, the landlord has the rent penalty, but the tenants do not have a good standard of maintenance in their building.

First of all, why did you abandon the standards board? Keep in mind I am not saying that the standards board was perfect. One of the greatest problems with the standards board was that it had to use rent review in order to enforce what it was doing. But why did you not simply empower the standards board to take care of this problem, and why did you take away a number of the safeguards that were in Bill 51 to ensure that the maintenance does get done?

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Ms Beaumont: As you say, the standards board was not perfect, although I should say the standards board has accomplished some good things during its lifetime.

Ms Poole: That it has.

Ms Beaumont: One of the problems, though, that we had seen with the way the system had operated was, as you refer to it, Ms Poole, the length of the system. It was so convoluted you had to go from the municipality through the standards board into the rent review system, and that in itself led to problems with action not being taken or action being taken so late that other problems developed. One of the things we were trying to accomplish was to reduce the length of that process and to provide some simplification in that process so that action could be initiated at an earlier stage.

In looking at the whole question of the substantial infraction of a substantial standard, or words to that effect --

Ms Poole: The 3S test.

Ms Beaumont: -- we looked at that and looked at some of the implications of that in the drafting of the legislation, fully aware that when property standards officers go into buildings, they will often come up with a list of 50 or 60 infractions of varying degrees of seriousness. We gave some thought to limiting the penalties to serious matters. But as we hear from tenant groups, as we see the concerns and listen to the concerns of individual tenants, many of them do not have to do with the one really serious thing that is wrong in the building but have to deal as well with an accumulation of little things which add up to the building being neglected and little things not being fixed.

The concern was that what we are trying to accomplish is that the landlords maintain the buildings as a whole to a standard that makes them comfortable for people to live in. The concern as well was that if it is a lightbulb burned out or a coat of paint that is needed in the basement garage, for heaven's sake let the landlord fix it, rather than wait for it to go through the long period of the time that is allowed for taking action on a work order and all the due process built into the legislation.

Ms Poole: I guess I could perhaps live with what you are saying if there was anything built into this legislation to provide a hearing, to provide due process, to provide an opportunity if there are extenuating circumstances, but I have had some really good landlords in my riding who are just beside themselves about this particular provision, and they are ones who I think are models. They say this is going to lead to a whole deterioration of the standards throughout the industry. They say that if they have problems with it, it is not going to cure the abuses. What it is going to do is make it just a nightmare of red tape and bureaucracy for landlords who are pretty good landlords. I would prefer to see legislation that goes after the ones who are abusing the system and making it very difficult.

Mr Turnbull: Just following on from Ms Poole's comments, I had a landlord who is certainly an extremely good landlord, keeps his building in very good order, and he made the comment that in view of the fact that there is a maximum of 3% additional available, he will live in fear of a work order being put on the building for whatever reason, and therefore he will not go into any proactive work. He will wait until immediately prior to a rent application and then see if there are any work orders or anything he is being forced to do, because he knows he has this finite amount of money to fix it. So you are going to achieve exactly the opposite of what you think you are going to achieve with this legislation. Here is a good landlord saying, "Look, I have always taken care of my building, but I can't afford to take the risk that I'm going to spend the money on this set of items when the tenants may come and say, `We've got to have this set of items addressed.'" He will react to the tenants' requests. Could you comment on that?

Ms Beaumont: Yes, we have heard those comments as well from landlords. I would only comment in response that the landlords know what the property standards bylaws say. The landlords know what the requirements of the law are with respect to maintenance of their buildings, and the responsible landlords I know have plans to maintain their buildings to those standards, and often to way beyond those standards, because most of those standards really are the minimum. That is why they are written the way they are.

Ms Parrish: I would just point out, for example, that we did a survey of all the orders that had come to the standards board, and over 95% of them passed the test.

Mr Turnbull: What do you mean by "passed the test"?

Ms Parrish: Passed the test that they were serious, substantial and subsisting.

Ms Parrish: They are serious and they have gone on for a long time is essentially the test.

Mr Turnbull: Okay, so you in fact do have a definition of what serious and substantial is then.

Ms Parrish: We did have a test in the old legislation, in Bill 51, and what happened, I guess, essentially is that almost nothing came through the system that did not meet the test. Then the question is, how useful is the test if almost everything that goes through will meet the test? All the test then accomplishes to some degree is delay, because you have to have a process of reviewing on that basis.

Mr Tilson: Following along with that, when there is a complaint, and I am looking specifically at section 36, the director will send an inspector to look at the building. Will there be a set of guidelines put forward by the ministry in some form of regulation, or is it your intent that the inspectors will determine their own parameters?

Ms Beaumont: If you read subsection 36(3), it talks there of determining whether the landlord has complied with prescribed maintenance standards, the intention being that the maintenance standards would be prescribed by regulation.

Mr Tilson: Will we be seeing those before we get into clause-by-clause?

Ms Beaumont: I am not sure. Colleen, where are we in reviewing the existing regulation?

Ms Parrish: There is an existing regulation under the current statute, so that would be our starting point. That was one that was done fairly recently by the standards board, and it had quite a widespread consultation. So although there may be some changes warranted to that, I think it is a very good start. We can provide you with that right away, because it has already been enacted. It is a fairly recent piece of work, because they went through quite an extensive consultation.

This is just the provincial standard. This is the standard that applies in areas of the province where the local municipality does not have property standards. The city of Toronto has its own standard. This is for those municipalities that do not have their own property standard bylaw.

Mr Tilson: Not necessarily. A complaint could be made. In other words, your standards could be different from the municipality's standards, and that is my question as to what guidelines are there. If that is what you are saying, that the guideline is going to be a specific municipality's standards bylaw, that is fine, but I do not think that is what you are saying.

Ms Beaumont: No. What we are saying is, if you look at the way the existing regulation that deals with property standards under the standards board operates, the municipal property standards bylaw applies where it exists, except in circumstances where it is not as rigid, where it does not meet the provincial standard, or except in circumstances where the municipality is not enforcing that standard. So if you have a situation where municipality X has a property standards bylaw which deals only with properties in a certain part of the municipality or only with certain classes of property, such as only high-rise or only commercial, in those circumstances, the provincial standard would apply.

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Mr Tilson: I understand all that and I guess I am looking at what will the inspector use to determine whether or not there is --

The Chair: Last question.

Mr Tilson: Yes.

The Chair: You are not nearly as flexible as I was.

Mr Tilson: Where was I? Again, if there has been a complaint, is there going to be a specific guideline? Are you saying it is the outstanding regulation that is in Bill 51 -- is that what your answer is -- plus the standards bylaw, or are you creating something else?

Ms Richardson: Perhaps I could mention that the municipality will have its own inspectors and they will inspect under the municipal bylaws, and the provincial inspector will inspect for the provincial standards --

Mr Tilson: I know that.

Ms Richardson: -- but only in areas where the provincial standard applies, and that may not be in major municipalities at all.

The Chair: This completes the briefing section of this afternoon's sitting. We are now going to revert to public presentations.

Mr Brown: I would like to make a motion, Mr Chairman.

The Chair: Mr Brown moves that before commencing clause-by-clause review of Bill 121, presentations be made to the standing committee on general government by the Ministry of Energy, Ontario Hydro and the Ontario Housing Corp.

Mr Brown, any further discussion on your motion?

Mr Brown: Yes. I have raised before this committee, as have my colleagues, some serious questions regarding the implications of Bill 121 for energy conservation and the goals of the Ministry of Energy and indeed of Ontario Hydro. As we have heard from the Ministry of Housing staff, they cannot discuss what the Ministry of Energy or Ontario Hydro might think of these particular provisions, and I think it is incumbent upon us to have those two groups before us to discuss those very important questions.

The Ontario Housing Corp. has been alluded to, as have municipal non-profits and a number of other groups. I think the Ontario Housing Corp. should appear before us. We have had a great amount of testimony relating to the costs of providing rental accommodation by the Ontario Housing Corp. Certainly there is a great deal of discussion around the issue of why non-profit housing in Ontario Housing units are not going to be subject to this bill. I would like some information, and I am sure other members of the committee would like some information, on the operating activities of Ontario Housing Corp. Why should they be exempt from this legislation and why has the government not included them? So that is briefly the motion.

Mr Tilson: The Progressive Conservative Party certainly supports this motion, specifically the issue with respect to the Ministry of Energy. It has become quite apparent, and I believe admitted by staff, that if a landlord does renovations for the purposes of energy conservation, the very next year an application could be made to reduce the rent; in other words, to reverse the very applications the landlord made for capital expenditures because of the reduction in general maintenance. That contradiction has yet to be explained by either the Ministry of Energy or the Ministry of Housing. We asked that specific question just this afternoon. Staff are coming back now saying that there are issues but they are cabinet security, cabinet confidentiality, so therefore I think our party certainly supports the resolution.

Mr Mammoliti: I am curious as to whether the subcommittee has had a chance to look at this. Has Mr Brown mentioned it to anybody on the subcommittee?

The Chair: I do not think it is necessary for the subcommittee to receive --

Mr Mammoliti: I did not ask whether it was necessary or not; I just asked whether or not it has had a chance to look at this.

The Chair: My duty here is to rule whether or not motions are in order, not whether the subcommittee has been consulted.

Mr Mammoliti: So is it yes or no? Have they looked at it? That was my question.

Mr Abel: I guess there is no question whether it is or is not appropriate; we know it is appropriate. But I would like to recommend that the subcommittee have an opportunity to get together and discuss this further, so I would like to move that this be tabled just so we can have an opportunity for the three of us to discuss it.

The Chair: It is an unusual procedure to have a member's motion referred to the subcommittee, but if it is the wish of the committee that it be done, of course we will do it. It is unusual. It would have to be up to the committee.

What I would like to do first, before we entertain that, is finish discussion on Mr Brown's motion, because I do not think Mr Tilson or Mr Turnbull had any opportunity to make comments if they wished to do so.

Mr Turnbull: In the spirit of co-operation with the government, certainly if we wanted to table it till tomorrow --

The Chair: That was Mr Abel's request, that the matter be reviewed by the subcommittee. That is different from having it put off till tomorrow.

Mr Turnbull: Okay, to review it by the subcommittee and then bring it back to the whole committee tomorrow. But I would point out that the stated objective of the Ministry of Energy is to reduce the consumption of energy in apartments, houses and other buildings, and it would seem totally appropriate that we should have expert evidence from those ministries and Ontario Hydro.

Mr Brown: I appreciate the fact that the subcommittee is going to discuss the issue. I would just like to point out however that we do already have the Ombudsman appearing before this committee.

Clerk of the Committee: No, she cancelled.

Mr Brown: Excuse me, we had the Ombudsman appearing before the committee but apparently she has cancelled. That was her choice. I think it is appropriate that we have other government bodies before the committee so that we can try to get an overview of public policy. One of the difficulties I have found, being a member in this place, is that often ministries are working somewhat in isolation in their own particular policy field and sometimes are not cognizant of the importance of other provincial policy matters, so I think it is important for us as legislators to have a look at what these other people are doing in related but not necessarily the same policy fields. I appreciate the government's offer to discuss this matter further in subcommittee.

Ms Poole: In the interests of time, perhaps it would be acceptable for the subcommittee to deal with this. We are all in Hamilton tomorrow morning; perhaps we could meet at 15 minutes prior to the 10 o'clock start time to discuss this.

I have checked with the clerk and we do have a number of spaces available for presentations next Tuesday. It is fairly open right now due to the fact we are no longer going to Ottawa. I have two other suggestions I would ask the subcommittee to consider. One is to invite a city building inspector. It does not have to be from the city of Toronto and could be any municipal building inspector acceptable to the steering committee members. The second proposal I tabled was for a former rent review hearings board member to come before us, if we were aware of one who was willing to do so. I would just ask for those two additional matters to be discussed at the same time.

Mr Mammoliti: I just thought it important to mention that we are open to the idea, but I agree with Mr Abel; that is, I think the appropriate place, and to be consistent with what we have done in the past, is to give it to the subcommittee to talk over and then come back to us.

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The Chair: Mr Brown, from what I have heard, I guess it is the consensus of the committee that we are going to discuss not your specific motion, but the request encompassed in your motion, and expand upon it to include the city building inspector and a former rent review hearings officer tomorrow morning in Hamilton at 9:45. That is the consensus of the committee, as I understand it. Very good.

Mr Turnbull: Can I make a motion -- I have just given the wording to the clerk -- that we have a presentation from the Ministry of Financial Institutions on the question of financing of apartment buildings.

The Chair: Would you like me to add that to the list?

Mr Turnbull: I am happy to add that to tomorrow morning's schedule.

The Chair: Do you think we are going to get all of this done in 15 minutes?

Mr Abel: These two motions have been brought up before they have been voted on. I really see no need to bring them up again. Certainly I think we should get together and talk about Mr Brown's motion, and I think it is going to take the full 15 minutes to deal with that, but now we are rehashing old motions. We are bringing them back to life, and I think that is most inappropriate.

Mr Turnbull: Mr Chair, he is just simply not correct. He is remembering what happened in Bill 4. We need a member of the ministry.

Mr Abel: You were not here. It was voted on.

Mr Turnbull: If we cannot bring before this committee people from the ministries who have some input on this matter, why are we bothering to have committee hearings?

Mr Abel: This has been debated time and time again. It was voted on.

Mr Turnbull: The NDP does not believe in open government. This is absolutely ludicrous.

Mr Abel: May I suggest that you read Hansard to find out what is going on.

The Chair: To resolve the disagreement, I have asked the clerk to check the records to see whether or not there has been a vote, and if there was, what the date of the vote was, and the motion itself, on the matter of having someone representing the Ministry of Financial Institutions at our committee hearings. We will try to have that information to you as soon as we can and that way we will be able to clear this up.

Mr Tilson: I have no motion to make, Mr Chair. I have a question of you as Chair.

The Chair: Certainly.

Mr Tilson: My counting is that Ms Poole has 14 more questions to go, and I have a few as well with respect to the staff. I do not know what the committee feels, whether that will be done after the presentations have been made from various people across this province, and prior to clause-by-clause, but I would like some indication as to when we can pursue those issues with the staff.

The Chair: Do you want to work through a lunch this week? Anybody?

Mr Mammoliti: This is something that I think should be discussed in subcommittee. If you want to alter the scheduling, let's be consistent here. We have done that in the past. Again, we are open to talk about it, but let's do it through the right forum. I believe that we should be consistent and do it through the subcommittee. There are a lot of people here who want to present to us today, and we are wasting time here.

The Chair: Just to make sure everyone understands how the committee functions, members can make their requests at the full committee and they can make their requests at the subcommittee. There is no prohibition against members making requests in the full committee. It is up to the committee itself whether or not it wants to postpone the discussions to the subcommttee. In some cases, committees like to do it; in other cases, they do not. So I do not think I am allowing anyone to be out of order by making these suggestions and I would not want the record to even appear that way.

Mr Mammoliti: I did not say that.

The Chair: Well, to me it appeared that way.

Mr Mammoliti: I was just making a suggestion.

The Chair: Excuse me, Mr Mammoliti, but to me it appeared that you said that the proper way to do this was at the subcommittee.

Mr Mammoliti: I said we should be consistent.

The Chair: Which means the Chair should have noted that to the member. The Chair did not do that because the member has the right to do it in this forum.

Mr Mammoliti: We should be consistent; that is all I am saying.

The Chair: I try not to interrupt you, Mr Mammoliti.

Mr Mammoliti: No, you interrupted me a number of times.

The Chair: Usually when you are out of order, as you are right now. So on the matter of the official from the Ministry of Financial Institutions, the record will be checked. I do not think we will have time tomorrow to discuss all of these items. We have only allocated ourselves 15 minutes, but we will get as much done as we possibly can.

Mr Tilson: I will not pursue the matter any further, Mr Chair. I would just like you to add that to your list of items to be dealt with by the clerk in due course.

The Chair: My recollection from Bill 4 hearings is that whenever we wanted to have ministry officials meet with us, we usually ordered in lunch and took advantage of the group being together to make the best use of our time. That is the only reason I suggested lunch, because we have done it on a number of occasions with the full consensus of the committee.

Ms Harrington: The staff of the ministry, I believe, are most helpful and most anxious to answer all the concerns or questions of a technical nature that are appropriate for them at any time. Obviously, in the last hour we have seen how long it takes to get all the questions thoroughly discussed. I would encourage any member of this committee to go directly to them if you have a technical matter that you do not understand. I think they would be most helpful to try and get that cleared up.

The Chair: The difficulty with that is, then it is not recorded in Hansard as part of the ongoing legislative debate and record and history of all of the members' work.

Ms Harrington: But sometimes members just want their questions answered for their own knowledge, I would think.

The Chair: I would just suggest to the committee that if certain individual committee members feel we need more time with ministry staff, and if our agenda for public presentations is full, we basically have two options: We do it over the lunch hour when we have approximately two hours, or we stay one evening after six and we agree to the time period, as we have always done, and we work within that time period. The only other option is first thing Monday morning, which makes it very difficult for the members who have to come in from out of town, or on Friday. Those are our options.

Ms Poole: The reason I checked with the clerk earlier was to see whether we did have any time available, and there is a large block of time on Tuesday during which we could deal with everything that has been raised today. I guess it has to be a political decision whether we want certain ministries to come or not, but there is certainly sufficient time on Tuesday because of the fact that we are no longer going to Ottawa for two days. We could easily have the ministry on that day without going into a lunchtime.

The Chair: Let me ask the clerk. What block of time do we have on Tuesday, please?

Clerk of the Committee: At this point there is time available on Tuesday. However, I have a number of outstanding phone calls, for which I am still waiting for replies, which will cut down the amount of time. In addition to that, the subcommittee had agreed to invite a member of the Canadian Bankers Association. There will be somebody coming from that association and at this point it has not been given a specific time because I still need to confirm that. So until all of that is done I am not going to know for sure exactly how much time will be available on Tuesday. I believe there will be some; I do not know how much, and I am not sure all of these representatives would be able to be fit in, along with an additional ministry briefing.

Mr Mammoliti: I just want to recommend again that perhaps the subcommittee talk about it even tonight on our way to Hamilton. Again, there are people here who want to present to us and I think we are wasting time by debating this. Let's get on with it and give it to the subcommittee, where I think it should belong.

The Chair: Thank you for your opinion.

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MULTIPLE DWELLING STANDARDS ASSOCIATION

The Chair: The first presenter for this afternoon is the Multiple Dwelling Standards Association. Sir, I think you are familiar with the procedures of our committee; you have been watching attentively for quite a while. The committee has allocated you 15 minutes, and you can reserve some time for questions and answers if you wish.

Mr Schwartz: My name is Jan Schwartz and I am president of the Multiple Dwelling Standards Association, on whose behalf this submission is being made. Our organization, which dates back to October 1970, does not represent builders or developers. Most of our members entered the rental housing field as investors, having purchased existing buildings, predominantly older structures. Many of these people put their life savings, or a great chunk of it, as a down payment on a six- or 10-plex. Some others pooled their resources and formed partnerships in order to acquire a 50- or 60-unit building.

