Tuesday 27 August 1991

Rent Control Act,1991, Bill 121 / Loi de 1991 sur le contrôle des loyers, projet de loi

Canadian Bankers Association

Ministry of Energy

Ontario Association of Property Standards Officers Inc

Ministry of Housing

Rockford Holdings

Albert Faccenda

Jim Bright

Tenant Advocacy Group

Kewin and Associates

Society of Rent Review Consultants of Southern Ontario

Canadian Development Institute

David Hulchanski


Chair: Mancini, Remo (Essex South L)

Acting Chair: Callahan, Robert V. (Brampton South L)

Vice-Chair: Brown, Michael A. (Algoma-Manitoulin L)

Abel, Donald (Wentworth North NDP)

Bisson, Gilles (Cochrane South NDP)

Drainville, Dennis (Victoria-Haliburton NDP)

Duignan, Noel (Halton North NDP)

Harrington, Margaret H. (Niagara Falls NDP)

Mammoliti, George (Yorkview NDP)

Murdoch, Bill (Grey PC)

O'Neill, Yvonne (Ottawa-Rideau L)

Scott, Ian G. (St George-St David L)

Turnbull, David (York Mills PC)


Callahan, Robert V. (Brampton South L) for Mr Mancini

Perruzza, Anthony (Downsview NDP) for Mr Bisson

Poole, Dianne (Eglinton) for Mr Scott

Ruprecht, Tony (Parkdale L) for Mrs O'Neill

Wiseman, Jim (Durham West NDP) for Mr Drainville

Clerk: Deller, Deborah

Staff: Luski, Lorraine, Research Officer, Legislative Research Service

The committee met at 1004 in room 151.


Resuming consideration of Bill 121, An Act to revise the Law related to Residential Rent Regulation.

Reprise du projet de loi 121, Loi révisant les lois relatives à la réglementation des loyers d'habitation.


The Vice-Chair: The business of the committee today is to conduct public hearings into Bill 121. Our first presentation will be from the Canadian Bankers Association, Ted Taylor, chairman. Sir, would you and your colleagues like to come to the table. This morning we have allocated one half-hour for your presentation. You can reserve some of that so that the members have an opportunity for questions. We appreciate your coming. Please begin by introducing yourself and your colleagues.

Mr Taylor: I am going to ask Al Cooper from the CBA to do that. I am Ted Taylor, the new chairman of the Canadian Bankers Association.

Mr Cooper: My name is Al Cooper from the Canadian Bankers Association. I am the vice-president. Ted Taylor is the chairman of the mortgage committee of the CBA and president of Scotia Mortgage Corp. We also have with us today Tom Alton, who is a member of the mortgage committee and president of the Bank of Montreal Mortgage Corp, and the person who does all the work, Barb Amsden, who is the director of financial affairs at the CBA.

We did make a submission to you which I believe the committee has been briefed on by the staff on August 16, and it focuses on the six areas of concern we have. Ted will address those in a moment. I might say, just as an introductory remark, why we are here. Banks in Ontario, and specifically the CBA representing all of the chartered banks in Canada, are very interested, of course, in the mortgage market. We currently represent about 50% of all lending activity in that arena, and anything that affects the residential mortgage market and its viability is of consequence to us. Not only are we concerned with the very small as well as large developers, but also those things that affect tenants, as they are also our retail clients.

Therefore we are very interested in assisting the committee to make a more viable and workable solution with respect to the issue of rent control in the bill that is currently before you. With that, I will turn it over to Ted to elaborate slightly on some of the points that were made to you in our submission of August 16.

Mr Taylor: It is certainly very good of you to invite us to discuss our paper and our views on the new Rent Control Act. As you are aware, our primary reasons for doing this submission on this subject are due to our involvement with the financing of projects for landlords. We are also very interested in ensuring that the quality of housing in Ontario remains at a high standard and in looking after the needs of all the people who are renters.

Lending for apartment buildings is largely driven by the projected net income the property will generate. If there is insufficient cash flow to cover debt servicing, a project is unlikely to be proposed by a developer or purchaser or financed by a lender. We are proposing some modifications to certain sections of the act which we believe will benefit both renters and landlords.

Our major concern at this point in time relates to capital expenditures. As indicated in the green paper relative to the legislation, it is estimated that by the year 2000 between 188,000 and 235,000 rental units could be in need of major repair, at a cost of between $4 billion and $7 billion. While the new guidelines should provide coverage for minor repairs, we are very concerned about difficulties landlords and lenders may have when it comes to required capital expenditures for projects such as underground parking structures, which require considerably greater preventive maintenance and/or repair than can be financed with the proposed cap and carry-forward period.

The proposed legislation may require that a major garage repair be broken down into a series of projects spread over many years at potentially much higher costs and greater inconvenience to tenants. We are concerned that the financing will not be available if the cash flow cannot support the additional financing costs. It is obvious that such projects will benefit the tenants for 20 years or longer.

The CBA's position on this is that for major capital expenditures which are required to ensure the safety or structural integrity of the property, rent increases above the norm should be allowed to cover these costs without the need for a carry-forward provision. We are suggesting that a change be made to part I of the rent control legislation.

Moving on, there is a certain word involved with the capital expenditures, the word "neglect." We believe it is a bit nebulous in the legislation as it has been drafted. What we think should be done is for you to look at clarifying that. It is our view that in certain instances a majority agreement by tenants should be able to permit landlords to submit for approval rental increases to support capital expenditures which will significantly benefit a rental complex. Right now individuals can improve their units, but what we are proposing is that if, let's say -- I do not know what the number would be, I will leave that to the people working it out -- 80% of the people believe that some improvement should be made to the complex, that should be looked at in the legislation.

Our second major recommendation relates to a provision to allow landlords to claim for increases in financing costs. Our suggestion there is on existing levels of financing when interest rates increase. If landlords are unable to recover higher costs resulting from future increases in interest rates beyond their control, their investment is inherently risky. The result is likely to be a reduced level of investment in housing by existing and potential owners. In this case we are suggesting that provision be made to allow for interest rate adjustments on existing levels of financing.

Our suggestion in this case is that we do not think every case where the rate has gone up the minimal amount should be considered. Our thoughts on it, and we did not present it in our paper, would be that for an increase of 1% or 2% the landlord may be allowed to apply for increases in his expenditures. On the other side of this, if he has applied, we believe that the tenant, after rates decrease, should be able to apply for a reduction.

I have only a couple more minutes and then we are looking for lots of questions, I hope. The other things are less important to us but we think they are changes that should be considered. For newly constructed buildings an exemption was provided for five years. In our paper we have suggested that it be extended to eight or 10, because there is a lot of cost in the initial period of construction.

Another approach we have provided in our paper is that maybe rent control should not apply to luxury units. In other words, an apartment being rented over a certain dollar amount should not fall within the guidelines. We have suggested in our paper that certain exemptions be applied there.

Application to reduce rent relative to inadequate maintenance: The tenant is able to apply for a rent reduction because of inadequate maintenance. I think that is a realistic thing. However, we have to have a definition of what "inadequate maintenance" is. It has to be looked at and defined clearly as to how that is going to apply for the renter who is requesting a reduction in rate.

The last point we have is relative to a work order to prevent a rent penalty from being issued which would prohibit the landlord from taking any rent increases. The period there is 30 days. I think on certain major changes to buildings he may not be able to get the action done within 30 days, so we again would like that considered.

Tom or I or the members of the CBA would be pleased to answer any thoughts and any questions you have on our presentation.


Ms Poole: Thank you very much for your presentation today. Mr Chair, we have had yet one more group come before us and express concerns about the fact that "neglect" and "inadequate maintenance" are not defined. Since on August 1 I asked the ministry to define those two terms and that is now four weeks, subsequent to today's hearings I wonder if the ministry staff could come forward at this time and give us their definitions of neglect and inadequate maintenance. Would that be in order?

The Vice-Chair: If we have consent it is in order. Everything is in order if we have consent. Is there consent from the committee?

Mr Turnbull: As long as it does not take away from any of the time allotted to the questions, absolutely.

The Vice-Chair: I take it we have consent. Perhaps someone from the ministry might clarify this for both the presenters and the committee. Dana, you can take a chair at the end there.

Ms Richardson: As you know, Ms Poole, the words "inadequate maintenance" and "neglect" are not defined in the legislation itself. This certainly has been the subject of a great many submissions from various groups, and the ministry has been listening to the suggestions those groups are making.

We are not prepared at this point to define in the legislation what those particular words concern. However, we will be making a presentation later today about some of the potential concerns that would be taken into account in deciding these particular matters.

We will, in our presentation at 11:30, be reviewing some of the submissions and some of the other concerns, legal concerns, about defining those particular words. Perhaps I could defer that matter until later on.

Ms Poole: I am certainly willing to defer the discussion, but I can say that I am really dismayed that after four weeks the ministry cannot give definitions for two very crucial components of its legislation. I, for one, am not willing to even consider passing any clauses or provisions that deal with these issues until we have seen such definitions. So perhaps you could have them work extra hard this morning and come up with them by 11:30.

Ms Richardson: We will certainly be prepared to discuss those, Ms Poole.

Mr Tilson: I think our party feels the same way, Mr Chair. It would be irresponsible of this committee to submit its report to the Legislature without knowing what the definitions of many of the sections are that affect this bill.

It appears that the other alternative would be simply to allow definitions to be defined by regulation, which means that the whole housing issue would be set by the bureaucrats as opposed to the Legislature, which I think we all agree would be wrong. It is imperative that many of these definitions you have been hearing from all sides, from landlords, tenants, all parties that have been making submissions -- it is not just the banking associations that have been making these requests -- it is not just the issue of neglect, but there are other definitions. Before we start going through clause by clause, how do you put forward whether you vote or whether you do not vote in favour of a particular section? If you do not know what the words mean, how can we intelligently deal with it?

Ms Poole: I have several questions. You have told us about the underground parking garage problem, and I concur with you that it is a serious problem that this legislation does not address. I was somewhat puzzled by your conclusion when you said that with major capital, all the legitimate costs should be able to be passed through without the need for carry-forward. Are you inferring from that that all the costs should be put through, obviously on an amortized basis?

Mr Taylor: Yes, on an amortized basis would be the approach that we have taken, but that they would all be taken in at the time the application was made.

Ms Poole: So you are saying, if it resulted in a 15% rent increase, so be it, and not try to phase that in.

Mr Taylor: No. Tom, do you want to answer that?

Mr Alton: It is not to be recovered in the one- or two-year period. In other words, the benefit may be much longer, so it might conceivably have the cost recovered over the financing period of that major renovation. If the major renovation was to be financed over five years, maybe you could have the rent increases for the major renovation amortized over that period. In other words, the prohibition to the carryover means that it can be carried over without limits.

Ms Poole: Yes, that is what I was trying to get at, because I thought that might be a more realistic way of looking at it than trying to lump everything in one year, which did cause problems under the old legislation.


Mr Callahan: If you did that, how would someone who rented during the period of the amortization be able to determine what was the proper rent? I imagine if the old registry continued to exist, you would register that rent which had, let's say, a 15% increase which was to be amortized over, let's say, five years. How would you register that? Would you register it with the 15% increase? And how would somebody who was renting in the interim determine what the proper rent was?

Mr Alton: I think perhaps you have answered the question. You would register the increase. I think it could be somewhat similar to a local improvement in the municipality. You put storm sewers in the streets and you amortize the cost over a period of time and you tax the home owners for that period of time that it is being amortized. At the end of that period, the tax goes off. So similarly, the rent would decline at the end of the amortization period for the amount that was used for the major capital expenditure.

Mr Callahan: The analogy of an expenditure that would go with a home is not really a valid one because the person who purchases the home, purchases the home with all its warts and pimples. I hope I am understanding this correctly, as I am just filling in today, but you are saying that if a rent increased for a major expenditure, the application would be made to the body. It would be granted. It would not be charged in that first year for the full amount of the 15%. It would be amortized over the length of the financing for the particular capital structure.

I guess I am thinking more about the mechanics. If someone were, let's say, buying the building and wanted to re-rent, how would he determine whether the rent as listed on the register -- which I presume would be the rent increased by 15% -- how would he determine what the proper rent was?

Ms Poole: Mr Chair, perhaps I could help out in this instance, because I am not sure our witnesses are prepared to answer or can answer that question. Bill 121 has a similar provision to Bill 51 in that the landlord would have to notify any incoming tenant of any proposed rent increase, so once rent review set the rent increase and what it would be over the subsequent, say, five-year period, then that landlord is under that obligation. If the landlord fails to do that, he or she would face a penalty of two years worth of increases. So that provision from Bill 51 has been carried forward.

Mr Alton: That is right, and from that point of view it would be unchanged with our proposal. In other words, what you have now in the legislation would continue to apply as to how people would know what the rents were.

Ms Poole: I was just looking at your proposal for luxury units. I guess there would be a difficulty defining what luxury units would be if you were to exempt them from rent control. Do you have a dollar figure in mind?

Mr Taylor: No, we did not. We discussed that yesterday at a preliminary meeting but we did not decide what that would be. I suppose we could be of assistance to the people looking at it based on luxury buildings that we finance, but we did not get into what that might be.

Ms Poole: Well, we will do what all good committee members do, which is put it back in the laps of the ministry and say, "Please define this and what should the dollar figure be." Thank you.

Mr Tilson: Your presentation deals mainly with specific items under the bill. I would like to know what your thoughts are on how this bill will affect financial institutions, banks, trust companies. There has been a number of articles in the newspapers over the last little while dealing with the survival of First City Trust and its problem seems to have been a write-down with respect to the real estate portfolio.

One article from I think today's Toronto Star talks about 41% of their portfolio up in -- and to use the paper's quote -- "riskier apartment building loans." They also talk about a certain percentage, 12% with respect to single-family mortgages. Listening to this, reading these articles, there seems to be some implication with respect to investing in apartment buildings. My question to you is, therefore, how do you anticipate Bill 121 will affect financial institutions in the province?

Mr Taylor: I am going to ask Al Cooper to address that first because he has been involved with both sides of the banks relative to new construction. A lot of the financing we do on apartment complexes is relative to take-out financing. I will let him take it on and then you can ask questions of both Tom and me.

Mr Cooper: With respect to the viability of financial institutions as it relates to any particular bill, there is never one issue. There are always compounding or a number of issues. Clearly, in the context of banks, while we are rather significant in terms of residential lending and we do react and respond to downturns in the economy and market value both of rental units and mostly single-family, home-owner type units, the proportion of the mortgage portfolio to the total size of Canadian chartered banks is not nearly as significant as it is for trusts which legislatively must have a proportionate amount in residential or real estate loans.

The value of those portfolios and the viability of those portfolios would vary from company to company. Clearly some are not suffering as much as others, but we are in a downturn period and the viability generally of many of these residential and commercial real estate ventures is under severe pressure and strain at this present time. Thus, you do see quite a number of articles and you will, as the financial institutions report the results, see increasing provisions. Some have a better capacity to deal with that than others.

In terms of the bill in general, I think it is reasonable to suspect that anything that is perceived by the market to inhibit, cap the ability to finance -- and, as was stated in our presentation and was mentioned earlier, when you are dealing with this type of unit you are dealing with cash flow and the ability to repay, not necessarily the underlying value, but those values will be driven down by anything that artificially caps relative to what the market would otherwise dictate.

Mr Tilson: What I am concerned with is that, because the number of restrictions appears to be increasing with Bill 121, which will make you, as bankers, more and more reluctant to either refinance or to provide new financing, I would like to know what you anticipate the effect will be on your industry, if any.

Mr Cooper: It will have a behavioural change, but it will not in any way affect the viability of banks.

Mr Turnbull: Turning to the question of value that exists in apartment buildings today, I think you would probably agree, and I would like your comments on this, that the difference between the reduction in value in, say, office buildings and apartment buildings is that office buildings have been driven by a vacancy rate, whereas the reduction in value in apartment buildings has been driven purely by legislation. First of all, is that correct?

Mr Taylor: Yes.

Mr Turnbull: Numbers varying between 25% and 40% reductions in apartment values have been reported to this committee. Can you just comment very briefly on that?

Mr Taylor: I do not think that, other than in luxurious type of apartment complexes, the decrease is 25% to 35%. I think it may be more in the 15% to 20% range.


Mr Alton: Yes, it is hard to generalize because it varies from market to market. Apartment buildings in Windsor might have a different effect than the ones in Toronto, but you just have to look at the apartment starts in this province, and they virtually dried up this year, and other than social housing there are really no multiple housing starts. Therefore, the banks are not financing very much of it.

Mr Turnbull: Turning to the availability of funds to refinance existing mortgages, are you taking a more conservative approach to refinancing?

Mr Alton: I think that would be the case generally among the financial institutions. That is right.

Mr Turnbull: We have heard stories of people who had collateralized their mortgage on the building against their own home. They put their life savings into buying the deposit. Indeed, yesterday on television we saw a couple who were evicted from their home along with their five children because they had lost their building because of their inability to refinance it. Is this a typical thing, that people are collateralizing loans?

Mr Taylor: I would say there are cases where people collateralize to support the initial venture into apartment financing, that it is security for the financial institution. I have not seen or heard of too many instances where there have been problems with financing, relative to the fact that there is no security backing it up in the form of collateral security.

The Vice-Chair: Ms Harrington.

Mr Turnbull: Can I have one quick question? It is really rather important to the considerations of this committee.

The Vice-Chair: It is Ms Harrington's time.

Mr Turnbull: I think we will answer some of the questions that the NDP has been asking.

Ms Harrington: I will see if there is some time for you.

Thank you very much, gentlemen, for coming. It is nice to see you again. I know you were involved in our deliberations last April.

I find it extremely curious indeed that Ms Poole is not aware -- because I know she was intimately involved with Bill 51 in the last three years -- that the regulations dealt with the definitions and in fact Bill 51 did not define ongoing deliberate neglect. The Tories supported this bill, so I think you should go back and ask the people who were involved about how that was done. It is our intention -- -

Ms Poole: Mr Chair, on a point of order: Since Ms Harrington has questioned my comments, I would like to point out to her a very real difference --

The Vice-Chair: That is not a point of order, Ms Poole.

Ms Poole: It certainly is --

The Vice-Chair: Ms Harrington has the floor.

Ms Harrington: We will discuss it. Okay?

Mr Callahan: It is a point of view.

The Vice-Chair: Yes, it is.

Ms Harrington: I have a couple of questions I would like to ask you. First of all, I should clarify that the 30-day provision -- and maybe our staff will help me later in clarifying this -- is not that it has to be done within 30 days. There is lead-up time to that in which the landlord certainly has time to rectify that situation.

You had mentioned in your brief the interest rate changes. Do you see a difficulty in tracking these, both up and down? Is this going to be a problem?

Mr Taylor: It would be possible to track it on a regular basis. I guess we are suggesting that maybe it be looked at on the basis of not every adjustment of a quarter per cent or a half to try to avoid a pile of work at different levels, but the information is available through the CBA.

Ms Harrington: I am just concerned --

The Vice-Chair: Mr Wiseman also has a question, just for your information, Ms Harrington.

Ms Harrington: Okay. I am concerned that it may be difficult, but it is something we are looking at.

The other thing I wanted to touch on is your proposed changes to the capital expenditure provisions in the act. First of all, I should let you know that we certainly expect tenants to pay. The government is involved in some of the renovations through low-rise rehab programs and certainly the landlords have to shoulder some of that responsibility as well. That is the way we see it. You mentioned an open-ended sort of pass-through over the years. We have proposed the initial year and one further year. How would you see it if it was extended one further year past that?

Mr Alton: I do not think that is going to cover the major capital improvements. I am talking about major; I am not talking about normal, small maintenance things. I am talking about big jobs like the redoing of the underground parking garages where the workers have to come in and jackhammer all the concrete out and redo it. That is a $1-million kind of renovation. I do not think that can be recovered in a one-, two- or three-year time frame.

Mr Wiseman: I would like to pursue with you for a minute some of your comments earlier in reference to Mr Tilson's and Mr Turnbull's comments. Currently we have a situation in Metropolitan Toronto where you can get the first month's rent free because there is a glut on the market. A lot of condominium owners have purchased on speculation. They cannot flip them and they are renting at what the market is determining to be the value, which is somewhere in the neighbourhood of $850 or $900 a month, even though they are carrying costs at $1,500 or $1,600 in mortgage payments per month.

Given that we have a market situation out there right now in terms of rent and that rents are actually, for some apartments, going considerably lower than they have been in the past, how much is the current market situation responsible for the decrease in the sale value of apartments, given what you talked earlier about, how cash flow from the unit is of importance?

Mr Alton: I think you are probably referring to condominiums which have been sold to individuals who have then turned to rent those units, and I think your assessment is basically right. Yes, there is an oversupply and rents have not been as high as was expected by the purchasers of those units. There is an overhang in the market, and that is exactly why we are suggesting that luxury units not come under rent control. We think rent control should cover those at the lower end of the scale, those that most need protection. We do not think the people who live in luxury units need protection.

Mr Wiseman: That was not exactly my question. My question was, how much effect is it also having on the resale value of an apartment block that is not what you would consider luxury?

Mr Taylor: My opinion on that would be it would not be having a major impact at this point. I think they are looked at by different types of investors. Certainly the overall market conditions and the recession and so forth have an impact; there is no question about that. But I do not think it is strictly the condominiums on the market versus the lower-priced apartments that are causing the problem.

Mr Wiseman: Then how do you differentiate? The market is out there making determinant factors, so how do you define what the impact of legislation is, what market is, what high interest rates are and, say, the value of the Canadian dollar? How do you determine what is actually causing the decrease in the resale value of an apartment block?

Mr Cooper: In the context of the effect of condominium rentals, clearly their price is driven by the rent-controlled price of apartment buildings more than the other way around.

Mr Wiseman: The condominium price?

Mr Cooper: For the condominiums that are on the market -- and most of them are short-term on the market -- the rental that is being attracted being different from the carrying costs is driven more by what the rentals are generally in the marketplace. The majority of those rentals are driven by the rent-controlled buildings as the alternative to renting. That establishes a cap.

Mr Wiseman: I am not sure I understand how you can say that, given that --

The Vice-Chair: Thank you, Mr Wiseman.

Thank you. We very much appreciate your attendance here this morning.



The Vice-Chair: The next presentation will come from the Ministry of Energy, Larry Moore, manager, energy management section. Good morning, Mr Moore. You have Mr Almassi here from Ontario Hydro also. You have 30 minutes to make your presentation. I am sure the committee would very much appreciate some time to ask you some questions.

Mr Moore: Good morning, ladies and gentleman. I am Larry Moore, the manager of energy management at the Ministry of Energy, and this is Mr Almassi. The way we would like to operate during our half-hour is that I am planning to give a very short presentation, just about a five-minute or perhaps 10-minute presentation, to try to set out the public policy relationship between the proposed Rent Control Act and the energy aspects. Mr Almassi is here from Ontario Hydro to answer questions of a technical nature that the committee may have about energy efficiency opportunities in rental buildings.

In terms of the relationship between rent control and energy, it really boils down to two key areas, and those areas are, first, to ensure the recognition of and the allowance for energy conservation investments to be dealt with, to be paid for. So energy conservation investments have to be paid for. On that one, our concern would be that there be no new barriers erected to prevent energy conservation from happening in these buildings. The other energy-related area here is the issue of allowing landlords to deal effectively with increases in energy prices, especially any exceptional increase in energy price that might happen some time in the future. So there are really just these two energy areas.

Both of these issues were thoroughly discussed between the Ministry of Housing and the Ministry of Energy. Both were included in the cap above the guideline as allowable expenditures to be included in that cap. We were pleased with that outcome of our discussions, our consultation. We were not overjoyed. Just like everyone else, I am sure, we would feel that we should have an unlimited ceiling. If people want to do energy conservation investments, that is the best possible thing that anyone could do, so you should be able to put all that on the rent. It is good for everyone in the long run. But of course we recognize that there needs to be a balance between all the investments that need to be made and, in the end, although I cannot comment on the specific size of the cap or on the number of years the cap should be applied or anything along that line, we feel there has been a real attempt to get a balance here between stable rents and the energy concerns that we have.

The overall key thrust of the Ministry of Energy is energy efficiency and conservation. We have seen over the years, and our analysis clearly indicates, that there is a wide range of economic and environmental benefits from going ahead and doing these things, going ahead and doing the energy conservation measures. One important element of this is that many energy efficiency investments are cost-effective in their own right. In other words, the fuel saving that you get more than compensates for the investment you have to make in that energy conservation measure.

In a situation where a landlord is paying the energy bills directly, as opposed to the situation where the tenant pays the energy bill, there are many situations where it would actually be cost-effective and a good investment for the landlord simply to proceed with that investment without it necessarily being reflected in rents. In other words, you could have a separate investment for the energy conservation measure, which in many situations would actually pay for itself through the direct energy savings. So this is an important element just in those situations -- and we believe it is about 80% of the situations -- where the landlord pays the energy bills. That alone is not a huge barrier to energy conservation, but nevertheless, it is important to have some ability to have this reflected on rents.

I understand the committee is somewhat concerned about energy price increases in the future, so I would like to just address in a general way our forecast of energy prices in Ontario. The oil price situation looks relatively stable for the future. We are looking at increases in oil prices. Our forecast is that oil price increases -- this is home heating oil basically -- will rise slightly more than the rate of inflation. Our estimate of the rate of inflation is around 5% now, perhaps falling down to 3% if the federal government is successful in making its inflation guidelines stick. So we are looking at approximately 4% to 5% inflation at this point, and oil prices rising slightly higher than that over the next 10 or 15 years. High oil prices that we have seen occasionally in the past have proven themselves to be unsustainable and we do not expect them to be sustainable in the future, at least the foreseeable future.

Natural gas prices are actually on a slight down trend still. The major distributing companies have recently got quite a good break on their next set of contracts from the Alberta suppliers. We are looking for a slight down trend in natural gas prices in the short term, perhaps some tightening when the oversupply is used up, so some increases at that point, but overall, no real sign of a dramatic price increase again, up to the year 2000 and beyond, for natural gas.

I guess electricity is the fuel of greatest concern, and understandably so. All of us are facing significant increases in the price of electricity. The forecast for electricity is that for the next three years, we will be seeing rate increases between 9% and 13%. Take inflation away from those increases and they do not look quite so bad, but the total increase, including inflation, is about 9% to 13%. Beyond those three years, both Ontario Hydro and the ministry are projecting electricity prices to rise again, more or less in line with inflation. There is unfortunately this quite high increase in electricity rates in the near term to deal with.

That is basically my presentation. I am at your disposal.

The Acting Chair (Mr Callahan): Mr Almassi, you do not have a presentation, I gather.

Mr Almassi: No.

The Acting Chair: We have consumed about seven and a half minutes, so the balance will be divided equally.

Mr Tilson: One of the concerns that was raised at the outset of this committee was that if a landlord decides to follow your recommendations or the Ministry of Energy recommendations with respect to energy cost-saving ventures such as completely new windows, perhaps a new heating system or a new type of heating system, if the landlord then undertakes that, in consultation with the Ministry of Energy, he or she cannot pass that through under this bill. Second, if he or she goes and makes the application for the rent increase and receives it, the tenant immediately or shortly thereafter can make an application for a rent reduction because of, on your recommendation, the tremendous cost savings that will follow; in other words, the maintenance saving that will follow.

Why would a landlord or an owner of a building therefore follow your recommendations for energy cost saving when they know perfectly well that it will be most difficult to obtain financing from the bank because of the risk of rents being reduced? Why would they do that?

Mr Moore: I guess one of the good news items around energy conservation is that there are lots of players and lots of partners who are prepared to assist exactly these things to happen. Ontario Hydro has a number of programs, an increasing especially where electricity is involved, to work with the landlord, to perhaps finance the investment and in some instances actually give a cash grant to make these things happen.


Mr Tilson: I appreciate that, but will they pay 100% dollars?

Mr Moore: Not ordinarily 100% dollars, no.

Mr Tilson: I hope not.

Mr Moore: What we are coming down to, and I think your point is a strong one about the possibility of an application for a rent decrease -- now in the electricity situation, you cannot imagine this happening. In other words, you cannot imagine the savings you would make more than offsetting the rate increases the landlords are facing if the landlord is paying the bills.

Mr Tilson: Quite the contrary. I think it could be established that there are cheaper maintenance costs, cheaper energy costs, whether it is heating -- I think you could determine the number of units that are being spent on heating. I think it would be very easy to determine the savings.

Mr Moore: What I was trying to establish was that as the rates go up, so the bill would ordinarily go up significantly. With the energy conservation measure the bill will simply go up more slowly, but it still may well go up or, more or less at best, stay stable. It is rather hard to picture, given the increases we are looking at now, a situation where the electricity bill particularly will go down.

The same is not the case for natural gas; there is an opportunity to perhaps have lower bills for natural gas. I guess in a situation like that I would have to trust the judgement of the people judging the rate reduction application to use good sense and discretion in terms of allowing those rent decreases.

Mr Tilson: The Ministry of Energy may simply say, "Put in some new windows. Replace your building with new windows," as an example. It may have nothing to do with other ventures. But why would they do that? Again, you can say good judgement would tell the landlord. Why would they run the risk of simply paying the bulk of that themselves? Why would they bother?

One of the main reasons we have asked you to come is that many of the members, not all of the members but many of the members, of this committee feel there is a major conflict between the policies of the Ministry of Energy and the Ministry of Housing, not just for apartment buildings because you could talk about the renting of single-family residences. So your policies are being scuttled by the Ministry of Housing.

Mr Moore: I guess we have not actually seen that happen yet. In the scenario you have described, the landlords' financing of those windows, in other words the cost that they bear, would have to be considered as well. But in the end, if there were an allowance of a rental decrease, surely it would be in a situation where both the landlords and the tenants would get benefit still. In other words, the landlords would still be reaping benefits from the investment.

Mr Tilson: I am afraid it will not sell. If I were a tenant and I could establish that the cost of heating is down because of the landlord renovating the building, I would sure as heck apply for a rent decrease under this act. That is what the act allows. I am simply hoping that your ministry will put forward strong recommendations to the Ministry of Housing to put forward amendments, that perhaps -- and this is my second question -- there could be a way of making an exception, whether it is possible to amortize the cost of conservation methods, whether it be windows or anything else over a period of time, so that tenants would be precluded from having those rent reductions. Otherwise, no one will get into your cost-saving ventures and you might as well close up your shop as far as those recommendations are concerned. Would you be prepared to make recommendations to the Ministry of Housing to put forward amendments in that fashion?

Mr Moore: As I mentioned at the outset, we have had extensive consultations with the Ministry of Housing, including this issue of potential rent decreases.

Mr Tilson: They do not appear to have been successful. Are you prepared to try again now that you have --

Mr Moore: I do take your point.

The Acting Chair: I suppose that is a policy question really and it is something I think is unfair to ask a person who is a civil servant.

Mr Tilson: Quite the contrary, Mr Chair. If the Ministry of Energy is putting forward recommendation policies and sees a major conflict with respect to another ministry, surely the recommendation from one ministry will go to another ministry, perhaps saying, "You're going in the wrong direction."

The Acting Chair: It is close to the line. I think you have your answer.

Mr Tilson: There is a concern. I guess we are looking at the anticipated 45% increase with respect to hydro costs being bandied about and the effect that will have on housing.

The Acting Chair: That is going to have to wait for either another day, or somebody else may pick up on that question. Your time has expired, Mr Tilson.

Mr Mammoliti: Earlier you alluded to some grants that are available to landlords. I would like you to expand on that somewhat. What is available? Give us an indication, perhaps verbally, of what is available, but I certainly would like something in writing as well to give this committee an indication of what is available for landlords in the way of grants; the sooner the better, of course.

Mr Moore: Actually, I would like pass that question to Mr Almassi because most of these grants are from Ontario Hydro.

Mr Almassi: I would like to point out that actually we were notified of this hearing at Hydro last Friday, so first of all I do not think we are quite prepared to make a great deal of comment on this particular act. As far as our programs go, I will provide the committee with a copy of the literature that summarizes all our programs. At the moment, I will just stick to explaining two particular programs most relevant to the landlords.

One is our lighting retrofit program. We offer partial incentives for converting from the regular incandescent lighting primarily to more efficient lighting such as compact fluorescent. This would apply mostly to the common areas. We have recently extended the program to include the in-suite lighting as well, so it is quite comprehensive. There are a variety of things next to efficient lighting that we offer and that we offer incentives for. We also offer free shower heads -- these are energy-efficient shower heads -- in exchange for the old ones.

Another program that is really important to us is what we call saving by design. Here is where we look at the particular case situation of the landlord. We do a feasibility study and, based on the energy savings that can be brought about by implementing a particular measure, we offer incentives accordingly. That saving by design is very comprehensive and there is no limitation as to what type of improvement in terms of energy efficiency we might be looking at.

We also have the power savers audit program. The audit is free. We do a thorough, comprehensive audit on their whole facility, produce a report and make recommendations.

Mr Mammoliti: It sounds like you have some interesting programs. I am looking forward to seeing something in writing, the sooner the better.

Mr Almassi: Certainly.

Ms Harrington: I think it has been made very clear from your ministry's point of view that you do not see a major conflict. Certainly from our point of view, as the Ministry of Housing, we would like to assure everyone that we are committed and very serious about ensuring energy efficiency, and it is part of this bill. If there is any way the opposition parties could help us to make that more obvious, we certainly would welcome that. I just wanted to let you know we are committed to working with you to ensure this goes forward.

If a landlord puts in energy-efficient windows and passes some of the capital expenditure for that on to the tenants, then instead of the tenants having their hydro costs reflected by the guideline going up say 13%, it will go up possibly 6%. I think that is what you were trying to explain.


Of course, the other major concern we heard in Sudbury and other places is what you have stated, the increase of 9% to 13% for electricity. The way this is dealt with in the bill is that it is part of the guideline increase, the inflationary increase. All the people of Ontario already know what was announced last Friday, that the guideline has gone up for next year, 1992, from 5.4% to 6%. Much of that, besides municipal taxes, is going to be these increases in electrical charges.

Interjection: Is that the cap?

Ms Harrington: If that goes up, it is reflected not in the cap but in the guideline. I am just wondering if there is any way you could make that clearer to people. I also appreciate the fact that you are saying that 80% of the projects undertaken for a building are in fact paid for in themselves by the energy savings. That is a very important point for people out there to understand.

The Acting Chair: If you are evoking an answer from them, you have very little time left for them to give that answer, but if you wish to continue yourself, that is fine.

Ms Harrington: Okay, if they would like to make a comment, that is fine.

Mr Moore: The only point would perhaps be a point of clarification. I mentioned that in approximately 80% of buildings the landlords pay the energy bills. These are the buildings where there is more opportunity for landlords to take advantage of cost-effective energy savings as opposed to 80% of the opportunities being cost-effective, but there is an array of cost-effective opportunities available.

Ms Harrington: Thank you for that clarification. What percentage do you think would be cost-effective?

Mr Moore: It depends on what you want to use as a baseline, but on average, something like 20% to perhaps 30% of energy use can be reduced.

Mr Ruprecht: I would like Mr Moore to clarify something for me if he could. Did you say that 80% of the landlords who pay the utility bills for their tenants would consider it a good investment to retrofit in the energy field? Did I hear you correctly?

Mr Moore: No, I did not say that they would consider it to be a good investment, but it would be a good investment for them.

Mr Ruprecht: It would pay for itself in a few years, in other words. That is what you said.

Mr Moore: That is correct.

Mr Ruprecht: Are you then prepared to follow up on Mr Mammoliti's question? Would you be prepared to ensure that there would be sufficient municipal programs as well in that area so municipalities would be ensuring that the idea of energy sufficiency and better use of energy should be used throughout Ontario?

Mr Moore: That is an excellent point. Much of this does lie in the municipal realm. Some municipalities as you know -- the city of Toronto is one notable example -- are really, if anything, moving ahead of the province in some of these areas. Other municipalities still have to come on board. But it is an excellent point.

Mr Ruprecht: Is this in the pipeline now?

Mr Moore: Yes.

Mr Ruprecht: You will have new programs coming and new moneys being spent in that area?

Mr Moore: We are looking at Ontario Hydro spending somewhere between $3 billion and $6 billion over the next nine years. The Ministry of Energy has recently enriched its program budgets by $10 million a year. That is relatively small compared to Ontario Hydro. We have the gas utilities entering into a major hearing this fall that may give them the authority, through the Ontario Energy Board, to spend money on conservation. So there really are major players out there.

Mr Brown: I am puzzled by this entire presentation and puzzled by the fact that you are suggesting that under this legislation there could be any payback for any landlord to do any energy conservation, period. The way this reads is that if a landlord pays over the prescribed amount of money for electricity; if he is over the guideline because perhaps his building is all electrically heated, everything in the building is electricity and that is what is going up the fastest, he can apply to have extra increases because he is spending more money on electricity. So if he spends more he can get more from the tenants. On the other hand, if he spends money on capital he is going to get less from the tenants if they apply for a decrease. So if there was any payback, there now can no longer be any payback.

Simple economics tells you that your energy conservation programs will not work in a scenario where if the owner of a building does something he is going to be penalized. People are stupid, but they are not that stupid. So to say that this will encourage any energy conservation or electrical energy conservation or any conservation, period, is ludicrous. You guys lost.

I would like to know how much Ontario Hydro has as a goal for reducing electrical consumption within residential apartment buildings over the next 10 years. Do we have a goal?

Mr Almassi: We see a potential for energy savings as high as, I would say, approximately 400 megawatts in the multiresidential sector. That would include condos as well. It has not been isolated just for rentals. That is the estimate, and probably by expanding our plans for conservation in the light of new financing and so on, that could be even higher. So I would say somewhere between 400 to 500 megawatts would be the potential in the multiresidential segment. As you might know, the condo section relative to the rental is relatively small, so the bulk of it would fall in the rental segment.

In terms of different programs we are offering at the moment, for example, a non-profit housing program where we offer a package of different retrofit measures, including air leakage control, lighting, shower heads and so on as a package. In non-profit housing, through this program, we expect in three years about 30 megawatts savings.

Mr Brown: Could you tell me if the programs you are putting forward, which I am telling you are not going to work, just because any money is too much money in this case, are based on net avoided costs for Hydro? Is that the criterion for spending money in this area? In other words, are we really spending money to have energy efficiency or is Hydro spending money above and beyond that for conservation purposes? There is a difference between efficiency and conservation. Is your program in apartment buildings based solely on net avoided costs?

Mr Almassi: I am not prepared to comment on all the programs as a blanket on the other score. I can provide the information for you as a generalized statement, but I am not prepared to answer that question, I am afraid.

Mr Brown: We are having some major difficulties trying to discover how to control the greenhouse effect, how to do the environmental things we want to have happen when we have a piece of legislation from the Ministry of Housing and -- they are laughing over there. They do not think that kind of thing is important. Well, it is and every piece of legislation that is before this Legislature has to be considered in the view of environmental and energy questions, which are linked very, very closely.


The Acting Chair: Order.

Mr Brown: We think over here that a Ministry of Housing that is coming out with legislation that is going to preclude that is very, very difficult and will be very, very harmful to the people of this province and to tenants.


The Acting Chair: Are you yielding the floor to supplementals, or what? We have to have a very quick response to that.

Mr Moore: I am quite prepared to answer any questions that you have along those lines.

Mr Brown: What is your goal for limiting gas emissions, both sulphur gas and carbon dioxide, within the ministry for the next 10 years?

Mr Moore: One of the very strong actions that you have already seen related to greenhouse gases, and it is not brand-new, but we have our crown corporation, Ontario Hydro, being prepared to spend between $3 billion and $6 billion over the next nine years to come to grips with electricity conservation.

Mr Brown: But Ontario Hydro right now is building gas turbines, which are not the most -- and that is what the short-term means for Ontario. Conservation is great, but what you are doing is producing more gas emissions every year and that is your program.

The Acting Chair: And on that pleasant note, we thank you for coming. We appreciate your coming.



The Acting Chair: The next presentation is the Ontario Association of Property Standards Officers Inc, Mr Brian Allick, president. Welcome, Mr Allick, to the den of -- welcome to the committee. You have 30 minutes and you can use all or any part of that time for your presentation, but I am sure the committee members will have some extremely enlightening questions to ask you, and we will divide that time equally among all three parties.

Mr Allick: My name is Brian Allick. I am president of the Ontario Association of Property Standards Officers. This association consists of some 800 members, a voluntary organization which was started in 1970 and has maintained through the assistance of the provincial government at various stages to its present status. We are in the process of organizing educational programs with the assistance of Seneca College for people wishing to enter the field of property maintenance and administration.

While I must, as your previous speaker said, apologize for my somewhat amateurish presentation, I was not advised of this meeting until last Friday, and being a voluntary association it is very difficult to try to get a group of people together to make preparation. But with regard to Bill 121, we have over the years with the green papers, with Bill 51, made presentations in written form, to the Ministry of Housing, and with your permission I would just like to reference a couple of the points in the report on the green paper and what we said at this time.

We, as property standards officers, are the clearinghouse at the municipal level for every piece of legislation dealing with a building that comes from the federal government, the provincial government or the municipal government. Consequently, the people at the municipal level dealing with this legislation need to be very, very well educated not only in the mechanics of building -- how they are put together, what makes them tick, how you maintain them -- but also the legislation that goes along with it.

The references this morning have been dealing specifically with Bill 121. We are dealing with the control of rents and the maintenance of buildings, but once we begin to talk of that, we cannot ignore, as proponents in the field, other legislation which impacts, ie, and the Ontario Building Code and the fire code. We have the Elevating Devices Act. We have the health and safety acts. Not only do we have acts dealing with residential properties, but we must also consider the food and liquor acts because many of the rental properties are above commercial properties. As property standards officers, we have to be aware of the legislation and we have to be able to apply this legislation. This is usually created by a network of communications between the various agencies at the municipal level. This, of course, is most important. Without that network of communications a property standards officer cannot operate.

Our other concerns involve the permissive legislation regarding property standards. As you know, the property standards bylaw at the municipal level comes from the Planning Act, section 31. It is optional upon a municipality whether or not it passes a property standards bylaw. In Bill 121, you reference maintenance, you reference adequate repairs. My question to this committee is, when we see these things, who is going to make that determination whether it is adequate, whether in fact it is required? How is this going to be determined?

Our members, at every meeting that we now hold, constantly bombard us as the executive. What do we do about the number of subpoenas our members are getting into in the rent review process? How can we stop this? The impact this is having upon the costs to a municipality is something, I think, that has not been referenced, certainly not that I have heard of. We as an association do work very closely with the Ministry of Housing, and we would like to continue to do this. Certainly if anybody has any questions on those comments, I am wide-open.

The Acting Chair: I think we are starting with the government first. Do we have any questions from anybody? Ms Harrington.

Ms Harrington: Thank you very much for giving us the background on how wide a scope you have at the municipal level. Being a clearinghouse, you certainly have to be familiar with many different acts. I understand from what you have said that it is a time of transition, a time of uncertainty. I certainly think your members will be a very important part of the future of housing in Ontario, both in municipal enforcement and involved with our Ministry of Housing. I have met with some of your members through my work with the building code, and a lot has to be clarified. I think that is what you are telling us and I think we are realizing that and taking this very seriously. It is not just through the Rent Control Act, but many other pieces of legislation as well.

I would like to tell you how important working together is. We are going to need your expertise very much, and we will definitely be negotiating a lot of these things. The question is, how can we ask municipalities to do it, if they do not have the funds to do it, and it is something that has to be done? The responsibility comes back to the provincial level. That is quite clear. So if there are any other suggestions you might have, let us know. We realize that the maintenance provisions in this bill are a very crucial part of it, and something that has to work well. It cannot have any hitches. It has to work efficiently, and because it has been optional in the Planning Act to have municipal inspectors, that has led to some problems across the province and the province being involved in some areas. So what I am saying to you, if there are any other comments you would like to make to help the government, I would certainly be willing to hear them at this time.

Mr Allick: The concern that we have as an organization, and we go back a number of years, is that at the municipal level a property standards officer has always been a guy whom the municipality did not really know what to do with. Somebody decides they will pass a property standards bylaw, and this one particular guy gets it. Now he does not only get the property standards bylaw; they pass a dog-catcher bylaw, so he also gets that one. Then they get a long-grass bylaw, so he also gets that one. One of the difficulties that we have had as an association is gaining recognition. Gaining recognition as a property standards officer is experience. A tremendous amount of the knowledge that a property standards officer has is experience. We have not found any educational place or building that puts on a course that teaches property standards officers how to do the job. Consequently, our approach to the universities -- and Seneca has taken up on this.

In an effort to gain recognition for our members, and of course I will never miss this opportunity speaking to government, we have a private member's bill coming before your government asking for recognition, that we will be recognized not only by the municipal employees but by the industry itself and the people. Once we get into the building code field, the building inspector field, we have the CET recognition, certified engineering technicians, we have professional engineers, we have got these recognitions which are there, but in the maintenance field we do not have it and what we are asking for is recognition.


Ms Harrington: I would like to --

The Vice-Chair: Mr Perruzza also has a question.

Ms Harrington: Oh, does he? Okay.

I would like to get back to our question which we discussed earlier this morning, and that is our definition of adequate repairs. This is something that is very important, and as I pointed out, in the previous legislation, the RRRA, it was defined in regulation. I believe it is the intent of our ministry and our government to work both with your people and with the tenants and the landlords and the bankers to set in co-ordination together what these definitions should be, workable ones. They are very important. You cannot do your job without them.

Mr Allick: Yes, right.

Ms Harrington: So that is our intention, to work with you on that.

Mr Allick: Thank you.

Mr Perruzza: I would like to start off just by making a general comment about bylaw enforcement officers and then I would like to taper off into a quick question.

I think the role of municipal property standards officers is expanding into the social work area, and I think the gentleman will agree with me that when a property standards officer visits the sites, he needs the full co-operation of the community members and more often than not he ends up being an arbiter in civil disputes and so on. More often than not they are able to resolve it right on the spot simply by bringing neighbours together, by bringing landlords and tenants together, by bringing the different parties together and talking.

I just think that our Planning Act and the Ontario Building Code and the bylaws by which the officers are both appointed and empowered at the municipal level do not go far enough in granting the officers who are out there on the street doing this kind of work enough enforcement abilities to be able to do their job efficiently and effectively. I would like to know from you, sir, what changes you would like to see to current legislation that would enable officers to perform their duties more expeditiously and in a better way.

Mr Allick: I am sure you know, Mr Chairman, there is a bill before the House, originally Bill 103, now Bill 112, which talks about amendments to the Ontario Building Code. That bill gives sweeping powers to a building inspector for powers of entry, for search warrants, for everything of this nature, and, I might add, in that same bill it talks about a code for existing buildings.

Now we as property standards officers have difficulty with the terminology "a code for existing buildings." A code, by definition, means a series of laws. When we deal with their building requiring maintenance, if we have a black-and-white situation in law, it hampers us. When we are dealing with the maintenance situation in a building, we look at several options at solving a problem, and this is one of the unique functions of a property standards officer. As you indicated, sir, we deal with social services. We use helping hands; we use any means and agency available to solve a problem. This is why I said initially a property standards officer is a clearinghouse of all these agencies to solve a problem.

But as far as additional powers are concerned, we would like powers of entry. We would like that ultimate authority, if we get into a situation where either a tenant or a landlord says to us, "You can't come in," that we can go to a justice of the peace and say, "We'd like a warrant to go in there." We have been involved in situations where people have been lying ill on the floor and nobody can get in. Even the police, in these situations, are hesitant to go in.

Ms Poole: Thank you for coming today. We were quite anxious to talk to you and get your impressions of the bill and how it is going to work.

I have two major items to cover with you. The first you brought up yourself, the definition of adequate or inadequate, who is going to be making these decisions and how are they going to arrive at them and is the burden once again going to be put on your shoulders. Earlier, and you may have been here at that stage, Ms Harrington said, "This is the same as Bill 51, where ongoing deliberate neglect was not defined." I think there is a very major difference, because in this legislation those two terms, "inadequate maintenance" and "neglect," are just crucial and very controversial.

The second thing is that when they were doing the regulations for Bill 51 they had an incredibly comprehensive procedure with landlord representatives, with tenant representatives, with representatives from various organizations. It went on for months and they basically drafted the regulations. They just did not have them handed to them, saying, "What do you think of this?" So it is a very different scenario.

Would you feel comfortable with this legislation passing in its current form if we have no idea what the terms "inadequate maintenance" and "neglect" are going to be?

Mr Allick: That is a leading question, but the answer is no.

The Vice-Chair: You are right.

Ms Poole: I like the answer to my leading question.

The second area of contention around this legislation regarding maintenance deals with the work orders, and you have pointed out a very real concern that I know property standards officers and building inspectors have had, and that is powers of entry, that you really need that.

The concern I have with the way it is set out now is that, say you are a building inspector, you go in and you see something wrong in the unit and you put a work order on and that has a time limit. At the end of that compliance period, if there is not compliance, that work order would automatically be filed with the ministry, in this case the director of rent control. Then the director would give notice of a possible rent penalty to the landlord. The landlord has 30 days in which to try to get the director to rescind that rent penalty.

Here is where we get to the crux of it. The only reason that work order can be lifted is full compliance. It cannot be substantial compliance. It cannot be reasonable efforts to get the job done. There are no extenuating circumstances, such as there is a construction strike, such as the inspector thought this underground parking garage could be fixed up in six months and when they got into the work, which is the only time that they can really determine how much work is necessary, and looked at the main slab, they found out it was going to take two years. None of this can be taken into account. It is just either they comply or they do not. If they do not comply, there is a rent penalty.

I do not want to ask you the leading question, "How do you feel about this?" Maybe I can moderate that somewhat and say, can you suggest any ways of dealing with this problem that would not be quite as draconian and allow no right of appeal?


Mr Allick: Yes. If you are familiar with the present process under section 31 of the Planning Act, what is required under that statute is, first of all, that a notice of violation is issued. This opens up the lines of communication between the owner of that building and the property standards officer. During that period of time, all that notice says is that the property standards officer feels this certain thing is wrong in your building. That is all it says. If the owner does not respond to that notice, the property standards officer then has the option to issue the order. It is this second, legal document which is forward to the RRSB. The RRSB then takes a copy of that order to do all these negotiations. In the meantime, the property standards officer is working with the owner of this property.

A municipality, if it is active in its enforcement of property standards, has the authority to order that work to be done and the costs of that work to be added to the tax rolls.

This happens quite frequently in the municipality that I am from. The work is cleared, the order is satisfied and everything else and we file the order away, and then we advise the RRSB that we have solved the problem. So they have gone through the process while we have solved the problem.

Certainly as property standards officers we do not feel that a rent penalty is a proper penalty for not maintaining a building. Invariably, if we talk to a landlord or a property owner, his immediate cry to us is, "I have no money to fix it," and we as property standards officers rush around and look at all the various loan programs available and try and link him up with a loan program so that he can financially carry this job. If he cannot and it gets to the situation that this is something serious, it is unsafe and the municipality had better do something, and we go in and put it on his tax roll. He is already penalized, then it goes to RRSB and he is penalized again. It kills that operative's financial intake.

Ms Poole: You have explained --

The Vice-Chair: Mr Callahan has a question, Mrs Poole.

Mr Callahan: Unless you want to pursue it.

Ms Poole: How much time do we have left?

The Vice-Chair: You have two minutes.

Ms Poole: Would one be enough for you?

Mr Callahan: Sure.

Ms Poole: Okay. You have really described the catch-22 situation quite well. What I am concerned about is that if we get into this catch-22 situation, then our building inspector is not going to want to put a work order on if he knows that the problem is that the landlord cannot get enough of a rent increase to pay for the substantial repair. Say it is an underground parking garage. The landlord cannot get financing to do it because he will not have the revenue in. What do you do in this case?

Mr Allick: Invariably we continue our enforcement and we close our eyes to the financial impact. In a situation where we cannot get it done and the costs are too big for the municipality to carry, ie, a parking garage, we will waltz this guy into court. Then the justices of the peace and the judges will penalize him again by fining him for an infraction of the bylaw, but we have still got the problem when he comes out of the court. So that is not the answer. Then we start all over again and we penalize him again.

Ms Poole: What is the answer?

The Vice-Chair: This may be impossible, but Mr Callahan for 30 seconds.

Mr Callahan: I did not want to interrupt her because I was intrigued by the questions and the answers.

Just quickly, when municipalities pass this enabling legislation by bylaw, they are not all the same, are they?

Mr Allick: No, sir, they are not.

Mr Callahan: So in fact what you have is an inequality of standards being applied, in some cases no standards and in other cases inequality because they are different. I am not going to ask you that, but I am going to throw out to the ministry people that they are probably going to find themselves in the Supreme Court of Canada on a constitutional challenge.

Mr Allick: My response to that, if I may, Mr Chairman, is that looking across the province I agree with those differences, because the standards required in a certain area of this great province may not necessarily be the same standards required in other parts of the province. Really, I feel that a property standards bylaw should be written by the local people themselves, with their input and involvement as to what they want to their local councils, and then the local council says, "Okay, this is what you want; this is the way we will deal with it."

We can look at bylaws in southern Ontario that have horrendous clauses which deal with inoperative motor vehicles stuck in a backyard or something of this nature, but if we go north of Sudbury, it is a fact of life that you have a second inoperative vehicle in the backyard to use for parts. If you were to apply the property standards bylaws in southern Ontario to northern Ontario, it would create severe hardships for the people.

Mr Turnbull: Mr Allick, I know your people have a very difficult job and I certainly take my hat off to you, because it is a very difficult, fine line you have to walk often. The Conservative Party very strongly believes we have to have rigorous enforcement of high standards of property maintenance in the residential area in this province.

My concern is, and I am going back to the underground parking garage, because this comes up all of the time, as you are well aware, an underground parking garage can cost as much as $1 million to repair. Under the proposed legislation, Bill 121, the maximum that a landlord can get in a given year towards capital is 3% plus 2%, and you can have a one-year carryover in the case of a building which has low rents and may not have undergone a major renovation, say, in the last five years when Bill 51 was available for you to pass that through.

It seems to me that with that kind of money it would be impossible for a landlord to undertake any major capital job if at the same time he had a high rise in taxes or some other unusual cost or he was slapped with a work order because a tenant wanted to use that in reducing rent. Do you believe it is going to be possible to undertake these major capital items like underground parking garages with this legislation?

Mr Allick: With due respect, sir, we do not. Certainly I have not studied this from a financial point of view to make any comment, but just on the face of how you describe it, I do not think it can be covered. The buildings in general over the province are getting older, they are getting to that point in time, specifically the larger buildings, because outside of Toronto no large buildings have been built for a number of years. What there is now is all getting tired. They are all getting tired and they are all requiring maintenance. Certainly we have been in the situation of even three-storey walkups where the landlords, the owners, have not been able to find the money to put a new roof on and we have wound up doing it.