These investor-landlords came from different walks of life, working in offices, factories, shops, various professions, etc. Many of them still do. Others have a sufficient number of units to require their total, full-time involvement and depend entirely on their rental income. A substantial number of our members, almost a quarter, have reached the age of retirement and their rental income represents either the sole or primary source of income. In fact, the smaller the building, the more likely it is to be owner-occupied. These types of owners are often referred to as ma-and-pa operators and, contrary to poplular belief, the bulk of the province's rental housing stock is owned by such small-scale landlords rather than by large corporations of builders and developers.

I would like to stress the point that rental housing has been an accepted part of the investment activity in this province for years. However, the present Ontario government seems to have other ideas about the structure of ownership in the rental housing field.

Seven months ago I appeared before this very same committee with regard to Bill 4, the temporary legislation which is to be replaced by Bill 121, the so-called permanent rent control legislation, as the former housing minister liked to refer to the successor of Bill 4.

While last January at the Bill 4 hearings we were given 45 minutes to make our presentation, this time the committee, in its infinite collective wisdom, reduced the time allotted to only 15 minutes. Consequently, we were not able to include today some of our members who were badly hurt by Bill 4 and will get reflief by the provisions of Bill 121. However, some of them managed to appear before your committee in the first week of hearings.

I wish we had more time to get to specifics on the proposed bill, but let me briefly mention some of the most objectionable sections of Bill 121.

1. Those who were caught by the moratorium under Bill 4 and were promised relief under the new legislation will be the first victims. Larger corporate owners who may have to write off huge losses, some in millions of dollars, may have the means to survive the blows, but the small investor who may have mortgaged his house to finance capital expenditures, or perhaps a new acquisition, could be wiped out if Bill 121 is not amended. However, whether large or small, no business or property anywhere in Canada should be treated by their elected politicians in ways which amount to expropriation without compensation. The drastic drop of values amounts to a 30% expropriation right now.

2. The overall cap of 3% covering not only capital expenditures but also extraordinary increases in taxes, hydro and other utilities amounts to a death sentence for most small-scale landlords, who do not have the financial means or reserves to survive. An all-encompassing cap of 3% is inadequate and punitive, especially if some work orders will be introduced or some retroactive major works.

3. Regarding the proposal of two different guideline increases, the artificial dividing line between large and small landlords makes no sense. If higher guideline increases are to be given to some buildings, it should be based on the age of the building rather than the size.

4. The maintenance enforcement rules are totally unreasonable. Owners could end up being victimized by some frivolous and vexatious complaints. In New York City some tenants deliberately vandalized buildings in order to get rent reductions. In Ontario, on the whole and with few exceptions, landlords and tenants get along fine, but it does not take much to stir up trouble, especially when incentives in the form of lower rents are tempting.

5. In conclusion, let me mention one section of Bill 121 which evokes the worst nightmares for a number of our members who settled in Canada in the post-war years, having left behind some of the most oppressive regimes in eastern Europe and elsewhere. Under section 113 of the bill, inspectors of the rent control administration will have the power to enter landlords' premises, seize records, inspect and photograph evidence -- and all that without a court order. If this is not the worst kind of intimidation, what is?

Mr Chairman, if there is time left, I would be pleased to answer a few questions.

The Chair: You have about seven minutes for questions. Mr Turnbull.

Mr Turnbull: Mr Schwartz, in terms of your membership, are you aware of any members who have actually had difficulties in refinancing their buildings as a result of this legislation or the Bill 4 legislation?

Mr Schwartz: Yes, we did, because lending institutions are not willing to renew mortgages for the same amount.

Mr Turnbull: So they require the paydown in the amount of the mortgage?

Mr Schwartz: Oh, yes.

Mr Turnbull: And that paydown is typically what percentage?

Mr Schwartz: The paydown could be a 20% to 30% decrease.

Mr Turnbull: Have you got some evidence to that effect?

Mr Schwartz: I do not have it with me here, but I have had recent conversations, yes.

Mr Turnbull: So that is the basis of your 20%-to-30% reduction in the value of buildings.

Mr Schwartz: Yes.

Mr Turnbull: You spoke about the potential for vandalism, and I believe you were sitting here when I questioned the ministry officials about the fact that some landlords are telling me that in fact, because of the legislation, where work orders can be put on, they will not do any proactive work. They will wait until a rent review application is going in and see what orders there are and react to their tenants' complaints, rather than do an orderly maintenance of the building, for fear of not having enough money to be able to do it. Can you comment on that?

Mr Schwartz: Yes, I would even go a little further beyond that. Many landlords who have planned certain work have simply indefinitely delayed any work, things that cannot wait. Of course, if there are certain things that have to be done, well, they have to be done. But for anything that could wait, the tendency is; "Let's wait, let's see what happens." An unexpected work order or some demands to improve fire prevention equipment or anything of this sort, elevators, balconies, you never know how much this could cost, so --

Mr Turnbull: Do you think under this legislation there would be any possibility of landlords investing in energy conservation measures in their buildings?

Mr Schwartz: Not if it is not absolutely required by law. I do not think they would volunteer to do it if it involves a large outlay of money.

Ms Poole: Thank you for your presentation today. I would like to go over section 113 with you, which you have drawn attention to in this act. A number of landlords have said this is very oppressive and the search and seizure measures are draconian. But there is part of section 113 where I have a lot of sympathy with what the ministry is trying to get at, and that is subsection 113(2) where the inspector has the power of entry, with reasonable notice, as long as it is between the hours of 7 am and 9 pm. One of the problems building inspectors have is that they cannot get access to a building and they have no way of enforcing this. So if they cannot get in, they cannot investigate a work order.

Is it just the search and seizure provisions that you are objecting to or is it the whole thing?

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Mr Schwartz: No, it is the search and seizure in particular. The way I understand it, it is to search. You must have a court warrant. Why are landlords being singled out as pariahs, worse than anyone else? Why are they treated almost on the presumption that they are guilty or are criminals? This is very disturbing, especially to a lot of our members who came from regimes where they could come in the middle of the night. Thank God that we have here certain hours. But still, they call it rent police. It scares the heck out of them.

Ms Poole: So you feel that as long as an entry is reasonable and gives notice, that is not the problem. It is what happens afterward if you have these draconian powers of search and seizure.

Mr Schwartz: The search and seizure must have a warrant from the court.

Ms Poole: I appreciate that advice.

Mr Mammoliti: On page 3, you mention that some tenants deliberately vandalize buildings in order to get rent reductions. Do you have any statistics? Do you have any proof of that today?

Mr Schwartz: I mentioned that this was quite common in New York. As far as Ontario, many of our members in the past reported to me that a certain tenant -- now, these are exceptions. I am not implying that the majority of tenants are going to do that, but there are always individuals.

Mr Mammoliti: No statistics then. You do not have anything for us today.

Mr Schwartz: No, I cannot give you numbers.

Ms Harrington: The intent of this legislation, our long-term plan, is to have good landlords and good tenants in this province working together for the benefit of everybody. Probably many of your landlords, I would assume all of them, are in this for the long term. They are not there as speculators, and we want to encourage that long-term planning for your building.

What has happened in the past under the RRRA is that we have encouraged land speculation, which has added to the cost of doing business and has ended up in maybe even causing a portion of our economic slowdown. We are trying to right some of these situations.

We recognize in our legislation the special needs of some of the landlords like yourself who have small buildings, and the number that you talked about, the six units. That is something we are looking at and we would certainly encourage your recommendations on what that number should be. We actually have allowed, of course, a higher guideline and a longer pass-through period for the people who own the smaller buildings.

What I wanted to ask you about was the rate of return. Putting aside when a person sells a building -- and we are hoping that of course you do not, because we want landlords in there not for speculation purposes but for long-term operating of the building -- what would be a fair rate of return, without including the money made on selling the building?

Mr Schwartz: When you say "return", return when you sell a building do you mean?

Ms Harrington: No.

Mr Schwartz: When you buy a building?

Ms Harrington: Your operating, your profit yearly. What is a fair rate of return without capital gains?

Mr Schwartz: A rate of return, the way I understand it, is a return on your investment. Your original investment or your equity? You see, in the last year the values of buildings -- I have read a lot of statistics, between 25% and 40% in that range -- have dropped. You are talking about rate of return. People who thought they had and did actually have 25% equity in the building -- let's say they put 25% down -- if the building dropped by 25%, they have nothing. Their entire equity has been wiped out. There is no activity right now. The only buildings that change hands are under power of sale.

The Chair: I wish we could allow you more time, but we are unable to. Thank you for your presentation.

Ms Poole: Very briefly, could I just ask the ministry staff, when they are preparing for the next time they come before us, if they could perhaps take a look at subsection 113(7) and define for us what they mean by "occupier," because this may eliminate a lot of concerns that this gentleman has just raised before our committee, if "occupier" means landlord and tenant.

The Chair: Do we have ministry staff here who could do that for us, please? Thank you very much.

KENSINGTON-BELLWOODS COMMUNITY LEGAL SERVICES

The Chair: The next presenter is Kensington-Bellwoods Community Legal Services.

You have experience before our committee. We are going to follow the same procedure.

Ms Pereira: I would just like to add to what Ms Poole has already said, that Mr Schwartz indicated or seemed to believe that no search warrant had to be issued before a search took place. Section 114 in fact requires that a search warrant be had before the search takes place, and that before a justice of the peace issues a search warrant, he or she must have reasonable and probable grounds to believe that an offence has been committed and that entering and exercising search and seizure power will afford evidence as to the commission of the offence, which is the same standard that other suspected offenders under the Criminal Code or provincial offences legislation have to meet. So it is not treating landlords any differently, in our view.

Kensington-Bellwoods Community Legal Services is a community legal aid clinic serving low-income tenants who live in downtown Toronto in the geographic area defined by Ossington Avenue, Spadina, Bloor and Lakeshore Boulevard. We have represented tenants who live in buildings with rental units of between two and 230 rental units, so we have a wide range of experience working with tenants.

Our office supports the government's attempt to control rent increases but laments the fact that Bill 121 will not necessarily ensure the affordability of rental housing in Ontario.

In our view, the main objective of any rent control legislation must be the preservation of existing affordable housing stock. Given that Bill 121 maintains a cost pass-through system, albeit a modified one as compared with the RRRA, we believe that it will not achieve the objective of the preservation of affordable rental housing stock in Toronto, where most of our experience lies. In Toronto, skyrocketing rents have led to overcrowding -- I have a number of tenants who live as families of four to six in bachelor and one-bedroom apartments -- tenants living in substandard or illegal units and tenants paying substantially more than 25% of their income towards their rent. This is because rents have escalated at a rate beyond the rates at which tenants incomes have been increasing. That means that affordability is becoming a thing of the past.

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Given that Bill 121 is still a cost pass-through system, it will allow rents to continue to increase at a rate, albeit a slower rate than before, that surpasses the rates at which low-income tenants' incomes are increasing -- at which social assistance rates are increasing for example. We applaud the elimination of the pass-through, however, of certain items, such as financial loss. Much of our experience with rents increase has been in the area of financial loss being passed through when buildings have been flipped.

I have some very specific suggestions and comments to make regarding Bill 121. One area I do not go into in my written submission is the issue of capital replacement reserves. However, the tenants we represent, given our experience, would support the idea of capital replacement reserves and regret the fact that Bill 121 does not in any way further the goal of establishing capital replacement reserves, which we believe is the only way to ensure that the capital needs of buildings, especially in Toronto, will be met in the long term. I am not going to go into that area; however, I would like to say that is an issue we feel very strongly about, an idea that we believe the tenants movement has for some time lobbied for and which we feel should be investigated further. Instead, we believe the government has chosen to simply modify the existing system, which is a betrayal of one of the many promises it made to tenants, and we regret that fact.

With respect to capital expenditures under Bill 121, we would demand that no increases for capital expenditures beyond the statutory guideline be allowed. The government said it is only 3%. However, it is not only 3%; it is 3% on top of the statutory guideline that would be allowed if justified by the landlord. It is our submission that the guideline increase is sufficient, that the government has to make a policy decision to allow only 2% of the guideline it has already designated as the tenants' share of capital expenditure cost. The government has to make a policy decision that this would be sufficient.

In the alternative that the government allows a 3% increase for capital expenditures above and beyond and statutory guideline increase, we submit that the landlord must be made accountable for capital expenditure money collected previously either under Bill 121 or the Residential Rent Regulation Act.

Clause 15(3)(a) and subsection 16(2) concern the issue of neglect and I just want to talk about neglect before I go back to this idea of accountability. These sections prohibit the rent officer from considering capital expenditures that became necessary as a result of neglect. However, neglect is, first of all, an undefined term which causes us some concern.

Second, Ministry of Housing officials have said in their informational pamphlets and during briefing around Bill 121 that the onus is on the landlord to prove there was no neglect. However, the legislation does not clearly place the onus of proof on the landlord. In sections 15 and 16, it only says, and I just have to read it to the committee, "A capital expenditure is not eligible if" -- this is clause 15(3)(a) -- "it became necessary as a result of neglect in maintaining the residential complex or a rental unit in it." This does not require the landlord to prove there was no neglect. In fact, the onus is on the tenant to prove there was no neglect before a capital expenditure will be disallowed.

Again, it is our position that the landlord is in the best position, with the fullest information, to prove whether or not he has been maintaining and taking care of his building, and consequently the onus of proof must be a legislative onus. It should be defined in the legislation as being on the landlord to prove there was no neglect before a capital expenditure is allowed. This can be done by way of providing receipts, showing regular maintenance or servicing has been performed on elevators, for example. There are a variety of ways in which proof can be required from the landlord. However, the onus of proof must be explicitly imposed on the landlord before a capital expenditure cost should be allowed. Whether or not neglect is a factor, landlords should still be accountable to tenants for that percentage of tenants' rent increases allowed to them specifically for the purpose of capital or repairs in the statutory guideline increase. The government has said that, of the statutory guideline increase, 2% will be allotted for capital expenditures; 2% is considered to be required on an ongoing basis. The government has said 2% should be the tenant's share of the landlord's capital expenditure cost.

In that case, given that this is a tenant's share, it is our submission that tenants are entitled to expect that such revenue is used annually by the landlord for the purpose for which it was intended. We suggest a period of five years for which a landlord would have to account before being allowed a capital expenditure increase beyond and above the statutory guideline increase; that is, the landlord would have to prove that for the past five years he or she has used 2% per year on capital expenditure costs before being allowed an increase solely based on capital expenditures for the year in which he is applying. Even if the expense only occurred over a period of one year, it is our belief he should prove that in the previous five years he has been using the 2% he was given for capital expenditures, whether or not neglect is a factor.

We endorse the incorporation under applications to reduce the rent by tenants, sections 23 to 28. We endorse the incorporation of provisions 24 to 26 into the process which landlords undergo in order to apply for an increase above the guideline, that is, looking at whether there has been ongoing disrepair and lack of maintenance. However, Bill 121 limits the retroactivity of rent reductions in cases of disrepair or poor maintenance but does not do so in cases where a service has been discontinued or a facility withdrawn, and we see no logical reason for such a distinction. These are sections 23 to 28.

In subsection 28(2), where an order is being made in respect of disrepair or poor maintenance, the retroactivity of the rent reduction only goes back to the date the application was filed, not to the date on which the disrepair commenced or the poor maintenance could be considered to have commenced. This creates, then, two parallel mechanisms by which tenants can request rent reductions: the section 96 application process and the Ontario Court (General Division), and the rent review process. However, the section 96 process in the Ontario Court allows tenants to seek rent abatements or rent reductions back to the date at which the disrepair commenced, whereas this system would only allow a rent reduction to be sought from the time of application to rent review services.

It is our concern that, should this committee decide to maintain the distinction between remedies awarded in these two forums, it would lead to tenants possibly not being able to seek a remedy in the Ontario Court, should they have first gone and sought a remedy in the rent review services or whatever it is called. It is our experience that the courts, having seen tenants achieve a certain level of rent abatement or rent reduction in the administrative tribunal setting, have believe the matter is already litigated, whether or not the remedies are the same, and have disallowed tenants from pursuing their remedies in the court system.

It is our demand that the retroactivity of rent reductions not be limited in cases of disrepair or poor maintenance, as they are not limited in cases where services are discontinued or facilities withdrawn. We see no logical reason for such a distinction, and we believe a factual finding can be made by the rent officer as to when the disrepair or poor maintenance began and that this is when the rent reduction should date from.

In applications by tenants under section 30 of Bill 121, Ministry of Housing officials, in a June 7 meeting I attended, stated that tenants would be allowed, under this section, to make an application for a declaration of the maximum legal rent alone. This has been an issue our office has litigated a number of times; that is, whether tenants can ask only for a declaration of the maximum legal rent and not for a repayment order. This is especially important in cases where, halfway through the proceedings, it is discovered that a repayment order would result, in the case of the old legislation, in a repayment of more than $3,000.

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The Chair: Time for questions, because you are rapidly running out of time.

Ms Pereira: Okay. I just wanted to make this one last point. Despite what Ministry of Housing officials have said, it is not clear under section 30 that tenants can make an application for an order for a declaration of the maximum legal rent alone. It is our office's experience that they should be able to do so; however, it is not clear that they can do so. Unless it is made explicit in this legislation, this will be an issue that again will have to be litigated at great time and expense.

Ms Harrington: First of all, I want to comment on your opening remarks about the problems faced by tenants here. I think all three parties realize that rent control is not the total answer to the solution. In fact, just today the other parties proposed looking at Ontario Housing Corp and various other things. I would like to let you know that the big picture of housing in Ontario includes the municipal non-profits, co-ops and all the various other options. They are part of the picture for those who cannot afford even any increase in their rent per month.

You talked about the capital reserve fund. That is something which is very difficult, as you know, because you need a buildup of funds. You need several years before you can even make that operational. That is part of the problem, and we have had people look into it.

The other concern that comes to my mind is the cost subsidy from one building to another. New buildings would subsidize older buildings, some tenants subsidizing other tenants. It is certainly a worthwhile thing to look into, but we do not have the answer yet.

Mr Turnbull: I agree with you that it certainly does not address the core affordability problem.

I am interested in your comments about the cost pass-through system. How would you fund repairs to a building if the landlord is already losing money? Do you object to the cost pass-through system?

Ms Pereira: Absolutely. I think there should be one increase and no further increases on top of the guideline.

Mr Turnbull: What happens if the landlord is losing money?

The Chair: I am sorry, we cannot have more than one question.

Ms Poole: He is a tough Chairman. That was not my question.

One area of your brief that you just did not have time to get to dealt with procedure and the right of a tenant or landlord to have a right of appeal. Under Bill 121, it is extremely limited and only to matters of law. You have made one suggestion, to at least have a panel of three. I was looking for the section.