We looked at this whole issue as an association and we even referenced the Ontario New Home Warranty Program in new buildings. We talked a little bit about if there was to be some method of financing where there were moneys put in by the provincial government, moneys put in by each individual tenant, moneys put in by the property owners to create a fund, as there is with the new home warranty program, and that fund could be used for these major capital expenditures you are referencing, then maybe that is the answer to the concern everybody has as to these wild fluctuations of capital expenditures on the large buildings.

As I say, it is something we discussed briefly. We have not gone into the mechanics of doing something like that, or the impact, but certainly it would appear that if an insurance fund, if you can call it an insurance fund, was to be created in that manner, that capital would be available.

Mr Turnbull: Obviously there are great problems with that scenario. Let us say you have tenants in a building which has undergone major capital repairs during the period that Bill 51 was available, the Liberal legislation. All of those costs will have been passed through to them. They would in essence, if you are making all of the tenants across the province pay for it, be paying double, whereas the people who have been in old buildings where they have not had rental increases because the major capital items have not come up would be the net beneficiaries from the other people.

Mr Allick: But surely, sir, on average, as each building needed a major entity, it would balance itself out. In the initial outset you would be absolutely right, sir, but after a period of, let's say, five or 10 years, when a number of buildings had been done, it would catch up with itself and everybody would be equal. It is the same, we can say, as when the new home warranty program was introduced. Everybody previous to that did not have the safeguards on the property they bought.

Mr Turnbull: There is a difference, though, inasmuch as you have some buildings, fairly identical buildings, where you have got $400 rent for one unit in this building which has not had substantial renovations and in the other one where it has had substantial renovations it is $800. I am just using simple numbers. That discrepancy would always be built in to the benefit of the people who are in the buildings that did not have substantial renovations before this fund came along that you are suggesting.

Mr Allick: But if we look at it that way, the introduction of the Fire Marshals Act, the fire code, in effect created two standards of buildings. So if we look back in history on the legislation, your legislation has always done something to differentiate those things.

Mr Turnbull: It did not have that significant impact in terms of the income of the building or the cost of maintaining the building. There was an impact, but not of the magnitude of 100%. I know it is difficult. There are no simple answers to any of this.

Mr Allick: As I indicated, sir, the financial --

Mr Turnbull: Yes, I understand. Would you advocate the continuance of the property standards board in the province?

Mr Allick: The Residential Rental Standards Board?

Mr Turnbull: Yes.

Mr Allick: I think it is a duplication of what the municipality does.

Mr Turnbull: So you would advocate having strong municipal inspection with some, from what you have said, differentiation as to where in the province it is.

Mr Allick: The province presently has its own rental offices throughout the province. I think those rental offices could be utilized in conjunction with the municipal property standards offices to create the scenario that you want to create, that the government wants to create, without this duplication at Queen's Park.

Mr Turnbull: You would like to see a set of clear definitions which would guide you in application of the bill?

Mr Allick: Yes.

The Vice-Chair: Thank you you very much for appearing this morning. We appreciated the view from the ground.

The committee will take a short recess and reconvene in committee room 1 at 1155. Public hearings will resume in this room at 2 pm.

The committee recessed at 1142.

The committee resumed at 1202 in committee room 1.


The Vice-Chair: We now have the Ministry of Housing people before us. I understand in talking to them that they have a list of concerns that members have brought forward and would like responses to. The ministry could, if it is the desire of the committee, go through those. After that, we can ask questions in some kind of rotation. I think if possible, and if it is the agreement of the committee, we could be a little bit more informal in terms of asking questions because there may be some issues the ministry raises as clarifications that members want further clarified. If that is how we want to approach this, I think that would be the best procedure.

Ms Parrish: For the purposes of Hansard, I am Colleen Parrish, director of housing policy at the Ministry of Housing. I should say that we provided to Deborah Deller some material that I guess you probably have on your desk by now. One is a very small matter which I thought I would dispose of right away.

I understand that earlier this week there was some discussion about the Ontario Housing Corp and what its tender procedures are and whether or not it in fact tenders for things and so on. We provided the committee with a short form of the requirements for tender at OHC, showing the tender requirements for items that do not require a tender, which are very minor items of less than $1,000, through to the various gradations of tender requirements.

I was not exactly sure why the committee wanted this, so I simply provided it and if there are further questions on that point, I think the material shows that the rules at OHC are fairly strict about what is tendered. They have a number of full-form tenders, depending on the size of the project, and they also have special provisions that deal with emergency repairs. Perhaps having just tabled that information would be adequate for the committee.

Mr Perruzza: Just to take up on that, do you have any statistics on how favourable our tenders are compared to those in the private sector for the same work? A lawyer appeared before us this week and he flippantly drew some conclusions about how it costs government much more than it does the private sector to do things and that kind of thing. Some of us challenged him on that. I am just wondering if you have any documentation that would dispute that one way or the other.

Ms Parrish: I am not familiar with any documentation that has studied that issue directly. I only know that on discussion with people from OHC, they indicated to me that they tender everything unless it is an emergency and that they have a very strict tender process designed to ensure a good-quality product and a reasonable price. The procurement practices of private sector firms are generally not known to the public unless they are publicly listed firms that must undergo certain disclosures. So I am really not in a position to say how these larger groups procure and whether they go through a formal tender process, except anecdotally. I have had some landlords say they do go through a tendering process but only for projects above a certain size. That is about the best information we could obtain in the relatively short time we had.

Mr Mammoliti: I brought this up yesterday because I felt that something one of the presenters said yesterday was inaccurate, that we pay top buck in the Ontario Housing Corp for maintenance work. Coming from the Ontario Housing Corp myself, working there for 12 years, I know this is not the case and in essence it is the complete opposite at times where we are paying probably the cheapest buck because of our tendering process. We have gotten a lot of complaints actually over the years, both from the tenants --

Mr Tilson: Mr Chair, a point of order: It is nice to hear all this but I am here to hear the ministry officials, quite frankly.

Mr Mammoliti: You do not like to hear what truth they say.

Mr Tilson: I could hear from you again, but time is limited.

The Vice-Chair: If we want to do this informally, we are going to have to do it informally. We have cautioned members. I think we have had an answer to that question and we should move along. Ms Poole and Mr Ruprecht also have questions.

Mr Mammoliti: With all due respect, I tried to bring this up yesterday and I was cut off. Today I am bringing it up again through the formalities and I am being cut off again. It is a little unfair. I think I should get my point across here.

The Vice-Chair: I do not have a problem with that, but the only option the Chair has in this situation is to preclude all questions and go through this in strict party rotation without --

Mr Mammoliti: That is the way to go.

Mr Perruzza: That is the only way you are going to get to it.

The Vice-Chair: If that is what you want to do, then I am very happy with that. I was hoping this could be a little bit more informal.

Mr Mammoliti: Again, I was not going to take that along with it. I thought it was important to clear the air on this particular item, and for the purposes of Hansard I think it is important. We had somebody -- his name was Mr Miller, I believe -- yesterday who alluded to the fact that we are spending top buck on maintenance and I want to prove to you that we are not and we have the officials here to verify this. Can I continue?

The Vice-Chair: Sure.

Mr Mammoliti: All right. In the past we have had a number of complaints both from tenants and from the contractors themselves who have said that the process itself is not that great. We talked about tendering and the fact that it usually results in the cheapest, both of material and quality. I know that, on a personal note, I have been looking into that over the past 12 years to figure out a better way of doing things. Just for the record, I would like to say -- and perhaps you can comment on this and say whether I am right or wrong -- that it is usually the complete opposite of what Mr Miller said yesterday. We usually do not pay top buck; we usually pay the cheaper buck to get a reasonable maintenance of whatever we are talking about, whether plumbing, heating, electrical or whatever. The tendering process is there for most things, three prices. Am I right?

Ms Parrish: There are requirements to tender and one of the major considerations in tender is price. Another consideration of tender, of course, is quality and the track record of the person doing it. Certainly price is a major consideration. The other two things are of consideration in tender as well. In some cases there are more than three tenders required. It depends on the size of the contract.

Mr Mammoliti: So we are not paying top buck as was alluded to yesterday?

Ms Parrish: From my discussion with OHC people last night, it would appear that this is not likely the case, but I cannot speak from my personal knowledge since I do not work at OHC myself. Of course, as we did not hear about this problem until after 6, there was a limited number of people I could talk about it with.

Mr Mammoliti: You answered my question. That is okay.


Mr Ruprecht: I had received what I would term a complaint about the tendering process at OHC. Is it necessarily true that some of the buildings are looking to the United States, the security systems especially, and then in the tendering process you would have an itemized listing of this particular security system and its specific numbers, a camera or screws or very specific security arrangements that are only made by one company in the States? When a tender of that nature comes out -- and let's assume it is true because I have written a letter; in fact I have not received the answer yet -- but if it is the case that the tendering process would preclude Canadian-made security systems or others, then the tendering process would seem to me to be somewhat skewed. I do not know whether you are ready to answer this point, but could you give me an indication that this should probably not be the case?

Ms Parrish: I have to say, sir, I apologize, but I really do not feel I can answer that question. I am not familiar with the problem. I am more familiar with Bill 121. It is not an issue directly related to rent control. I can, when I go back to the office, point out that you have not received a response to your letter and you would like to have a response to your letter. Perhaps that would be the most helpful thing I could do to answer your question.

Mr Ruprecht: It has only been two weeks for the letter. I would not be as concerned about the letter as I would that the tendering process would exclude comparable or Canadian-made product. You may just look into that.

Ms Parrish: I will pass on that.

Ms Poole: On the whole issue of the OHC and non-profit subsidized housing, recently when Cityhome, obviously from the city of Toronto, tabled its annual report, it indicated there would be a 9% increase in operating costs. Have you done any investigation of this because, obviously, when we are setting the guideline, when we are ensuring that the operating costs, inflationary component is adequate and all this type of thing, it is important that we look at the full rental housing market, not only the private rental stock, but also the subsidized housing to see whether what we have said is realistic. Have you had a chance to analyse the Cityhome figures and see why those operating expense increases are so high?

Ms Parrish: We have looked at the Cityhome rent increases, I think, over the last two years and the answer I am going to give you is a little bit complicated. Cityhome operates housing under several programs and the rent increases are differential depending on the program they are operated under.

For example, there is a federal-provincial program in which the rent increases have consistently been below guideline over time and the operating costs increases associated have been below guideline. There have been other programs which, because of the different ways the program is financed, have generated higher increases in rent. Last year, one program was at 10 and this year at 7, I believe. So essentially, what has tended to happen is that the rent increases at Cityhome have tended to be more closely related to the kind of program than to the operating structure.

In general, interestingly enough, the newer programs tend to generate the higher increases which would not be what you would expect because there are generally more buildings. Why is this occurring? We are still in the process of discussing that with Cityhome staff. When we got the initial information about rent levels, it seemed to be counterintuitive. The older programs appeared to have lower rents, below guideline; the newer programs, the higher rents. We are still trying to find out exactly why that is. It looks to me like it is more to do with financing and the way the subsidies are being flowed than it has to do with operating costs.

I cannot give you a complete answer. I can say there have been some fairly high rents in the market component at Cityhome. I should also say those programs that have experienced those relatively high market rent increases, 10.5% and 10.7%, have been in buildings with very high levels of RGI. So 80% of the people have been RGI and the proportion of tenants who are paying market rent has been very small anyway. That is as far as we got. Having got that information, it appears to me that there is no good explanation and so we are looking into it further from a research viewpoint.

The Vice-Chair: Ms Parrish, just to be helpful for Hansard purposes, what is RGI?

Ms Parrish: Rent-geared-to-income housing. That is, the rent paid by the individuals is based on their income and not on the market rent.

Ms Poole: I would very much appreciate receiving a copy of that analysis when it is available. Leading from that question is a very natural one which many tenants and landlords have brought up for two very different reasons. Landlords believe the non-profit subsidized housing should be included under rent control because that would make sure it was a level playing field. Tenants believe they should be included, with the exception of co-operative housing, because those tenants deserve the same protection as those in the private sector. Would you like to comment on why non-profit housing was not included under the orbit of Bill 121?

Ms Parrish: The answer is somewhat complex. I guess I would start out by saying that Ontario housing programs do not distinguish between co-operative housing and non-profit housing. It would be very difficult to do what many people have asked us to do, which is to include non-profit market housing and not co-op because from our viewpoint they are more or less the same program. From that viewpoint, if you say it is all the same, it is difficult to make that distinction.

One of the major reasons it was not appropriate to include them in the statute, and indeed they were not included under the previous statute either, is that the vast majority of units in these dwelling places are rent-geared-to-income units. If you had rent control imposed only on the market units, you would have a significant problem trying to figure out what costs are associated with what. If you have a building where the units vary -- for example, you might have 70% of the units in RGI one month and 80% the next and 50% the next or whatever -- it is very difficult to say which units would be covered by rent control and which would not because there would be this constant moving in and out because.

Normally we cover the unit in rent control. We register the rent of the unit in the registry. We control the rent of that unit. What happens, of course, in rent-geared-to-income housing is that we provide housing to the people who live in the unit. So we would have this very difficult situation of having to constantly track which costs were attributable to that unit over time.

If you decided to cover all these non-profit and co-op units by rent control, they would be covered for one year, then the next five years they would have a rent-geared-to-income housing person there. During this period there would be guideline increases and perhaps operating cost increases and capital increases, so you would have to go through some sort of artificial allocation to this unit. Then when it came out you would have to figure out what the rent was and then put it back in. It might be in the market for another two years. It might come back out again. The logistics of doing this would be fairly onerous.

In addition, all of these kinds of housing already receive very significant government funding subsidies so there is already a significant control over the units in terms of the subsidy flow, the program flow and so on. It would be very difficult, given the fact that the vast majority of units in these buildings are rent-geared-to-income, to really design a system that would be fair to the people in the building. I think it would be very difficult to do, plus it would be very difficult to distinguish between the co-op and not-for-profit, because from our viewpoint they are all the same programs. There is no program distinction. There is a distinction in terms of how their rents are set in the sense that they have more input in the co-ops than they do in the not-for-profit units, but it would be difficult from a straight program viewpoint to do what people are asking us to do.

I have some sympathy with what people want to do in this area. I understand why they want that and why they think it would be appropriate. On the other hand, it would be a very difficult thing to do from a straight logistics and management viewpoint. There would be tremendous incentive to move the allocations around in a building. If you did a roof, then the big debate would be how much of this roof is attributable to the rent-geared-to-income housing units and how much is attributable to the market unit houses. This goes on for 15 years, because this roof repair is amortized over 15 years. It would be a logistically very difficult thing to do. I am not sure if there would be a significant gain or advantage to the individuals in the housing.


Ms Poole: Did you have any report or study or any preparatory work that you had instigated in order to reach the conclusion you have that might be made available for committee members?

Ms Parrish: I could provide a summary of the points that I have made and talk about some of the considerations that we looked at in looking at the programs, the proportion of rent-geared-to-income housing that we find in these units and the fact that there is fluctuation, if that would be of some help.

Ms Poole: That would be quite helpful.

Ms Parrish: There was not a formal study.

Ms Poole: Mr Chair, that does bring up a problem that we have. The hearings are concluding this week and over the following two weeks members will be taking a look at amendments. However, when I contacted Hansard yesterday to get the Hansards from last week's ministry presentation, I was told that they are not available in any form, instant or otherwise, at this stage. It is going to be very difficult for us to formulate these amendments and take a real look at what the witnesses said if we cannot somehow get that process speeded up.

The Vice-Chair: I understand your problem and the problem of all the committee members. I would think that if the ministry wants to make a request --

Clerk of the Committee: No, the committee.

The Vice-Chair: If the committee wants to make a request -- you are off the hook, ministry -- and ask Hansard to make it a priority to report on this committee, then we can have those more quickly, I am told.

Ms Poole: I would certainly be pleased to make that motion as long as other members consent.

The Vice-Chair: Does anyone else wish to speak on Ms Poole's motion? Is it the pleasure of the committee that the motion carry? Carried.

Ms Poole: With great pleasure.

The Vice-Chair: Mr Turnbull had some questions.

Mr Turnbull: As you know, the Conservative position is that we believe we should have moneys targeted to those people most in need. Of course, this begs the question as to where the money would come from. I want to pursue some questions on the funding of non-profit co-ops. We have two levels of rent in these non-profit co-ops. We have the rent-geared-to-income and then we have the so-called market rent situations.

I am using this specific example, and I am bringing this just from memory: A non-profit co-op was funded by the government in Scarborough last fall. I asked a question at the time in the House and did not get a satisfactory answer. From memory, the building was about 70 units and about 51 of them were subsidized. The press release that the ministry issued gave the minimum annual subsidy, and I emphasize the word "minimum."

By taking that minimum annual subsidy and dividing it by the number of subsidized units, I arrived at a number with which I was able to then calculate how much mortgage that would bear, and in fact I used current interest rates on the mortgage, as I checked with a trust company, and I used a 25-year amortization as compared with the 35-year amortization which is typically used on these non-profit co-ops. So the cost would be even more burdensome. I am taking the worst-case scenario. It might be even more than this, but the equivalency of that subsidy on a per-unit basis was to buying a mortgage on a property worth $235,000 per unit.

At the time, as I pointed out in the House, there was a for-profit -- you know, that dirty word that the government does not like -- available in the press, some for-profit condominiums advertised in Scarborough at $135,000, in other words, $100,000 less. Or putting it another way, one could have gone out and bought a new single-family detached house for these people for the same amount of money or less at the time. Could you explain to me the rationale in paying such vastly inflated amounts of money for non-profit co-ops as compared with making this money available in rent subsidies?

Ms Parrish: I am not familiar with the project that you have discussed, and I have to say I did not -- perhaps I should have but I did not -- anticipate having to answer questions about funding of non-profit housing, so I have not prepared for that answer.

There are two kinds of subsidies that non-profit housing receives, whether they are co-op or not-for-profit. We do not distinguish between those kinds of developments in our programs. The federal government does, but we treat ours the same. The first kind is what is called a rent-geared-to-income subsidy, which is a subsidy to allow people who have low income to stay in that unit and the government essentially pays the difference between 25% of their income and the market cost of the unit.

There is a second kind of subsidy, which is the building subsidy or the bridge subsidy, which is the amount of money which is needed to pay for the costs of the building above and beyond the amount of income generated from rent-geared-to-income housing and the market rents that are generated by these buildings. Over time the bridge subsidy is withdrawn as the building becomes increasingly more able to pay for itself. The rent-geared-to-income subsidy is never withdrawn, because it is always based on the income of the individuals in the building.

It does not matter what kind of building you have; you have rent-geared-to-income subsidy. For example, if you bought all those condominium buildings and paid rent-geared-to-income in that way, you would have to pay that income subsidy, because those people would probably not be able to afford the rents in the condominium either. Many people prefer that system. They call that a shelter subsidy, as opposed to the other system, which combines shelter subsidy and building subsidy.

That debate about whether these various kinds of subsidies are good or bad -- as I said, there are two sides to this opinion. The one comment I would make is that shelter subsidies are most likely to work in populations which are stable. For example, many European countries do not have growth in population and therefore shelter subsidy systems work fairly well in those countries because they do not have a significant demand for supply because their populations are stable. Many of the Scandinavian countries, Germany and so on, have relatively stable or even declining populations. In populations that experience significant growth like Ontario, which is having no stimulus to supply, it means that you probably will have a permanent shortage of rental housing.


Mr Turnbull: I think you have put your finger on the problem. There is no stimulus to supply as long as you have control of the rents. Certainly a five-year window, as was presented by the Canadian Bankers Association this morning, is an insufficient time to see any light at the end of the tunnel. Indeed the private sector is going to look somewhat askance at governments of any stripe that will pass retroactive legislation to effectively confiscate the value of their equity from them. But I am talking about this vastly inflated amount of money that this government is paying to create non-profit co-ops as compared with the private sector, as evidenced by my example.

Ms Parrish: As I said before, I cannot speak to your specific example. What I can say is that the goal of the creation of non-profit housing by either the federal government, which has been doing this for many years, and the provincial government, which has been a more recent arrival to this activity other than as a partner to the federal government, has been to create housing which is affordable in the long term. Market housing can sometimes be affordable in the long term and is sometimes only affordable for a short period of time.

Mr Turnbull: Would it not be reasonable for government to utilize those short-term periods when it is available at below the cost that government -- let's assume that is correct, what you said, that it is only a short-term affair. You then buy units at below the cost at which non-profit co-operatives can produce it.

Ms Parrish: There are situations in which the non-profit housing is created through purchase of existing buildings and turning them into co-operatives -- and that has occurred and our programs would provide for that -- and there have been cases, which are usually referred to as turnkey, in which the non-profit developer simply purchases an existing condominium or purchases essentially land which has been zoned for condominium development and builds non-profit multi-use buildings on it. That does occur.

Mr Turnbull: You raised some very interesting points here. For example, there is a joint venture between the Metro tenants' organization and some other organization that buys existing apartment buildings. I have been through the program, and it is quite clearly a waste of taxpayers' money. First of all, they only want to buy apartment buildings where the rents are high enough that they say they can justify it. There are many people in the private sector who own low-cost apartment buildings, and they are being told by this so-called non-profit sector it cannot afford to turn them into non-profit co-ops because the rents are not high enough. Could you comment on that?

Ms Parrish: I am not familiar with these cases. It would not surprise me if the co-ops in the current market are trying to get as good a buy as they can. We encourage them to do that and we encourage them to get a good deal.

Mr Turnbull: But they are not going after the good deals; they are going after places with higher rents.

Ms Parrish: I really cannot comment on that. I have to say I did not prepare for these questions, because I anticipated talking about Bill 121. I do not mean that in any disrespectful way, I just did not think of preparing for this line of questioning.

Ms Poole: On a point of order, Mr Chair: Mr Turnbull has raised some very valid questions, but I am not sure that staff is the appropriate level at which these questions can be asked. I am assuming, and perhaps I am erroneous in this, that the minister will be joining us once we started clause-by-clause and will be making all these statements. This is perhaps something that it might be more appropriate to continue with the minister and ask exactly what the political agenda is for the development of co-operative housing and for housing within the private sector.

The Vice-Chair: That is not really a point of order. We tried to close this discussion earlier without any success. I just point out, though, that we have discussed for 35 minutes what the ministry brought before us as what was said to be just a clarification of the process.

Ms Parrish: I apologize, Mr Chairman.

Ms Harrington: Point of order.

The Vice-Chair: Perhaps in the interest of moving this discussion along though, we could deal with what the ministry has been asked by the committee to provide. That might expedite the process because we only have 1 hour and 25 minutes left.

Ms Harrington: A point of order, Mr Chair. Two points of order actually.

The Vice-Chair: We will do one at a time.

Ms Harrington: First of all, I do not believe Mr Turnbull's comments were directed at amendments to this bill or improving this bill, which is what we are trying to deal with. I would like to tell him that certainly the ministry is looking at various options, and some of your suggestions are much larger than rent control --

The Vice-Chair: That is not a point of order.

Mr Turnbull: Mr Chair, if we are to allow speeches, I would like a response to this.

The Vice-Chair: What is the second point of order?

Ms Harrington: It was my understanding that I you were going party by party. At this particular time we have not reached that stage yet, I gather.

The Vice-Chair: I would point out that your party started. Mr Perruzza and Mr Mammoliti have already spoken to this particular item.

Ms Harrington: I see. I was under the understanding that we had got on to other subjects.

The Vice-Chair: I was not actually going party by party. I was just trying, foolishly I guess, to be non-partisan and to elicit some answers from the ministry that all members would like.

Ms Harrington: Could I ask that possibly at this time we could ask the ministry staff to give their presentation?

The Vice-Chair: I think that is what I just said.

Ms Harrington: I would appreciate that. Thank you very much.

The Vice-Chair: So, Ms Parrish, if you would like to continue on your second probably insignificant point that we will go for an hour on.

Ms Parrish: The second one is an issue that I think has come up quite a bit and that is search and seizure. We have prepared a letter for the committee. I did not realize that Mr Mancini would not be here today, so it is addressed to him. I believe there was a copy circulated to everybody. Does everyone have a copy? It is addressed to Mr Mancini and it starts out, "This will respond to certain questions about powers of entry and the Rent Control Act."

I did review some of the comments and I spoke to my staff about issues that were raised, and we tried to capture the questions that were asked in the committee. I think we have them all. There may be a few questions we did not quite pick up in terms of the rapidity of people asking questions.

I would point out that Bill 121 has quite a few sections that deal with powers of entry and warrants and inspection. It may seem that there is a lot on powers of entry. One of the reasons that there appears to be a lot is that we have spelled out in much greater detail than other statutes have done how these powers work and what their restrictions are. In general, that is a coming thing, in the sense that there has been more case law that has appeared over the last few years under the charter that gives some guidance to the provinces as to the appropriate constraints they should be putting in statutes to deal with search, inspection and seizure powers. The act before you has more detail in it because that is the approach that is being taken in most new provincial statutes, now that we have more guidance from the courts on search and seizure powers.

There is one thing that would be useful as a point of clarification. The law, as I understand it, places a higher protection on dwelling units because of the right of privacy than it does on any other area. This statute provides that you cannot enter a dwelling place unless you have consent of the occupier or you have a warrant. It does not matter whether or not the occupier of the dwelling unit is a landlord or a tenant; the rules are the same.


If you had a situation where a landlord lived in an apartment building and had one of those units and had, for example, his business records in that unit, you would not be allowed to enter without a warrant or consent. The law protects the dwelling unit. It is not a question of it protecting landlords or tenants --

Mr Tilson: The act says "any place."

Ms Parrish: There are special rules that relate to dwelling units. What the statute says is that there is an absolute protection on dwelling units that requires consent or a warrant. Where there is no consent and no warrant we can inspect, but we have to give reasonable prior notice of inspection, the inspector must show his certificate of appointment and the inspection has to occur between 7 am and 9 pm.

Mr Tilson: You cannot enter any place, that is quite clear.

Ms Parrish: It is quite clear that you cannot enter a dwelling unit.

Mr Tilson: I see clause 113(3)(a).

The Vice-Chair: Let us do this in some kind of order. If Ms Parrish is finished that particular statement, then I think I will give each party five minutes to clarify its position. This is obviously an important issue that members have raised on a number of occasions. If you are finished your clarification, we will try to further clarify it with members' questions.

Ms Parrish: Okay, I just would point out subsection 113(7), which says, "A person shall not exercise a power of entry to enter a place that is being used as a dwelling without the consent of the occupier except under the authority of a search warrant issued under section 114."

The question was asked as to what an occupier is, and I think the letter does attempt to deal with that. It tries to deal with the issue of notice, and I would just summarize by saying that the current Bill 121 provides for more restrictive powers than the current law, than Bill 51, and that is because since Bill 51 was enacted we have more guidance from the courts as to what is appropriate to protect privacy.

I would also like to point out that during the course of presentations and comments made on search and seizure there were two points that were brought to the attention of the ministry that I think have some merit for further consideration. One is the issue of what happens when something is seized by the ministry, for example, records. We say we have to give a receipt, and we also say that we have to copy them and give them back as soon as practicable. In the meantime, there might be some problem and the landlord needs access to these records and we are copying them or whatever. Some people have made the comment that there should be provision for access to records held by the ministry during this period of copying or whatever, and I think there is some legitimacy to that point and we are looking into that.

Second, some people have commented that it would be useful or perhaps appropriate to have more specific powers illuminated in section 113 of the statute indicating exactly what the circumstances are in which you can use the powers of entry. In discussion with my colleague Nancy Makepeace, who is a solicitor in our branch, and with the Ministry of the Attorney-General, we also think that point has some merit, and we would be looking to seek some guidance on that from the minister.

However, I think it is the case that the powers of entry in this current statute are more restrictive and have a higher standard of protection, particularly for dwelling units, than the current law and that these provisions are very widespread. We have given you a list of statutes in which more intrusive provisions exist, but my understanding is that there are over 1,300 statutes in Ontario with power of entry provisions. We only gave you the most immediate and directly applicable provisions.

The Vice-Chair: I think I will start with the Conservatives. Mr Tilson, five minutes to clarify whatever you wish.

Mr Tilson: The act appears to allow the inspectors to seize anything they wish, and there do not seem to be any guidelines as to what they can or cannot seize. They could seize photographs, they could seize books, they could seize -- well, I have given the example in the past, diaries. I know it sounds silly, but they could seize anything.

You say there are 113 pieces of legislation where police powers are given to government officials. I think that maybe we are getting too many. Maybe we are getting too much police interference. But my question to you is, if this does carry, and I hope it does not, should there be a procedure for an independent body to determine what should be seized and what should not be seized, such as a court, for example? In other words, the inspector comes in, grabs a whole roomful of things, whether they are documents or things or objects, and before that person's privacy is taken away any more, those items are bundled up, secured and taken to an independent body, such as a judge, who would decide whether or not the inspector can unilaterally decide in his or her discretion what can be taken.

Ms Parrish: I would say then if you require a warrant, and it seems likely that you would require a warrant to take a diary because it is likely that it would be a dwelling place, you have to justify the purposes of the warrant before a judicial officer, a JP. That is the same procedure which is used under the Provincial Offences Act in Ontario for all provincial offences, so there is a judicial officer who does look at that.

Second, you are constrained. You can only seize things which are relevant to the inspection. I am not sure how this diary became relevant to the inspection, but it seems unlikely to me it would be. In any event, you can only seize things which are relevant to the inspection, and what is relevant to the inspection is specifically indicated. It says in clause 113(3), "An inspector exercising a power of entry may...(b) require the production and inspection of records or other things that may be relevant to the inspection." So it must be relevant.

I guess there is some concern about whether or not we should be spelling out in greater detail in section 113 exactly what you can do, or you can inspect to see whether or not standards are met, for example, and so on. We are looking at whether we should make that a little bit more specific. But I think it is already very clear, as it is under the Provincial Offences Act, that you can only seize things which are relevant to the power that you have to enter, which is related either to the inspection or to the warrant you have received.

Mr Tilson: That is not my point. My point is that, first of all, the justice of the peace who issues this warrant has not seen what is going to be seized. Therefore the discretion as to what is going to be seized is left because the inspector has not seen anything yet. He has not seen what is in there. So the inspector can simply go and grab what he or she likes, take it away and, at his or her discretion, decide whether it is relevant or not, because the justice of the peace has not even seen it yet.

My question is whether items that do not even belong to the landlord or owner could be seized under this legislation. Second, it is my understanding from reading this section that you cannot enter a dwelling place without the consent of the occupier, but that does not preclude a warrant being issued to enter a dwelling place. Section 114 certainly allows, coupled with subsection 113(3), if reasonable grounds are given, an inspector to enter a dwelling place. So what you have said is not quite correct. You cannot enter a dwelling place unless consent is given, but if consent is not given you then look to section 114, in which case you can certainly get a warrant to enter a dwelling place.

Ms Parrish: What I said was that if you want to enter a dwelling place you must have either consent or a warrant.

Mr Tilson: Of course. I am saying that you certainly can enter.

The Vice-Chair: Mr Tilson, your five minutes are gone. I am sure the clause-by-clause will be quite interesting. Ms Harrington.

Ms Harrington: It is just on this particular topic?

The Vice-Chair: Right. The more time we save the more we can use for something else.

Ms Harrington: Very briefly how would you describe the difference in what is allowed in this particular aspect of the bill between Bill 51 and Bill 121?


Ms Parrish: These provisions are more restrictive than in Bill 51. In specific, Bill 121 says what the purpose of the inspection is, sets out the scope of the investigation and so on, and one of the things we are looking at is whether we should even increase that specificity. Bill 51 simply provided for a fairly open kind of ability with no restrictions. Bill 121 provides that you have to have reasonable prior notice of inspection to be given where there is not a warrant. The Residential Rent Regulation Act had no requirement notice for ministry inspection. You had to have adequate prior written notice for a standards board inspection. These are probably similar although the language is slightly different. I think that "reasonable" is a stronger test than "adequate." However, that is probably debatable.

Bill 121 requires that you identify yourself with a certificate of appointment and not just a general driver's licence or whatever, so in order to inspect you have to actually say, "I am an inspector and I have been appointed to be an inspector," so there can be no doubt as to who the heck you are and what you are doing there.

Bill 121 does have limitations as to when the inspection can occur, ie, between 7 am and 9 pm. RRRA did not indicate any time restriction at all. A standards board inspection could occur at "any reasonable time." Again, Bill 121 has stronger protections because, when seeking consent to enter a dwelling place, the inspector is required to say to the individual in the dwelling place, whether a landlord or a tenant: "You do not have to give me your consent. You can refuse to give me your consent and you can insist that I require a warrant." The RRRA did not have that for ministry inspections but did have that for standards board, so it increases the amount of protections that I found.

That is why these provisions are longer. There are more restrictions on the powers in Bill 121 than in the current statute we are administering.

Ms Harrington: I would like to clarify once and for all, is there any foundation at all to the innuendo or the statements that we have heard around that there will be some kind of harassment from some kind of rent police under this legislation? It seems to me from what you have just said that it is entirely somebody's dream and that, in effect, under the previous legislation that was much more of a possible threat.

Ms Parrish: I was not actually at the committee hearings where this particular discussion took place, so I cannot comment except to say the protections in Bill 121 are greater than the protections in the current statute and they are comparable or of superior protection to the privacy of landlords and tenants involved than most current statutes.

The provisions related to offences are identical to those of the Provincial Offences Act, which is the law of general application in Ontario. There is certainly nothing unusual about these provisions, except to say they probably have a higher degree of protection for dwelling units and more constraints upon the actions of inspectors than the current law. The only unusual thing about them is they have more protections and that, I think, is where the law is going generally. I think in future you will see more statutes that look like this and have these kinds of protections for dwelling units.

Ms Harrington: There appears to be, from any rational outcome, no foundation for this fear at all. Thank you very much.

The Vice-Chair: Both Ms Poole and Mr Callahan have an opportunity to ask questions for five minutes here. Ms Poole first.

Mr Callahan: Could I just ask very quickly and then I will get out of the way? Is that consent going to be verbal consent? Because if it is I can see you are going to have a whole backlog of court processes. I would suggest, if you are going to do consent, it should be in writing to make certain that issue is not an issue that gets voir-dired at the beginning of any procedure or gets used on the quashing of search warrants. We have got all that stuff today. I could read them off, "I read him his rights." It falls off the lips just like verbatim.

Mr Tilson: You got a right to a lawyer?

Mr Callahan: Yes, you got a right to a lawyer. You got to remain silent. All this stuff. I would suggest if you really want to protect them, you better make it in writing so they understand. That is all I have to say.

Ms Parrish: That is something we can look at. There are statutes that require these in writing. It is also the downside of trying to communicate in a manner which does not intimidate people. That is an issue, I think.

Ms Poole: The first section I would like to clarify relates to the section on powers of entry and to whom it applies.

We had a presentation from the association relating to building inspectors this morning. I cannot remember the specific name. He was saying one of the biggest problem they have with enforcement is the fact they do not have the power of entry. Later, the gentleman was telling me that the building code does not give them adequate power of entry except for things like fire -- safety standards but not property standards. He saw this as a great deficiency.

Are the powers under sections 113 and 114 only for provincial inspectors or, for the purposes of this, could the director say that all municipal inspectors are appointed as provincial inspectors for the right of power of entry?

Ms Parrish: These powers only apply to ministry staff and ministry inspectors.

Ms Poole: So this does not solve the municipal building inspector's problem when he or she is just denied access to the building.

Ms Parrish: No, they would have to have their problem resolved under their own statutes. I have to say that what their problem is depends on what they are doing. For example, if they are wishing to enter for the purposes of a provincial offence and they have reasonable and probable grounds, they have to get a search warrant. If they have something to seize, they can get a search warrant saying, "I want to search this and seize it."

The problem they have, and that we would have had, had we not had our own provisions around warrants, is that by and large when you are doing an inspection you do not have anything to seize, so you cannot get into a search warrant under the Provincial Offences Act because you are not going to search and seize anything. You cannot seize the hole in the wall or you cannot seize the lack of heating, so you cannot get a search warrant under the Provincial Offences Act. You have to get essentially an inspection warrant that allows you to enter for the purposes of inspection or this modified warrant that allows you to enter if you believe there is an offence and there is nothing to seize.

If you want to seize records, for example, you can simply depend on the powers that are already in the Provincial Offences Act, if there is something to seize. This is a long-standing problem in the Municipal Act, the Planning Act and so on.

Mr Ruprecht: Just a short question. I understood that Ontario Housing Corp had come to some kind of an agreement recently to permit the right of entry for purposes of searching for drugs. Could you update us on that briefly? What is the latest on that?

Ms Parrish: I will have to inquire. I do not know. I cannot say that I am a specialist in drug enforcement.

Mr Tilson: Inspectors will be.

Ms Parrish: As I recall, it has been quite some time since people have been able to have writs of assistance and that you have to have a search warrant for drugs. But it may very well be that what Ontario Housing is doing is giving the police wider access to common areas as opposed to dwelling units in order to facilitate the capturing of people who are terrorizing public housing communities. But I can only look into that issue. I cannot say that I know a great deal about it, except to know that there has been a desire to increase co-operation between the police and public housing without infringing on the privacy rights of the individuals.

The Vice-Chair: Ms Poole has a real quick one.


Ms Poole: In relation to subsection 113(7), I want to be perfectly clear about this. If a landlord or a tenant lives in a unit and that is taken to be the dwelling, then there has to be either consent or warrant. However, I have two questions relating to that.

First of all, could a dwelling not be taken as the entire building? Could "occupier" not be taken to be the person who is working in that particular scenario? The second question I have is relating, am I perfectly correct in that if we are talking about an area that is not a dwelling, for instance, if they want to go into the landlord's offices, are they required then to get a warrant under 114 or is nothing required other than reasonable notice?

The Vice-Chair: Before you start to answer that question, the time has expired. What I think we will do for the next hour is go 10 minutes in rotation among the parties and they can ask about anything they want. Your time is on now for the Liberals and 10 minutes from now the Conservatives will be up. I think that is fair. Everybody will get 20 minutes.

Ms Poole: We are going until 2 o'clock?

The Vice-Chair: Yes.

Ms Poole: So would that be 20 minutes per party?

The Vice-Chair: Yes, but we will do it in 10-minute bites.

Ms Parrish: If it is clear that there is nobody living there, it is an office or a common area, then you do not have to have a warrant and you do not have to have consent. You just have to have reasonable prior notice. My understanding from my consultation with my colleague here is that a dwelling unit is a rental unit. Therefore, it has to be the rental unit. We can look into that further, but I think the answer is that a dwelling unit is the rental unit and not the common areas of the building or whatever. It has to be the rental unit of the individual.

The Vice-Chair: You can proceed with any other clarifications on the whole of Bill 121, Ms Poole, or Mr Callahan or Mr Ruprecht.

Ms Poole: I am going to leave the definitions of "neglect" and "inadequate maintenance" for some other caucus's time and then see how that goes for our second round.

I gave a list of requests to the ministry, which you are obviously working your way through, and any moment you are going to get to my requests, that I made on August 1. I asked for an explanation of why a cost-no-longer-borne provision is not in Bill 121. I asked for an opinion on the viability of separating property taxes for rent. In Windsor later on, I asked for a definition of "occupier" in subsection 114(7), and I think Dana touched on that this morning.

I have another list of questions. First of all, do you have available either a written or a verbal explanation of the cost-no-longer-borne provision?

Ms Parrish: I can speak to that issue. I just would say that the issue of definition of "occupier" is in the letter that we have just given you.

It is not completely the case that cost-no-longer-borne is not in the statute. It is in the statute in the same way as it was in Bill 51. That is, if you have a situation where the landlord replaced the stove and then comes along later and replace the stove again, you take out the allowance he has already received for the stove. So there is a form of cost-no-longer-borne provision there. But it would require the landlord to come back and reapply, so to that extent we have continued what the law was under Bill 51, which is that if the landlord does apply for the same item again he can have the allowance taken out.

I think what you are asking is whether there should be some sort of automatic provision where, for example, if the landlord gets an allowance for, say, a 10-year period to repair the roof, whether at the end of the 10-year period you should be taking out of the rent base the allowance he has received for the roof. Is that the question you are asking? That is a question that has come up quite a bit during the course of the debates and we are looking at that, as staff people, as to whether it is practicable.

The concern we have about it is not as much that we would be opposed to it as a matter of principle. The concern is largely how practical it is. It would involve a fairly sophisticated and complex tracking system. It would involve having landlords and tenants make calculations with these charges sort of held separately to one side, and when the guideline comes along, you put the guideline on part and not all. There is already a fair bit of difficulty that we have every year that people cannot take their rent and multiply by 5% and figure this out.

Once we start adding complexities of saying, "Take this part of your rent, multiply that by five, add this, subtract this," there will be an increasing complexity and it will be harder and harder for landlords and tenants who are completely and totally honest and well intended to figure out what the rent is. We think that is a problem because, of course, whenever that happens, you are going to get a lot more illegal rent-taking and you are going to get completely innocent people making mistakes. So we are concerned about how practical it is, because with these very long amortization periods for capital repairs, we may be looking at trying to track 15 or 20 different allowances over a 20-year period, all coming in and out at various times. That could be quite complex for both the landlords and tenants.

It would also be relatively difficult for the ministry to maintain the information base and have a good registry. People are increasingly wanting us to have a very accurate registry, so we have that concern as well. The concerns we have about these provisions are not as much in principle, but more as to whether or not is going to be practical for the system to work and whether or not it would create more confusion that would be to the disadvantage of tenants than it would create advantages.

I am being very honest in saying that we are struggling with that issue. I think you have to balance the complexity of the system and the fairness and the number of rules you can devise, as to whether or not you really design a system which is in theory a good system but in practicality just breaks down.

Ms Poole: I understand what you are saying about the provision being the same in Bill 121 as in Bill 51. I had a problem with it in Bill 51 because what it does not do is take care of that gap between when the landlord finishes paying off the refrigerator and maybe that 15-year period before he or she buys a new one. I am sorry; I can understand that there is complexity, but in this day and age of computers and the fact that all this information should be put on computer at the time that rent review applications are made, I find it incomprehensible that we cannot work out the logistics.

It would seem to me one major purpose of the rent registry should be to take care of that. I agree with you that because of the complexity it would be very difficult to go back in time. I think you just have to start from whenever this act comes into force onward. But I think you should really take a look at what your computer system is doing if it cannot handle this kind of complexity. I think that is something we would certainly like to pursue later.

The second question that I have relates to the Royal LePage study. When we were talking about the calculation of the building operating cost index --

Mr Callahan: And residential complex cost index?

Ms Poole: BOCI and RCCI, yes. We are not supposed to call them that any more, but it takes a while to get our heads around it.

When we were talking with you the other day about the calculation of BOCI, I asked you why there was a differentiation between your statistics and those of the Fair Rental Policy Organization of Ontario as to the average -- FRPO said it averaged 58% for inflation for operating costs, and you based yours on, I think, 44% to 48%.

I looked through the Royal LePage study and I had a couple of questions stemming from it. The first relates to how accurate the study is. This really goes back to the purpose of the study, which I understand is quite different than the material you are extrapolating it from, and how in-depth this update was when it was conducted. For instance, they say they only had one week from the time the ministry requested the information until the deadline when it had to be submitted to the ministry.

I would like to question the methodology. The buildings that they used in their sample were, I believe, resale buildings and buildings that were basically 22 years old or younger, which would make it almost virtually all high-rise buildings. I am wondering whether this invalidates some of the conclusions reached, because obviously the low-rise older housing stock would not be included. I am wondering if it is really right to make such a dramatic change to the BOCI formula when it does not seem to me this study was specifically prepared with that purpose in mind.

Go for it.


Ms Parrish: The study was prepared essentially for the housing framework paper, which members may have seen, and I do not think we have ever made any secret of that. Let's put it this way. The current statute, Bill 51, says that RCCI is two thirds of BOCI plus 2%. There was never any study done on why it should be two thirds. It was simply agreed to by RRAC as essentially a sawoff. I have never seen any support at all for two thirds. Indeed, the study that was provided by FRPO does not support two thirds either. They show somewhere around 58% as their top of the range. Their range is somewhere between 51% and 58%. The ranges here are lower, but they are not greatly different.

I guess it is true that when you pick a formula there is always going to be, you know, should you pick 50%, 55%, 60%, 58%, whatever. I think what is clear is that two thirds is not the right number, that it likely has led to a higher guideline than might be appropriate. Certainly guidelines have been well above where you might have expected them to be in recent years. I do not think I can say with absolutely certainty that any study can show absolutely equivocally what the right number would be, but I would say that this study, combined with other material we have, would indicate that it would be below 60%.

The Vice-Chair: Okay, thank you. Mr Tilson, I have debited your account by two minutes.

Mr Tilson: The issue of mobile homes or land lease has been raised in Toronto and many of the cities that we have attended. We have had a great deal of difficulty dealing with applications or depositions made by not only the owners, but the people who are renting these units or lots. I think I commented at one of the hearings that for once we had both landlords and tenants who could agree on something. They all agreed that either this should be a separate section within the bill dealing with those units, or a separate bill.

Of course, it has been drawn to our attention by Ms Harrington that there is an interministerial committee working on this. I would like you to inform us more about this interministerial committee: who is on it; whether we can refer these groups to that ministerial committee for consultation; confirmation as to whether you know when this committee will be making a report, and whether there is any usefulness in our committee, this particular committee here, passing on our comments to assist that committee in its deliberations.

Ms Parrish: There are representatives from a number of ministries on the committee. It is chaired by the Ministry of Housing. The chairman is a man called Vince Brescia, and Vince works in my branch. We have representatives from other areas of the Ministry of Housing, from the ministries of Revenue, Consumer and Commercial Relations, Environment, Municipal Affairs -- I may have missed some -- the Ministry of the Attorney General.

The goal of the staff level committee is essentially to describe or find out what the issues are and to develop enough information on that to come forward with a report. My understanding is they have had a series of meetings with almost all of the major mobile home park groups. I think some of the people who gave presentations before you commented that they had met with the committee and that they had, I guess in their view, had lots of opportunity to say what they thought. So that stage, I think, is pretty well completed, although the committee would certainly talk to anybody who wanted to talk to them.

Mr Tilson: How do they do that?

Ms Parrish: They can contact Vince directly in my branch. He is in the phone book and I can give his number to Deborah for the records.

I should say that I know the committee has prepared an internal draft of their report and that they are meeting during the month of September to finalize their report. At that stage I am not sure what will --

Mr Tilson: Whom are they reporting to?

Ms Parrish: They are reporting to their ministers, to the Minister of Housing and to her colleagues.

Mr Tilson: And this report will be made public?

Ms Parrish: I think that is one of the considerations the government will have to think about, what would be an appropriate next step. There are a number of ways they could proceed. They could say: "Here's the report of this committee. Let's have a consultation. What do you think, people in the world? Do you think we should do this? Does this look like a good idea or not?" That is one option. Another option might be to simply proceed with some recommendations. I do not know, to be honest.

As you know, we have had a change in minister, we have had a change in deputy minister. I have not briefed either the new deputy or the new minister yet, although we are scheduled to brief our new minister soon.

Mr Tilson: This committee may or may not see this report. That is what you are saying.

Ms Parrish: I cannot speak for the government. I can only say that the staff is doing the work. What the government will then decide is appropriate -- they may feel it is appropriate to have a consultation, as we had on rent control, or they may feel that the issues are well known and that there has already been sufficient consultation and that they should simply proceed to address some of the issues that have been raised -- I cannot prejudge. I do not know whether or not they feel another consultation process, some sort of green paper, would be appropriate, as we did with rent control, or whether they will say, "We already know quite a bit about this issue so perhaps we should proceed." Or perhaps they will feel they should not proceed.

Mr Tilson: Thank you. Do I have time for another question?

The Vice-Chair: You have almost five minutes.

Mr Tilson: During Bill 4 and during Bill 121, we have had many complaints from tenants as to the condition of the buildings, and obviously whoever drafted Bill 121 has attempted to deal with that issue.

One of the concerns I have, on which I would like you to comment with respect to specific sections, is how that is going to be dealt with. In other words, we have bylaw enforcement officers from municipalities, we have people from the province, we have inspectors under this bill. Who else do we have? Those are the three main groups, I suppose. There does not seem to be any solid group that is going to deal with the issue of maintenance, serious maintenance that perhaps does not comply with health or standards, throughout the province.

I guess I did ask the question specifically as to how these problems are going to be dealt with. The answer appeared to be given by one of the ministry officials. It appeared to be that if a municipality had a bylaw enforcement officer, that is the person one would go to. My concern is whether or not the ministry has taken any more consideration as to whether or not, because this is a provincial problem, this type of problem should be dealt with by the province as opposed to downloading it on to the municipalities.

Ms Parrish: I would say that the response we see from the municipalities and from AMO would indicate that their preference is to maintain jurisdiction over property standards and maintenance issues and that they would not welcome what they would view as the province coming in and saying, you know, this should be the standard for Hamilton, or whatever.

The approach taken by the province in Bill 121, which is similar to that taken in Bill 51, is that the province has a residual authority in relation to areas where there is no property standard being created and applied in jurisdictions that have exercised their powers and have taken the jurisdiction which they are given, that we should not be imposing our standards in substitution to theirs.


Mr Tilson: That was the answer that was given before, and I appreciate that. I guess the real issue I am getting at is that we are hearing particularly from tenants' groups, obviously from tenants' groups, saying the laws we have are not working. We are having photographs shown to us, not so much in the Bill 121 hearings but certainly in the Bill 4 hearings, of intolerable conditions that tenants are living under.

If they are to be believed, and I have no reason not to believe them, or we would have heard something from the owners of the buildings, the system we have of municipalities taking jurisdiction of this is not working. Yet in Bill 121 the province does seem to be getting into maintenance, because if certain standards are not met, rent will be frozen or reduced.

Obviously the provincial government is taking the position of trying to have it both ways. I am trying to say, should there not be some sort of semblance, some sort of reliance on a group that will actually take hold of this issue and deal with it as opposed to saying, "Oh, well, the municipality will solve it"? Maybe they will, maybe they will not.

Ms Parrish: The provisions in Bill 121 bolster the power of the municipalities by providing a much greater remedy. I think one of the problems that has occurred in the past is that not obeying the work order in a municipality has in many cases not led to very much of a penalty.

Most municipalities will prosecute only as a last resort, and when they do prosecute they get relatively light fines in many cases. That has often amounted essentially to a licence not to obey the standard. By having a connection between rent and work orders, I think the intention is to strengthen the hand of those people trying to enforce the statute by making a closer connection between an incentive which landlords are concerned about and obeying the law of Ontario.

Mr Tilson: What I am getting at is that hopefully you have heard some of the remarks made by tenants that obviously the system does not work, that there is confusion and that hopefully the government will consider amendments to make one group, as opposed to two groups, responsible for this issue.

If I could move into another area, that is the area that --

The Vice-Chair: You can in the next round, Mr Tilson.

Ms Harrington: I appreciate the concerns Mr Tilson has raised, and also Ms Poole. Certainly the maintenance provisions are something we want your help on. First I should mention that the issue of the mobile home parks seems to be very complex, certainly with so many ministries involved, and yet I believe it is of immediate concern, from what I am hearing in various ridings, of people being threatened with not having somewhere to live. I will let the minister and/or the deputy minister know that this committee has an interest. That is what I am hearing.

Mr Tilson: I think we are all concerned. As I say, for once the two groups are united and they are desperately looking for some guidance as to how to deal with these problems, so that hopefully --

Ms Harrington: I will at least let them know that we are interested and see if that is possible.

Mr Tilson: I think the members of the committee are united on that issue. The sooner this committee presents a report we can all look at, because so far we are just saying, "Oh, well, something will come in October" -- but now I am told we may or may not hear from this committee, which is somewhat alarming.

Ms Harrington: I have several questions. I am not sure how many I will get to in this round. First of all, with regard to interest rate changes, we have heard a fair amount from the landlords about this and this morning we heard from the banking association. Is it at all possible that this could be put into the legislation with some kind of automatic going up or going down? I know there are problems, but how bad are the problems associated with that?

Ms Parrish: Bill 4 does provide for interest rate changes going up, so it is certainly not something which is not possible to do. Going down also could be done. It is an added complexity, but it is not an exceptionally difficult complexity. I think the problem is more with the automatic part. I am not exactly sure how that would work.

If landlords and tenants actually made applications, it would probably be fairly straightforward. It would increase workload obviously, and you know when you increase workload you increase costs to the system. There would be more complexity. The automatic part is more difficult, because it would involve having to monitor what the interest levels were on all these mortgages and then find out when they got renewed, because they could get renewed and nobody actually applied for anything and then you would have to find out what happened.

Of course people do not always renew their mortgage instruments at the end of the term. Sometimes they will pay a small penalty to move ahead in order to get a lower interest rate or some other advantage, or to remortgage or whatever. It is not always obvious. You cannot just say: "It's a five-year term. I'll look in five years later." That person could actually renew the mortgage six months later. The automatic part is what would be very difficult. If it were simply done on application up and down, it would be fairly straightforward.

The disadvantage of course would be that it would be relatively difficult for the tenants to have the same information as the landlords, which is always a disadvantage, an inherent unfairness. As I said, it is more the automatic part that would be very difficult to manage with any degree of integrity unless you said to people, "You can't renew your mortgage except." It is a bit like the cost-no-longer-borne provision, except that it is even more complex because at least with the amortization period you know it is going to be over in 10 years or 15 years.

You do not know when they are going to renew their mortgage, and unless you are prepared to say that you are going to prevent them from renewing their mortgages except on the date, it would be difficult to make it automatic as opposed to on application by landlords and tenants.

Ms Harrington: I will give Mr Glass a little chance here. I have heard certain concerns that the rent registry is still behind and yet I think I have heard from the ministry that things are looking fairly good. What is the actual state now?

Mr Glass: The rent registry is currently in the process of cleaning up a number of its records. We have records on 691,000 rental units in the province and we are in the process of correcting information that has been sent to us over the years in that area. We are in the process of completing what we call a historical order log, which is to put on file all the orders ever resolved under the various pieces of legislation in rent review for record purposes for people who wish to purchase buildings or investigate past history, and we are completing the entry of all current orders, which give us lawful maximum rents for about 451,000 units of the roughly 1.1 million units in the province.

All that work will be completed in the month of September and then we will return to issuing notifications under the legislation to obtain lawful maximum rents on the balance of the large buildings. Then under the proposed legislation we will go after lawful maximum rents for four, five and six units. We expect to issue notifications, which is our way of obtaining information on lawful maximum rents, starting about the end of September.