Ms Pereira: If they request a hearing; that is right.

Ms Poole: You have only 15 days or something?

Ms Pereira: Yes. I did not put that in the brief, but I would like to add that. Given our experience, it should be that a hearing is automatic unless a tenant asks or a tenant and landlord both ask that a hearing not be held or is not necessary.

Ms Poole: So you would like it to be automatic.

Ms Pereira: There should be an automatic hearing.

LABOUR COUNCIL OF METROPOLITAN TORONTO AND YORK REGION

The Chair: We have next the Labour Council of Metropolitan Toronto and York Region. We will be following the same procedure, 15 minutes, and if you wish questions and answers you will have to reserve some time.

Ms Torney: I am Linda Torney, president of the labour council. With me today is Penny Bethke, the executive director of the Labour Council Development Foundation.

The Labour Council of Metropolitan Toronto and York Region represents more than 180,000 unionized workers in the greater Toronto area. Our labour council has had a long-standing concern with the creation and maintenance of affordable housing for our members, as people who both build and live in various types of housing. This concern led us in 1974 to establish the Labour Council Development Foundation, which is a non-profit resource group that develops and builds co-op and non-profit housing. I would like to thank the committee for the opportunity to appear before you today.

We are generally supportive of the initiatives which the current government has taken to address the housing needs of Ontario's residents through legislative changes, to protect tenants from high rent increases and to preserve and maintain a stock of affordable rental housing. Four laudable principles have been named as fundamental to Ontario's housing policy:

1. Access to safe, secure and affordable housing suitable to people's needs is a basic human right.

2. Housing is fundamental to individual and family wellbeing and to the quality of life in Ontario communities.

3. Housing contributes significantly to the prosperity and stability of Ontario's economy.

4. Responsibility for the provision of housing is shared among all levels of government and among all sectors of Ontario's economy and society.

To these principles, I would add the right of security of tenure. A rental home is not secure if rent increases are outstripping wage increases and if appropriate preventive and remedial maintenance is not performed in a timely way. Part of this equation has been recognized in the previous attempts by provincial governments to regulate rents. To a limited extent, previous rent review legislation provided consumer protection by mitigating the worst excesses of increases of the early 1970s.

The rent review system in place since 1976 has been based on a statutory guideline that was supposed to cover the ordinary operating expenses and a cost pass-through mechanism to deal with extraordinary capital expenditures and financing costs. Landlords could charge higher rents based on the guideline or apply for increases above the guideline based on documented and actual costs. This system presumed that moneys allocated for ongoing maintenance and capital replacements over time were actually spent on these areas.

This legislative and bureaucratic system has become increasingly technical and complex over time. This is largely because it attempts to marry the resolution to two distinct problems in one legislative package. Affordable rental housing is both an income problem and a rental housing supply problem. The price of producing housing in the greater Toronto area far exceeds the ability of the average industrial wage earner to afford the economic costs of the unit.

This simple fact has long been recognized in the provision of subsidies to non-profit housing projects to help them bridge the gap between market rents and economic rents. Both the federal and provincial governments have previously offered various grant and tax incentives to private developers in order to encourage investment in rental housing. But as Ontario's stock of rental housing ages and deteriorates from the lack of proper maintenance, such investors have chosen to put their capital somewhere else, where better returns are to be found. Such choices are not available to the thousands of families and individuals who are faced with permanent exclusion from the home ownership market. They must choose among the sacrifices they are prepared to make: Do they give up adequacy, affordability, community bonds, location or security of tenure?

The housing market is not like other investment markets. It is fitting that the provincial government intervenes to regulate rents if we consider that housing is a basic right. Government has a responsibility to set standards and regulate the practices of people who choose to make housing their sphere of business activity since they are choosing to carry on business activities in an area that affects people's right to housing.

The proposed legislation has addressed some of our concerns about affordability and about the longer-term condition of our rental housing stock, but there are some serious limitations in the proposals.

The first of these is the five-year exemption for new buildings. Rent review legislation has not stopped the construction of new rental housing. What has inhibited the construction of new rental housing is the high cost of producing such housing and the opportunities to make more money building luxury condominiums and office buildings during the recent boom. When buildings occupied after January 1, 1976, were exempted from rent review, the provincial and federal governments still had to provide grants and tax incentives to stimulate the construction of new rental units. When the condominium market took off and the grants were eliminated, the limited production of new rental housing dried up and was replaced by short-life rental housing in investor-owned condominium units.

In British Columbia there is also a problem with rental housing supply, particularly in the lower mainland. There is no rent control in BC, yet rental housing is still only produced with government financial incentives. Because of the gap between affordable market rents and economic rents, rent control is not a significant factor in determining the production of rental housing supply. The high cost of creating the housing is the culprit, and a moratorium on the first five years for new buildings will do nothing to abate this cost.

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Government funds should be used to help those who cannot compete in the private market. The private sector has demonstrated that it can serve very well the needs of those who can afford home ownership. The public sector should concentrate its efforts on the areas where people cannot afford what the private sector produces. The provincial government's initiatives in this year's budget to create an additional 10,000 units of co-op and non-profit housing will do far more to create a permanent stock of affordable rental housing and more than 22,000 person-years of work in the construction industry than any exemption on new buildings could hope to achieve.

Second, however, we do support the exemption from rent control for a form of housing like non-profit co-operatives, which are required to review their housing charges annually with their resident membership. As a labour movement, we believe strongly in the principle of user consultation. For this reason, we would like to see improvements to the rent-setting process in other forms of non-profit housing where tenants currently have no input in the budget-setting and rent-setting processes and no grounds for appeal of large rent increases.

Third, any intervention by the government in the housing market has obvious job creation and job maintenance implications. We support the government's initiatives to fund the creation of a non-profit rental stock to deal with Ontario's growing needs in the next decade. We want to see stronger mechanisms to ensure that moneys which are allocated in rent increases for ongoing maintenance and capital expenditures are actually spent on these items. A consistent plan for preventive and remedial maintenance will create a steady stream of employment for the building maintenance industry. We would like to put an end to a boom-and-bust cycle of work that is dictated by the cynical neglect of buildings until extraordinary measures are required.

Since such extraordinary costs are still passed through to the tenants, we recommend that landlords be required to account for the appropriate use of the guideline increases for the previous seven years when applying for an extraordinary increase. If landlords are receiving a 2% increase per year for capital expenditures, they must demonstrate that they have been reasonably spending those funds on capital improvements all along. In addition, increases for extraordinary capital expenditures should be deleted at the end of the life cycle of the improvement. This will ensure that the next required capital expenditure occurs on a timely basis and is not delayed in order to take advantage of a windfall profit for costs no longer being borne.

Fourth, reliance on the use of municipal inspections to enforce maintenance standards has been a hit-and-miss approach for tenant protection in the past. It does not address the ability of tenants to have local bylaws passed and enforced or work orders issued. Consistent deadlines for municipal inspections and the issuance of compliance orders need to be established for all Ontario municipalities. This would ensure that the issuance of a rent penalty order had an effect when the problem occurred, rather than long after the tenant's comfort and safety had been undermined. Such provisions would ensure that the buildings are being properly maintained on an annual basis, jobs are created and maintained in the construction industry and tenants do not pay twice for the same level of service.

We wholeheartedly support the goals the proposed legislation is intended to serve, but we are concerned that many problems remain with the proposed means of achieving those goals. Rent control is only one tool in dealing with the the dilemmas of affordability, access, adequacy and economics posed by the housing market today. Permitting the conversion of existing buildings to co-operatives should also be part of the solutions which the government considers priorities. Many families have had to make rental accommodation their permanent home when they are faced with house prices that even a unionized wage earner cannot afford in the foreseeable future. The provincial government's intervention in the regulation of rental property through rent control and in the supply of affordable housing through its co-op and non-profit programs are measures which will make housing units into secure homes for working people across the province. Thank you very much.

Ms Poole: Thank you for your presentation today. As representatives of labour, many of the people you represent would be in the construction industry and would be very dependent not only on new construction but also on rehabilitation of buildings. We have had representations from the Concrete Restoration Association of Ontario. I suppose many of the people who work in that sector would be the people you represent.

Have you looked at the issue of the capital increase -- you have made some references to it in here -- the 3% cap on capital expenditures and whether there is enough incentive in here for companies, for landlords, to want to do this type of work? It is obviously going to have an impact on the people you represent.

Ms Torney: I am going to do a partial answer to that and then I am going to ask Penny to respond. In our discussions with the construction industry, its primary concern has been -- these are members of the unions that we represent -- the boom-and-bust cycle. I think we need to address that boom-and-bust cycle very solidly. That is why we think the maintenance issue is important.

With regard to the 3%, maybe Penny would like to respond to that one.

Ms Bethke: Yes, it is difficult. I speak from experience in the co-operative and non-profit sector where we develop replacement reserves, and it has often occurred. Fifteen years ago, CMHC allowed a 2% per annum replacement reserve expenditure, the blunt theory being that the building had a life cycle of 50 years, and so if you put away 2% a year, you would be covering off all of the building components after 50 years. Actually, we have learned a great deal in the last 15 years in that process and learned that you actually have to do costing out of the life cycle of specific building items. They will have different lifespans and may in fact have a usable life after the official life-cycle cost. I think, as with any across-the-board blunt instrument, 3% is probably inadequate, but I could not tell you specifically how it is inadequate. It would probably have something to do with the building form, whether it is an elevatored apartment building or a walk-up building.

Ms Poole: The age of the building.

Ms Bethke: The age of the building, a whole complex of factors.

Mr Winninger: You have argued that quite possibly a five-year exemption from rent control will not necessarily act as a stimulus for new construction. That may be true, but do you not also see a benefit in a five-year exemption in that it will allow rents to settle in? For example, a landlord might be able to rent the first few units at an inflated rate, but once the effect of competition in the market sets in, it might bring those rents down a bit, so that instead of tenants being subject to a statutory increase right from the outset on what may be an inflated level of rent, once rents have settled in, there might actually be a benefit to the tenant in that process.

The Chair: We have time for a short answer.

Ms Torney: I will try to make it short. I see two problems with that. First, that presumes there are enough people these days, certainly in our territory, who can afford to pay a market rent. This is absolutely not true. Second, it presumes that the rental charged is the sole factor in governing how prices are set. In this city speculation on land is your major factor. I do not think you can deal with this question simply through rent control. It is only a part of it. But to penalize tenants is not the answer. You have also got to look at things like speculation tax.

Mr Tilson: Given that 75% of the units are 20 years or older, I would like to hear your comments as to what recommendations you have to this government to encourage landlords to make capital improvements.

Ms Bethke: From the point of view that there is an existing affordable housing stock out there that is for rent, there have been several major reports done about the state of its ongoing deterioration. There were some buildings built in the last 20 to 30 years that were not built to last for 50 years or more. They were built to last for considerably less than that. The difficulty becomes that it does require a conscious investment in repairing and maintaining those properties and that, in the long run, is probably a less expensive solution to this government than constantly having to look at ways of creating a new supply. If we are constantly losing good-quality housing out from under our feet, it does not matter how many thousands of units the Ontario government develops every year; we will be losing a good stock of existing housing on the other side.

The difficulty becomes, in part, that you have to convince the people who choose to practise their business in this field that there is a limited return on their investment. If they think some of the gains that have been made in the past 20 years can continue, the government, in effect, has to indicate that they are wrong, that there has to be an investment back in the housing of the kind of rent increases the tenants have experienced in that time, and as far as they are concerned, they have not seen the investments back in the housing.

Mr Tilson: The difficulty is of course that landlord after landlord is simply saying: "With this legislation, we're not going to make any capital improvements, because we can't. We don't have the financial resources to do it." That's why the question was asked as to specifically what encouragement could be given to landlords to make these capital improvements.

The Chair: Thank you. I think that was a repeat of the first question. There was a long answer and our time has expired. I wish I could give you more time. Thank you for your presentation today.

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URBAN DEVELOPMENT INSTITUTE OF ONTARIO

The Chair: Next is the Urban Development Institute of Ontario. Good afternoon. We will be following the same procedure, 15 minutes, and you will have to reserve time for questions and answers.

Mr Kells: It is a pleasure for UDI Ontario to be here one more time. I will not take much of the 15 minutes, except to introduce my colleagues. We find it a little difficult when you represent 80,000-plus units to try and get all your concerns wrapped up in a 15-minute brief, but with the help of our planning co-op students and the expertise that is involved in UDI's apartment group, we have done just that.

I am Morley Kells. With me is Ephry Merkur, chairman of our Bill 121 subcommittee, and also a veteran landlord in the city of Toronto. Making our presentation today one more time is Yehudi Hendler, also chairman of our apartment group.

Mr Hendler: The Urban Development Institute of Ontario is a non-profit organization which has represented the land and development industry since its founding in 1957. UDI currently has approximately 225 member companies. Our apartment group members are the larger, long-term landlords in Ontario, the bedrock of the rental industry in this province, and account for over 80,000 rental units in Ontario. Our goal as long-term landlords is to provide quality accommodation at competitive prices to our customers, the tenants of Ontario.

As the representative of these long-term landlords, UDI welcomes the opportunity to address the standing committee on general government concerning Bill 121, the Rent Control Act, 1991.

Our industry, mostly Canadian-owned, has always reinvested its cash flows back into the province. As a result of rent controls, this has slowed significantly.

It is important to emphasize that as long-term and stable landlords, we look at our buildings as an ongoing business. In order for our business to be viable over the long term, we have to provide quality accommodation at competitive prices and realize a reasonable rate of return on our investment. The former is necessary to achieve the latter, and without achieving the latter, investors will direct their resources to other sectors of the economy or to other regions where reasonable rates of return may be found. The Rent Control Act, 1991, if passed as it now stands, will have serious effects on our ability to continue to provide quality accommodation.

While we have many specific concerns with Bill 121, only a few of the aspects of the legislation which we see as most problematic will be addressed here.

The first issue we address is Bill 4, which enacted a retroactive moratorium on rent increases over the statutory guideline for capital expenditures. The landlords who have pending capital applications as of October 1, 1990, have been trapped by Bill 4. These landlords acted within the spirit and letter of the law when they made expenditures for repairs on their properties, expecting to recover this investment. The moratorium, in changing the law after the fact, is grossly unjust, especially in its retroactivity.

Subsection 16(1) of Bill 121 subjects applications on capital expenditures made between January 1, 1990, and June 6, 1991, to a 3% cap on rent increases over the statutory guideline, while subsection 16(2) imposes new conditions regarding neglect in maintenance. This is totally unfair. In order to treat landlords fairly, UDI's first recommendation is to administer rent applications for rent increases according to the legislation which was law at the time capital expenditures were made.

Also blatantly unfair is that the landlords who have pending capital applications for work substantially completed in late 1989 will not be able to recover any costs whatsoever. UDI's second recommendation to the committee is that clause 16(1)(a) be amended to include work in relation to capital expenditures that was substantially completed in the autumn and winter of 1989.

Also landlords are uncertain as to what rules will be applied to applications for capital cost pass-through for work substantially completed between June 7, 1991 and six months prior to the third reading of Bill 121. Bill 121 is not at all clear on this matter. UDI therefore recommends that section 16 be modified to clarify the treatment of applications to rent review for capital work which was substantially completed on or after June 7, 1991.

The adoption and incorporation of these three recommendations will help to restore some confidence in the stability of the economic and legal environment and will indicate that the NDP government actually does have a commitment to the fair treatment of all the people of Ontario.

UDI has concern for both elements of the statutory guideline increase. First, the operating cost component. Section 12 of Bill 121 allocates 50% of the rent control index to be incorporated into the annual guideline for rent increases for buildings of seven units or more. This reduction in the operating cost portion of the guideline from previous legislation translates into a reduced cash flow to building owners and operating costs that will become an increasingly large portion of their total guideline increase, cutting into funds ostensibly allocated for routine capital expenditures.

Mr Cooke, when he introduced Bill 121 on June 6, 1991, indicated that this 50% allocation was intended to reflect the inflationary costs of running a rental property. We submit that it fails to do so. Simply put, 50% of the BOCI is not enough. We hear from our members, whose buildings are mostly pre-1975, that most of their buildings run at about 60% or more of the BOCI formula. Information compiled by Ernst and Young for the Fair Rental Policy Organization of Ontario confirms that 50% of the BOCI is inadequate.

UDI recommends that the allocation for the operating cost portion of the statutory guideline for large complexes enunciated in subsection 12(1) be raised to two thirds of the rent control index as per the RRRA. This point is especially important because of the effects of subsection 15(2) and its more stringent definitions of allowable capital, ie, some capital items must now be reclassified as maintenance, resulting in increased operating costs.

The second portion of the statutory guideline under Bill 121 is the 2% provision for capital costs. There are two types of capital costs. One is the replacement of the existing assets, ie, structural, mechanical, electric, etc; the other is the unforeseen costs that are required as a result of new government legislation and are not within the control of landlords, ie, fire code changes requiring expensive retrofits, recent changes to the regulations regarding elevating devices and window cleaning, and the new Occupational Health and Safety Act.

UDI recommends that the amortized costs of these types of capital expenditures, ie, those unforeseen costs legislated by various governments, be allowed to be passed through in rents over and above any guideline increase, and that they be exempt from any cap over the guideline increases.

Section 13 of the bill treats extraordinary operating costs and large capital expenditures as one and the same. Extraordinary operating cost increases such as hydro and taxes are beyond the landlord's control and can have a great effect on the planning of major necessary capital expenditures. These increases will result in loss of revenue required for capital expenditure, piecemeal fashion of capital work and tenant inconvenience. UDI therefore recommends that extraordinary cost increases not be subject to the cap on increases over the statutory guideline.

The 2% reduction in the amount allowed with respect to the guideline increase as enunciated in subsections 20(3) and (4) and 22(5) is another concern, and we recommend that the provisions in these sections be deleted from Bill 121. Also, UDI recommends that subsection 21(5) be amended to allow landlords for large buildings to carry forward rent increases over the statutory guideline for a more appropriate longer period, and without the reduction of 2% on the carry-forward.

UDI members have expressed much concern over the issue of maintenance enforcement rules as manifested in sections 23 to 25 in Bill 121. These draconian sections will unfairly penalize all landlords for the actions of only a few. We at UDI believe that reduced rents for reduced services is fair. However, it is grossly unfair to allow for reduced rents due to inadequate maintenance, as this concept is subjective and not clearly defined. Provisions allowing for rent reductions based on inadequate maintenance will increase the likeliness of frivolous, vexatious and nuisance actions by tenants.

UDI recommends that Bill 121 allow for reduction in rents only if a decline in maintenance is established, and that section 25, dealing with inadequate maintenance, be deleted from the legislation. We have no objection to protecting tenants from bad landlords -- and make no mistake; there are some -- but there are also bad tenants. It is only fair that landlords also be protected. Claims against landlords should be legitimate, and vexatious and frivolous claims must be discouraged before they go to rent control proceedings.