Ms Harrington: So if people ask, then we should be up to date in September.

Mr Glass: We will have our current information up to date. We will have complete information on larger building units, and by this I mean seven-plus units by the end of the fiscal year. Some time after the introduction of the new legislation, if it proceeds as prepared, we will have the four-, five- and six-unit size buildings.

Ms Harrington: Is all this on computer?

Mr Glass: Yes.

Ms Harrington: So if we want access to it, we can --

Mr Glass: Yes, it would be able to be accessed. It is on a mainframe computer and can be accessed through our local offices through a network program.


Ms Harrington: I want a clarification. I know I have had trouble explaining sometimes that it is not just a 30-day period. Can you explain in a simple way how I should explain that for maintenance?

Ms Richardson: I suppose you are referring to the rent penalty provisions found in Bill 121.

Ms Harrington: Yes.

Ms Richardson: First of all, most of the rent penalty orders would result from a municipal work order that has been sent to the ministry. The 30-day period starts to run when the compliance date has expired on that municipal work order. That means that if the municipal work order says you have 30 days or 90 days to do something, that period must first expire before the 30 days would start to run.

The other point would be that this period would start to run when we have notice -- "we" being the province -- from the municipality that there is a work order and we would know when the expiry date happens, so if we do not receive a copy of a work order we would not actually start that 30 days running until we have that notice.

The 30-day period would start and in that 30 days it is a notice sent first of all to the landlord to say, "There will be a possible rent penalty unless within this 30 days there is proof that there has been compliance with the work order." A rent penalty would not be issued if indeed there is proof of that compliance within that 30-day period. That gives the landlord another 30 days' opportunity to bring the information forward that could actually prevent a rent penalty from being issued.

Ms Harrington: We have heard various concerns this morning, I think. One of our briefs said that if there were a strike in a certain industry or winter weather, this would cause hardship. Can you foresee any of those types of problems?

Ms Richardson: As I have said, it does depend on when the municipality sends us a copy of the work order. It is my understanding that a number of municipalities would grant extensions to individual landlords in circumstances like that. If that is the case, then their compliance period would not yet be up before the provincial period would start to run.

Ms Harrington: So we think reasonably that this would not be a problem.

The Vice-Chair: Five minutes, Ms Poole.

Ms Poole: You told me I used up two minutes of my second 10-minute round.

The Vice-Chair: I am going to move everyone else back so that it evens out, but if you have a check at the clock, five is good.

Ms Poole: It had better be a long five.

There are two areas that I want to discuss with you. One is a continuation of what Ms Harrington was talking about, the work orders, and the second is the neglect and inadequate maintenance.

First of all, with regard to the work orders and the rent penalties provision, this is basically very similar to the Liberal amendment under Bill 4 except that there are a number of quite substantive differences, at least in my mind. The first is that we had the standards board that was going to administer it. We did not rely on a rent review system, which may end up getting backlogged and where maintenance takes a second seat. Our evidence was that the problems with the standards board related to the fact that they had to go through rent review and that is where the backlog came in, not at the standards board.

The second was that we felt they should be work orders of a substantive nature, the physical integrity of the building being in jeopardy or the health and safety of the tenants, and that the rent penalty would come into effect if the landlord did not make reasonable attempts to comply. This would then leave open for the landlord a number of safeguards and they are actually contained in Bill 51 in clauses 15(9)(a), (b), (c). It says:

"(9) In deciding whether to make an order...the minister shall take into account,

"(a) the nature of the work required to be performed to comply with the maintenance and occupancy order and the history of the matter that is the subject of that order;

"(b) actual seasonal factors and financial constraints affecting the ability of the landlord to perform the required work; and

"(c) the availability of the persons and materials required to perform the required work."

I cannot comprehend for the life of me why you would take those provisions out of Bill 121. It is common sense. What this did was safeguard the landlords who were genuinely making an attempt to satisfy work orders but running into circumstances beyond their control. Those landlords I do not have a problem with. I have a problem with the ones like those down in Parkdale who abuse the system, who milk the tenants, who try to delay things and procrastinate and go to court, and to me we have missed the point of this.

I like a number of things about what you have done. I like your intent, but without that safeguard, we are going to have ordinary, law-abiding landlords who get caught in a catch-22 situation. Maybe you could explain why those safeguards under clauses 15(9)(a), (b), (c) are not in this legislation.

Ms Parrish: When we were developing the legislation, we looked at the substantial compliance or whether the thing that the landlord had done or not done met a certain test. What we found was that well over 96% of all of the work orders that came through the system met the test. The test really did not appear to do anything except to create delay because you would have spent some time looking at all these things, and since almost all of them already met the test, it just did not seem to be adding anything. It was there, but it did not seem to do very much.

The question about delay and so on, the period of time, the average time between a date that an order is reported and a rent penalty issued is 246 days, according to the information that we have. I do not want to point a finger at anybody in the system and say that anybody was doing his job wrong, because I think that they were all trying to do their job as well as they could, but I do think that a system that involves having the municipality decide whether or not there is a lack of compliance and then having the standards board decide whether there is a lack of compliance and then having rent review decide again that there is a lack of compliance just did not seem to be a particularly desirable system.

Ms Poole: I agree. You cut out rent review.

Ms Parrish: The problem has been mostly that almost everybody has said, "If you want this to be a meaningful system, you have to create a connection between the rent penalty and the bad condition, and if you don't, you're just going to be back into the situation of fining people $50 for not having any heat in the building," and that that system has not led to an improvement in the condition of adequacy in rental housing.


Mr Tilson: On the issue which was raised with the Ministry of Energy and which we have raised in the past, the energy conservation conflict of the landlord putting in windows, insulation, whatever, taking advantage of the programs put forward by the Ministry of Energy, with the very probable possibility of a tenant making application for and receiving a reduction in rent because of savings of maintenance, is there any possibility of any further discussion with the Ministry of Energy on that conflict?

Ms Parrish: Of course. There is always an opportunity for further discussion.

Mr Tilson: It appears to be over.

Ms Parrish: Not to be controversial, I did not hear any evidence that there was a conflict. I do not think they have said that. I do not think we have said that. I understand it is your view there is a conflict, but as staff from Energy said this morning, we have had a lot of discussion with them and we think we have come up with a reasonable balance between the various interests.

I understand you do not agree, but we do have specific provisions that deal with energy conservation and we do not require, for example, that energy conservation measures be necessary in the same way as we require other things. We do give them a sort of special place, as we do, for example, access for disabled people, for the same public policy reasons.

Certainly we can have further discussions with them. We have had discussions with them and will continue to have discussions with them, but I think that --

Mr Tilson: I think that if you read Hansard this morning, there was an admission that there was a conflict -- "conflict" is my terminology, but there was an issue that was agreed that a tenant could apply for and might receive a reduction in rent as a result of a landlord applying for an increase, making a capital expenditure for energy conservation.

Ms Parrish: It would be fairly unusual circumstances. You would have to have a situation where the actual costs fell, as opposed to, as the staff from Energy were saying, just decreasing the amount of increase.

Mr Tilson: I will not spend any more time on that.

Turning to the issue of illegal units, I am thinking of the issue that has been raised with rent registry. Perhaps I could ask my question to you, sir. As I understand it, a tenant, for different reasons, could request that one unit in a basement apartment of a house, for example, or just a unit in a house should be registered. As I understand it, that is what the new Bill 121 allows.

If that were to take place -- and I have asked this question to different people before, particularly tenants' groups and legal people -- inadvertently a tenant, in trying to enforce his or her rights, could force a municipality to take the position that that unit is illegal and close it down. Has the ministry any record -- obviously it does not have a record, but does it have any anticipation of the number of these types of units around the province?

Mr Glass: I am afraid we have no records of illegal apartments.

Mr Tilson: Of course you do not have any records. As I say, I qualified that, but do you have any anticipation from the numbers around the province as to whether that is any real problem?

Mr Glass: I do not believe that there have any studies done of a policy nature into the number of illegal apartments that we might anticipate, nor is there any necessary connection between a tenant in one of these units asking us to register it in the municipality's bylaws. I do not believe we have carried out any studies that would quantify the number of illegal apartments.

Ms Parrish: Some municipalities have done estimates. I think East York has done an estimate. Scarborough has done an estimate as part of its municipal planning statements. Those are only estimates.

Mr Glass: But at a provincial level we do not have those data.

Mr Tilson: The issue of rooming houses has -- I have asked the minister that question and I am still awaiting an answer. Is there a position yet, or something to assist me?

Ms Parrish: The bill as currently drafted treats rooming houses differentially based on the number of rental units. If it has six or fewer, then it is small, if it has more, it is large and therefore gets the lower guideline. That is what the act says as currently drafted. I understand from what you are saying that you think perhaps that is not appropriate and they should all be treated as small.

Mr Tilson: No, I did not say that. It seems to me that there could be a number of units in a building, generally speaking -- there is never any rule, I suppose, but generally speaking, units of rooming houses are smaller; Smaller than, say, apartment units.

Ms Parrish: In size.

Mr Tilson: In size. Therefore, that qualification of large and small would probably create a problem with rooming houses. I guess my question is whether there is any possibility of a recommendation to the government to provide some sort of a subsection to deal with that issue.

Ms Parrish: I do not think we have made a decision on it one way or the other. The act is fairly clear the way it is drafted. We would certainly look at whether there was a valid argument for saying that rooming houses, irrespective of the number of units they have within them, should be either an A or a B guideline. We could certainly look at that.

Mr Tilson: I guess my reason for asking the question is that those are the very types of people we are trying to assist, generally speaking.

Mrs Parrish: Yes, often very vulnerable people.

Mr Tilson: I am going to ask the question again. On the issue of either regulations or adding to the definition section in the act certain words, I have made it clear this morning and I will continue to make it clear that I am having a great deal of difficulty properly understanding some of the sections in the act when I do not know what some of the words mean.

Ms Harrington: I believe I will take that concern, besides back to the ministry people, back to the minister, and see what we can do.

Earlier Ms Poole had mentioned the guideline formula and whether it should be two thirds or one half. I just wanted to set the record straight here that the minister has indicated that she would like to look into how that formula is calculated and I believe is asking people to do that. We will come back to you with information on that.

I had two questions. One was whether or not we could feasibly separate out different charges within the rent, first of all for accommodation, second for taxes, and third for temporary charges. While you are mulling that one over, I will give you the other one, which might be a little easier.

It is very important that we deal realistically with the capital costs that landlords are experiencing, and I believe we have attempted to do that. A couple of weeks ago I got from the ministry two pieces of paper which explained an example of a roof, and for the sake of all of us here, I would like to just have a brief look at that and see if it will help us look at how realistic this bill is with regard to dealing with capital costs. I think it is probably an easy example.

What I wanted, Colleen, is if possibly you would look at it again with us and clarify it if there were questions. I think it was basically a 12-unit building with an annual income of about $100,000 and the landlord wanted to put on a roof.

Ms Parrish: We did give out these handouts before, but we have more of them.

Ms Harrington: We actually did not talk about it in the committee, so I would like to take this time --

Ms Parrish: Yes, we never really talked about it, but it was tabled.

Ms Harrington: The expense of the roof was $6,000, I believe, and what would be the easiest way for that landlord to handle that expense. I just wonder if you could run over it briefly.

Ms Parrish: Dana will take you through this example, which attempts to show people how much the landlord gets from the actual capital allowance and then how much the landlord gets from what is called compounding, which is the guideline increase on top of the actual capital allowance.


Ms Richardson: The particular example is actually found on page 3 and it is called example 1. It gives an example of a small building, one that would be under six units, and the building generates annually a revenue of $6,000. The roof replacement cost was $6,600. When the calculation is done as far as amortizing the cost with interest is concerned, according to the tables under the RRRA, roofs were about 15 years. The actual cost is amortized over a period of time.

Because this is a small building, it is eligible for a two-year carry-forward. The result is that in the first year this landlord is eligible to get an above-guideline increase of 3%. In this example, that is $180. This is in addition to the guideline increase and therefore makes an assumption that 2% is being spent on other kinds of capital as well in this building.

In the second year, that $180 is in fact built into the rent. It is already there in the rent. Because it is in the rent, it also is increased by the guideline, and that is the first step of compounding; $9.72 actually represents a 5.4% increase in that amount that is in the rent. Because this is a small building, it is eligible for a carry-forward. The carry-forward in the second year also allows the landlord to go up to another 3% above guideline. So $195.12 represents 3% above the guideline, but because we have already built a certain factor into the rent, the base itself is higher and therefore 3% of the base is higher. That is why $195.12 is allowed in the second year as opposed to $180.

This is done again in the third year, because it is eligible for two years of carry-forward. By the fourth year the landlord has built into the annual rent the sum of $586.63 for that roof replacement. There is in the rent itself that amount of money which, for the next years, will be increased each year by the guideline amount. At the end of 15 years, the landlord will have received $11,778.33 to pay for that roof replacement. This represents $8,000-plus for the actual capital replacement, plus the compounding that each year is added on to the amount in the rent. This indicates that on that initial cost of $6,670, the landlord, after 15 years, has recovered $11,778, which takes into account interest rate factors and the compounding in the guideline.

Ms Harrington: Just to generalize from this example, if a small landlord in this case were to go to a lending institution, would he or she have any problem getting a loan for this kind of expenditure, with the $500 a month we are talking about here?

Ms Richardson: Individual circumstances may vary. There may be other circumstances in that building. They may have a high debt for other reasons and the lending institution may be unwilling to lend that amount of money. I think this morning the Canadian Bankers Association indicated that its concern would be whether a landlord would be able to recover sufficient money to repay the loan. If a landlord brought forward all of the calculations that showed how the amortization would work, how the cash flow would work, if it fell within the 3% per year that the landlord would recover in this case, then the landlord could get --

Ms Harrington: With any kind of reasonable mortgage percentage -- say 85% of his building was mortgaged -- he could still have no problem getting a loan?

Ms Richardson: Probably in that instance, but it would vary from place to place.

The Vice-Chair: Ms Harrington, two minutes each for this round, and you have used your two minutes.

Mr Wiseman: I finally have a question and I cannot ask it.

Ms Poole: I cannot ask the questions I need to ask in two minutes, so I am going to give the ministry a list of questions. I would like them to get back to us in writing since it appears we will not have another opportunity.

First is the one I mentioned earlier, the outstanding matter of whether property taxes could be separated from the rent and how you would see a proposal such as the one by the High Park Tenants' Association working.

Second, I would like some details on how the regulations are going to be handled. We had a very comprehensive system set up with the Rent Review Advisory Committee on the regulations under Bill 51. I am not terribly optimistic, given this government's record of consultation to date, that we can expect that kind. So I would like to know what type of consultation input there will be at each stage of the draft legislation, or are groups going to see it after you have drafted it? I would like to know whether the government intends to table those regulations with our committee so that in the winter session the general government committee will have an opportunity to make sure these regulations mesh with the legislation as passed.

Third, I would like an explanation of why interest rate changes are not included in Bill 121, as they were in Bill 51, and why garbage tippage fees are not included in the building operating cost index and the residential complex cost index. When this was brought up by Mr Tilson during the last session, to have this included for extraordinary operating increases, he was told we could not because the formula was in place and it was something that could be considered when the formula was reworked. That is obviously missing at this stage.

The other thing is an interpretation of subsections 13(4) and 13(5). Can this section be interpreted so that the rent increases would be allowed for a 15-month period instead of 12? I have looked at it both ways. I know your intent is the same as under Bill 51, but I am wondering if because of the 90-day filing period for applications, this could not be interpreted to be 15 months. Again, I would like a written explanation of that.

I am asking whether the terminology in this legislation should be changed, for instance, where they are talking of Small Claims Court, Divisional Court, that type of thing. I am not a lawyer but Mr Tilson is, so he could probably make these comments in a much better way, but it seems to me since we have changed those names and the courts have been amalgamated and merged and all that kind of stuff, we should use the new terminology. Most important, with regard to neglect and inadequate maintenance, I would like a full explanation of the provisions.

Mr Tilson: With regard to the subject of interest rates changing on refinancing, I am waiting to hear a response to perhaps a political question as to why that is not included in the act. If it is, I understand that; we will deal with that in clause-by-clause. Is there some reason other than a political reason as to why that is not included in the act, why that is not taken into consideration in the bill?

Ms Parrish: The bill focuses on maintenance and capital and has removed from it any aspect related to the landlord's investment. That is the philosophy behind Bill 121. Currently of course, as you know, interest rates are very stable and have been for some time and/or are declining. It was felt that in those circumstances it would be inappropriate to bring in a provision that would allow interest rates to go up but did not allow interest rates to come down to give tenants the same benefit.

Once you do that, you do buy into a much more complex system, because you have to build in some ability of the tenants to find out what the interest rate structures are so that they can make an application to bring these things down. Then you get into the whole issue around how you can make sure that happens in a situation where the landlord has not applied for anything.

It does just increase the complexity of the system if you try to be fair to landlords and tenants in terms of that system. You have a more complex system and you have to handle all these additional things. Also, there is the philosophy behind the bill, which is to treat the investment of the landlord and capital maintenance as being separable issues.

Mr Tilson: I ask the same question with respect to the capping that would be placed on large increases for municipal taxes, insurance rates, hydro, those types of things. Are there reasons other than political reasons as to why that capping would exist in situations like that?

Ms Parrish: When you look at the historical experience with extraordinary operating cost increases and necessary capital increases, it would lead you to believe that those caps were, over a certain period of time, adequate for the demands of the system and therefore would protect the tenants while creating sufficient income in the system.

The Vice-Chair: The committee will recess for 15 minutes. We will resume our hearings in room 151 at 2:15 sharp.

The committee recessed at 1400.

The committee resumed at 1418 in room 151.


The Vice-Chair: The first presentation will be made by John Andrade of Rockford Holdings. You have 15 minutes to make your presentation.

Mr Andrade: My name is John Andrade and I have been asked to appear for Rockford Holdings. Rockford Holdings is a landlord in the city of North York. I will deal with some reasonably specific matters which are on the fact sheet I have given you and then I will deal with some general aspects of the law.

Rockford Holdings is an owner, as I have said, of an apartment building at 6010 Bathurst Street in North York. I have been asked by the owners to emphasize that this building has been owned by the same family group for 20 years. There are no flips, if such an animal exists; there are no takeovers, no acquisitions, no sales, no financial loss. It is a long-term owner we are talking about.

From time to time they have done capital expenditures to maintain the physical integrity of the building. I think it is fair to say that despite these year-in and year-out expenditures, they came to the conclusion that it was necessary to do certain capital expenditures; the owners identified a number of items including restoration of the parking garage. The result of their studies, and they had engineers and other experts assist them, was that they had to spend $1 million, and they commenced spending this money in 1990.

I want to emphasize to the panel, especially the members on my left, that this company did not install marble lobbies, they did not install gold-plated doorknobs; they did items which were essential for the physical maintenance and integrity of the building and to provide, I dare say, good service to the tenants.

They determined -- and they did this in consultation with me, they hired me to assist them -- that they had to spend the said $1 million and that they would generate perhaps $160,000 to $170,000 in rental increases. That is not on account of interest only; I want to stress that is on account of amortizing the expenditures over their useful lives.

Under Bill 51, as it stood before the Bill 4 amendments, when they went to rent review they would incur what is generally considered a 1% penalty. The government of the day and, in fact, the law as it still stands in effect said that the guideline includes 1% for capital expenditures. So you lose 1% when you do capital. The result is that they could perhaps obtain a net increase in excess of the guideline somewhere in the area of $150,000. This would have paid out the expenditures including an allowance of interest, say at 11%.

The calculations I have done, in conjunction with the people at Rockford Holdings, is that assuming everything goes well they will end up over a two-year period with a rental increase of $57,000 over and above the guideline. It bears repeating that under the previous law they were expecting about $160,000 to $170,000. That is the law under which they did the work; that is the law under which they planned the work; that is the law under which they had a reasonable expectation, but their return, if you will, their incremental increase above the guideline, is being cut back to approximately $57,000.

That is completely contrary to what I am sure I heard the former minister, Mr Cooke, say not once but several times. He said he realized the hardship caused by Bill 4, it was rough justice, but that when Bill 121 came about there would be an allowance made. Well, the allowance is $57,000. In other words, not counting amortization, my clients will get a rate of return of less than 6%. I am not sure how many members of this committee would be content with going to the bank, putting money in a savings account and earning interest on about half the money, or less than half.

I have been asked to say a couple of other brief things by Rockford Holdings. They have been asked, if this law goes through, to reapply under the new system. The new system being put forward by this government involves a wholly within-ministry bureaucracy under someone called the director of rent control. This is an ominous departure from anything we have had before in this province. Until now we have had people, people who were Conservative, Liberal and, I dare say, NDP, appointed to the various boards and tribunals and they have been able to go there and make fair and independent decisions. That is not the intent of this government. Maybe it is a plan on the part of the bureaucracy. Whatever it is, I say to you, and I believe that some tenants have voiced the same concern, you must have an independent decision-making body.

Thank you very much. I have no further specific points on Rockford Holdings. I would be glad to entertain any questions.

Ms Poole: I would like to ask you to elaborate on your comment about the necessity for an independent decision-making body. Would you like it set up very similarly to the current Rent Review Hearings Board, where there is an administrative tribunal first, followed by a route of appeal, or do you have any ideas of how you would like to see the system reworked?

Mr Andrade: I think it is important that the system works in a smoother fashion, Ms Poole. What we have right now, as you are aware, is a system within the ministry at first level and then a system under which independent people can put their minds to the issue. I will give you an example.

Years ago the ministry decided it would apply what is considered a very strange interpretation of the definition of capital, despite the fact that virtually every panel of the appeal board said no, that is not right. The ministry, for whatever reason, continued along its merry way.

These things will happen. We need to have an independent tribunal. I do not care whether they are appointed on the basis of party affiliation or preferably on the basis of merit, but you can have meritorious appointments to a tribunal. I have heard said that they are trying to get away from partisan appointments. Well, there is no mutual exclusivity here; you can have both. It is important that the government of the day be not able to dictate to the decision-maker. It is also important, because people make mistakes, that you have appeals on fact before going to the time and expense of the courts.

The Vice-Chair: There is a little bit of time left.

Ms Poole: In that case I will follow up. We have had a number of presenters talk to us about what is going to happen with the government's proposal to have either a choice of an administrative review or a hearing, and there have been some predictions that the number of hearings would dramatically increase. Instead of reducing the amount of time and paperwork involved, the government would be increasing it because people would say, "If I only have one kick at the can, one shot at this, I am going to make sure it is a hearing so I get my fair day." Do you anticipate that might happen?

Mr Andrade: I completely agree. As a consultant, if I may put on that hat in a generic sense, I would be advising all my clients to go through the hearing process. We would line up at the hearing room door with all their experts, because this is it. If you look at this bill, for example, the hearing officer is allowed to take evidence by telephone, and I am not sure how one effectively cross-examines by telephone. An appointee can take evidence and, given the apprehension which I believe is felt on the part of most landlords with respect to this government, I think you would have a further backlog in the system. If you build more hooks into the system people will have more confidence in it.

Mr Tilson: I would like you to give the committee your comments on another rather controversial issue in this bill that has to do with the guidelines, the rent control index; specifically, the decision to allow two thirds for small buildings and 50% for the larger buildings. There has been some evidence given to us that, perhaps, instead of talking about large buildings and small buildings, one should be looking at age. I would like you to briefly comment on the issue --

Mr Andrade: I think there may be a couple of break points, such as post-1975 buildings versus pre-1976. I do not happen to hold to the proposition that age will necessarily make that great a difference and I think you often find that some larger buildings, the smaller ones in the larger range, tend to have a higher cost than the smaller buildings because they have superintendents and they have elevators.

What is really wrong with this whole thing is the notion that it is appropriate to allow 50% of the inflation index plus 2% capital -- and let's leave that 2% capital aside because it is the government's opinion that landlords need that 2% for capital. If you take the 50% index -- and let me make the completely unrealistic assumption which confounds all the evidence which I have seen, and let's accept the government's belief for one second that landlords can operate at 50% -- we all know it is really 60%, but even if it were 50% it would be an utter disaster because at 50% you get back dollar for dollar what you incur in operating costs. That means a landlord who has a nominal cash flow of $100,000 will have the same cash flow in the year 2020.

I do not know, but I rather suspect that the people on my left have a great deal of difficulty with unionized workers being told: "Oh, you make $30,000 a year. That is it for ever." That is what this does under the best scenario. Under the scenario where costs are 50% of revenues, landlords will have in nominal terms no increase in income, and of course their real income will fall every year by inflation. Throw in the hooker that for the undefined "inadequate" maintenance rents can go down, and you are talking decimation.

Mr Wiseman: I would like to begin with a number of questions concerning your brief. It does not have quite the detail I would like and I could use for my own evaluation. How many units does 6010 Bathurst have?

Mr Andrade: About 120 units here and this landlord manages about 250 units in three or four buildings.

Mr Wiseman: Are we talking about all three or four buildings?

Mr Andrade: No, we are talking about just this one case which has been applied for.

Mr Wiseman: Okay. What is the average rent per unit?

Mr Andrade: It is about $550 to $600; about $600.

Mr Wiseman: And is there an existing mortgage on those units already?

Mr Andrade: There may be a mortgage, but it is a long-term ownership, so there certainly is no financial loss.

Mr Wiseman: You made the comment that it has been in long term. Have they remortgaged the building at any time? And what is the indemnity now?

Mr Andrade: I do not know, but I can tell you, because I have reviewed the previous rent review decisions, the rents certainly have not increased one penny on account of any mortgage or financing.

Mr Wiseman: That still does not answer the question. The next question I have is, in your last paragraph on page 1 you say the million-dollar expenditure would generate approximately $160,000 to $170,000 in rent.

Mr Andrade: Yes.

Mr Wiseman: How was that calculated?

Mr Andrade: That is amortizing the expenditures at 11%.

Mr Wiseman: For how many years?

Mr Andrade: For 10 years.

Mr Wiseman: So what you are saying is, they are looking at a total repayment on their loan in the future as opposed to taking into consideration any accumulated capital from the previous years' rents that have been paid in?

Mr Andrade: I am not sure what you mean by accumulated.

Mr Wiseman: You are assuming that all repairs should be paid for in the future as opposed to them having a liability for allowing those repairs to come to such a high toll.

Mr Andrade: I do not know any more than you do, Mr Wiseman, whether or not any so-called surplus they had in the past may have been used up doing other capital in the past. I can tell you that when they undertook these expenditures and when they carried them out, they were acting within the honestly held belief that they could recover these in the future rental stream and that, therefore, they said to themselves, "What cost will I incur and what revenue will I incur to match against that?" And the point is that when they answered that question after looking at Bill 121, the answer is you get a 5% return. That is the answer.

The Vice-Chair: Thank you for coming before the committee today.



The Vice-Chair: The next presenter will be Albert Faccenda. Mr Faccenda, introduce yourself for the purposes of Hansard and then, as you have seen by the way the proceedings operate, you have 15 minutes to make your presentation.

Mr Faccenda: Hello, committee members. My name is Albert Faccenda. I am a landlord in the Hamilton area. Up until recently I owned 13 apartment buildings. I am presently down to six, and I am also a tenant in one of the units that I have sold.

Throughout these committee hearings you have heard hundreds of submissions from both landlords and tenants. I am just saying that east is east and west is west and never the two shall meet is probably a good description of how far apart both groups have been. Tenant groups argue the increased transfers of their incomes to landlords which occur when rents go up higher than normal. Many argue they cannot afford their present rents, and these are the people on welfare, disability, etc. Landlords, on the other hand, consider the difference between regulated rents and rents in the absence of regulations as a transfer of their income to tenants. Landlords further argue that they are forced to provide social housing, which should be paid out of the tax revenues and be the responsibility of the government. The basic argument is social fair rents versus fair market rents.

Social fair rents reflects social values as embodied by public policy, what we are experiencing today. Fair market rents are the rents that are the minimal level which will provide landlords with a fair rate of return, sufficient to retain existing investment and attract new investment, something that certainly is not the case presently.

For most households the socially fair rents, or their limits, are above the current market rents for the rental accommodations they occupy. I am not aware of a justifiable reason or criterion for fairness which warrants benefits being extended to those households in the form of lower-than-fair market rents or subsidized housing at either the expense of landlords or taxpayers generally.

For other households -- and this is the problem area -- the socially fair rent is lower than the fair market rent for adequate housing. The new proposals introduced in no way affect this at all and do not help the problem whatsoever.

Rent regulation, in its present form of holding all rents below market rents, does not satisfy the fairness criteria. It imposes unjustified financial losses on landlords, provides inadequate relief to lower-income tenants and has a disastrous effect on rental stock. I do not think there is much construction going on now in Toronto or Hamilton or anywhere else.

Furthermore, the amount of relief provided to tenants is not related to need. Therefore, much of the assistance is misdirected. This policy is popular among those who benefit from the misdirected assistance. Policy which is aimed at those in need and denies such aid to the majority who do not require financial assistance should be the course new policy should take.

Social assistance should be the responsibility of taxpayers so that the burden can be distributed equally throughout society on the basis of income, not thrown in the lap of landlords.

I have some facts to consider, and you have probably heard this all before. Average rents have fallen approximately 20% below inflation. Is there anyone today on the committee who can tell me that has not occurred? Taxes and utility costs, in some cases, have tripled over that time. Can anyone deny that? Housing costs, bricks and mortar, and land values have gone up 300% to 400% in Hamilton. I imagine they have done the same in Toronto. Certainly no one can deny that. Apartments are the highest-taxed per value of all forms of real estate and yet municipalities and governments say they are interested in keeping rents low. That is not consistent. A $30,000 apartment pays the same taxes as a $130,000 condo or home, and we are trying to keep rents reasonable.

On the other side of the coin, apartments are the lowest-selling per square foot of all real estate investments. Compared to all, apartment buildings sell for the least amount, yet they are one of the most expensive to build. New construction for the foreseeable future is non-existent from the private sector and, under the proposed changes, never to be seen again.

In Hamilton no new buildings have been built over the past 20 years by the private sector. The result: 15,000 to 20,000 illegal units creating havoc; no parking; high crime; illegal conversions and deplorable living conditions for those who could find no other housing elsewhere. The city does nothing to prevent this because what could it do? Throw all the people out on the street?

Ontario's population in 1951 was 4.6 million; in 1981 it was 8.6 million. If we expect growth to continue at this rate, and growth is important, we will require hundreds of thousands of units to be built over the next decade. That is scary at a time when over the past two decades there has been no new construction.

A system that deters private sector investment in the Ontario rental market is not acceptable. There will be a substantial requirement for additional capital in the foreseeable future because population growth, immigration and changing demographics will increase demand beyond present levels. Ontario will require over the next 20 years 10,000 to 15,000 units built every year to cover new demand, 2,000 or 3,000 units to cover or cushion vacancy rates to bring them to a reasonable level and up to 20,000 a year to replace the old and existing stock; much of it is at the end of its life expectancy.

The cost of new construction is approximately $120,000 to $140,000 per unit, depending on where you live. Multiply this by the 40,000 units we need yearly, if the demographics continue to grow the way they do, and over a period of 20 years that total works out to $104 billion just to keep pace with the housing that will be needed. Now, that is assuming that all these units are built at today's prices. If you add inflation on to that, the prices are astronomical. I put $1 billion on my calculator and I did not have enough spaces there to accommodate all the numbers.

Funds to provide these new units must be made available if tenants in Ontario are not to be faced with a staggering housing shortage. The private sector will have to provide a large portion of this capital required. Certainly at the deficits we are running now, not mainly the fault of the NDP, we certainly do not have the funds to accommodate all this housing.

Mr Callahan: To a good extent, though.


Mr Faccenda: I will not get involved in that. So, the reality is there is simply not enough money for the housing that is required. It is not a gimmick. It is not a joke. It is simply fact. If there is nowhere for people to live -- and the question to ask yourself is, if it was not for the landlords of 30 or 40 years ago who built all the units, where would the people today be living? I cannot come up with an answer for that. I have tried and tried. If it was not for those landlords, I do not think the government would have had enough money to subsidize. Can you imagine the deficit we would be running today if the government had been left responsible for building all those units? The numbers are astronomical. The irony is, investors are running the other way, and the new policies are also headed in the opposite direction.

The NDP policies: The facts are that rents have not kept up with inflation, and the poorer tenants will argue that their pay has not kept up with rents. So that is who we have to try to help out. If we are talking about subsidizing the poor you have my full respect, because they do need the help. When you talk about subsidizing tenants in general, you drive a wedge between tenants and property owners. Property owners are subject to inflationary costs, high interest rates, all the perils of owning real estate. Many of those costs have not been passed on to the tenants, even if interest rates had gone up or there were extraordinary operating costs, etc. The NDP has seen the light in that matter and is reconsidering.

But there are increases that are in the process of being passed now that will lower the annual increases even lower than in the past. That goes to the issue of using two thirds inflation and reducing that to 50% inflation. I am at a loss for words when the rent increases do not keep up with inflation, and the NDP government is trying to figure out a way of keeping rates even lower yet, realizing there is a housing shortage, with no answer to the housing shortage.

The NDP wants to register rents on small units, so that tenants may register rents on two- or three-unit buildings. What this is going to do is cause triplexes to be converted back to single-family homes because the highest and best use of those houses would be as single-family homes and not as income properties, eliminating even more units from the market.

You talk about prosecuting bad landlords but you say nothing about prosecuting tenants who skip out without paying their rent at a cost of hundreds of millions of dollars to landlords each year. Should they not be treated equally? Should landlords and tenants not have some sort of recourse to get their money if they have lost?

It appears that investments in apartment buildings right now are not viable. If increases cover only operating expenses, the take-home amount remains the same. The building will not appreciate, people will not buy, investors will invest elsewhere at a critical time when we need housing the most. Make no mistake; no return, no investment. Since the government does not have the money, and the shortage is imminent, will home owners have to share their homes with others? Will builders of condos be forced to turn their buildings over or use them as rentals? Will the Rental Housing Protection Act be extended to cover single-family homes or condominiums? This smells too much of communism and it is a time when the colour red is not that popular.

Mr Callahan: Well, now, I object to that.

Mr Faccenda: Unfortunately, the direction we are heading is going to leave no alternative. If the policies do not change, the taxpayers will have to pay over the next 20 years $104 billion, and that is a low estimate. To ignore the housing shortage would change the way Ontarians live and the way we have learned to live in Ontario; people living in the streets, etc. Present and future governments are facing this problem, when previous governments did not have to worry when rent controls were first installed.

The landlords' reasons for not building: The governments have broken every promise made to landlords. People built with the expectation of fair market rents. Many would not have built at all if they had been able to foresee rent controls. Units over $750 were exempt and then they were pulled back in under rent controls. Post-1975 buildings were exempt and then they were pulled into rent controls. The most devastating of all was the retroactive legislation that took away increases that were already approved, resulting in bankruptcy for many landlords. This is not rhetoric. Talk to any banker and he will tell you what is happening.

Fear of future rent controls: Many investors fear that rent controls are only one election away. If we talk now of lifting rent controls, as in BC -- people say, "Well, in BC there are no rent controls." Nobody is building. It is the fear of rent controls that is causing people not to build, because people are crying for rent controls. Unless there is some constitutional change that guarantees property rights, you may never see the private sector involved in apartment building again.

I believe needy tenants should be assisted in being able to have decent accommodation to ensure a decent lifestyle. Shelter subsidies should be given to these people: the elderly, the disabled and the welfare recipients. I do not believe tenants who can afford to pay market rents should be subsidized at the expense of taxpayers. They should receive the same treatment as home owners and be subject to the same inflationary forces that govern the majority of social -- I will skip through that; we are running short anyway.

My recommendations: All tenant households should have access to decent housing suitable and adequate to their needs, whether they can pay rent or not. Those who cannot afford to pay rent should be subsidized. Private investors and landlords should be major suppliers of rental units. Private investors must earn a competitive return on their investment. Similar units should rent out for similar rents. There should be the gradual phasing out of rent controls, with lower rents allowed to increase at a higher rent than high rents, resulting in equalization and no severe increase. There should be assurance in the private sector, to regain the lost trust created over the years, that rent controls will not be reintroduced. Shelter subsidies for the needy cost a lot less than the province building rental accommodations, and we are looking at millions versus billions, cost-wise. Costs of administering rent controls are already one tenth of the subsidy costs.

The results: All tenants would have a decent place to live. The supply of housing would increase with hope of a profit for landlords. Taxpayers would save billions to be spent on other programs. Taxpayers and landlords would not have to subsidize all tenants, just the needy ones. Or does the NDP or anyone else feel it appropriate to try to buy votes at the taxpayers' and landlords' expense, as in the past, by cushioning affluent rents?

Taxpayers have had enough. Any program that would reduce government expenditures could not be anything but popular.

Thank you. If there are any questions, I would be more than happy to answer them.

The Vice-Chair: Thank you, Albert, for your presentation. There are some questions, but there is not any time. I am sorry, but we are out of time.


The Vice-Chair: The next presentation will be from Jim Bright. Good afternoon. You have 15 minutes. We always appreciate it if you reserve some of that time for questions and answers.

Mr Bright: What I have written should take about 10 minutes.

The Vice-Chair: I could warn you, if you would like.

Mr Bright: Sure. Good afternoon, ladies and gentlemen. My name is Jim Bright and I am a landlord. I appeared before you to make a presentation on Bill 4, to no avail, of course, and I am back because the problems caused by that bill you propose to perpetuate in Bill 121. Needless to say, the problems caused to my family and me are still there.

Let me review. I purchased a 51-unit building in October 1989 at an average cost of $54,900 per unit. Most of the units have three bedrooms, some with second bathrooms, and the building is located in an excellent residential area, overlooking a park. I had shopped for a full year and this building was by far the best deal I could find. In addition, it was close to my home, which would work out well for my hands-on type of management. Yes, there would be a cash-flow loss at the beginning and the building needed repairs. However, the rent, at $563 per month for a three-bedroom apartment, including utilities and parking, was very low and could stand some increase to offset capital cost improvement, proper maintenance, and management but still be a very reasonable rent. The fact is that with revenue at this rent level, no owner, past, present or future, can maintain this building properly. It is as simple as that.

I have been employed for 41 years with one company. My intention was to retire this fall at age 60, and the building was to be a source of investment and occupation over the next 10 years. Looking back, I did weigh all the facts surrounding this purchase very carefully -- all but one, that is, and that was a change of government. I never contemplated that an NDP government would legislate such problems for me, especially in a retroactive way.


The next part of this subject is Bill 4, and now Bill 121 turns the rental laws of this province into a trap for innocent investors.

Maybe the NDP, from its ideological point of view, does not agree with my business rationale in buying this building. However, my decision to buy this property also involved consideration as to what the rent review laws of that time allowed. In accordance with that law, I did a rent review and received an order from the Ministry of Housing recognizing my financial loss and permitting gradual rent increases over a period of years to offset the same. The retroactive measure of Bill 4 cancelled this order so that this year I did not receive the 5%, which is about a $16,000 order phase-in allowance.

There is only one conclusion that can be drawn from this, and that is that I have been trapped and betrayed by the NDP government of Ontario. It has no regard for previous laws and the fact that citizens of this province made business decisions and put trust in their government. It is understood that a new government will make new legislation in various sectors of its administration, but not retroactively. The NDP government can find fault with the previous administration's rental legislation, but should it penalize the citizens of the province because of that? It is so unfair; surely it must be illegal also. Do not penalize the innocent people who did not make the laws.

The results and the impact on my family -- my savings and equity built up over the past 20 years are wrapped up in this building. I do not want to lose it. Even my home is involved in the financing. To reduce my loss, I have done the following: I have discontinued the job of full superintendent. My previous super is now on unemployment insurance. I replaced the super with a lady who does janitorial work only. My family and I do all maintenance and repair, mow the lawns, etc. We receive all requests for service and various other communications at home by phone direct from the tenant. We try to patch, repair, make do on jobs that arise, and there are many. I still have a full-time job. All evenings and weekends are taken up with the running of this building. We are slaves to the place, yet might in the end lose it.

The future with Bill 121: We have been hanging on, hoping that Bill 121 would do something to address hardship situations of people like ourselves who invested under the previous government's legislation. It is not so. For instance, Bill 121 will ensure that we are stuck with our financial loss. It locks us into a financial-loss situation which guarantees we cannot borrow money. In October 1992 we have a mortgage which the vendor took back in the amount of $562,000 coming due. He requires the loan to be paid back at that time. I ask you, what bank or trust company will provide the money under these circumstances?

Bill 121 will ensure that I cannot raise money for capital expenses. Again, who will loan us money to spend on a building that is already in the red on cash flow? Even if I could raise the money to qualify for the 3% capital allowance, I have to spend 5% each year because 2% is deemed to come out of my annual guideline allowance. Bill 121 will ensure that our building, purchased two years ago at $2.8 million and diminished in market value to $1.6 million because of Bill 4 legislation, will continue to be worth that amount for resale or takeover by the mortgage company.

The ad that the Association for Furthering Ontario's Rental Development ran in the New York paper was right, only the loss, I think, in building value is higher. This loss, if it should happen, would wipe out everything we own. It is ludicrous because the land, with no building on it, would be worth close to this amount. The total replacement cost of this building would be about $6 million, and it is worth $1.6 million.

If this does not create enough problems for us, consider the following: Bill 121 will ensure that I maintain my building up to their standard or the guideline increase could be denied or rents actually reduced. Bill 121 will ensure that increased costs as a result of higher interest rates come out of our empty pocket. Bill 121 will ensure that if the essential services -- heat, hydro, water -- over which I have no control go up extraordinarily in a year that I happen to carry out capital expenses, it will reduce the amount allowed for those capital expenses. The 3% is an all-inclusive cap. Bill 121 will ensure that as a rental property owner, if you are not making a profit now, you never will. Nowhere do they make provision in any shape or form for a return on investment. The list goes on.

Why do you not round up all the landlords and shoot them? Because it is like lying there bruised and bleeding and somebody comes along and delivers the finishing blow.

In summary, the only thing of a little positive nature is the 3% allowance over the guideline for capital expenditures, erodible as it is by other factors.

The package might not appear bad to owners of new buildings who are in a positive cash flow position and have little repair and maintenance expenses. Generally these are the higher-priced rental units. However, the bulk of the problem in our housing stock is with older buildings, especially those purchased in recent years where maintenance and interest costs are high and there is no profit. Bill 121 will drive such owners into financial ruin.

I respectfully ask you today to consider and show some concern for landlords like us whom you have placed in dire straits. Is there even a word in your vocabulary called "mercy"? If you cannot understand this in a business sense, think in terms of humanity and on that basis see if there is some way you can help us. Can some provision be made in Bill 121 to help us cope with financial-loss situations on purchases made under the previous government, especially where those rent review orders were processed and rulings made? Even if you attach a provision that in such cases the buildings must be kept for a minimum number of years, say five or more, it would go a long way in helping us out of our dilemma. Believe me, we are in a begging position.

Mr Rae these days is crying about unfair treatment from Ottawa. Such hypocrisy. He can only recognize unfairness when he is on the receiving end. Come on, Bob, look in the mirror.

That is the end of my presentation.

Mr Tilson: I remember you from the Bill 4 hearings and you certainly appear to be much angrier now than you were then. I can understand that.

Mr Bright: I had some hope before.

Mr Tilson: I guess the same comment could be made now as was made then. I would like to hear your response to the government's or the NDP's comment that you made a bad investment. Of course, you suggested that you anticipated that type of argument from them.

Mr Bright: Right.

Mr Tilson: They will go further and say: "Why should the tenants pay for your mistakes? Why should they pay for your bad investment?" That is the standard pat comment by the government members of this committee. Can you comment on that?

Mr Bright: I could. I had made a statement that at the rents that were coming in in this building, there is no way any owner, past, future or present, could maintain it properly. I am an experienced type of landlord in handling a building, in talking to tenants -- I get along well with tenants -- in handling the economics of running a building. It needed somebody. It is okay to say, "Mr Bright, if you hadn't bought it, it could have gone on for ever." But it would have deteriorated more.

I am a person who will lift up the building, and it can be lifted up from $563. If you think of it, for three bedrooms, some of them with second bath, it is a ludicrous rent because it cannot maintain that building. Buying the building at the time, I guess, was a bit circumstantial, in that I did look for a year. This by far, despite the fact they might say it was a bad investment, was the best one I could find.

I declare myself here. I knew there was a law there that could help me with the finance of uplifting this building which I planned to do. The $563 may end up at $750, but for three bedrooms? Think about that in relation to owning a three-bedroom house, for instance. Tenants cannot be insulated from all the things that go on in the world in terms of higher costs. I thought it was a good investment from that standpoint, that I could uplift the building. It would be a good investment in the end for me. Maybe I would have a positive cash flow or, in the end, maybe I would get some money return on the building.

Ms Harrington: Thank you very much for coming back to see us again. Certainly all of us, I think, can relate on the level you talked about -- humanity -- and I will take that into account. I am sure the minister has said that also to me, but our job is to act as a government and look forward in the long term to what is best for this province as well. I want to just deal with that for a moment with you.

First of all, during the 1980s -- I do not know whether it was a Liberal love-in or whatever -- there were developers in this province who raised the cost of land, especially around Toronto, to a very high level, and I think we all are aware of that. That is not the least of the problems.


Mr Callahan: Where is the investigation by your party?

Ms Harrington: Excuse me, you are using up my time. May I have some extra time?

The Vice-Chair: Continue.

Mr Mammoliti: You are putting in great time, you know that. You are rude and arrogant.

Ms Harrington: George, I need my time, please.

Mr Callahan: Absolutely outrageous.

Ms Harrington: The cost of land is certainly part of the problem that we are dealing with, the cost of buying these buildings plus the cost of what the previous presenter was talking about, the big picture of housing, of trying to build more units, which is not part of rent control but is certainly part of our mandate as the Ministry of Housing.

There are some new realities in this province and that is, in the past, under the Liberal legislation, the business of being a landlord or running a property was a guaranteed return. Whatever the costs were, you were guaranteed to pass those through to the tenants, and that is no longer the case.

Mr Tilson: Guaranteed to lose.

Ms Harrington: I would like to ask you this question. Who do you feel is responsible for capital repairs or capital investment in buildings? I would say that certainly the tenants have a part in this and government has to play its part. We have certain programs like the low-rise rehab program, and also the landlord has a responsibility to the building he owns. So I think there is a three-party organization here. Would you agree with that?

The Vice-Chair: I think Mr Bright would love to answer but Mr Callahan is going to ask a question.

Mr Callahan: I am not going to ask a question; I am going to make the same kind of statement as the government made.

You have to recognize that this government feels you should be just absorbing these losses; they are part of your investment. It is too bad you invested.

I think the thing they have not realized is the fact that it is kind of like the job situation. They will tax employers to the hilt and want the employer to pay all these benefits and so on, not recognizing that eventually those jobs will disappear. They seem to think these jobs and they seem think housing just springs out of the ground, that it grows. You throw a couple of seeds on the ground and up it comes.

I think the sooner they recognize that is not the case, and that in fact what they are doing is counterproductive to increasing the strength and longevity of this province, the better off we will be. I think the people took an experiment the last election, and when Ms Harrington made her comment that there are new realities, I thought she was going to say the NDP have come to government. Well, that is a new reality. It is an amazing reality, which I think people are now starting to reflect on and realizing that we are about to destroy this province.

Mr Mammoliti: So what is your question?

Mr Callahan: We are pretty close to becoming part of Buffalo or --

Ms Harrington: You do not even make that determination.

Mr Callahan: You notice the way they drift in and out of the committee hearing. They do not even understand what is going on in this committee, many of them. When they come back in and make useless comments, then I would suggest you just ignore them.

Mr Mammoliti: So what is your question?

Mr Bright: It could be that their mind is made up already, like in Bill 4.

Mr Callahan: That is right.

Mr Bright: Their mind is made up, so it does not matter about what they hear.

Mr Callahan: So what goes out of the committee may necessarily just be passed by their large majority.


Mr Perruzza: On a point of order, Mr Chairman: It is my understanding that there is a procedure that strictly should be followed at this committee, a procedure that has been agreed to by all three parties. It is my understanding that dialogue between the deputants and the speakers who have the floor is something that is not permitted by just an ongoing free-flowing dialogue. It is my understanding that questions are to be put to the deputants and the deputants are --


The Vice-Chair: Mr Perruzza is on his point of order. Mr Perruzza has an opportunity and I have not heard the last couple of sentences, so Mr Perruzza, if you would continue.

Mr Perruzza: My objection, to sum up in a nutshell, is that a free-flow dialogue or discourse between the members who have the floor, the deputants, the members of the third party is something that is unacceptable and not permissible. It is my understanding that questions are to be put from the members who have the floor to the deputants and the deputants are to respond, not simply to interject when it is timely and make outlandish remarks.

Ms Poole: On the same point of order, Mr Chairman, I find it incredibly arrogant of a substitute member of the committee to come in and tell our committee what is permissible and what is not. We have listened many times at great length to the parliamentary assistant making statements instead of questions and we do not say that she is out of order for doing so. She is using her time in that way. So I would think a substitute member of the committee should take the lead from how other committee members behave and not try to intrude on the process.

The Vice-Chair: I listened very carefully and I have not heard a point of order from anyone. The committee has agreed that each party would divide the questioning time equally among them, and I have done as good a job as I can do to make sure each party is treated fairly in terms of how much time it has. I have no way, and should not have any way, of instructing the parties how they are to use their time. That is up to the parties themselves.

Mr Perruzza: Interjections are acceptable, Mr Chairman?

The Vice-Chair: Under all conditions at all times interjections are out of order in this committee.

Mr Perruzza: Thank you.

The Vice-Chair: I have noted, as many people may have noted, that the interjections come almost equally from both sides.

Mr Bright, I think you have about 20 seconds to answer the question that I cannot remember.

Mr Bright: I would like to address a remark to Ms Harrington, because I would like to ask her what she thinks of the situation where I invested -- whether you agree with it or not, what I did was legal. I did not make the trap. You can say the Liberals made the trap. I was the innocent victim and you sprang the trap, if you want to put it that way. That is simply the way it is. Do you not think, as a humanitarian type of party, which you portray yourself to be -- you are supposed to be the people who listen, who understand, who are in tune -- you have done a dreadful thing to me as an investor? How do you address that? How do you undo that?

The Vice-Chair: Thank you, Mr Bright. We appreciate your appearance before the committee.

Mr Bright: Well, think about it. You are ruining my life.

The Vice-Chair: Thank you, Mr Bright.

Mr Ruprecht: I think the last comment, Mr Chairman, was a good one: ruining one's life.


The Vice-Chair: The next presentation will be made by the Tenant Advocacy Group. You have 15 minutes.

Ms Mahoney: Thank you very much. I am here today on behalf of the Tenant Advocacy Group, which is a group of 14 Metro-area legal aid clinics. Our membership is comprised of tenant case workers. We also have associate members: the Federation of Metro Tenants' Associations, the Committee for Equal Access in Accommodation and some members of the private bar.

My name Is Elinor Mahoney and I am a community legal worker at Parkdale Community Legal Services. I have been monitoring these hearings on behalf of the Tenant Advocacy Group and have travelled alongside the committee as it has gone through Ontario, and will continue to do so.

I would like to start off by giving you a general impression of what I have seen, both for your committee members' information and also for the information of those Ontario viewers who may be tuned in today. I would like to say that I am somewhat shocked at the callous attitude I have seen shown by several landlords at the non-televised hearings. Here in Toronto we have had some very sincere landlords come forward and address the committee, talking about their fears of financial insecurity for themselves, and I certainly do not doubt their sincerity or their situation. But I would like to comment that when we were in Hamilton and in London and in Windsor, what we saw there I found truly disgusting.


First of all, hundreds of tenants are evicted from their homes probably on a daily if not a weekly basis because they cannot afford high rents through the retroactive rent increases that have been allowed under the previous legislation. The orders are still being churned out by the rent review services. The reaction to the plight of tenants, to the affordability problem, on the part of landlords is very different than the reaction landlords have presented to their own plight in front of this committee.

In Hamilton one particular landlord, I believe it was Mr Arun Pathak, complained about Bill 121's restrictions on rent increases. When asked by a committee member if he had people on fixed income living in his buildings he said yes, and when asked what effect the rent increases he had received above the guideline might have on those individuals, his response to the committee was, "Well, I guess those people will just have to cut back a bit on their holidays." I find this is a fairly callous attitude to take and totally at odds with the attitudes that landlords have presented when the television cameras have been turned on about their own situations.

In London another landlord, Ray McNally, said that if Bill 121 was passed intact tenants would damage their refrigerator crisper drawers and use the resultant disrepair as a reason to oppose a rent increase. Again and again throughout the hearings we have heard people accuse their tenants of potential vandalizing of their own homes as a way of somehow creating a loophole out of Bill 121. I find this not only disturbing but somewhat offensive, to think that people would destroy their own homes to try to save a little bit on the rent increase. I think it portrays more the attitude of the individuals involved than the potential attitude of tenants.

In Windsor landlord after landlord said that Bill 121 was going to produce a police state. They likened themselves to victims of the Gestapo, which I found to be particularly offensive, given what happened in Nazi Germany. I really do not think that a rent control bill in Ontario should somehow cheapen the shock effect of Nazi Germany. It is quite offensive for landlords to compare themselves to victims of the Holocaust. I might also add that while landlord after landlord said this, there was a little juvenile display of bad manners as landlords in the audience cheered and jeered on without being chastised by the Chair in question.

I will say this: some landlords have made very thoughtful presentations to this committee, but my general impression was that landlords want carte blanche in their business decisions and that they do not feel that any government, duly elected or otherwise, should be able to exercise its electoral mandate and bring in the will of the people if it affects them at all. This attitude was perhaps best exemplified by Derek Lobo, a landlord consultant, whose presentation amounted to a sour grapes attack on the Premier and Ms Harrington.

Many landlords and their lobby groups accuse the government of breaking a sacred contract with them by changing the rules of the game. Why they think an unfair and unworkable rent review law, which the government campaigned against in the election campaign, would last for ever is beyond me. It was clear that Bill 51, the previous legislation, was bad and that whatever government came in was going to have to change it, and this is something that the landlords, if they believe in a democracy, are just going to have to accept and start to work and co-operate to make the change as efficient and as painless as possible.