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Currently work orders are issued automatically, even before the time period for dealing with problems has started. There needs to be a buffer period to allow landlords to do repairs before receiving work orders for them. Also, some types of work cannot be done immediately. For example, work to stop penetration of water into a unit cannot be done during the winter months and must wait until warmer weather.

UDI recommends that landlords be informed in writing by tenants about maintenance and repair problems and given at least 30 days to complete the work before a work order may be issued, that time periods for completing work be revised to differentiate between work which may be done immediately and work which requires a longer period of time to be accomplished, and that the rent control inspectors contact both parties to determine the status of the complaint before issuing any work order.

In addition to the aforementioned issues, the provisions for regulations are also problematic. Section 125 of Bill 121 includes provisions for the Lieutenant Governor in Council to make prescribed regulations. This means that many of the rules of rent control can be changed without recourse to the Legislature. Section 125 creates uncertainty for landlords, with too much authority and direction in the hands of bureaucrats. UDI recommends that further and extensive consultation with the industry be undertaken in this matter to ensure that regulations remain practical, allowing the system to operate.

UDI also has concerns with regard to the appointment of rent control inspectors under section 112. This section fails to place any sort of requirement on the selection of these inspectors. UDI recommends that section 112 be amended to include a subsection which guarantees that rent control inspectors have a background in the rental accommodation industry, minimum university education and a thorough knowledge of the building codes and be cognizant of repair and maintenance issues, procedures and problems, and to include a subsection requiring the ministry to publish a job description for rent control inspectors which is to be used as the basis for hiring and which details the duties and responsibilities of the rent control inspector.

Once again, we would like to thank the committee for hearing this presentation. We would be glad to answer your questions now and we offer to meet with any individual or group of members on the committee to discuss the industry's concerns regarding Bill 121. One final point to keep in mind: As long-term owners of apartment buildings who have been in the industry in some cases for generations, we are interested and concerned about the safety and security of our tenants. We are also concerned about the livelihoods of the trades who work together with us to repair and maintain our buildings. Bill 121 as it now stands threatens to harm the trades and will impact upon our tenants by restricting maintenance and repairs. We hope you take our recommendations to heart.

Mr Tilson: Dealing specifically with sections 12 and 13, which you have referred to, and I guess really section 13, many landlord groups have said that instead of the guidelines that are being suggested we deal with the age of the building as being a guide. Do you have any thoughts or recommendations to this committee? No one has really defined what that means. What is an old building?

Mr Hendler: I guess the easiest way to define an old building is pre-1976 and post-1976. Probably the early 1960s, late 1960s, early 1970s is when a majority of the buildings were built. Those that were built post-1976 did not come into rent controls and many landlords, including ourselves, went to rent review on the new basis, under the new act, and there is a spread of anywhere from $200 to $500 between current rents and maximum rents. So in buildings where the maximum rents occur, I do not see where any of this is going to help us, because I do not see us reaching those rents for another 20 years, maybe longer. In the current buildings they need the moneys, dollars and cents, to put these buildings back into shape.

Mr Tilson: On another issue, it does not appear that we are going to get definitions prior to clause-by-clause and probably not even the passing of this bill. I would encourage any groups, whether it be landlords or tenants, to put forward in written form definitions that they feel should be considered for this legislation.

Ms Poole: Perhaps I could address my question to Mr Merkur, since he owns buildings in my riding, and I must say that they are extremely well maintained and the tenants seem to enjoy living there. My question is about maintenance repairs and maintenance enforcement rules. What do you see landlords doing if the rent penalties and if the work order provisions that are in Bill 121 go through in their current form?

Mr Merkur: I think landlords will have to comply. If you have the enforcement provisions, you can always make people comply one way or the other. One of the things we are seeing is that as soon as you get a work order, even on a minor thing, for some reason rent control is issuing an order the same day, so there seems to be a linkup of computers and there seems to be a breakdown. It is not supposed to work that way, but we are already seeing sort of an automatic -- even before the time limits are up, etc. But it is going to be very difficult, because building safety is very important to the members of our industry and the 3% just is not enough to handle the requirements. I am sure if you make enough rules you can force everybody, but it is going to be very hard because it is going to be hard to finance it. It is going to be hard to work it and 3% just does not work. We have looked at it.

Ms Poole: You have mentioned one example where work has to be done at a seasonal time, so that a work order could be issued and you simply could not get to it for another three or four months. Can you think of other examples where this legislation is unduly punitive?

Mr Merkur: Yes, in certain cases you get a work order -- you are tying in the provincial regulations with the municipal -- for a garage slab that might take two or three years to do, that might involve $2 million or $3 million. The work order would only give you 30 days to do it. The municipal inspectors know that it will, and as long as you are progressing with the job they will co-operate with you. But at this point, under the new act, you would be in terrific problems because at the end of 30 days you would be in violation. All the penalty clauses in the act would fall in on you. So it just would make no sense whatsoever. You could have the best intentions but it is just impossible. If you have a large garage slab, it is physically impossible to do it in less than a certain period of time. The work order still might say 30 days.

Mr Winninger: On page 5 UDI recommends that subsection 21(5) be amended to allow landlords of large buildings to carry forward rent increases over the statutory time line for "a more appropriate longer period and without the reduction of 2% on the carry-forward."

Given that a landlord can pass through up to 10% of capital costs over the first two years, and that increase then becomes built into the basic rent and in turn indexed over successive years, how many successive years of increases do you really need beyond the two that the proposed legislation would give you for the larger building? Why would you not want to reduce it by the 2% which is built into the normal statutory increase for capital repairs?

Mr Hendler: If you have a major capital expenditure such as an underground garage, it can cost $3 million or $4 million to do. Maybe you are going to do other structural work. We are not talking about fancy lobbies and things like that; we are talking strictly structural. You have already cut out a lot of items in the capital expenditure items that we can claim as landlords, so you have already taken care of that and the 2% is supposed to cover all those items. If you do 10%, you are only getting 6% because you are getting less 2% and 2%, so you are really only getting 6%. If you were to take 2% in the year that you do it, and if you look at even your own rent review process, it shows that the average rent increase was about 15%, or under 15% for the majority of buildings, you would take, let's say, three years with a 2% reduction, and if you got 15%, then you have capped it at 15% less 2%, so you have 13% pass-through. Then you have your costs no longer borne.

The Chair: Okay, thank you. I wish I could give more time to the presenters, but I am not able to.

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KAY GARDNER,
MICHAEL WALKER

The Chair: The next presenter is Kay Gardner. We will be following the same procedure, 15 minutes and you can reserve some time for questions and answers.

Ms Gardner: I have with me Councillor Michael Walker, a colleague from an adjoining ward, ward 16 of the city of Toronto, who also endorses the comments I am about to make.

I wish to thank you for this opportunity to speak on Bill 121, the new rent review legislation. I believe what I will have to say will accurately reflect the views and aspirations of almost every tenant in my ward, ward 15, and Councillor Walker's ward also.

Exactly one year ago yesterday, on August 18, 1990, the New Democratic Party issued its election manifesto. It was entitled An Agenda for People. Under the heading "Rent Control," the agenda stated:

"New Democrats would bring in rent control. That means one increase a year based on inflation. There would be no extra bonuses to landlords for capital or financing costs. It's simple, it's fair, and it avoids the bureaucracy which has frustrated both tenants and small landlords."

This was not a rash promise made by a candidate in the heat of an election battle. It was a political party's carefully considered policy statement. It was a clear, unambiguous and solemn pledge made to the tenants of Ontario. It promised one increase a year based on inflation with no extra bonuses to landlords. Tenants had every reason to expect it to be honoured.

Instead, the promise was broken. Bill 121 does not embody the rent control system outlined and promised in An Agenda for People, not by a long shot. Yes, it is an improvement over all past rent review legislation and tenants do appreciate that, but it certainly does not protect tenants from increases above the rate of inflation. It does not honour the promise so clearly made that there would be no extra bonuses for landlords.

Before dwelling on the negative features, let me recognize two welcome improvements in Bill 121. The most important of these is that at last the financial loss provision has been killed. This is the provision that encouraged speculators to flip the buildings and force tenants to pay the mortgage costs. I have been campaigning with Councillor Walker against this ripoff since long before the Cadillac Fairview scandal made it notorious.

When I appeared before your committee in support of Bill 4, the rent moratorium, I described the case of a run-down building in my ward. A rent review order for the building stated, "The financial loss of $193,896 is due to increased financing costs resulting from a purchase of the residential complex." I described the plight of an elderly couple whose rent had increased from $780 a month to $1,034 a month because of three financial loss increases of 5%, plus the guideline.

I trust this prohibition will not be tampered with before Bill 121 becomes law.

Another positive feature of Bill 121 is that it will allow tenants to challenge a rent increase or to apply for a rent reduction on the grounds of poor maintenance. How much bureaucratic wrangling this will take remains to be seen.

In June, Ontario's largest and most respected tenants' organization, the Federation of Metro Tenants' Associations, said, "The government's new rent legislation is a big disappointment," and so it is.

The worst feature is that rent increases for capital expenditures have not been eliminated. The agenda clearly did promise no extra bonuses for capital costs. In spite of this, Bill 121 does allow for an extra bonus of 3% a year for capital costs. This means that if the guideline is 5.4%, landlords may obtain rent increases of 8.4% a year, and it is built into the rents for ever.

The Metro tenants' federation has said, "Rent increases above the rate of inflation are to be the norm under Bill 121." This is rent review. It is not rent control. The impoverishment of tenants, young and old, will continue, creating serious social consequences.

Last December, a report from the city of Toronto's commissioner of planning quoted from a study made in 1986 which revealed that 68,600 tenant households in the city of Toronto faced affordability problems and that the situation today was relatively worse, which means they really cannot afford to pay their rent. The tenants were in fact spending more than 25% of their income on rent. Some poor people are paying 40%, 50% and even 75% of their income just to keep a roof over their heads. And people wonder why, in this rich society, we must have food banks and why more and more people are forced to use them.

I appeal to this committee to recommend to the government that it enact its original proposal for one increase a year based on inflation. After all, the income of tenants does not keep up with the inflation rate, let alone with rent increases of 8.5% a year.

It is with a heavy heart that I make these comments. I and tenants I represent have worked for 16 years to achieve real rent control and we believed it to be within our grasp. But alas, the landlord lobby is rich and powerful and it has shattered our hopes. I would like to say that I believe our Minister of Housing was spooked by the landlords.

The original proposal for rent control limiting increases to the rate of inflation has been unanimously endorsed by Toronto city council. At its meeting of May 27 and May 28, 1991, city council adopted a comprehensive report on the government's green paper on rent legislation prepared by me and Councillor Michael Walker.

Here is the most important recommendation adopted by city council, which reads, "That council reaffirm its position on rent control in Ontario; that is, that there should be one fixed annual increase based on the rate of inflation, with no exceptions, and request the Minister of Housing to honour the NDP pre-election promise of `one increase based on inflation' when drafting the new rent control law for Ontario."

I would appeal to the committee, and through you to the Premier and the Minister of Housing, not to approve Bill 121 in its present form. Justice demands a better, a fair deal for tenants who are being impoverished by rent increases they cannot afford. Fairness demands that a rent control law as defined in An Agenda for People be enacted. The agenda itself said of its proposal, "It is fair." Yes, it was fair in August 1990. It is still fair a year later in August 1991.

The Chair: Thank you, Councillor Gardner. Councillor Walker, do you have anything you might want to add at this point, or do you want to leave the time for questions?

Mr Walker: Just briefly, the other two portions of the city council resolution Councillor Gardner referred to were, "that council request the Minister of Housing to impose heavy fines on landlords who are found guilty of failure to meet legal maintenance standards and the Residential Rental Standards Board should be empowered to impose forfeiture of a rent increase, not merely suspension, as now is the case"; and, "That council urge the Minister of Housing to consider the establishment of a capital reserve fund as a possible solution to the capital expenditure problem, such a reserve to be funded by the landlords out of the guideline increase and by other means and not from any extra charge imposed on tenants."

Councillor Gardner and I suggested among ourselves that the deposit is an instant source of those funds, the deposit of the first and last months, and that this is a way to give a shot in the arm to the argument that the reserve fund will take time to build up, and in the interim, what are we going to do?

Councillor Gardner said it all. There should be a portion of everybody's monthly rent that is put back into the building to keep it up. That is what you and I do if we own a home. A lot of landlords do live within the guideline and maintain their buildings. There is no reason why all of them cannot.

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The Chair: We have time for one question each.

Ms Harrington: I thank Councillor Gardner and Councillor Walker for coming, and we certainly appreciate the resolution of the city of Toronto. It is going to help us.

First of all, I must say that this is the best tenant protection we have ever had and we are struggling to make this a model for all of Canada or even all of the world, that a system here will work. It is going to be very difficult and we need everybody's help to make it work.

I would like to tell you that during our consultation process, which has taken a good part of the last year, we have listened to a lot of people, and what we have come to see as the reality, not just in Toronto but across the province, is that there are these large buildings which are 20 to 30 years old and need major repairs. This is something we have had to come to grips with, which of course is the difficulty of the pass-through and the capital cost involved in that.

I would like to say that rent control is not the whole answer to the problem. It is a partial answer. We have to look at all the options, such as the options you have proposed here, the capital reserve fund and using the money that you have, the first and last months' rent, in that kind of system.

I would like to finally say that I see a problem, and that is that this legislation is on top of previous legislation which was very unfair and the whole system was askew. There are very low rents; there are very high rents. This has led to a real difficulty for us. We cannot go and right the sins of the past.

Ms Gardner: I would just like to know where the low rents are. A lot of people ask.

Mr Tilson: Ms Gardner, you referred to a building on Eglinton Avenue, and you did that on Bill 4 as well.

Ms Gardner: Yes.

Mr Tilson: My understanding is that as a result of actions taken by you and some other councillors, rent at that building doubled from what it was before. I guess my question is, given the number of tenants around this province who cannot afford any increase, what recommendations do you have to this government with respect to those individuals?

Ms Gardner: I want to comment on your first comment that due to something that we have done, the rents in those buildings have doubled. Actually it was not what we had done. It was because the building had flipped every year, and every year the tenants were --

Mr Turnbull: Not true.

Ms Gardner: You must not be thinking of the same building.

Mr Turnbull: Ben Axelrod owned it until the city --

Ms Gardner: I am not talking about the Axelrod buildings; I am talking about entirely --

The Chair: Order, please.

Ms Gardner: The Axelrod buildings are history. They are owned by the city of Toronto. I am talking about a private rental building.

The Chair: Order. The question has been put and we have had an answer. We are not going to debate the answer.

Mr Walker: That's a social housing project. They are rent-geared-to-income.

Ms Gardner: Eighty per cent of the rents in the Axelrod buildings are geared to income.

The Chair: Order. Thank you for your co-operation.

Ms Gardner: That is not the building I am talking about at all.

Mr Brown: I think you put very well the disgust people have with politicians who make cheap election promises which they seem to have no wish to fulfil. My question for you, though, really relates to your responsibilities as municipal councillors or aldermen, and that is, with regard to Cityhome, do you think it should be subject to rent control or rent review or whatever you want to call this beast, and if it is not, do you expect that the city of Toronto should undertake its own form of rent control if that were available through provincial legislation?

Mr Walker: Excuse me; 80% of the units in Cityhome are rent-geared-to-income. The others are market rents. It is under the legislation that is imposed.

Ms Gardner: By the province.

Mr Walker: By the province and the federal government. There are restrictions upon that. I notice the submission from the labour council basically supports non-profit co-ops being exempt from rent review.

Mr Brown: But the question is, should they be subject to rent control?

Ms Gardner: They reflect the market rents in the neighbourhood.

Mr Walker: The low end of the market rents.

Ms Gardner: Yes.

Mr Brown: So they should be subject to Bill 121.

Mr Walker: If you control the market rents in the neighbourhood, you will in effect be controlling the market rents -- only the market rent units -- in Cityhome projects because they are the only ones affected. All the others have a subsidy.

Mr Brown: But should they be subject to Bill 121, the same as everybody else?

Mr Walker: Ideally, they should be, yes.

The Chair: Thank you for your presentation. I wish we had more time.

80 ST CLAIR AVENUE EAST TENANTS ASSOCIATION

The Chair: The next presenter is 80 St Clair Avenue East Tenants Association.

Mr MacKenzie: I am a little startled by the timing. I thought you were running a touch late. I thought I was scheduled for 4 o'clock, but I am quite prepared.

The Chair: No, we are on schedule. We are efficient. Just relax. You have 15 minutes and you can reserve some time for questions and answers.

Mr MacKenzie: I will do the very best I can. There was material to be distributed. I assume that has been or is being done.

My name is Ken MacKenzie, as you gather. I have been the chairman of the various subcommittees that have been fighting a rent increase since 1986, which we won and finally lost. The gentleman with me is one of the tenants in the building, Mr Max Rhodius. However, I will be doing the talking and answering the questions. I will be reading the first part. The reason I wanted you to have it is because there are references to appendices. I gave it to the clerk. I do not know what happened.

Mr Brown: It is coming.

Mr MacKenzie: This submission -- you will notice it is called Unfinished Business -- deals with known inequities which have not been resolved by Bill 4 or Bill 121. It has been prepared in the hope that the committee members will consider it carefully, realize it illustrates a situation that is unfortunately not only quite common but prevalent, and then take the necessary steps to prevent an obvious injustice both in this particular case and the many similar ones.

First, the background: 80 St Clair Avenue East is a typical building of 307 suites built in 1970. It had a perfectly normal repair problem. In 1985 to 1987, extensive repairs were carried out to correct corrosion problems in the underground parking garage. The total cost was very contentious through the years but finally set at about $1 million. Financing was through a second mortgage with no direct investment whatever by the landlord.

Logically enough, the landlord applied for a rent increase to have the tenants pay their portion of the cost. There is a commercial parking operation which is not relevant to this submission. There was all sorts of controversy and prolonged delay for reasons which are of no consequence to this committee.

Eventually it got to rent review services in 1988. We did not at that time object and never have to this day objected to paying the costs once they were established, but we did point out vigorously in oral and written submissions to everybody we could reach at rent review services that the regulations, as they were written at that time, and it is almost as it is now, specifically called for capital expenditures to be "amortized over the anticipated useful life of the expenditure in the form of a blended equal annual payment of principal and interest." That is what the regulation said. This obviously meant the payments were to stop at the end of the statutory useful life and should not be subject to any increase during that period. It is simple English.

Rent review services ignored all submissions to all levels and issued an order without any stated reasons whatever -- just a bunch of numbers -- which in effect added an amount to the rents then being paid as the capital expenditure allowance. That amount was to be subject to all future percentage increases regardless of the useful life of the asset involved or the dollar amount of the capital expenditure involved. To add insult to injury, the amount was calculated by determining the amount that would have been appropriate if the regulation had been followed literally. This is quite obviously a grotesque absurdity, as you will see shortly.