I would like to go on and give a couple of points about Bill 121 in general and then give some specific comments from my advocacy group's position. Bill 121, in our view, is a major mistake. It compounds the mistakes made by Bill 51, and I think there are some things that landlords and tenants can agree on. I heard Mr Andrade talking about how landlords feel about hearings and about administrative reviews and I was sitting back there saying, "Right on, right on, that's how tenants feel about administrative review as well." We are so fed up with having a rent review system that nobody can understand, full of bureaucratic loopholes, full of regulations that are not brought forward for examination prior to passage of the act, that we cannot really trust that this rent review system is going to do what we believe the government wants it to do and intends it to do.

We think that Bill 121 is essentially flawed in two ways. First, it tries to accomplish too much. It tries to address the situation of landlords like Mr Bright, who made a very good presentation earlier, as well as trying to protect the affordability in rents. You cannot accomplish two contradictory objectives in one piece of legislation.

The point we made when we addressed the Liberals on Bill 51 is, "Don't be schizophrenic." Rent review has always been, and should always be, tenant protection. If there are landlords who through no fault of their own are going to be bankrupt by this or hurt by this, that should be redressed as well. That should be considered by your government -- but not in tenant protection legislation. That should be dealt with separately. Let's not cut the baby in half like Solomon was threatening to do. Let's keep the baby whole and let's make sure that landlords, who are the few who are really hurt by this, have some other means of redress to keep their properties.

The second reason the bill is unnecessarily flawed is that it is too complicated and very badly written. If I had to sum up what Bill 121 is in a nutshell, I would say it is Bill 51 warmed over. It is just not acceptable to tenants. I can tell you that, as a tenant advocate with 10 years of experience in rent review, I look at this bill and shudder more every time I see it.

We have been asked by the government -- which I do believe intends to make some amendments and is listening to the tenant advocates -- to prepare a shopping list of changes we would like. That list is so long, I cannot in 15 minutes even begin to go through it. What I do say to you is that we urge the government to withdraw this bill. It is that bad. I am telling you that this bill will not accomplish what I truly believe your government intends to accomplish. It should be withdrawn. A new bill should be brought forward, with some of the same principles and some of the soundness that could be put into a new approach to rent control. Bill 4 is still in effect to maintain the status quo.

Now, I am going to move on very briefly and say that if you cannot do that, here are some of the changes we would like to make. I promise this government that I will be bringing forward with my organization a detailed shopping list. If we cannot have what we think is best for Ontario, we will do whatever damage control we can to rectify this terribly flawed bill. We will work day and night to do it. But I am urging you to reconsider whether we should be getting rid of the bill and starting from first foundations. Here are some of the points we would like these first foundations to have.

First, we want a hearing for all applications, with no option of administrative review. Administrative review does not work. Landlords do not like it when they do not get decisions their way and tenants find that they cannot really participate in it. The administrative review decisions we have gotten have been God-awful. No reasons have been given. There has been no explanation of calculations in the order. There is no judicial fairness in this. Tenants who do not speak English, or do not have a word processor, do not really have access to respond to a landlord's points in that.

The only exception we would see, perhaps to save the government money, is if tenants have a rebate application and both the landlord and the tenant are willing to have administrative review for a simple application on a tenant rebate of rent. But for all landlord applications and for all other types of applications, it should be a hearing. We want to this hearing to be good. We want it to be better than some of the hearings before.

We think there should be either a transcript or tapes that are kept on record, so that when there is evidence of bias, or when remarks are made that are taken at face value but not backed up by documents, that there is some record of what happens at a hearing. We also think that the administrative review officers the government has now are not competent in their current training to be hearings officers. So, either you have to look further -- as Mr Andrade has suggested, a different approach -- or else you have to train these people rigorously so they can actually be fair in making their tribunal decisions. There should be reasons in the orders given.

We also want one guideline for all buildings, and we suggest that 50% of building operating cost index is the correct approach to take. You have heard landlords saying across the province that if you have two different guidelines, you may appear to be fairer to these landlords than in actuality. They are afraid the tenants might leave the smaller buildings and move to larger buildings in order to avoid to having a higher annual increase. We do not think tenants usually have the option of moving. But we think if the landlords do not like it, and we do not like it, then you should not put it in.


We are happy with the A. E. LePage study. The landlord's study, remember, was that they canvassed their own membership. I do not think that is very scientific. In lieu of another study, I think you should go to the one that you commissioned.

Our third point is that section 16 should be removed from the act. The government promised to stop capital expenditure rent applications with Bill 4. Now you are suggesting that we raise them up from the dead. This is what we call the Lazarus principle. The tenants thought they were dead and buried and now they are supposed to pay in 1992 for the capital work done in 1990 and 1991. We think that is breaking the promise that you made with Bill 4. We also think it is going to create a terrible backlog that will again create the very unfair, unjust situation that Bill 51 precipitated.

I will also say that with the guideline for 1992 being established now at 6%, that means tenants who have just moved into a building where repairs were done two years ago and do not know anything about that, will now face an automatic 9% rent increase for 1992. Plus, if a lot of work was done, they may face an additional 9% for one or two years more. That means that over two or three years, tenants may face increases of 18% to 24% because of this retroactive provision. So we say, take it out.

We also think the government should not fall into the convenient amnesia that landlords have fallen into. Landlords say, "Look, the capital does not cover the costs of the work done." And we remind the government, again and again, that for five, six or seven years, these landlords who just did the work have been collecting above inflationary cost. They get an extra 2% in the guideline since 1985 onwards to cover minor capital work. Unless they did capital work in each of those years, they were getting money for nothing. Now they are saying that in future they should be able to recoup in future rent increases for the one year they did do capital work. And we say, "What happened to the money you got from 1985 to 1990?" If you do not take out section 16, at least make those landlords show what happened to the money.

That brings me probably to my final point because I know I do not have much time left. There is an inequity in the treatment of landlords and tenants where a landlord who carries on with a previous landlord's rent review application can collect the retroactive rent once the order comes out for that. But tenants who had been overcharged by a previous landlord cannot recover from the current landlord the rent they were overcharged. We feel that if the benefits of the land run with the land, so should the obligations. They do not in this statute, and they do not in the Landlord and Tenant Act.

So we are asking you to reconsider your approach, perhaps in your definition of landlord, so that a tenant no longer should have to try and find out where the previous landlord is to recover money paid, but should be able to recover it from the current landlord, just as the current landlord can get the rent increases that otherwise would have gone to the previous landlord. Does that conclude my time, or do I still have some more?

The Vice-Chair: You are one minute over. Thank you very much for your presentation. The committee appreciates that. There are were some questions, but unfortunately, there is no time.

Mr Henderson: Will there be a written record of the presenter's comments?

The Vice-Chair: It will appear in Hansard.

Ms Poole: Since there is a cancellation for the next presenter, could we at least have unanimous consent for each caucus to have one minute for questions?

The Vice-Chair: With unanimous consent, we can do anything.

Agreed to.

Ms Poole: Elinor, I really agree with a lot of what you have said today, but I suspect the government is not going to be willing to withdraw this legislation, so it may be a matter of damage control. I would like to ask you about an area you did not have time to get into, which is the Residential Rental Standards Board and the rent penalty provisions that are in there right now. Do you think it would be better to have the standards boards overhauled and to have the maintenance issue dealt with separately than in rent review? How do you see that in the best scenario?

Ms Mahoney: I am glad you asked that question, Ms Poole. The Tenant Advocacy Group's position when we were asked to respond to the government's green paper, the consultation paper, was that the standards board should be strengthened and it should have the power to assign the penalties.

The reason that was our position -- and still is, incidentally -- is because I for example know of several buildings in south Parkdale where the standards board has issued a non-compliance report and months and months and months have gone by and rent review has done nothing, because they are too busy dealing with landlords' applications. We feel it is not efficient to have rent review dealing with all of these backlogged applications for rent increases and rebates, as well as trying to monitor the provincial standard. So that is the approach we took back in April, I guess it was, and that is our current position.

Mr Tilson: I understand your organization has received funding with respect to your advocacy. Could you tell us how much that is?

Ms Mahoney: I do not know how much it is.

Mr Tilson: But you have received funding, your organization, to be involved in these proceedings.

Ms Mahoney: Yes, we have.

Mr Tilson: Can you inform us as to what that is? Can you find out and let us know later what it is?

Ms Mahoney: It covers my travel expenses, essentially.

Mr Tilson: So you are being paid by the government to go around the province to comment on this legislation?

Ms Mahoney: No, I am not. I am being the legal aid funding source, which is --

Mr Tilson: Legal aid is paying you?

Ms Mahoney: Yes, is funding me to be able to go around and monitor the hearings for the Tenant Advocacy Group, which is comprised of legal aid associations. The purpose of this monitoring is to inform tenant advocates who work in legal aid clinics of all the changes, the proposed amendments to Bill 121 and so forth, that are going on. I am here now in my regular capacity. I have not travelled to come here; I live four blocks away.

Mr Tilson: So the government pays --

The Vice-Chair: Thank you, Mr Tilson.

Mr Mammoliti: I wanted to address one part of your presentation. Early in your presentation you were talking about how disgusted you were with some of the landlords who have presented in other cities. You did not allude to Toronto. However, I think you were here the other day when AFFORD came up and did its thing. Along with calling us all kinds of names, they have recently taken out an ad that, in our opinion, is trying to drive business away from Ontario. My question is --

Ms Mahoney: You want me to comment on that?

Mr Mammoliti: My question is, do you think that they are deliberately planning an attack on this government, and do you think it is right for them to do this?

Ms Mahoney: I think they called you thieves and cheats and a few other names that I heard. I do not see that that really gives them a lot of credibility, but it is certainly their right to do that and certainly their right to take out ads to say whatever they want.

Our approach, as an advocacy group, is to tell you straight out what we want, and to co-operate in whatever way we can to help you develop a good rent control system for Ontario. So we are not going to call you names. We may disagree with Bill 121 and we may want quite a few changes to it and some new legislation, but we are willing to work with you for that. If they are not, well, they have the freedom to make that choice.

The Vice-Chair: Thank you, Ms Mahoney.



The Vice-Chair: The next presentation will be from Kewin and Associates, Steve Kewin. Good afternoon, sir. You have 15 minutes.

Mr Kewin: My name is Steve Kewin. This is my report to the standing committee on general government as it prepares to make law of Bill 121, the bill that will kill for ever the initiative of the private sector to be involved in the development and perhaps even the passive ownership of existing residential rental stock.

For the record, this is my third appearance before various MPPs to state my total dissatisfaction and disgust at what the NDP proposes as a new law that will govern residential rents and related matters in this province.

I am here before you today as an apartment building owner, investor, real estate investment broker, and a very disturbed citizen of what not very long ago was a province of very optimistic, entrepreneurial and loyal people. This optimism and loyalty is fast fading among all Ontarians who believe in the principles of free and fair enterprise, who believe the just rewards and compensation will be earned by those who risk and try a little harder to create wealth for themselves and in turn for those who need a share of the same.

The NDP has shown itself to be untrustworthy and incompetent with the way it has handled this legislation. They have promised to consult with those affected by this new law that will in time make Ontario's big cities, Toronto and the like, the New York of the United States, with its well-earned reputation as having the most unworkable and draconian rent control legislation in the free world.

I do not suggest that the government did not consult; it did, but not meaningfully. It organized hearings like this one and pretended to listen to the landlords' concerns and constructive criticism, but all it heard was the tenants' side of the argument. Yet what else can one expect when the NDP pollsters are only too aware that they won the last election with their sellout to special-interest groups like unions, teachers' federations and tenant groups?

I used to think this government was incredibly naïve and ignorant of all but the most mundane issues. I am not so sure about that any more. In fact, the government seems to be proceeding with its ill-timed and unwanted insurance legislation in much the same fashion it did with the rent control issue. It pretends to consult, to encourage an open and honest dialogue with those who have a stake in the results in law, as if it really has not made up its mind on what direction it will take. Yet only last weekend a Toronto newspaper printed that it has information that the government is reviewing office space proposals for the hordes of new bureaucrats who will add to the underemployed government workforce -- new staff required to administer a government-run auto insurance scheme.

I think this government makes its decisions on extremely complex and difficult questions in advance of the necessary research that any logical, thinking person would require. You did not consult with us fairly. You had made your decision on rent control law based on NDP dogma that surely predates many of us in this room today.

All of this considered, I was very close to cancelling my appearance before the committee today, because frankly I just do not think it is going to do one bit of good. However, I feel I owe it to my clients and colleagues to at least show up. If nothing else, I can vent my frustrations.

Bill 121 falls down in so many ways it is hard to know where to begin. Let's start with the issue of retroactivity. So much has been said on this, and you have listened so little. You have destroyed the investment portfolios of hundreds of hardworking Ontarians, many of them very small landlords who invested their life savings in this industry.

You heard some of these people tell their stories and actually break down as they described the financial hardship you caused by making void retroactively the phase-in provisions on orders that were issued as early as 1987, three full years before you were elected. You heard similar stories from owners, big and small, who have been caught by the pulled-from-the-hat October 1 date that balanced the fate of millions of dollars of well-spent capital improvement moneys.

Thanks to your bill, many landlords will simply be wiped out, as they are now able to get only a minuscule 3% rent increase on what in many cases was work that was earlier entitled to increases of 10% to 15%. I know you have talked about eliminating all those 115% increases -- propaganda and misinformation that was issued to the media, designed to earn sympathy from those who would choose not to be well informed before making their decisions. You stole property from the owners with this retroactivity, and this theft is the responsibility and burden of the NDP as people, not MPPs hiding behind their group identity.

The 3% cap on rent increases due to capital work will cost the taxpayers of this province millions over the coming years. It will cause landlords to hand over Ontario's tougher buildings, those with serious structural problems due to concrete deterioration in areas such as parking decks, many of which are presently unsafe. If the owner cannot finance the improvements, ultimately the province will have to buy or perhaps confiscate the buildings to ensure that matters of safety are remedied as they should be.

Who is going to pay for this? Many of these properties are huge drains on owners' cash flow as they are. Many hope their investment might reap a capital gain some day if it is cared for, but many will lose their buildings to the government, the people. If the people of the province only knew how their tax dollars are going to have to bail out this government for its suicidal plunge into the apartment building ownership field.

As an association of landlords in fighting this mess, I think that is where we fail to make a serious impact: informing taxpayers, particularly home owners, of the enormous cost of the legislation. The election is some four years away, and my hope is that before then we will be able to inform them better than we have to date.

You changed the annual operating increase guideline regulation so that so-called large buildings, those of six units and more, will be given increases based upon one half of the inflationary costs of building operations. Very simply, what this confirms so emphatically but what you have been somewhat reluctant to state in public since election is that the private sector is not entitled to earn a profit in the rental housing business. Bob Rae said it in print before he became Premier and Dave Cooke said it in private meetings with landlords in the past few months, but neither, of course, has had the guts to be so honest as to reiterate it in public.

The one-half-inflation calculation will ensure that net operating incomes, the money available to the property to service debt and that ultimately determines property value, will remain flat over the course of the building's life. This assumes that the owner will spend the balance of the increase, 2%, on annual capital repairs.

If net incomes remain relatively flat, how does the owner handle the possibility of any increased financing costs when mortgages mature? The answer is that he does not. Yes, in keeping with your total lack of understanding of economics -- or, conversely, your total disregard for the financial welfare of landlords, and in the long run all taxpayers -- you have eliminated completely the ability of the landlord to increase rents to offset increased financing costs.

I hope the home owners of this province awaken to the fact that you will protect tenants of all stripes -- wealthy, middle-class and poor -- from the ravages of increasing financing costs. Do you propose to be as generous to home owners as the mortgage interest rates on their homes today increase? Will you subsidize a home owner's mortgage payments like you do the tenant's rent, all with taxpayer dollars? Or will you go after the big, bad lender and drive more business out of this province?

Aside from the economic disaster promised by the bill, what frightens me even more is the new power given to your rent police. You intend to give them the power to search a landlord's own home --

Ms Harrington: Less power than before.

Mr Kewin: More power than before, ma'am; read the bill -- to seize records and photograph evidence.


Mr Kewin: Read it again. What kind of bureaucratic mess are you proposing to create? What has happened to your belief in civil liberties, or are only the tenants of the province entitled to such considerations? You people have no respect for those who hoped to earn a better living than the welfare state will provide. You have no belief or understanding that it is business that creates jobs. As you continue to treat landlords and business with disdain, you undermine the right of every Ontarian to a better life, to an improved standard of living and an opportunity to create their own wealth and their own dreams and --


Ms Harrington: On a point of order, Mr Chair: The conduct of this committee is in order to listen to you, as you pointed out in your very first sentence, and bring those --

The Vice-Chair: What is your point of order?

Ms Harrington: And to make amendments to this bill and improve this bill for the betterment of the people of Ontario.

Mr Turnbull: What is the point of order?

Mr Abel: Are you the Chair?

Mr Duignan: But not to change the intent.

The Vice-Chair: Ms Harrington has the floor, at least briefly.

Ms Harrington: Thank you, Mr Chair. I would just like to have you, Mr Chair, explain to the witness that it is very difficult for members of this committee, including the government, to try to do that job if certain expressions go beyond a certain point. My job is to listen to what you are saying and try to take that back.

Mr Tilson: Well, listen to him.

Ms Harrington: I am doing so. But I would like to caution the witness, or have the Chair do so, that it is very difficult to do so when he goes past a certain point.

Mr Tilson: This is BS. This is a load of bunk. You tried that in Hamilton. These people have every right in the world --

Mr Turnbull: This has already been ruled on.

The Vice-Chair: Order.

Mr Turnbull: Mr Chair, it has already been ruled on. This kind of interjection is --

The Vice-Chair: Mr Turnbull, on the same point of order?

Mr Turnbull: Yes. This has been ruled upon. They have the right to free speech.

Interjection: The Lord has spoken.

Mr Turnbull: Yes. To silence the people; we know that is your government's agenda.

Ms Harrington: He wants me to listen and I would like to listen to him.

The Vice-Chair: Thank you. I listened very carefully. I do not see a point of order. I would tell the witness, as I would caution every witness, that during these hearings you have no immunity, although the members of the committee do, and therefore everything you say is subject to the laws of the land. But that is the only caution the Chair can make.

Mr Kewin: Are you suggesting that perhaps I might say something that the NDP will hold against me later? Is that it?

The Vice-Chair: The Chair is not suggesting anything to the witness; he is just stating a fact. You may continue.

Mr Kewin: Thank you, Mr Chair.

As you continue to treat landlords, and businesses in general, with disdain, you undermine the right of every Ontarian to a better life, to an improved standard of living and an opportunity to create their own wealth and build their own dreams. Business in general has lost all trust in your government, as it has come to understand some of our problems and empathize with the plight of landlords. I personally have always been a responsible owner of rental property, as have most landlords in this province.

My relationships with the tenants on my property have always been good, because my property is for the most part in smaller-town Ontario, where tenants are generally respectful of the property of others and less confrontational. I may be fortunate enough not to be attacked by mean-spirited tenants trying to incite your rent officers to eliminate rent increases or allow rent rollbacks, as the bill provides. But I pity those who own or manage property in Toronto and other larger communities. They are sitting ducks for the worst kind of management problems that this bill will surely invoke. It is very unfortunate for the majority of well-meaning tenants and very unfortunate for this province. Thank you.

Mr Tilson: Mr Rae, of course, has indicated that as far as he is concerned, the government wishes to buy out private enterprise. In fact, even the green paper states that after 1991 virtually all anticipated new rental housing will be social housing, non-profit and co-op. My question is, realizing that this is the real intent of the government, to put people like you out of business, what effect do you anticipate that will have on the taxpayers of this province?

Mr Kewin: I think all it can do is increase the deficit. Right now buildings that do not operate profitably are funded by the pockets of the landlord. He loses money and he takes it from this profitable centre to fund this unprofitable centre, if it is an unprofitable operation, this property.

I think it is exactly those kinds of properties, those that are in deficit, those that are tougher buildings, physically run-down and not the fault of the present landlord at all -- buildings do deteriorate in time, and 50-year-old buildings need a lot of work, a lot of money. It is for those kinds of buildings that without proper financial encouragement through an allowance to increase rent based on capital work required, landlords will simply say: "I can't afford to do this. My lender won't give me a loan. It's not a wise investment to throw another half a million dollars into this parking deck, so I'm afraid I'm not going to do it."

What I see happening, based on some of these proposals, is they will tighten up further work orders. They will give very little time to have work done. Regardless of the amount of time, landlords will not be able to do it; they will not be able to fund it. Eventually, what will happen? I do not know. I can only see the government probably expropriating buildings like it expropriates a municipal corner and funding it with taxpayer dollars. The home owners will pay for it all. We all will.

Mr Perruzza: Mr Chairman, I was not going to address this point, but I feel I am going to have to, simply for the record. Yesterday I sat in on this committee and a similar situation arose where a deputant had exceeded his time allocation. You asked for unanimous consent, because another member had cancelled and we had some extra time available to us, to ask questions of that particular individual. Unanimous consent at that time was not given. It was the Conservative duo who said no, they would not agree to unanimous consent yesterday to question a deputant.

We had a similar situation happen just before this gentleman came up to the podium, and unanimous consent was given so that our Conservative duo could take their nasty bad-cat approach to the housing advocate, and of course they proceeded to do that. It is interesting to note that the rules are not the same for everybody as we deal with individual delegates who appear before this committee to make representation.

I just felt that had to get into the record before I proceeded to address some of this gentleman's comments with respect to NDP dogma and some of the other allegations that were levelled at this committee.

Mr Kewin: I would love to answer questions, sir.

Mr Turnbull: He has taken your time up with utter nonsense.

The Vice-Chair: As a matter of fact, there is no more time.

Mr Perruzza: Mr Chairman, I am sure that this gentleman will appear before us again and I will have ample opportunity to ask the list of questions that I developed for him today. I look forward to that.

The Vice-Chair: Thank you, Mr Kewin, for appearing today. We appreciate your presence.

Mr Kewin: Thank you, ladies and gentlemen, for the opportunity.


The Vice-Chair: The next presentation will be from Heather Waese of the Society of Rent Review Consultants of Southern Ontario. I have a sense that you know how this proceeding works. There is 15 minutes for your presentation. We always appreciate some time for questions and answers.

Ms Waese: I am here today to speak on behalf of the Society of Rent Review Consultants of Southern Ontario. This society represents owners and managers of rental property of more than perhaps 150,000 residential rental units. Today I wanted to highlight a few of the areas of the proposed legislation where we request reconsideration by this committee on behalf of the landlords. The first area I would like to touch on is with respect to capital expenditures incurred by landlords during the moratorium period. The Minister of Housing of the day, Mr David Cooke, had stated that with the passage of Bill 4 it was not the government's intention to penalize retroactively landlords who had incurred capital expenditures in good faith prior to the passage of Bill 4 during that moratorium period.

The proposed Bill 121 outlined the time frame for recognizing those costs incurred, and that is mainly from January 1, 1990, to June 6, 1991. With that time frame in fact some landlords are penalized. I am referring specifically to those landlords who undertook capital projects in the latter portion of 1989, completed the program early in 1990, and applied in June of 1990 for a first effective date of October 1, hence the moratorium period.

Those costs that were incurred in the latter half of 1989 would not be recognized by way of this legislation as it is currently drafted. The cap that is imposed in this legislation would still protect the tenants, but at least in this circumstance those landlords who had incurred costs in good faith would have the opportunity to be recognized up to the allowance of the cap.


Our recommendation with respect to an amendment of that particular issue would be that any costs that would have been recognized in an application for October 1, 1990, or later would be eligible under this Bill 121.

The second area I would like to touch on briefly is with respect to conditional applications. Although Bill 121 recognizes, on a very specific basis, the circumstances of those who had obtained conditional orders, the 15% cap, although the number sounds large, is still onerous to those very few individuals. I believe there are statistics on the number of people who have conditional orders and have subsequently applied. Those particular landlords had done substantial work, and that would be the reason they would have applied first for a conditional order. Otherwise they would have undertaken the work and then applied directly for an order from the minister.

There are some people also included in that group who undertook a conditional application as a prerequisite for exemption under the Rental Housing Protection Act. This was a criterion for obtaining that exemption. What these people had done was taken basically uninhabitable places and converted them into excellent accommodation for renters. That was not at a cost that would be recognized by that 15% cap. Those are costs that would have exceeded that amount, and maybe on a phased-in basis, some consideration for those who took that extra step beyond what was generally required by landlords should perhaps have some consideration.

The third area of consideration I wanted to touch on today is the rollover of allowances that exceed the cap recognized by this legislation. The ultimate goal of this legislation, we all are very much aware, is to protect the tenants, but it is not mutually exclusive to recognize the needs of landlords in that process.

Previously one of the members of this committee had requested of a landlord who was a deputant here, "Why must you do all the work at one time?" I would like to answer that question, as from my experience representing a number of landlords, I believe I have a good understanding of that.

Generally I have found that landlords must obtain perhaps a second or third mortgage on their property to obtain financing to fund those capital expenditures. When they go to the bank and request a loan and register it as a mortgage against the property and those funds are advanced, it is obviously most economical to get the funds to do all of the work that they require, considering the age of the housing stock.

Second, they would want to expend that money as quickly as possible because they are paying interest on those funds. So it would be prudent for a businessman in that position not to obtain a second mortgage and sit on the funds over a number of years before he expends it, but to do the work when those funds are advanced. They do not have the possibility the next year or the year after to go back for a third, fourth and fifth without paying onerous interest rates.

In addition to that, the disruption that is caused to tenants, and the difficulty it causes the landlord in co-ordination requires a landlord, for example, if he is putting up scaffolding on the side of the building to do the windows or aluminum siding -- you do not set up a full scaffolding system, then tear it down, then put it up next year to do aluminum siding, then tear it down, and then do tuck-pointing the following year. All the work that would require such a major construction would tend to be done at that same time.

Last, I think it is a generally accepted principle that the experience of rent review is not a pleasant one for landlords or tenants, and the requirement to do it repeatedly would certainly not be one the landlord would like to undertake. It is confrontational, it is difficult, and the sooner they get it over, the better. Making a legislation of this nature, that requires the landlord to go back year after year, and not recognizing the possibility of further extended rollovers, I do not believe really benefits either party. If that rollover recognition could be extended, at least to accommodate the major work that is required by the aged housing stock, I believe it would limit the number of applications required, and landlords would still have the ability to recognize the costs that were incurred.

That leads me to another area of consideration, which is the minus 2% in subsequent reviews. In our experience, landlords generally undertake a small amount of capital expenditures annually, regardless of the need for any major item. I have found, through my reviews of their financial statements, that there is always some plumbing, some electrical work, a major roof repair, something of that nature, that is ongoing. If a landlord incurs a major garage cost or a roof replacement, that does not preclude the need in the subsequent years still to do those general minor things, and this reduction, even on a carry-forward in the subsequent application, only promotes the number of applications that would be required by landlords. In so doing, it does bog down the system.

We hopefully will not, but maybe, looking at these severely retroactive orders, especially in view of the fact that it is a hearing, a personal attendance, that may be required at each and every application -- those are difficult to schedule historically, under the Residential Tenancies Act, as we have seen, and it causes substantial delays to get everybody together. The limited number that may be required would probably facilitate the system, and I do not believe there would be any major windfall to the landlords in so doing, under those specific circumstances.

The last area I would like to touch on is with respect to the elimination of appeals and the resultant rehearing by the same person when a serious error occurs. The appeal process under this legislation affords both landlords and tenants the opportunity to correct either misinformation, inadvertent omission of information, or purely just the confusion on the administrator's part in issuing an order. It gives both landlords and tenants the opportunity, at another level, to correct or right a wrong that was done in a first-level decision. If both landlords and tenants are forced to go to Divisional Court on only a point of law, we will have major errors enshrined indefinitely in legislation, we will have errors that cannot be truly be corrected; or the alternative is both for landlords and tenants to incur substantial, heavy legal costs to go to Divisional Court. I think that would be a hardship to both parties.