The tenants appealed to the Rent Review Hearings Board, a very long and very stormy hearing until about 1:30, from 7 o'clock. Eventually, after about a year, the Rent Review Hearings Board released its decision. In an absolutely unique but commendably fair decision, the Rent Review Hearings Board ruled that the tenants were absolutely correct and that they did not have to pay more than once for the same repair, and that what they had to pay was to be limited to the cost of the repair. Common sense and fair play did triumph.

The landlord was not satisfied with having the tenants pay the entire applicable cost of the repair, but appealed to the Divisional Court to have the excess payments restored so that tenants would once again be compelled to pay vast sums of money for absolutely nothing, after having paid the cost of the repairs.

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At this point, we tried to get the Ministry of Housing to support the Rent Review Hearings Board order in and out of court but it did nothing and has never really explained its lack of support in this crucial and precedent-setting case. I doubt if very many of you even knew this case existed. The landlord unfortunately not only won the case in Divisional Court but the tenants have been ordered to pay legal costs. We will not be proceeding to the Court of Appeal. There is no point without the support of the Ministry of Housing or the Rent Review Hearings Board. This is a very sad end to a five-year fight for justice.

Very quickly, and this is where the appendices come in, the present situation: The tenants are now obligated to pay steadily increasing amounts for ever and ever rather than the actual cost of the repairs. This is discussed and illustrated in appendix A that follows the first yellow sheet. There is a three-column table first. The first column indicates the payments we are actually making each year, when you total them up and when you take the actual amounts for the first six years with the remaining years based on the average escalation for the first five increases. The second column is what the Rent Review Hearings Board said was absolutely required to pay the total cost of the repair. The third column, of course, is the excess. When you go down to years 11 and 12 the amortization period is over and the entire payments are excess payments.

If you flip to the next page you will then see the thing on a chart for those people who prefer graphs rather than columns. The red line represents the required amounts; the green line shows what is happening to the payments we are making -- very distressing. If the graph were properly drawn it would look worse because -- each little square is $5,000 -- we would have a page that would be much longer.

That is what is going on. Our case is not unique, it is one of hundreds of buildings with thousands of units involving millions of dollars for both necessary, in our case, and unnecessary capital expenditures, for many others. You all know about the marble lobbies and the golden taps and all that rubbish, and of course this is precisely why those things were done.

Every tenant or tenant group that has ever raised this issue has strenuously objected to paying any more than the actual cost of capital expenditures. No landlord group, to my knowledge, has ever asked publicly for anything more than cost recovery. You heard UDI which was sitting here earlier this afternoon talk about cost pass-through. I was here earlier when the Fair Rental Policy Organization of Ontario was here. I have their very large booklet, which I am sure you have. You will not have had time to digest it but in that massive submission of theirs -- I have been through that with a fine-tooth comb -- never once do they ask for more than the cost. Nobody is asking for more than cost.

Appendix C is the third one in. It is just an advertisement from last November from the Fair Rental Policy Organization and the only reason I have it in is, if you look down the lower left-hand corner, the part that is fairly badly smeared, it says, "If Mr Cooke announces a rent freeze which eliminates cost recovery" -- again landlords are asking for nothing but cost recovery; the tenants are saying let's have cost recovery. To make it even worse, no Ministry of Housing document dealing with annual increases or capital expenditures has ever pointed out the absurd overcharges that result from this process.

If you look in appendix D, the last one, you see The 1991 Rent Review Guideline. I will give a loonie to anyone who can read that and find anywhere in there, one sentence, one phrase, one word that would give a tenant a clue that the capital expenditure allowance built in is going to be increased by the amount of that. No formula will work if it is not applied to the proper base. If it applied to anything other than the operating cost, it is being improperly applied.

With all the uproar about marble lobbies and golden taps, there is no doubt whatever that the Ontario electorate believes the NDP is committed to correcting this nonsense. Our hope is that this promise will be kept. That is the unfinished business. It was not kept in Bill 4; it is not kept in Bill 121 as it sits.

Specific recommendations: I am not a lawyer; I am a chartered accountant. Therefore these are not phrased the way a lawyer would put them. You should put legislation in place to ensure that capital expenditure allowances specifically put into rents, under any legislation, past or present -- I want to get that old legislation if only because we were told by the courts that the reason we lost was that the Rent Review Hearings Board could not make a prospective decision. I do not want anyone telling you you cannot make a retroactive one because then where do I go? If anything is put in there as an increase and further increased through the years by the annual percentage increases, it be taken out of the rents at the later of 1991 -- that would catch all the ones that may have been completed by now -- or the year following the year in which the capital expenditure is finally fully recovered. If the landlord never gets the cost back, leave it in. Once it is back, take it out. What is wrong with that?

That is recommendation one. Recommendation two: Do one of two things in all new capital expenditure allowance calculations. One, you can either keep it separately and not have it subject to annual increases, or two, use some common sense on the initial calculation and bear the upcoming increases in mind when calculating the initial year.

This I have discussed in detail in appendix B where I have set out the appropriate mathematical formula for doing it and show -- I have taken a mythical $100,000 and shown what you do with an equal annual payment -- the dreadful thing that happens if you simply increase it annually, and then I have shown what would happen if you calculated the proper initial annual payment. Again, there is a graph accompanying that one. I am not going to go into it in detail, although of course I am prepared at any time after this to meet with any or all of you to go over any of the mathematics of the thing and explain it in further detail, but it works. What happens? The only assumption you have to make is for the average increase in rents per year for the useful life that is coming up. That is all you have to make. The rest of it is a given.You have the interest rate, whatever it costs to finance it, what has to be repaid and the number of years.

The only other thing I have brought with me and I am not going to go into this one because it would take a further point. People have mentioned that subsection 78(2) in the old Residential Rent Regulation Act, that talked about when you replaced an asset for the second time, when you had to repair it for the second time, you reduced the amount the landlord could even talk about as a capital expenditure allowance by the cost of the initial repair. Everybody thinks that does something wonderful for fairness and equity and it is absolute rubbish.

What I did was to take what happened in our building. It took 16 years for the garage to fall apart. I said: "Okay, it'll take another 16 for it to fall apart again. I will calculate what it would cost to replace it 16 years from now, assuming a reasonable inflation rate. I will use a normal, equal, annual replacement cost." Then you get that chart and you will see one line goes right off the top of the thing altogether. That is the way subsection 78(2) operates. The way it should operate is one or the other of the ways down below. I understand that same flaw is repeated in Bill 121. It is just a useless thing. It does not do anything for anybody. If you think that is beneficial, rethink it.

That is very quick, dirty, loud and perhaps abrasive. Any questions?

The Acting Chair (Mr Brown): We certainly have some.

1600

Ms Poole: I did not find it dirty, loud or abrasive, so that is to your benefit, I guess. I just want to be very clear that I understand what your final premise is. Part of it is based on costs no longer borne. Once it is paid for, you do not have to wait until the landlord replaces it to be taking into account that the rent should be decreased. Immediately after that is paid for it should come out of the rent. The second point you are making, if I am not mistaken, is that instead of just going on the base rent, they are going the next year on the base rent plus the increase. Is that what you are saying?

Mr MacKenzie: I did not think that is where you were going, but that is an objection to it, yes. Very seriously, if they are going to have a capital expenditure allowance, it should be left alone and not increased, if they are going to have it on the basis that they are calculating it now. If they want to calculate it on the revised basis that I have suggested here, then there is no real problem. But it is just insane to calculate it on a basis which deliberately says there will never be an increase and then feed that into a formula with an increase. That makes no sense whatever.

Ms Harrington: This time I will not get into a model for the world, although you are going to help us make this into a model piece of legislation. Thank you very much for a very clear example of the costs-no-longer-borne problem, and I want to thank you for coming and listening all afternoon and coming last week as well, or two weeks ago and for all the math and the graphs you have done. It really is appreciated.

I wonder what would happen if you showed this to the landlord groups, what their response would be. I want to say one thing to you and that is that the costs-no-longer-borne issue is something we are definitely looking further into. One way that has been suggested to deal with this is have the capital charges separate from the rent so that the tenants themselves can see what is what.

Mr Turnbull: You are absolutely correct in stating that, and I have followed your case with some interest over the period you have been challenging this through the courts. To me it is obvious that you should not keep on building rental increases based upon a capital cost allowance. It should be a flat charge. But let me put it to you this way: Statistically, it is about an average of 17% of household income that is spent on rent in this province. You may find that in your building it is vastly more than that on average, but nevertheless, throughout the province an average of 17% is spent on rent. Would it not be more reasonable to look at some way of unwinding rent control and making sure we go to people who are least able to pay their rent, and in that way, not control artificially one part of the sector. You, as an accountant, must be dealing with people who are profit motivated, and at the moment we have buildings which are not making any money, and we are just compounding the problem with successive layers of legislation which take little account of the original intent.

Mr MacKenzie: I do not have a great deal of quarrel with anything you say there, and I undoubtedly was naive in 1974 or whenever it was. I really thought that rent control, whatever it was dubbed at the time, was a temporary measure. Like income tax, it has turned out to be.

Mr Turnbull: We know about that.

Mr MacKenzie: But bear in mind that I have not said anything here other than -- I am prepared to have the tenants pay these costs.

Mr Turnbull: I understand what you are saying.

Mr MacKenzie: We are not trying to penalize the landlords in any way, shape or form. If anybody could develop a sensible program that would provide the housing that must be available as soon as you start loosening rent control, then I will move to your riding and vote for you.

DAVID SIMMONS

The Acting Chair: Our next presentation will be from David Simmons. The members will know we have already distributed Mr Simmons's brief.

Mr Mammoliti: Perhaps I may -- just before we get to this -- ask Mr Turnbull where he gets the 17% figure.

Mr Turnbull: It was presented to us at the Bill 4 hearings by the Ministry of Housing, George. If you go back to your notes, you will find it there.

Mr Mammoliti: Do you recall what it was called, though, David. I am just curious. I want to look into it.

Mr Turnbull: We asked the Ministry of Housing what the average --

The Acting Chair: Maybe you could do that privately. Mr Simmons, the members have your brief. You have 15 minutes to make a presentation to the committee. You may want to reserve some of that time for a period of discussion with the committee. Perhaps you would introduce yourself for the purposes of our Hansard.

Mr Simmons: I am David Simmons. I am a 31-year-old businessman with a wife and two kids. In January 1989 I purchased a 24-unit apartment building in Brantford. The rents were very low, and I realized that I would lose some money in the first couple of years. Using the guideline rent increase, the rent review system, with a lot of hard work, which I was prepared to do by absorbing my family's labour for free, after two or three years I had no doubt that my building would be breaking even. I would have a well-maintained building, good tenants, fair rent and would be breaking even. We studied and relied upon the rent review system to help us raise the rents legally so that we would cover the building expenses and the building would be breaking even.

Well, it has been two and a half years. I have a very nice, well-maintained building with good tenants. The rents have not changed accordingly and are still not fair. My costs have increased far more than my rental income.

This building was going to provide a little extra income to pay for my children's education and later supplement my retirement income. I borrowed $75,000 from my parents, $25,000 from my wife's parents of their retirement money. They are not rich. I am not rich. They put mortgages on their houses to obtain this because it seemed like a pretty safe investment under the current laws when I bought. All of my life's savings that I have worked hard for are in this building. Everything I own is in this building. Now, because of the NDP government, this building is my worst nightmare and I am stuck with it. I am faced with the inevitable reality of losing my building, all my life savings and my families' homes.

I have had considerable financial loss in the last two or three years, which was expected -- maybe not quite this much -- but I was supposedly going to get it back through phase-ins under the rent review system. I have lost some $70,000: $16,000 in the year 1991. In September 1990 I was granted a rent review order which allowed me a 5% phase-in in April 1990, another 5% in 1991 and so on until the loss in the first year was brought down. This was also going to help bring the rents up to market level -- which are ridiculously low -- and it is not fair at all that they should be kept that low. It is ridiculous.

With Bill 4, I lost a 5% phase-in April 1, 1991. That works out to $3,925.17 in rental income that I have lost for this year. Using just a standard 10% cap rate, that has reduced my building by just about $40,000. Now Bill 121 is coming in and I am not going to get any more phase-ins for financial loss. I am going to be stuck with just increasing the rent at the guideline level. I am going to be buried. I am already buried.

Over the next four years, the rent review order that was all legal, issued and everything, was going to allow these 5% phase-ins, which would have worked out to about $17,000 in rental income over the next four years. I have lost that, which works out to about $216,000 off the value of my building over the next four years. I cannot afford that, and there is over $150,000 of my own money with that $216,000.

With Bill 121, it is easy to see how damaging it is going to be to me. It is going to reduce the value of my building by more than $250,000. I am going to lose more income of $73,000, not counting what I have already lost. It is like with Bill 4, I have my throat sliced and I am bleeding to death, left for a year and a half, and now, Bill 121 is coming in and saying, "Oh, here is a little bit of guideline at 3%." Meanwhile, I am losing 5% all that time.

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Mr Cooke's statement to the Legislature said financial loss was often used to make tenants pay for the costs of the landlords' investments. Mr Cooke said himself that it is not just someone's investment; it is the tenant's home. Why should they not pay for it? Why should the landlord pay for the tenant's home? Why should I pay for the difference between what it costs to supply the living accommodation and the price that is paid for that living accommodation? Why should I pay the difference out of my pocket? Maybe I should just give them a box of groceries, too.

As for selling, I cannot afford to sell. I would lose all my equity and my family's homes. It would be disastrous. I would sell in a minute if I could just break even. I have had it. I just want to get out of this business after all this crap. But the thing is, who is going to buy it? No one is going to buy it, especially with the threat of Bill 121, and I cannot afford to sell it, so I am just waiting until I slowly die, go bankrupt.

My operating costs have increased overall probably about 19% or 20% this year alone. I got a 5.4% guideline. I have gone further down, further backwards. It would not be too bad if I could just snap my fingers and I would have maximum market rents and everything might be okay then, but I cannot. I am being forced to keep these rents way below.

Just for an example, the average market rent in Brantford for 1990 was $485. My rents, for a large two-bedroom apartment, are $400 until April 1992, when I get whatever little bit of an increase. My one-bedroom apartments rent for $367. If there were no guidelines, I would not gouge anybody, if all this rent control control was taken away. I would raise them to a fair market rent so that I could rent out the apartments. I use these figures: $550 for a two-bedroom -- in Brantford there are a lot of people paying $600 or $700 for a two-bedroom that is in nowhere near as a good shape as my building -- and $475 for a one-bedroom.

In my submission I have listed all my expenses. I have estimated in the last four months, but it is what I have spent in this year, 1991. It is costing me $522 for a two-bedroom apartment and $435 for a one-bedroom. That means I am subsidizing the rents of the two-bedrooms by $122 a month each, and the one-bedrooms by $68 a month each. It works out to $27,514.08 that I am subsidizing the tenants' accommodations in my building. That is hardly fair. Most of them can more than afford double the rent. Most of the tenants in my building have a higher gross income than I do, and all of them have a higher net income after I subsidize their rent.

Maintenance and work orders: Just because a few landlords before took advantage of tenants is no reason to make my life miserable. I have a very well-maintained building, with clean halls and recently repaired roof. All the apartments are freshly painted, hallways clean, laundry rooms clean. All the maintenance is current. To prohibit rent increases because of a maintenance order is ridiculous. The only reason the maintenance would be lacking is because of a lack of cash flow in my personal circumstances. It has been that way ever since I bought the building, and I have put my own salary and my own work and my family's work in to keep it well maintained. There is not anybody who can say my building is not the cleanest in town. It is a clean, well-maintained building.

I would like to know what the definition of the term "neglect and inadequate maintenance" is. I hope it is figured out before they start accusing people of offences under the act for these things and go out to people's houses, break in with a search warrant and take some pictures of my personal belongings or whatever they want to do.

Changes in interest rates are not considered in this bill. What if my interest rates go up 20% next year from 11%? This would mean a direct payment increase to me of $5,219.31 per month. I cannot afford that. Why should I have to pay for that?

In Mr Cooke's statement to the Legislature he said that he listened to the tenants but only heard the landlords and that he recognizes my situation. Well, if he recognizes my situation, why does he not do something about it? Is he going to let me go bankrupt? It is going to ruin my life and my family's. It is not fair at all.

The Chair: Would you like to include some time for questions and answers? There is about a little more than four minutes left. It is up to you.

Mr Simmons: Yes, a couple of minutes. Garbage removal costs are not included in this bill. They have skyrocketed. They have doubled and they are going to double in the future as well.

I have read the bill all the way through and there is no good news for me at all. It is only bad news. The idea that two guideline rent increases -- I have 24 units in my building. What am I? Huge? Rich? Why should I pay and get less of an increase? It is not fair. My operating costs have not been reduced from 66% of what they were based on before to 50% of the inflation costs. They have not done that. I am also being penalized here for having all my units in one building. That is not fair either. I used to have them all scattered out, but now because I do not, because they are all in one building, I am being punished.

To have tenants able to pay 12 monthly equal instalments of money owing to me? I have to wait even longer for money owing to me? I am going broke here. To have them able to leave the apartment, to leave the province or the country is crazy. I can see them pulling up in limousines to come give me my instalment.

The powers of entry, search and seizure: What is this, a Russian movie or something, like we are criminals? Maybe it is justified, but it is frightening. Who says it is justified? Who makes that up?

The power to reconsider: You can change your mind after a year. Decisions are already made.

I demand that Bill 121 be thrown out. Second, I demand compensation for relief of hardship and financial loss and for the capital expenditures I have already done, or allow me an increase of 8% above the guideline for three years -- this should straighten me out. Bill 121 is just not fair at all to me. It is going to bankrupt me. I am not out to gouge anybody, but I do not like being taken advantage of. Why should I go bankrupt just because my rents are below market and nobody wants to raise them a couple of bucks?

The inevitable end: It is very shattering. Everyone keeps saying to me: "Why don't you do something? That's not right." Here I am, trying to do something. It seems hopeless trying to deal with a socialist government that does not listen to me and is trying to bankrupt me.

It is a very bleak future to look forward to, knowing that if Bill 121 is passed I will probably go bankrupt, knowing that my parents and in-laws will probably lose their houses over this, and right when they are ready to retire, they will be put on welfare or something, knowing that I will lose everything, things that I have worked so hard for all my life and knowing that my credit rating will turn into dirt. It is just disastrous.

The worst part is knowing I did nothing wrong. I had a sound financial plan when I bought. It was under the old rent review system and everything was all planned out, thought out. I was not going to gouge anybody. I was not going to take advantage of anybody. It was to secure a future for my family. It has been ruined. I have done nothing wrong and I have to go to all this trouble just to fight for my rights so that I do not die without saying anything and go bankrupt. It is just totally unfair.

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Mr Winninger: A substantial portion of your expenses, Mr Simmons, relate to your financing costs. I gather you were expecting to recoup them by increasing the rent over the first few years of ownership.

Mr Simmons: One of the reasons my financing costs are so high is because I lost my phase-in and I had to refinance for a higher amount to pay for my property taxes that I could not pay for.

Mr Turnbull: What are your actual rents, on average, in the building and what is market rent in the area?

Mr Simmons: My maximum legal rent for a large two-bedroom right now is $400; $367 for a one-bedroom. The Brant and Brantford Housing Authority released a figure that in the year 1990 the average rent in Brantford was $485. I am not sure if that is a one-bedroom or a two-bedroom, but even if it is a two-bedroom, it is still way out of proportion. Those were 1990 figures. I am charging $400 for a large two-bedroom and I cannot raise it until April 1992.

Mr Turnbull: Are you under any pressure about the refinancing of your building?

Mr Simmons: Yes, I have been.

Mr Turnbull: Will anybody refinance it?

Mr Simmons: With Bill 4, I lost my 5% phase-in and my financial institute held back $33,000 of financing. I had to really scurry around, trying to make up that $33,000. Luckily I talked my second mortgagee into increasing the second mortgage. It was supposed to be temporary, until this was all sorted and I got my phase-in, but we all know I am not going to get my phase-in. This January or February they come due and that is probably --

Mr Turnbull: Thank you for the good presentation.

The Chair: Mr Simmons, thank you for your presentation. I apologize again for the mixup earlier on.

Mr Simmons: Thank you for the time to express my views. I hope everyone reads my written submission. It is all true.

ADVOCACY CENTRE FOR THE ELDERLY

The Chair: Next is the Advocacy Centre for the Elderly. I apologize again to you too for the little mixup earlier on. We will be following the same procedure, 15 minutes. You can withhold some time for questions.

Mr Monticone: My name is George Monticone. I am here on behalf of the Advocacy Centre for the Elderly, which is a legal clinic for low-income seniors.

I am in rather a dilemma today because I am asking this committee to include a group of people under a piece of legislation that I am not entirely happy about. I am not going to talk about why I am unhappy about the legislation. You have heard the sorts of things I would say from other groups, in particular Metro Tenants Legal Services. Their brief has been attached to my written submission and I have indicated to you the ways in which I agree with their submission.

I would like to focus on the first issue; that is, I would like you to include a group of people under this legislation which apparently you have decided not to. Many of the clients of the Advocacy Centre for the Elderly live in either boarding or lodging homes, rest and retirement homes or institutions such as nursing homes or hospitals.

The first of those, boarding and lodging homes, clearly were brought within the scope of the predecessor legislation, the Residential Rent Regulation Act. The second of those, the rest and retirement homes, are somewhere out there in limbo, and the third, institutions such as nursing homes and hospitals, apparently quite clearly have been exempted under Bill 121.

I want to focus on the rest and retirement homes segment, although some of my comments would also apply to boarding and lodging homes.

In April 1989 the Office for Senior Citizens' Affairs released a study called Findings of the Survey of Rest and Retirement Homes. At that time, they indexed 550 homes under that rubric, and some 23,600 tenants. I think it is quite safe to say that number has increased, so we are talking about somewhere over 25,000 tenants at this particular point two years later.

All of those kinds of places I mentioned -- boarding and lodging homes, rest and retirement homes and institutions -- have one kind or another of personal service associated with them, such as meals, nursing care, attendant care, house-cleaning services, laundry, shopping and so on.

The rest and retirement homes vary tremendously in their size, from what we might call mom-and-pop operations with only a few suites and a few tenants to very large institution-like places which, at first blush, would appear to be something like nursing homes.

The Advocacy Centre for the Elderly is asking this committee to address this particular problem now. Do not allow Bill 121 to go forward without addressing it.

As we speak, there is a commission called the Lightman commission, headed by Dr Ernie Lightman, that is making recommendations, I assume, as to what to do about this particular segment of the accommodation industry. We do not know what his recommendations will be, but they could quite possibly be recommendations that would involve Bill 121, would involve the new rent control legislation, and I would hate to see the situation of this bill being passed into law and then finding that you have recommendations which require that it be amended. My strong suggestion is that you look at what the Lightman commission has to say before allowing this bill to go forward.

More specifically, we are asking that you eliminate clause 3(1)(e) which exempts accommodation of various kinds, including accommodation occupied "for the purpose of receiving care." If you eliminate that exemption, you will bring the rest and retirement homes under rent regulation.

There are those who will say that rest and retirement homes have these care services associated with them. Some do. The degree to which they do varies, but the point I would make with this committee is that does not alter the fact that all of these places offer accommodation and it is accommodation which this piece of legislation is supposed to regulate. That is why we are asking you to bring this segment of the industry under the act.

Second, we ask you to bring the services which are offered in rest and retirement homes and similar facilities under the rent regulation act or under some other regulatory scheme for the simple reason that if you do not do so, landlords will raise the costs of personal services to offset what they perceive to be shortfalls in their rent. If that were to occur, that will either force some seniors to move out -- lawyers like to refer to that as constructive eviction -- or it will force some seniors, those who remain, to pay very high service costs. You have a situation potentially where you have very reasonable rents being paid by a senior and exorbitant costs for, let's say, meals or attendant care.

Our written submission outlines some of the difficulties with bringing services under the rent regulation scheme. We also suggest some of the solutions to those difficulties.

There are difficulties relating to separating the costs of services from accommodation. There is a difficulty implied in the idea of regulating the cost of services, which is that would amount to regulating perhaps the costs of wages of service providers. If that is a solution you do not like, my suggestion would be to ensure that wages are exempt from the rent regulation scheme.

There are 10 additional points we have set out at pages 2 and 3 of our submission. These are more general points relating to the structure of the act. I do not propose to go over those at this time. I would like to reserve the remainder of my time for questions.

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Ms Poole: Thank you for your presentation today and for bringing this issue before us. My understanding is the reason the government did not proceed with putting rest and retirement homes into this legislation was that it did want to wait for the results of the Lightman commission, which, if I am not mistaken, is supposed to be in September.

Ms Harrington: October.

Mr Monticone: Yes.

Ms Poole: This legislation probably will not go to third reading until after that particular point, so if indeed the Lightman commission does recommend that rest and retirement homes come under it, we will at least have some opportunity prior to the final passage of this legislation to include it.

I would like to ask you about some of the reservations that some of the rest and retirement homes expressed about being in this type of rent control legislation. One of them was the cost of wages, which in many cases did go up significantly and could not be controlled under rent regulation, and you alluded to this point. The second was the fact that if they were forced to try to separate the care component and then to offer services on a -- what is the word I want? -- not-mandatory basis, they could not function. They were basically saying that when they set their rates at the beginning of the year, they have to be able to rely on having a certain level of services used by their residents and it would create chaos within their system if people opted in and opted out and created problems. Would you like to comment on those two points of view that were brought up.

Mr Monticone: I am certainly pleased to hear that this committee would not allow this to go forward without hearing from the Lightman commission.

Ms Poole: I am not quite sure I phrased it in that particular way, but certainly it would be our hope the Lightman commission would report prior to final passage of this legislation.

Mr Monticone: There is a difficulty relating to economies of scale, I suppose, for providing certain kinds of services. One in particular comes to mind, which is found in many rest and retirement homes: an emergency call bell system with a nursing station, with somebody always present to respond to a call. It is relatively costly, I assume, to provide all of that. I assume also that it is something a landlord would not undertake without being assured of being able to recover the cost of that type of service.

That kind of service differs significantly from a service such as individual nursing care, where somebody might wish to hire a nurse to come in for an hour or a day to administer an injection or some such thing. Those kinds of services are pay-as-you-go and they can be accounted for in terms of some kind of hourly rate, but the other type of service, yes, is a difficulty.

In our written submission we made it very clear that we believe it should be possible for landlords to decide which services are offered on a mandatory basis and which are not. That is a key element of our proposal. There is a great need for flexibility out there in offering services to seniors and to the disabled community and we do not want to see legislation come in which will limit that flexibility, so it should be possible for landlords to offer certain services on a mandatory basis and others on an optional basis. We do not believe which is which should be stipulated in the legislation.

The Chair: I am sorry; we are going to have to move on to the next questioner or she will not get equal time and Mr Mammoliti will have a point of order.

Mr Mammoliti: Mr Chairman wants to be funny.

Ms Harrington: I appreciate your coming before us. This is the first presentation we have had in this regard, I believe. I understand from talking to some of the people in rest and retirement homes, and the people who provide this service as well, that there is a fair amount of concern out there on both sides and I am glad to see you have put so much time and effort into looking at the issue.

What I wanted to ask you was, have you spoken with and are you aware of the position that is being taken by the association of rest and retirement homes?

Mr Monticone: I am aware that a proposal for a piece of legislation was put forward by that association to the previous government. I do not know beyond that.

Ms Harrington: They have expressed to me their concerns about being included in this legislation. It would be good, if you are in direct contact with them, to try to see exactly what their position is and why and what their concerns are so that we could try to work out some kind of middle ground.

Mr Monticone: I would not want to suggest we are in direct contact with them. Our relationship is a cool one at best inasmuch as we represent tenants who have challenged owners of rest and retirement homes under the current legislation.

Ms Harrington: I see. Okay.

Finally, I just want to say that the position of our government is that the seniors are people we have to have a great deal of concern and care about, and certainly as much as other tenants. We are awaiting the results of this study, I believe to come down in October, and we will then have a look at it.

RICHARD A. FINK

The Chair: Richard Fink: Sir, you have been allotted 15 minutes and you can reserve some time for questions and answers.

Mr Fink: I have provided written remarks. I am not going to repeat them. I just want to make the central points.

I have done rent review representation on behalf of tenants for 15 years. In 15 years of sitting at hearings for hours on end I have had a lot of time to reflect on rent review, and my general opinion is, to use the vernacular, that it is stupid and should be abolished.

The rent review legislation we had under the Liberal government was on the generous side to the landlords. It resulted in a case our office was involved with called the Balliol injunction case, where for the first time in western law in the past 500 years of recorded decisions tenants tried to stop renovations from being made in order to avoid a rent increase.

In the past, prior to that decision, which was approximately 1989 and 1990, our office had been involved in trying to force landlords to do renovations. These cases in our office of forcing landlords to do renovations have involved practically every notorious landlord in the city of Toronto. We were successful in our office in 100% of the cases. We achieved damages, we achieved injunctory relief forcing the landlord to do the repairs, and in 100% of the cases the tenants were not happy with the result.

The reason is that maintenance in a building is much more than simply fixing the roof, putting the cable television back on, repairing some holes in the walls. It is the day-to-day concern by a landlord to make the tenant's life somewhat reasonable. If the landlord is absolutely determined to avoid punitive damages and to avoid the injunctions of the court, then he can make the tenant's life so miserable that it is a sawoff -- nobody wins.

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In the current legislation, the proposal is that we are not going to give the landlords too much money for capital repairs, but we still expect them to do all the necessary repairs. We are going to give them no more than 8% and change, but we are still expecting them to do the repairs, even if it is going to cost the landlord what would be under the old system an 18% or 19% rent increase. If they do not do the repairs, we are going to penalize them and take away rent increases. We will do various other things which, by the way, in my opinion are outside the jurisdiction of this legislation. It infringes on the Landlord and Tenant Act and federal jurisdiction.

Nevertheless, because of my experience, my opinion is it is just not going to work. We even had a case where the landlord was going to be put in jail by the judge. He was in contempt of court. He managed to do some salutary repairs and satisfy the judge for a while, and then the situation simply returned to where it was.

The legislation currently, and I would add this as an aside, has no appeal procedures. Historically throughout rent review tenants have been extremely dissatisfied with the first level of decision-making. This legislation has no appeal procedures. The decision-making at rent review has been poor throughout the course of 15 years. There is no reason to expect it is going to improve. Without having any appeal, there is no opportunity for second thought.

My expectation is the landlords' response to this legislation will be civil disobedience. The institutional landlords will comply with the legislation as they wait out and hope the legislation changes. Individual landlords, even those holding large buildings but also smallish landlords -- for instance, they hold only a couple of buildings, perhaps 200 or 300 units -- will rebel against this legislation. They will go to court and challenge the constitutionality. They will appeal everything and will be as obstructionist as possible, obviously because they are not getting money for their repairs. The losers in this whole battle are going to be my clients, the tenants.

There is a very simple solution which I have been proposing to the past three governments, including this one, and which I have been proposing for about 10 years. The solution is to have tenants buy their own buildings. They are the only ones who care about maintenance. Since they are already paying for capital repairs now under the current system and under the past system, they may as well enjoy the benefit of it. They have already paid for financing the building through financial pass-through. In the future, they are going to be paying for capital repairs. They should have the benefit of the buildings themselves.

The simple solution would be to have the two thirds of the tenants who can afford to buy their units buy them and pay a surtax or a surcharge for the one third who cannot afford to buy their buildings. I use this two-thirds/one-third formula from the studies done by the city of Toronto called Living Room I and Living Room II, which say one third can barely afford their current rent and two thirds can.

Units would be sold to the tenants as owner-occupiers. One third of the units, which would be also paid for by the people who are buying the units, would be put into a trust held by the government to use at no cost to the government. Those tenants who refuse to buy their units would simply pay the rent to cover carrying costs of the units.

This would be the end of rent control. Rent controls should have been a temporary system. It is a stopgap effort. It makes no one happy. I have spoken to approximately 2,000 tenants since this legislation was introduced. I have spoken to 5,000 tenants since Bill 4 was introduced. They are unhappy with both pieces of legislation. They have a sense of foreboding. They are not satisfied that this legislation is going to protect them for very long. They see a landlord backlash and they are going to be the main victims of it.

I suggest the legislation go back to your ministry and be completely redrafted, with some new ideas rather than the old, tired ideas simply shuffled between tenants' concerns and landlords' concerns as to whose ox is gored, how much rent is paid and who takes on what responsibility. Change the situation. You have taken all the landlords' property rights away -- you heard this from one of the landlords who spoke about half an hour ago -- and left them with nothing except managing the building, which is really not much right, given that they do not have much flexibility, and expect them to behave as appropriate Ontario citizens. To me, it is just dreaming, having had dealings with landlords, big and small, rich and poor, Liberal and Conservative, for the last 15 years.

I would be happy to answer any of your questions.

Mr Tilson: Mr Fink, I agree with a lot of what you say, but I would like you to clarify. For tenants who cannot afford rent increases, where is the money going to come from to purchase their unit?

Mr Fink: The city of Toronto says that two thirds of the tenants could afford more rent; they can afford their current rent and they could afford more rent. If the tenants all had to buy all their units, the two thirds who can afford it, for $70,000 -- which would be quite a bargain given they sell for $120,000 in the private marketplace and they cost $150,000 to replace -- if they all bought their units for $70,000 and the landlords were expropriated at $45,000 or $50,000, this additional $25,000 would go to pay for a trust for the other one third who cannot afford their units.

Mr Tilson: Why would they buy the buildings when it is quite clear that it is going to be impossible to maintain them?

Mr Fink: Let's say the average building needs $10,000 per unit of repairs, which has to be paid for one way or another. Even at $85,000 or $80,000 the units are quite a bargain. You can go on Eglinton Avenue today and it will cost you $130,000 or $140,000 to buy one of these equity co-op units. So at $80,000 they are quite a bargain. My associate, who lives in one of Ms Poole's buildings, said: "No, I'm not interested in buying one of these units. The building's crappy. It's falling down. Who needs it?" For these people, they would simply have to pay the rent to carry the cost of the government buying the unit, of putting the one third in trust, of capital repairs the general membership voted on, as well as daily maintenance. His rent may go up from $800 to $1,100.

My position is that tenants should be forced to run their own buildings. They should be forced to take charge of their living accommodation, not keep whining, "I want this fixed, I want that fixed, but I don't want to pay for anything." They should also be forced to consider the buildings as their homes, if they do not already consider their buildings their homes. Many do, and I am sure Kay Gardner was here earlier telling you that. It should be forced legally and economically that they are their homes. They are not the landlord's homes. To the previous landlord I just heard, and I am sure you have heard dozens of them already, it is simply an investment. The quagmire will never be solved as long as it is an investment for one and a home for another.

Mr Turnbull: Mr Fink, I agree with your approach -- I am surprised -- but I am alarmed about one expression you used about expropriating at $45,000. Let's say, hypothetically, that a landlord has owned a building for four years, and bought it for $55,000. I hope you are not suggesting that they make that loss.

Mr Fink: I am suggesting the buildings be bought at their fair market value, whatever it is.

Mr Turnbull: Okay.

Mr Fink: If the landlord loses, then he loses. Fair market value, though, is the only way I can see buying them.

Ms Poole: Thank you for your presentation. I can say it has certainly been one of the most interesting and creative we have had. Leaving aside the solution you have proposed, because I am not terribly optimistic that the government is into new solutions, and going back to the maintenance issue and how Bill 121 deals with it, instead of a carrot-and-stick approach, it is basically a stick-and-stick approach.

From your comments here, are you saying this approach is not going to work?

Mr Fink: I do not think it is going to work unless the act remains in place for about six years, because for two or three years there is going to be what I would consider every means employed to try to frustrate the intent of the maintenance re buildings.

Ms Poole: If you just had to look at the work orders and the maintenance provisions, the rent penalties as expressed in Bill 121, how would you change that to make it more of an incentive for the landlord to do the work orders and to ensure they are being done?

Mr Fink: This is the essential problem with rent review. It never can achieve a balance. For each time you legislate something, there is a reaction. If you made the penalties more draconian -- for instance, imprisonment -- this would cause landlords to pay some attention. The result of that is going to be that landlords become even more frustrated with the system and react with even more hostility.

If you use the Liberal government's definition, which was, "We are going to give them all types of incentives for the repairs," then you get repairs being done without any value. You get the repairs being done for the sake of repairs, and the giant increases my clients experience. There is no middle ground. If I knew of a middle ground, I would come here and tell you today.

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Mr Mammoliti: Thank you, Mr Chairman. I have to disagree, by the way, with Ms Poole. We do want to listen to new ideas, but as my colleague has said, we are too busy fixing up the Liberal mistakes.

I want to touch on the new approach you mentioned to buy the units: two thirds that can afford to, one third that cannot. What do you do about the complete opposite; for instance, the Sorbara buildings that are in my riding, and the new order that was given, a 33% increase to a lot of the tenants who are now economically evicted because of that order? They obviously cannot afford to buy the building either, because they have to move out; they cannot afford the rents. What do you do in a case of the opposite -- one third that perhaps can afford it, and two thirds that cannot?

Mr Fink: If you have one third that can afford it and two thirds cannot, so that you are going to have -- what you are saying is shuffling around. I have not given it a lot of thought. I am simply going on the statistical generality in the city of Toronto study. Perhaps the tenants in North York are poorer than the tenants in the city of Toronto, but I do not have any statistics.

Mr Mammoliti: What do you do about the Sorbara buildings? What do you do about those buildings that have crippled the tenants because of these terrible rent increases?

Mr Fink: The problem in the Sorbara buildings is that the rents went up by 33%. What you are finding is that tenants are not going from the Sorbara buildings into condominiums, and they are not going from the Sorbara buildings into shelters; they are going from the Sorbara buildings into cheaper accommodation. I have seen tenants in the Sorbara buildings go from one Sorbara building to another Sorbara building. In fact, Mr Sorbara will rent his units out at a lower rent than he got from rent review if you are coming in, because he is having trouble renting them at the rent he is asking for.

The essential problem with those buildings is that rent review should have been made more retroactive. You were told that at a meeting the other night where tenants wanted more retroactivity. The problem with those buildings is the old legislation.

The new legislation I am proposing assumes that two thirds will be able to buy the units. I think if you look at it from that perspective, a lot of your constituents want to own a piece of property. Their goal is to actually own a house at some time. They would bend over backwards, scrape up money, perhaps take in subtenants in order to be able to afford to buy their own unit. I think the desire to buy a piece of property, a condo or real property, is a very pressing one among the population, and I think you might even find more than two thirds would want to buy it.

Mr Mammoliti: Would co-ops be an answer?

Mr Fink: The problem I see with co-ops is that you are then going to have to tax the two thirds who are wealthy in order to subsidize the one third who are not wealthy, because we do not want the one third subsidized out of government revenues. Why would two thirds want to subsidize the one third when there was absolutely nothing in it for them? I am just assuming everyone will operate in their own best interest, and they might be willing to subsidize in the purchase price for someone else's interest if they thought they were getting a bargain, which at $65,000 or $70,000 it would be.

The Chair: Thank you for your presentation, Richard.

Mr Fink: Sorry it was not longer.

Mr Brown: Yes, we are too.

The Chair: You will have to speak to Mr Mammoliti about that.

JOHN D. TODD

The Chair: John Todd: John, we will follow the same procedure, 15 minutes, and you can withhold some time for questions and answers if you wish.

Mr Todd: A copy of the paper I have prepared is being passed around right now. It is a little lengthy, so in the presentation I will just give you some brief highlights.

The central theme of the study is, to rewrite an old adage: If it's broke, fix it. The Ontario system of rent regulation is broke; now is the time to fix it. That means it should be replaced, not simply patched up and repainted so it can hobble along for a few more years.

A major part of the study examines how tenants have fared in terms of the incidence of rental housing affordability problems since the introduction of rent regulation in 1975. Several observations emerge from the analysis that I would like to bring to your attention.

If you turn to page 8, figure 1, tenant affordability problems are sufficiently widespread that relief of affordability problems should be a priority in developing and evaluating housing policies in Ontario. Figure 1 shows that roughly one tenant in four pays more than 30% of household income in rent. That means three in four pay less. Thirty per cent is the normally used cutoff for whether or not a tenant has an affordability problem.

Figure 3 on page 10 shows that virtually all households with incomes below $10,000 have affordability problems, while few with incomes above $20,000 have affordability problems. In the $10,000 to $20,000 range, there is a substantial portion, but not the vast majority, that have affordability problems. Policies intended to deal with affordability problems should primarily benefit households with incomes below $20,000.

There is a table on page 13 with a lot of numbers. You probably will not want to really look at it closely at the present time, but it shows that women seniors are the most in need of housing policies that will alleviate affordability problems. Senior-led households are twice as likely as non-senior-led households to be in core need. Female-led households are two and a half times more likely to be in core need than male households. Single mothers are a particularly seriously hit group. One in five single-female-parent households are in need, compared with one in 17 two-parent households.

Clearly there is a need for substantial help on the affordability front. The proportion of tenants with affordability problems is not significantly higher in urban centres than in rural centres, but household incomes below $20,000 are significantly more likely to have affordability problems in major urban centres. In the low-income area, the size of city makes a difference.

What has rent regulation done to help out on the affordability front? Figure 12 at the top of page 18 shows that during the first six years of rent regulation -- really seven years, but the data available were for 1976 and 1982 -- affordability problems were on the decline in the early years. Most classes of tenants were paying less of their incomes in rents after seven years of regulation than they had been paying in the first year.

After the initial period, 1976-82, which is shown on figures 16 and 18 on pages 20 and 21, the incidence of affordability problems has increased. The increase is particularly noticeable, if you refer to figure 18, in the $10,000-$20,000 income range. There, since 1982, the proportion of households with affordability problems has increased from 31.5% -- less than a third -- to 52.9%, or over one half. The number of households in this range with affordability problems increased from 55,500 to 114,500. Clearly problems have become much worse since 1982.

In summary, Ontario's system of rent regulation has failed to ease the plight of low-income renters who suffer from severe affordability problems.

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The experiences of Quebec and British Columbia are also reviewed for comparison. Comparing the provinces indicates that the trends are dominated by underlying economic conditions. However, there is evidence that tighter regulation holds rents down on average, but restricts the availability of moderate price rents for low-income households. Rent regulation appears to reduce affordability problems overall by a small amount, while significantly increasing the incidence of extreme affordability problems. It helps the average but hurts the low end.

Looking at why these trends have been seen, referring to table 2 on page 31, you will see that incomes have been rising much more rapidly than rents. The explanation for the increasing affordability problems does not lie in declining income relative to rents. In addition, at the present time the supply of socially assisted units is growing, not fast enough to make a significant impact itself on the affordability problem, but fast enough that it should be at least keeping pace. An absence of socially assisted units is not the explanation for this worsening of affordability problems.

It leaves two explanations for the worsening of affordability problems: First, the loss of low-priced units which were replaced by higher-priced renovated units, a turnover in the stock; and second, the competitive disadvantage suffered by low-income households relative to high-income households when they are searching for bargain units in a tight rental market. In other words, low-income households are put at the bottom of waiting lists when they are looking for an attractive, low-priced, good unit in the market. It is the moderate-income or higher-income tenants who get those good units, so the low-income people who most need assistance are the ones who are left out in the cold and are not helped by the long-term effects of rent regulation.

What are the long-term consequences of rent regulation? A restrictive system such as Ontario's clearly discourages investment. Reduced investment increases affordability problems in the long run, because the regulated market price is higher than the competitive market price would be in the rental market. The regulated market price is the price that new buildings can get because there is a shortage, or the price an old building can get if it gets its legal rent increased. You end up with a two-tiered market. One tier is higher than rents would be in the absence of rent regulation. The other tier is the core stock, which has been effectively controlled since 1976, where rents are lower. That ends up being prejudicial in terms of how it is allocated to households in need.

What is perhaps most damaging is that by keeping rents down, the cost to government of subsidizing market units in social housing developments has been increased. As a result, funds that should have been available to increase the supply of rent-geared-to-income units have been diverted into subsidizing market units. In addition, the attention of government has been diverted from the affordability problem of low-income households to dealing with the availability problem, which has been spawned in part by rent regulation.

So where do you go? Instead of proceeding with Bill 121, the role of rent regulation needs to be redefined. Since 1975, the design of Ontario's rent regulation system has been driven by concerns about its impact on the affordability of housing. This is not an appropriate role for rent regulation. The reasons are as follows: Although rent regulation is a universal program, affordability problems have not been reduced by it. Alternative measures would be far more effective in reducing the affordability problems. Although rent regulation can make rents more affordable for many renters in the short run -- this is not the same thing as eliminating affordability problems -- doing so is self-defeating in the long run. Affordability problems are increased by the allocational biases that work against low-income households, as I have already discussed.

When the affordability goals are pursued by rent regulation, the goals set out in the Housing Framework for Ontario: Issues for Consultation can be compromised. The role that would be appropriate for rent regulation would be to focus on the secure rather than the affordable part of the first principle set out in the framework document. Rent regulation can stabilize rent increases. It can protect tenants against both economic eviction and discriminatory rent charges without compromising the availability of rental housing. This role can be served by what we call a moderate system of rent regulation. This is defined in the paper.

Social housing is the primary instrument being used in Ontario to provide effective relief to core-need households. Unfortunately, social housing programs can only reach as many households as there are units. An alternative that could be used to assist all core-need households is a shelter allowance. Even if it failed to reach all core-need households for administrative reasons, which is the experience in other jurisdictions, the takeup rate would easily or effectively exceed the takeup rate for social housing in Ontario for many years to come, or many decades probably.

It is difficult for me to understand how even the strongest proponent of social housing could oppose the concept of providing shelter allowances, at least to the tens of thousands of households on social housing waiting lists. A shelter allowance could be phased out if and when the social housing stock is expanded to the point that is adequate to meet the needs of housing assistance in Ontario.

The Chair: You have about three minutes left. You can save it for questions or you can continue on.

Mr Todd: A workable system of rent regulation would balance the objectives of affordability and availability in the rental housing market. The primary obstacle to any move in that direction is the argument that economic rents have exceeded market rents since 1975. That argument is laid out in part 3 of the housing framework document. Since 1976, there have been some very severe bouts of inflation which have led to unusual economic conditions. The norm is not to have economic rents above market rents. Further weakening in land values or declines in inflation or interest rates would lead to an elimination of the current gap.

Consequences: The approach should not be to wait for economic rents to fall below the average market rent before introducing moderate regulation, but rather action should be taken now to bring in a moderate system so that confidence can be rebuilt, so that potential investors will believe there is a system in place that will treat them fairly and so that when that gap is eliminated investment will begin. That may be soon. If you look at the information provided by the framework paper, you will see that it has been declining since 1981 and is quite narrow now.

Having been the research director for the Thom commission, I just wanted to point out to you that the commission recommended a system of regulations similar in several ways to that envisaged by Bill 121. Both are designed to severely restrict increases in excess of standard guideline rates, but the Thom recommendations go a step further. They totally eliminate the cost pass-through. The feature that makes that possible is the proposal to establish a guideline for rent increases based on an adequate return on investment in the rental housing market as a whole. It would be very enlightening for the standing committee to revisit the Thom commission in detail before making recommendations on Bill 121.

The difficulty with the Thom proposals, as any other proposal for a system of moderate rent regulation, is that there may be some short-term pain for long-term gain. In easing the rent regulation system, you will aggravate affordability problems for low-income renters until confidence is rebuilt and availability problems are resolved to resolve those allocational difficulties. It is important that this short-term pain be alleviated by direct subsidization of low-income households. As noted above, the only way to deal with the affordability problem of core-need households in the short run is to introduce shelter allowances. If cost is a concern, then a partial allowance could be introduced. Almost any level of housing allowance would do more for core-need households, many of whom are at risk of becoming homeless, than the current or any proposed system of rent regulation.

The Chair: Thank you. The time for your presentation has expired. We appreciate your very lengthy and well-documented report.

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JENS GRAVLEV

The Chair: Jens Gravlev, we will follow the same procedure, 15 minutes, and you can withhold some time for questions and answers if you wish.

Mr Gravlev: I am Jens Gravlev, a private businessman and a landlord. I am 45 years old. I live in Cobourg, Ontario, approximately 55 miles east of Toronto. My wife and I own two buildings in Kingston, each of which is 50% residential and 50% commercial. The residential component consists of six apartments in each building.

Since I have been working in the mortgage industry for 21 years, I have a circumspect point of view on most issues involving real estate. The most important of these issues today is rent control. I have heard and discussed points of view on both sides of the issue. I have reviewed the legal case of Haddock and Haddock versus the Attorney General where the Federation of Metropolitan Toronto Tenants' Associations acted as intervenor. I have heard landlords plead to have the system modified while tenants' representatives make such misinformed assertions as, "Landlords are charging too much."

I do not wish to discuss the apocalyptic effect that rent control has had in other parts of the world where this affliction has existed for even longer than in Ontario. The stifling and inequitable results in every case are self-evident for anyone who wishes to look.

What I do wish to discuss is why rent controls are not right for Ontario as long as we are part of Canada. Canada is a country of people whose philosophy is that people of all groups are equal. In fact, our equality rights in section 15 of the charter goes one step further. It seeks the "amelioration of conditions of disadvantaged individuals or groups, including...those that are disadvantaged because of race, national or ethnic origin, colour, religion, sex, age or mental or physical disability."

The obvious purpose is to establish parity between people both for rights and opportunity. Rent controls in Ontario have been passed in a piecemeal, ever-tightening process. Initially rent controls were concurrent with wage and price controls which were passed in 1975. Rent controls had little impact then, since they were established at current market rents and many buildings were exempt. Rent controls should have been dropped along with wage and price controls when it became evident that they too just did not work.

Rent controls would have been dropped had it not been for the anticipated political fallout from a large group of renters versus a small group of landlords. It is curious that landlords have not challenged rent controls with violence, as have other freedom-seeking movements such as suffrage, slavery, race equality, unions, etc. I believe government has achieved this muzzling by segmenting landlords into random subgroups: big/small owners of new/old buildings in good condition versus those buildings in a dilapidated state. The government's clever divide and conquer policy resulted in us landlords never achieving cohesiveness as have other besieged minority groups.

These landlord subgroups have never been strong enough to challenge the intrinsic human rights violation that rent controls present against landlords via sections 1 and 15 of the Charter of Rights and Freedoms. Rent controls have had the effect of financially crippling the challenger. Certainly for myself that is true. Additionally governments have consistently pervaded the notion that landlords are fat or well financed. The government of Ontario, by its legislation and arguments for rent controls, has caused the population to believe that landlords need to be controlled, that landlords own the buildings and must have achieved this by ripping off the tenant.

The following are my reasons for abolishing, not modifying, rent controls:

1. Rent controls violate sections 1 and 15 of the Charter of Rights and Freedoms.

2. Rent controls force landlords, including myself, into a position of working without receiving pay. This violates Canadians' human rights and the employment standards code of Ontario. 3. Rent controls unfairly advantage one tenant over another tenant for similar accommodation. 4. Rent controls suppress the value of targeted buildings and therefore their assessment for realty tax purposes. Consequently, targeted buildings do not pay their fair share of education and municipal taxes in a community, resulting in an unfairly high assessment for tenants of new apartment buildings and owners of houses and other real estate. I know that it is not uncommon for tenants or house or condominium owners to pay three or five times more realty taxes than older rent control-targeted apartment buildings having equal accommodation. This disparity violates section 15 of the Charter of Rights since the tenants in new buildings and other property owners are unfairly disadvantaged.

5. Rent controls are not for the benefit of low-income people. Actually the speaker in front of me struck a chord there. Although some poor people may benefit, that result is a matter of luck. The ability to rent an apartment in a building caught by rent controls is a matter of timing and planning, attributes which by definition favour more affluent people. There are many examples of families earning $50,000-plus, paying $400 monthly in rent in a rent controlled building, just as there are examples of low-income families paying $850 monthly in rent of similar accommodation.

The caveat, therefore, to section 1 of the Charter of Rights, which reads, "Subject to such reasonable limits prescribed by law as can be demonstrably justified in a free and democratic society," will not support rent controls.

Furthermore, pertaining to this inequity and to the inequity in realty tax assessment, rent controls offend the intent of chapter 6, item 6(b) of the Canadian Human Rights Act, which states that, "It is a discriminatory practice in the provision of commercial premises or residential premises to differentiate in relation to any individual."

6. Rent controls have identified landlords as a group as being evil in society. While politicians have trod carefully, the current ruling government has labelled landlords as "fat" and "well financed" and with many other derogatory references.

During the last election, the NDP touted further rent control tightening as being part of its political platform. In conjunction with various negative remarks, I believe this violates the human rights act's part entitled "Hate Messages."

7. Rent controls can, and are, in many communities, having the effect in newer buildings of actually increasing rents over market. Since market demands vary, landlords, like any supplier -- in a free market system -- would lower rents if vacancy increased. That is the basic law of supply and demand. Under rent controls, many landlords leave their apartments vacant rather than lower rents since the rent controls prevent rents from reverting with the market to the previous level, since the permitted increments may only be applied to the new lowered level. This situation is occurring in my home town of Cobourg and in Port Hope now, according to an article in the Cobourg Star quoting Kathy Sheppard of rent review services.

8. Rent control administration is incredibly expensive. According to my information, the Ontario government spends $33.5 million per annum to administer this system, which has absolutely no productivity whatsoever other than benefiting those tenants who luck out. In fact, I submit that landlords spend an amount equal or more than $33.5 million per annum trying to comply with the system. I have certainly spent my part.

I propose that we could close down this bureaucracy and spend $33.5 million to help people who actually have a need. This amount would allow us to support, for example, 10,000 apartments by $279 a month.

9. Rent controls support the notion in our society that something is available for nothing. Such organizations as the Metropolitan Toronto tenants' association arguing for rent control represents only a self-serving interest and should carry no more weight that any other citizen's group protesting the price of gasoline or cereal.

10. Rent control is effectively a subsidy to some tenants which the government of Ontario has designated some landlords to pay. This legislation is as ridiculous as it would be for the government of Ontario to single out a group such as all the citizens of Toronto to pay one-third of their income to other citizens of Ontario. This concept could be supported, just like rent controls have been supported, by the fact that the average resident of Toronto has more wealth and earns more than people outside Toronto. In fact, politicians could even justify their actions by such scurrilous remarks as "Torontonians are fat" or "Torontonians are well financed," as have been used to label and categorize landlords as a group, and more specifically as an evil group.

Last, the caveat to section 1 of the Charter of Rights, if used successfully to justify the limitation of action of landlords, can also be used to justify the actions in this example.

11. Rent controls should not stand alone. If tenants' associations can make a case for rent controls, then the same case can and should be made for other necessities of life, namely, food, clothing and transportation.

12. Rent controls are a political tool. There are approximately 3 million renters in this province, who probably all assume that rent controls represent some sort of abatement in their accommodation cost.

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This voting bloc is not ignored by political strategists. They know that appealing to this group at the cost of oppressing a minority group of landlords is a key ingredient for being voted into power.

The implications of political parties pleasing one group at the expense of another group for political power is shocking, but precedents are many in history, sometimes quite infamous. Such discrimination against landlords and their categorization as an evil group, as a predatory group, is immoral, as much as discrimination is against any minority. As in other pogroms, confiscation of property follows targeting. While that may sound dramatic, I speak as someone who is threatened with losing my house and my apartment building.

The discrimination is the same. Landlords are categorized by government as an evil group and their property is confiscated. The basics are identical, except that the confiscation process of rent controls is slower and couched in rules and regulations which are not comprehensible to anyone but the dedicated expert -- in fact, the master I sat in front of indicated to me that he could not understand a lot of the rules -- and the rules are changed regularly to confuse even further.

Bill 4 is further evidence of the Ontario government's victimization of landlords. Like me, thousands have renovated their buildings, induced by government to spend millions of dollars based on a formula for rent increase phase-ins. These phase-ins were set in writing by the Ministry of Housing through a process concurred with by each and every one of the tenants in my building, just as they were by all of the tenants of various buildings that have had this done. The reneging of these phase-ins by Bill 4 is a breach of contract to me as a landlord and constitutes premeditated theft by the government from the landlords. I cannot stress too strongly the gravity of this fraud.

In summary, our political system will be the subject of intolerable abuse if the courts are convinced by tenants' associations to take such a narrow view in the matter of rent control. It will seal the fate of any other group, such as tenants in newer buildings, auto workers, plumbers, home owners, even members of competing political parties, which may need the protection of the Charter of Rights. Rent controls, without universal wage and price controls, offend every fibre of a society which aspires to parity. The only solution for obtaining dignity and fair rental prices is supply. I ask for your support, not just for the landlords, but for all Ontarians who are discriminated against by rent controls.

Mr Brown: I appreciate your presentation. My concern is that this bill is likely to pass. The people over there have more people than the people over here.

Mr Gravlev: Right.

Mr Brown: What in your particular situation is going to be the outcome? By that I mean, if you survive bankruptcy, what will you do? Will you be able to do the maintenance you would like to be able to do? Will you not be able to do it?

Mr Gravlev: I am not doing any maintenance of the building now. I cannot. Through an error in the system to start with, my rents were marked back from $650 to $300 approximately per month. The situation I have is that I received phase-ins based on the work we did to the building, and when it comes time to renew my mortgage, I am not going to get that mortgage renewed. I do not know what is going to happen, but the Wellington Trust Co holds the mortgage for that building. I cannot show coverage. I showed a 1.2 coverage when I went into the transaction with them. My rents, at the point where I renew the mortgage, are going to be $25,000 a year less than they are now.

Mr Winninger: It seems to me that when rent review favours your position as a landlord, you think it is okay. You mention in your brief --

Mr Gravlev: I am sorry. You cannot say that.

Mr Winninger: Just let me finish this. You mention in your paper that you looked forward to taking the benefit of the phase-ins under the RRRA. Yet now that the rules have changed, you think rent control is abhorrent. I have difficulty with that contradiction.

Mr Gravlev: The phase-ins were part of a contract which was done between me and the government by which I spent $150,000 on my building, and the government has now reneged on that contract. So whether or not you perceive it as being to my benefit or not is immaterial, because the fact of it is that there was a contract which was agreed to by the tenants, agreed to by the Ministry of Housing and agreed to by me. I had a building which people could not live in. We spent $150,000 on a six-unit property, and it is of no benefit to me. That is why I say it is renege.

Mr Winninger: There might be a more compelling argument if tenants were on an equal basis with you in determining what future changes are made to the building and how they are going to be reflected in rent.

Mr Gravlev: With all due respect, the tenants could not live in the building. The building was empty when I bought it.

Mr Tilson: Your remarks obviously show a great desperation, and I certainly sympathize with them. You have given to Mr Brown your comments as to where you will unfortunately end up. What about the tenants of your building and buildings like your building? What is going to happen to them?

Mr Gravlev: The tenants in my building are extremely affluent. My building happens to be in downtown Kingston. The market rent is approximately $750 a month today, but whether they or their families were paying $1,000 a month or whether they were paying $250 a month, they would be there.

Mr Tilson: But who is going to take over your building?

Mr Gravlev: I guess the trust company will, and they will probably sue me for the differential if I cannot pay it.

The Chair: Jens, thank you for your presentation. I am sorry we did not have more time for you.

PROVINCIAL BUILDING AND CONSTRUCTION TRADES COUNCIL OF ONTARIO

The Chair: The Provincial Building and Construction Trades Council of Ontario. Murray, we will follow the same procedure, 15 minutes. You can withhold some time for questions and answers if you wish.

Mr Tilson: Mr Chair, I must confess, just on a procedure as to where we are going this evening, that I had based my planning on the fact that I would have approximately half an hour after these hearings ended before the bus would leave. Obviously that is not going to happen. I have to do something. Unless I leave right now, I am not going to make the bus, so I guess I am asking the committee's indulgence either to delay the bus or excuse me. I want to stay and hear these people.

The Chair: We will delay the bus.

Mr Tilson: Thank you.

The Chair: I have been too lenient with the time today. Every witness has gone over a couple of minutes, and that is what happens when we allow that. Murray, sorry to interrupt your presentation; 15 minutes.

Mr Gold: I will be brief, I hope, and to the point. I am here for the Provincial Building and Construction Trades Council of Ontario, which represents unionized construction workers, approximately 100,000 of them, in this province.

We are not a traditional participant in this rent review, this rent control debate. We have become involved now because the situation seems to have polarized and there seems to be an impasse that is seriously affecting the construction industry. As a consequence, our clients find themselves drawn into this debate, not so much to help one side or the other side but to kickstart and resuscitate our industry, which in some senses is simply caught in the middle.

I hope, though, that we are well situated to see both sides. Most of our members are tenants. Very few of our members are landlords. On the other hand, we are familiar with the construction industry. We have some sense for the state of repair or disrepair in the housing stock, and we have made an effort to familiarize ourselves with some of the public policy concerns government has in dealing with this issue.

Our beginning point is that the housing stock in Ontario is aging and deteriorating. According to the 1986 census, some 60% of tenants in this province lived in units that were 20 years old or older. Just like human beings, buildings age, and when they age they need work. Indeed, it is even the case that many newer buildings constructed within the past 20 years are in need of substantial renovation in order to restore their structural integrity. So we begin with that problem, that being our expert perspective on the issue.

We have turned to an examination of Bill 121, and in our view, that legislation is now approaching a fair compromise on this issue. It is clear that the government has listened to the concerns that we and others have expressed over the course of the last number of months, and Bill 121 now presents, in our view, a statute that is approaching a very fair compromise.

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In our view, there are three issues, two for clarification and one for change, that would be required to bring Bill 121 into alignment. The first is this: It is a technical issue, and it relates to the 2% element of the guideline that has been set aside for capital expenditures. It is our understanding that the government's intent is that where a landlord does apply for a rent increase above guideline as the result, for example, of an eligible capital expenditure, the landlord is entitled to a rent increase equal to the guideline prescribed by the minister plus 3%.

Unfortunately the drafting of Bill 121 right now may not lead to that result. Some have interpreted the current drafting as providing that where a landlord makes an application for a rent increase above guideline, then the landlord loses the benefit of the 2% allowed in the guideline for capital expenditures.

That is not our understanding of the intent. Indeed, we think that interpretation is wrong, but it is one that has some basis in the legislation. Our understanding is that the intent is that where a landlord applies for a rent increase above guideline he must justify the 2% in the guideline that has already been set aside for capital expenditure. In other words, they must prove they have used that 2%. We have no difficulty with the intent. However, we have some concern that the actual drafting of the bill does not reflect it.

A second area of clarification relates to the timing of eligible capital expenditures. It seems to us implicit in the bill that an eligible capital expenditure must be complete at the time that the rent increase is put through.

On the other hand, it also seems to us implicit that the eligible capital expenditure may have been completed at any prior time since the effective date of the bill, after the transitional period, and not in the immediately preceding period. In other words, if an eligible capital expenditure is completed in 1992 it may be the basis for an application for a rent increase above guideline in 1995 -- no reason why not under the current bill.

However, there are no express provisions with respect to the timing of eligible capital expenditures and in particular the time when those expenditures can be relied upon to justify a rent increase in excess of guideline. So we would ask that be clarified and that it be made quite express that eligible capital expenditures that are undertaken after the transition period set out in the bill can be used as a basis for an increase of rent above guideline at any time during the currency of the bill.

Our final concern, our third concern, is with respect to the carry-forwards that the bill proposes. The bill treats large buildings and small buildings differently, permitting a two-year carry-forward for small buildings and a one-year carry-forward for large buildings.

In our view, that carry-forward period will be sufficient for many expenditures, but will not be sufficient for concrete restoration work. I am sure this committee has heard before, and likely will again, of the state of concrete deterioration in parking garages and exterior structures in the province. This is a problem that was not redressed by the building code until about 1987, and so although it is a serious problem in older buildings it is also a serious problem in newer buildings. The cost of concrete restoration work is very substantial. It is not necessarily a lot more substantial for big buildings than small buildings; once you are doing concrete restoration work, you are into a very significant expenditure.

Our concern is that the two-year and one-year carry-forward periods for concrete restoration work are not sufficient, that those carry-forward periods should be extended, and that careful thought should be given to an appropriate length of time for which those particular eligible capital expenditures for concrete restoration work can be extended. Otherwise, we fear that the work will not be done in an expeditious way, that it will be delayed and postponed at great cost to everybody and at some safety hazard.

We are also concerned because concrete restoration work is a highly specialized area. It is an area our members perform work in. It is an area that supports many working people, and it is good work and necessary work and there may be a problem financing that work under the existing carry-forward limits.

Those are our basic comments on the bill. Overall, we find it to be approaching a fair compromise and we would ask for the two clarifications with respect to the 2% rule and the timing of eligible capital expenditures that can be used to increase rent above guideline, and we would ask that the carry-forward provisions with respect to concrete restoration work be extended.

Mr Tilson: Of the 100,000 construction workers who are in your association, are you able to estimate the job loss that Bill 4 caused, if any, and second, the anticipated loss if Bill 121 passes unamended?

Mr Gold: No, we are not able to estimate the precise level of job losses. We know the economy has been very severely depressed and construction unemployment has been very high over the last number of months. The last figure I saw in December was in excess of 20%, and anecdotal evidence suggests it rose somewhat after that. Some of that is attributable to Bill 4 and to the impasse over Bill 4. Some of it is attributable to the depressed economy.

In terms of Bill 121, as we say, we think that Bill 121 is approaching a fair compromise and it is now time to get down to work and to do this work, and we expect and hope that it will be done under Bill 121.

Mr Brown: You have obviously been having discussions with your employers, the contractors who do the work. Could you tell us what the outlook is for the construction industry as far as residential buildings go? This bill does have a provision of a five-year moratorium on rent control for new buildings. Are the people whom you are in contact with thinking there will be many more buildings built? Does your membership look forward to more jobs in both the maintenance, restoration and new building sectors?

Mr Gold: Our membership depends to a significant extent on restoration work, and this is why we have put the very substantial emphasis on concrete restoration. That is a key element of the employment scene at the moment, as you can appreciate, as I guess your question assumes. The rate of construction right now, owing to a great number of factors, is depressed. This is one sector we believe can be stimulated and should be stimulated at this time through Bill 121.

We believe that concrete restoration is a labour-intensive field, that it draws largely on union labour, and that it is necessary, important work and can be encouraged through improved carry-forward provisions under Bill 121.

Mr Brown: The other issue is energy conservation measures, which I presume your members would be involved in also, the replacement of buildings' windows, for example. Have we been seeing much of that in the last year, and does your membership expect to see more of it in light of Bill 121?

The Chair: A short answer.

Mr Gold: A short answer? I really am not an expert in the rate of exterior windows. It certainly is a big-ticket item, no doubt about it.

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Mr Duignan: Thank you, Mr Gold, for coming along here this afternoon and putting an excellent balanced document in front of the committee this afternoon. I am glad you agree with us with what we have been saying all along, that Bill 121 is a fair, workable compromise on the whole issue of rent control.

There is one question I would like to touch on very briefly, and that is the whole question of concrete restoration work. You are suggesting that the time frame we are talking about is too short. What type of time frame would you suggest or recommend?

Mr Gold: Our sense for concrete restoration is that we are dealing with a period that is substantially longer than the two years. Unfortunately there is a certain dearth of data I can fall back on for a certain response. Nevertheless, I guess our feelings are that we are looking at something that is perhaps in the 7- to 10-year range. We are looking at very substantial expenditures.

Mr Duignan: Do you have that information? Is it available?

Mr Gold: As I say, there is a dearth of information at all levels -- from government and from private industry -- as to the precise costs and figures.

Mr Duignan: Thank you again for your balanced presentation.

The Chair: Murray, thank you. We appreciate your brief.

COTOR MANAGEMENT LTD

The Chair: Helen Zavitzianos: Helen, you have been observing us all day, so I think you are familiar with the procedure the committee is using: 15 minutes and you can reserve some time for questions.

Ms Zavitzianos: Very good. My presentation is very short. First, I want to introduce myself. I am the principal of a very small company that keeps a stable of real estate portfolios for offshore owners. I am not an investor, but I have very grave concerns and I also have a social responsibility. I would like the buildings I manage not to have balconies falling off and garages collapsing.

We have had the same clients since 1968 and we still manage the original properties. In the residential we have one building with 159 suites, a fourplex, and a single family, so I have a pretty global feeling of what the small landlord is facing.

With the existing and past legislation, the amount of administration to try to keep up with the forms and the regulations has been tremendous. The fees we get are very inadequate and we cannot keep up with the latest legal requirements. But what really frightens us is the cap of 3%. Everybody thinks that you do retrofitting and you get 3% of the cost, with a 2% deduction.

I have worked on our particular situation. In order to justify the 3% you have to spend 5%. The 2% is taken off, so you can retrieve in the first year the 3%. Here we go. We have a rental income of $1 million. The garage restoration, very minor, was $500,000. Actually I would strongly suggest that you ask North York, Mr Marone or somebody --

Mr Mammoliti: Marone.

Ms Zavitzianos: Yes, and they have a visual presentation that shows what happens to garages and balconies. There is no preventive work that you can do there to prevent what happens, not that our engineers would know and advise. You see the Gardiner Expressway. If they knew how to preserve it, they would not be at it year after year.

We go back to the arithmetic: $500,000 the landlord has to spend. The first year with 3% he can only justify $250,000 from the bank. The second year you take the balance, so that $250,000 that remains, when you take the 2%, which is considered a disallowance, whatever, you can only justify $112,000. So you are there, you have spent $500,000 and you can only get, as a loan, $362,000. Where are you going to find the rest? The cost of garage preservation -- they collapse. Some of have been sort of emptied. Where is the landlord going to get the additional $137,000 that the banks are not going to lend him? I think the 3% guideline is inadequate for the preservation of our buildings.

Then I compare the increase that the private landlord is getting with what Ontario Housing is getting. The history is about 10% a year, while the private landlord has been getting between 4% and 6% all along. This year my mother, who lives in a senior citizens' building, got a 7% increase in a new building. That represents $41. In our building, with lower rents, we get 5.4%. In our building that increase represents $29. In my mother's building, Ontario Housing, it represents $41. With a $41 increase you can pay the taxes, the electricity, what have you. With $29 what can you do? You are deeper in the hole.

Another item in the bill that I disagree with is the elimination of the appeal of an order. I find this is very undemocratic. I have an example of a landlord making an application and making a mistake and saying and thinking that cable is included. Then comes the order and the landlord is given the order based on paying for cable, while previously he did not pay. The order technically is correct. It is not a legal point to appeal on. It is technical. It cannot be done because the order is right. This is very unfair and only technical.

Another point is a search warrant if there are reasonable and probable grounds. Coming from Europe and going through a communist regime for a little while, I find this like a police state procedure. That frightens me. As far as I know, under British law all citizens are innocent until proven guilty.

Another point is that there is no provision for continuation of the Residential Rental Standards Board. I am not going to say whether the standards board is useful or not useful, but what I like in the standards board is that there is a forum for landlords, municipal representatives and tenants, and when there is an issue there can be a consensus. I think every government should have something where representatives of all parties can have an opinion and a dialogue outside of an adversarial climate.

I think a registry of buildings of from three to six units is expensive. What will it accomplish? In Toronto and outside there are vacancies. The rents are below even the rent registry. I hear the tenants in Mississauga tell you, "If you don't give us $200 reduced rents we'll leave," and there are lots of condominiums where they can go. There is no issue of keeping the rents down. The rents have gone down.

Also, I am very concerned about how this aging stock needs concrete restoration, electrical upkeep, fire marshal's orders, things that have to do with safety and health. With this 3% cap, how are the older buildings with depressed rents going to be able to get the increased rents to do those things?

In conclusion, I believe your efforts to mould Bill 121 should try to give the flexibility required within a reasonable financial framework for the landlords to operate, maintain their buildings and upgrade them to meet the constantly new safety and health bylaws. Some of them are really for the birds, but you have to do it. Why should you increase the railings in an inside stairwell when the opening is that narrow? You have to increase them and spend $20,000 to do that, to increase it that much. What is going to fall down there? The two stairs are so narrow nothing can go through anyway.

Try to find out what are the Ontario Housing costs to operate and upgrade and give the private sector something comparable.

I suggest the government should try to treat the landlords as partners who have provided accommodation about 45% less expensively than it costs the government and not to hound the landlords as criminals.

This is all I have to tell you and I thank you for the opportunity of hearing me.

Mr Mammoliti: You touched on the city of North York, an individual by the name of Mr Marone and a video.

Ms Zavitzianos: Because I saw his presentation.

Mr Mammoliti: In your opinion, how many landlords have taken advantage of such a video as the one you have described, one that will actually teach landlords how to protect their property?

Ms Zavitzianos: I do not think there is protection. I think buildings should be inspected every two or three years because even the inspectors do not know. The reason we spent only --

Mr Mammoliti: No, but the video you were talking about.

The Chair: There is a limit of one question. Mr Turnbull.

Mr Turnbull: Unfortunately I can only ask you one question. You touched on older buildings with depressed rents. As you know, in this legislation they have elected to go with the differentiation between large buildings and small buildings, the borderline being six or less for the small building. It seems to me that the older buildings with depressed rents would be more appropriate if you are going to have this type of legislation differentiate in terms of the rent increases. They are the very ones that are going to take more money because they are older and were under rent controls. Do you think it would be more appropriate to differentiate between older and newer buildings as opposed to larger and smaller buildings?

Ms Zavitzianos: I think so. Of course, you have also a program for small buildings, but they have to be up to six storeys. A lot of older buildings are very old and they do not qualify.

Mr Brown: If I understood your presentation right, one of the things you are saying to us is that you are going to have a very difficult time maintaining the buildings you manage over the next period of time under Bill 121. You will not be able to do structural repairs, the repairs that are most necessary to buildings. You may have difficulty acquiring the financing to do them. Am I understanding what you are telling me fairly closely?

Ms Zavitzianos: Yes, in the future. You see, we have all these balconies. Last year, every balcony would cost $14,000 to repair. The tenants take their barbecues and in the winter they throw salt. You tell them it is not allowed, but how can you? The salt eats through the concrete. That is $14,000 on 100 units to replace these balconies. Where are you going to find that? This is a question of having the concrete fall on somebody's head. Actually we had a piece that big that fell off. It is something that does not give you any indication of happening. On the exterior restoration, we have concrete walls coming out. The exterior aspect did not show any deterioration at all, but when they started with water-blasting and hammering, it was horrid.

The Chair: Thank you for your presentation. Our time has expired. We appreciate your coming before the committee.

The committee has completed its agenda for today.

The committee adjourned at 1752.