The alternative that was proposed in this legislation, similar to the one that we have right now, is that the person who issued the order in the first place has the ability to determine whether he made that mistake himself, and then rehear. Again, experience has shown that it is very difficult, depending on the personality, to admit to major errors that were made by oneself and then, from an unbiased perspective, look at those mistakes and try to correct them. I am not saying it cannot be done, but the outward appearance of bias in that position is quite obvious and, I think, quite possible.

At the very least, the recommendation would be that someone other than the person who made the error in the first place should have the responsibility of determining whether a serious error was made. At least with that opportunity there would be a somewhat fewer number that would be required to go to Divisional Court in the event that there is still, after that process, an error enshrined in the order, and have then the opportunity, without incurring substantial legal fees, to correct it if that is a wrong.


I have supplied a brief on behalf of the Rent Review Consultants of Southern Ontario which addresses in part some of the areas I spoke of and, in addition to that, because of the limited time, addresses some of the other areas. If you have an opportunity, I would appreciate it if you could give your attention to that brief.

Ms Harrington: Thank you for your brief. I certainly will read it. We are concerned also about the appeal procedure, and we are looking at that. What would you think of a one-year rollover extension?

Ms Waese: Obviously, any rollover extensions are an improvement, but the point is that with the cap imposed by this legislation, if there was an ability to recover a full major cost -- and that could easily be calculated, the length of time that would be recovered -- if the rollover period would accommodate something of that nature, it would at least be some assistance to those landlords who have to incur those big costs.

Ms Harrington: Would one year help at all?

Ms Waese: Minimally.

Mr Tilson: You obviously speak with authority on this subject. I do not know whether you can perceive or observe trends. Much time has been spent with respect to other jurisdictions and observations of other jurisdictions, specifically New York and where rent controls have become quite restrictive, of the games that are played, specifically by tenants in causing rents to be reduced; I am sure there are similar games played by landlords. Do you perceive in your observations of the systems that those types of games are starting in Ontario as a result of rent controls?

Ms Waese: Attempts have been made, in limited circumstances, to do that. The trauma truly that would be caused to a landlord would be with that potential of reducing a rent roll, and the exposure when he has already incurred indebtedness against the building. That should be looked at and at least tightened so that sort of thing could not happen; that it would be limited to those issues and not such a broad range, the way "inadequate" is referred to in this legislation.

Mr Tilson: We put forward during the Bill 4 hearings an amendment that if tenants and landlords could agree on capital expenditures, even if they resulted in high rent increases, that would be acceptable. That, of course, is precluded in this legislation. Do you see any difficulty in that type of provision?

Ms Waese: You will find that the minister, as well as the other parties, received a lot of documentation from tenants with respect to the Bill 4 legislation that stated they were most happy with the nature of the work that was done and do not mind the increase. In some instances, as long as everybody is agreeable to the work and the resultant increase, obviously it would be an improvement. Buildings would be improved and there would not be the unhappiness that is going to be promoted through this legislation.

The Vice-Chair: Thank you, Ms Waese. I call Nicholas Patterson of the Canadian Development Institute.

Mr Tilson: On a point of order, Mr Chair: I know the speaker after Mr Patterson is Mr Hulchanski, who is giving a comment with respect to British Columbia controls. There appears to be, in flipping through some of Mr Patterson's paper, a further review with respect to British Columbia or a pullout of rent controls. I believe these two individuals give quite different impressions, just from what I understand has been presented to us in the past, and I would therefore move that perhaps Mr Patterson be allowed a half-hour, as would Mr Hulchanski, so we can properly assess their respective positions.

The Vice-Chair: We need unanimous consent, or was it a motion?

Interjection: Why is Mr Hulchanski getting more time?

Mr Turnbull: Because he was proposed by the NDP, that is why he is getting more time.


The Vice-Chair: Order.


The Vice-Chair: Welcome to the committee, Mr Patterson. You have 15 minutes to make your presentation. Would you introduce yourself, your organization, your position within the organization and then commence your remarks.

Mr Patterson: My name is Nicholas Patterson. I am executive director of the Canadian Development Institute. Our brief sets out the background of our group as an Ottawa-based, public policy think tank, along with our special expertise in the subject of rent controls, going back to 1985.

I was going to talk about our extensive research on the subject of decontrol, which Ontario should now be implementing, and that is what our written brief is about. But why waste my breath talking about research and the facts to this disreputable NDP committee? Initially, I thought "to hell with it."

The reason I decided eventually to come here was to talk about a serious public scandal, the atrocious and shocking mismanagement of Ontario's rental economy by this incompetent government. Rent control is always a political free-lunch disaster and today rejected as a dud almost everywhere else in the industrial world. And now it is about to enter a nightmare phase here in Ontario, à la New York and dozens of other cities around the world destroyed by rent controls. This is on account of this incompetent government of boobies and its ideologically driven, Marxist doctrine of hatred for private landlords, an outmoded concept of old-line socialism based on class warfare and the belief that private enterprise is essentially an exploitative system set against the poor. This is despite the now overwhelming evidence that it is this outmoded form of coercive socialism, the Bob Rae variety, not capitalism, which confiscates their property and holds the people in bondage.

Bob Rae is certainly into confiscation. His outmoded form of coercive socialism is based on big government, huge deficits, more welfare and massive regulatory intervention, along with a good measure of nationalization and a healthy dose of outright confiscation thrown in, just so we all know that Bob Rae is the boss. This is a tried and true formula for failure and stagnation by ideological egomaniacs in eastern Europe, China, much of the Third World and in the so-called social democracies of western Europe and Australasia. All these socialist democracies, including France, UK, Australia, New Zealand and most recently, Sweden, each one of them has had --


Mr Patterson: I beg your pardon? Let me talk. You talk after, fella. Be quiet. Chairman, get him to shut up, will you?

The Vice-Chair: Order. Interjections are, of course, out of order.

Mr Patterson: Each of these social democracies has taken a pronounced U-turn. They are all vigorously reversing decades of debilitating socialism through deregulation, privatization, balanced budgeting and by shedding their former hatred of free enterprise. It is about time you guys did that.


But not Bob Rae. Quite the contrary, he is going after the auto insurance industry by virtually confiscating it and apparently without compensation. This is because insurance is a favourite capitalist enemy since the writings of Lenin. He is also regulating the trucking and private day care industries into the ground, again an effective confiscation. Why? Because the very idea of private enterprise taking care of kids is one of Bob Rae's hates. He also hates food banks because they are based on private initiative and voluntarism rather than big government. He promised in the election he would put them out of business, setting government agencies in their place. But he is holding back a bit on this one, I noticed recently, because this lunatic idea created such a public outcry. He is passing all kinds of new legislation, much of it, he boasts, the most progressive -- read "extreme" -- in the world, that will reinforce our growing uncompetitiveness.

We now all know about Bob Rae's real agenda for the confiscation of the private rental housing industry which he openly disclosed in plain English in an interview in the Federation of Metro Tenants' Associations' newspaper, Tenant Bulletin, in the winter edition of 1989. This is his totalitarian scheme to confiscate private rental housing by driving down the price through tougher rent controls, then having the government buy it up cheap. There is no doubt about what he said in the plainest possible English. But this is nothing new, because it is the classic formula long applied by totalitarian regimes around the world. If you want to take over an industry, first you regulate it into the ground and then you buy it up cheap. That is what Marx said, that is what Lenin said, that is what Bob Rae said too, and that is exactly what Bob Rae is doing through this bill and Bill 4.

Bob Rae has a pretty ambitious program and a very disreputable and underhanded plan on how to do it. No surprise, therefore, that it necessitates a good deal of misrepresentation to accomplish it. Winston Churchill coined the phrase "a bodyguard of lies," which was needed to protect the truth of the Normandy invasion. Bob Rae and his government also have their own bodyguard of lies, even if his goal is a good deal less honourable than Churchill's. What is Bob Rae's bodyguard of lies? It is nothing less than a shameless campaign of barefaced falsehoods coming straight from the Premier of Ontario and his government, claiming widespread abuses under Ontario's previous system of rent control as a justification for the radical tightening in this bill. In other words, there was so little public demand for the changes of this bill that he had to stir it all up himself. This bodyguard of lies includes falsehoods about widespread high rent increases; false claims of generally unaffordable rent levels; dishonest allegations of widespread speculative flipping of apartment buildings to justify rent increases, and his claims of purportedly high landlord profits. The important point is these are demonstrably false and, more important, they are the basic rationale for this bill. What a scandal.

Some months ago we did some extensive research documenting in detail all these falsehoods. We set it out in our testimony before this committee on February 15 in Ottawa, then in our presentation of March 7 to the minister, Dave Cooke, which was suppressed by him at the last moment. At the time we were all mad as hell about this, but we issued a press release on it and it was very widely reported because it was such a scandal. But the suppression of free speech, of course, is very much a part of the strategy of the big lie. I will provide the committee with a copy of the extensive research we have done on this.

Let me just conclude by saying that the cancer of Bob Rae's policies and his old-line coercive socialism is spreading. In just 11 months we have rental housing, auto insurance, trucking, food banks and private day care all being regulated into the ground, just confiscated or taxed out of existence. We have got stupid new legislation affecting all industry, raising costs and reducing our competitiveness, thereby cutting our standard of living. This is pay equity, labour organizing, higher minimum wages, higher corporate taxes, and the classic radical socialist measure, a tax on wealth through reintroduction of succession duties, which every province, including Ontario, dropped 15 years ago. In 11 months, Bob Rae has degraded Ontario's credit rating and ruined our standing as a dynamic place to invest. He has created in its stead a large-scale flight of capital. In other words, Bob Rae is the best thing that ever happened to Buffalo. Thank you.

Mr Callahan: I note you have some information attached to this: "Decontrol -- The Time is Right." I have not had a chance to read this, nor has anyone else, and I thought maybe you could advance your thoughts about decontrol.

Mr Patterson: The time is right for decontrol for a number of reasons. The first and clearest one is that the vacancy rate now in Ontario is very high, 2.3% across the province and in Toronto 2%. That means that the risk of a post-decontrolled bulge of prices would be much, much less.

Mr Callahan: Why is that? Do you have any studies as to why that is, why the vacancy rate has gone up?

Mr Patterson: Why it has gone up? The one area of important freedom in the housing economy is in the production of condominiums. Is it not just marvellous how this free enterprise sector, condominiums, has come in and rescued the rental housing sector, which of course has been ruined by government controls. In other words, overbuilding of condominiums are now being offered up for rent, and there are so damn many of them, an oversupply, that they have created a big vacancy rate in the rental housing sector. Does that explain it?

Mr Turnbull: Turning to appendix C of your presentation, you have included some CMHC figures showing the vacancy rate comparing Toronto and Vancouver and the average monthly rents in Toronto and Vancouver. I am struck by the fact that since deregulation of rent controls in BC -- I have not done the exact math, but quickly eyeballing it -- it appears that, on average, rents have gone up less in BC than they have in Ontario under rent controls and that the vacancy rate has gone up. I know there was an initial time frame where there was not much construction after they took rent controls off, but then afterwards it gathered momentum. Could you comment on that?

Mr Patterson: Vancouver is an astounding proof. I think there was this fellow Rainville who was trying to claim that the Vancouver case proved that the private free rental market did not work. They call him Rainville, and I guess that is because he is all wet, because his observations on Vancouver are absolutely clearly disproven by a brief look at CMHC. CMHC figures prove that as soon as they took rent control off, the very same year, the vacancy rate went from virtually zero to 2.5%, in one year. At the very same time, Vancouver started a seven-year continuous period where -- under rent control Vancouver rents were higher than Toronto. Under decontrol, over the last six years, rents in Vancouver have become lower than Toronto.

In other words, Mrs Harrington, can you not see that this is a clear proof of what you should do, for goodness sake? I mean, it is as obvious as the day is long. What is wrong with you guys?


Mr Perruzza: I will keep my comments really brief. I guess part of any listening exercise is to take as much abuse as one can level at you.

Mr Patterson: Just the facts.

Mr Perruzza: I have to tell the witness who is appearing before us today that it is precisely his small-minded, tunnel-visioned attitude which essentially shackled this country from burgeoning into the type of country that we could otherwise be --

Mr Patterson: Oh, come off it. Baloney.

Mr Perruzza: -- both in our social infrastructure and as an industrial power.

Mr Patterson: Till you guys came along.

Mr Perruzza: I would also remind him that the Tories governed this province for close to 40 years and essentially kept this province from being able to --

Mr Patterson: It became the richest place in the world, that is what.

Mr Perruzza: I would remind the deputant who is appearing before us that the Tories are governing federally and, quite frankly, in my view they are selling this country for a photo opportunity with the American President.

Mr Patterson: Oh, how impressive. How impressive that is, a photo opportunity with the President. My gosh, you are a good talker. What a bullshooter.

Mr Perruzza: Mr Chairman, if people like this gentlemen here and the federal Conservatives --

Mr Patterson: Towering intellect. God, they are full of them.

Mr Perruzza: -- had their way, we would lose even our Third World industrial rank.

Mr Patterson: Oh, my God.

Mr Perruzza: I will have to tell you that Bob Rae and the NDP are here and that is not going to happen, precisely because we are here and because we do not have the small-minded, tunnel-visioned attitude that has been persistent and prevalent in this province for many, many years, held by the Pattersons of this world.

Mr Patterson: My gosh, you sure know how to hurt a guy. I am just cut to the quick.

The Vice-Chair: There was a question? No. Mr Abel.


Mr Patterson: When we do research on a subject, we come to a factual conclusion.

The Vice-Chair: Mr Abel.


Mr Patterson: Oh, baloney.

The Vice-Chair: I am sorry, Mr Abel.

Mr Abel: Thank you, Mr Chair. I have so much to say, but I would like to pass to Mrs Harrington.

The Vice-Chair: I am sorry, Mr Abel. The time has gone. Thank you, Mr Patterson.

Mr Patterson: By the way, when this fellow Hulchanski comes along, be sure to show him those statistics, because I think he is going to give you a bit of the old NDP BS.

The Vice-Chair: The next presentation is David Hulchanski.


The Vice-Chair: Order. I would remind everyone, especially those who are in the audience, that there can be no participation in this committee. This is an extension of the Legislature; no demonstrations or comments can be made.


The Vice-Chair: Order.


The Vice-Chair: Order.

Mr Wiseman: On a point of order, Mr Chair: I would just like to make a comment that this committee is seeking to analyse this bill in the best way possible and that vitriolic expressions from either the right or the left do not really contribute a whole lot to the discussion and to the analysis of the bill and do everybody here a disservice in terms of the way they portray themselves to the viewing audience and to the people who are here.

There is an old saying that if you have nothing to say, you should just say it over again louder and louder and louder to try and make your point. I think perhaps some people would like to bear that in mind, because lack of content does not become any better by yelling.

The Vice-Chair: That is an interesting point of view and an interesting observation, but it is not, unfortunately, a point of order.

Mr Mammoliti: Also on a point of order --

The Vice-Chair: I just ruled it was not a point of order.

Mr Mammoliti: On another point of order. Mr Chair: I would just like to allude to something Mr Turnbull said. There was a remark made about this individual having a half-hour and Mr Turnbull said it is because he is a socialist that he is getting a half-hour. What that says to me is that Mr Turnbull has a problem with what the clerk has done in regard to the scheduling. I would like Mr Turnbull to perhaps --

The Vice-Chair: I do not think that is a point of order either, Mr Mammoliti. It might be an interesting point of view.

Mr Mammoliti: I just think it is a little unfair to the clerk, that is all.


The Vice-Chair: Maybe we could have order, which would be helpful to us all. Let's not tease the bears.


The Vice-Chair: Good afternoon, Dr Hulchanski. As you know, you have half an hour allocated by the committee. You can commence your presentation after identifying yourself for the purposes of Hansard, and I would remind you that we as committee members appreciate some time to ask some questions and hopefully receive some answers.

Dr Hulchanski: I am David Hulchanski, professor at the University of Toronto, but only recently so. For the past eight years I have been a professor at the University of British Columbia. I went there in 1983, a very convenient time for a housing researcher and a housing professor. That is the year rental decontrol happened in British Columbia, so I have been following that very closely. Between 1983 and 1991, when I was at UBC, I also served a term as director of the research institute there called the Centre for Human Settlements, which also did research in affordable housing and rent controls and rent regulation. Prior to that I was in Toronto doing a master's degree and PhD and teaching at the University of Toronto from the early 1970s up until 1983. I was a research associate also at the U of T Centre for Urban and Community Studies.

At UBC I followed the boom/bust cycle very closely. There was the real estate boom that collapsed in 1981. A severe recession followed that, and then there was another boom in the 1988-89 period. So we have a fairly good case study of both rent control, which existed from 1974 to 1983 in British Columbia, and then rent decontrol in the period since 1983.

In addition to this, I have done housing research on a variety of topics, which I will not go into now, but in 1984 I was one of several consultants to the Thom commission here in Ontario, the Commission of Inquiry into Residential Tenancies, and I will make reference to that in a moment.

My research on BC rent decontrol is finished, but I am in the process of writing that up now. The move has delayed me a bit. Some of my findings were published earlier in a research bulletin called Rental Housing Trends in the City of Vancouver, where I traced what happened to rental housing in the city of Vancouver after 1983, after the rent decontrol.

What I want to do today is two things: briefly outline my research in rent regulation, those aspects that I believe will be relevant to this committee's work, and this is drawn from my Thom commission work and my BC case study of rent decontrol; and I want to comment on problems of doing research in general on the impacts of rent controls and how easy it is to jump to conclusions looking at certain data. There is a difference between proper research methodology and theoretical claims that are starting with conclusions, selecting data that seem to conform and then celebrating those particular data.

First I want to talk about the rationale for rent regulations, why might we have rent regulations. This was the task I was assigned in 1984 by the Thom commission. I wrote research study 6, with the exciting title of Market Imperfections and the Role of Rent Regulations in the Residential Rental Market. The key words there are "market imperfections and the role of rent regulations," what is going on with the rental market and why might we need rent regulations.


I make two basic points in that report which I think are still relevant today and relevant to this bill before you.

The first point is that there is failure of the market mechanism in the rental sector. Supply and demand, everybody knows and can notice pretty easily, is not working as it should. What economists would call market equilibrium, where supply and demand are in balance, at some stage at least, should happen in all markets. If there is a shortage of ice cream or shoes or something like that, you make more, you catch up with the shortage and so on.

In the rental sector, we have lots of demand but very little supply of new rental housing. But the demand we have -- and this is a difference from the 1960s -- is not market demand, or it is not effective demand. It is not people with lots of money in their pockets; it is social need. It is people without enough money to afford what the market could build and what it needs to make money on building rental housing.

This failure began in the late 1960s and early 1970s. It especially started with a severe inflationary crisis that resulted from the 1973 energy crisis, with energy prices going up and what that did to not only the Canadian but the world economy. For the first time, we started having all that inflation, the high and unstable interest rates and all those difficulties, and we continue to have conditions like that today. So chapter 3 of that report I did for the Thom commission -- and I will just refer to what is relevant here -- talks about the problematic characteristics of the residential rental market.

Mr Tilson: On a point of order, Mr Chairman: The motion that was made for to this person to address us was with respect to informing us on rent controls, before and after, in British Columbia. I think we are interested in hearing about rent controls in British Columbia and I am wondering if you could direct the speaker to limit his remarks to British Columbia.

Dr Hulchanski: I am getting there. That is my objective, but there is a two-part objective.

The Acting Chair (Mr Callahan): I am not sure that is a point of order. I think we invite witnesses before our committees. This is a learning process.

Mr Tilson: This motion was brought forward by the government in Windsor. The purpose of the motion --

The Acting Chair: Let me just look at the motion.

I was not in Windsor but I have had an opportunity to look at the motion. You are quite right. It was to share with this committee his expertise on British Columbia rent control. But I think if this committee is to have the benefit of it, as Chairman I am going to exercise my prerogative to allow him to review that with us but at the same time to have some latitude to compare it to the present situation. I think to do otherwise would be perhaps limiting a witness in a way I do not think we should limit our witnesses, really. They are here to --

Mr Tilson: The only thing I have heard about British Columbia is that he lectured at the UBC. I think the purpose of the motion --

The Acting Chair: Let's let him continue, and if we get to the point --


The Acting Chair: Just a second now. Anyone who wants to chair, let him come up.

Mr Mammoliti: Sorry, Mr Chair.

The Acting Chair: Give him an opportunity. If it does get too far beyond what was the purpose, then perhaps I will intervene, but for the moment I would like to hear a little bit more.

Dr Hulchanski: There is a logic to the flow of what I am saying. One is talking about the potential rationale for rent regulations and then what are the impacts of these regulations, and that is the British Columbia case study of what regulations and the decontrol of these regulations do.

To carry on, there is the failure of the market mechanism. Why did it fail? There are internal and external reasons, if you think about it for a moment. I will not go through all of them, but think about the filtering process. If we ask how poor people get rental housing, the answer is filtering. But what happened beginning in the 1970s? Upfiltering -- gentrification -- was just one of the factors that happened back then, but there are all these external constraints that happened to the rental market that led to rent controls throughout the country -- the inflationary period in the early 1970s, the rising mortgage interest rates.

Remember, until the late 1960s you could get a 25-year mortgage as home owner or rental housing investor. I will refer to some data soon about how condominium tenure allowed people to own apartments. What did that do? It had the side-effect of creaming the higher-income renters from the rental market, so that increasingly there is only poor people in the rental market, not the higher-income people.

So you combine gentrification with the fact that there is a smaller group of higher-income renters who can afford the new stuff that builders can build and you cannot make money -- that is the point -- starting in the early 1970s in the rental sector.

What has gone on increasingly in Canada, and it is well documented, is the polarization of households by tenure and income; that is, unlike the late 1960s, most of the highest-income groups -- the fourth- or fifth-income-quintile people -- are home owners now. As high as 27% of the highest-income-quintile people back in the late 1960s were renters. So you can see that if you want to build rental housing you have a market there because new buildings cost more to rent. It is logical. But they fell from being 27% renters down to 13% renters in a period of about 15 years. Because of what? If you want to live in a nice location you now have the choice of condominium tenure. I am not knocking condominium tenure. It is fine. It is just a fact to explain why it is so difficult for builders to build rental housing these days and make money.

Now, the second point here -- and then I get to the British Columbia case and we carry on.

The Acting Chair: I was just going to ask you to do that.

Dr Hulchanski: I noticed.

What are the potential rationales for rent regulation? If you have conditions of market failure where supply is not matching demand, what is protecting people in that marketplace? The market is not protecting them any longer, so you need some form of consumer protection legislation.

BC was the first province -- aside from Quebec, which always had rent controls going away back -- to introduce rent controls, back in 1973. Why? As a form of housing-related consumer protection legislation. They were not introduced as a solution to the housing problem. It is very clear they were not introduced to subsidize tenants. They were not even considered a housing program.

In BC, as originally here in Ontario, the rent regulation legislation was part of consumer and corporate affairs. It was a consumer type of legislation, something to protect people in a condition of market failure. That is why I feel Bill 121 or a bill like it is absolutely necessary. Until supply and demand are in equilibrium, what is protecting people in the rental marketplace?

Having said that as preface, I turn now to the impacts of rent regulation. We have rent regulations, and those are a few other reasons why we have rent regulations, but what are their impacts? Here you find all kinds of claims about the impacts of rent regulations.

How can this be researched? There is a variety of ways. It is a difficult methodological issue, but a case study is one appropriate method, ideally a Canadian case study because the tax system, housing conditions, housing markets and all that in other countries are quite different from Canada's. So it is nice to have British Columbia, the third-largest province, the province with the third major metropolitan area, have a period of full regular rent controls, 1974 to 1983. They are called second-generation rent controls in the literature; that is, they allowed cost pass-throughs and all that kind of stuff. There were regulations in place under two governments. Both the NDP and the Social Credit governments maintained these rent controls for the 10-year period. In fact, they existed mainly under the period of the Social Credit government. Then there was decontrol in 1983. We have had at least seven or eight years now of no rent controls in British Columbia.

How does one research this? Let's start with one's conclusions or assumptions or generalities about this politically charged issue. What I did was identify all the theoretical claims that were made about what would happen if you decontrolled rents. Okay? You are hearing them here. There are all kinds of claims. "If you decontrol rents, X, Y and Z will happen." There are politicians making claims about what would happen, there are academics making claims about what would happen and there are lobbyists of all sorts from both sides making claims about what would happen if you decontrolled.


It is very easy to go back to 1983, to the Legislature debates, the newspapers and other sources like this, and see what people said. It is all documented in my study, what they all claimed. But then what you do is to take those 1983 claims and collect empirical data to see if their predictions -- and you turn those predictions into hypotheses -- are correct and did they indeed happen. I have 20-year runs of all kinds of numbers, the 1970s to 1990s, all kinds of indicators.

What did I find? The major claims which could be empirically tested, and not all could be, as research hypotheses included claims such as: rent controls decrease rental construction and then that decontrol would increase rental construction; claims that rent controls increased conversions and demolitions and that decontrol will help limit that; claims that rent controls create excessive demand for rental housing because you are subsidizing, it was claimed, tenants.

Just to give you two quotes from the minister then responsible for the legislation, in 1983 the BC minister told the Legislature, "I believe these deregulatory measures will ultimately result in new real estate development, more jobs and a continuing healthy availability of rental accommodation." He also noted that, "We feel, as economists have stated in the past and continue to state, that it will provide opportunities for new construction in a society where you don't have rent controls." So there is a claim there, a theoretical assertion yet, about a link between rent controls and rental housing supply, and that is what I want to say something about here.

Is there a link between rent control, rent decontrols, your rent regulation systems or their lack and rental housing investment? That is why my preface was necessary. In theory, this seems logical, but in reality? We have a real case study. What did I find? We can guess at some of the findings.

First, what was really important? What was a causal relationship that could be clearly established? Well, macroeconomic conditions are the main determinant on housing starts of all types. Of course, when there is a recession there is not much house construction of any kind. When there is not a recession there is more housing construction. When there is a boom there is even a lot more, obviously. That is what really shows up clearly, all the relationships.

Second, and naturally linked, but we often forget about it, is net migration. There are periods when very few people move to British Columbia and people leave British Columbia, and the same with immigration; migration from other provinces and immigration from other countries. There are net gains or losses. BC in bad years still gains, has a net gain of a couple of thousand people. In a boom period, like the late 1970s and the late 1980s, they have a net gain of 50,000, 60,000 or 70,000 people in a year, which is very substantial, and 75% to 80% of them go to the Vancouver area, in the recent data on that.

If I recall correctly, in Ontario during the boom years some 100,000 people or so were net gain, but Ontario is much larger than British Columbia and the net gain was quite close. So the impact in British Columbia is quite large.

But what about non-subsidized market rental starts? All the way from the early 1970s to the present there have only been 200 or 300 non-subsidized market rental starts. I am saying non-subsidized because there was the ARP, assisted rental program, started in 1975 or 1978; there was the multiple-unit residential buildings program that was on and off during the 1970s and ended in 1981; there was the CRS, Canada rental supply program from 1981 to 1983. Those are subsidized private sector rental starts, so subtract those or else you are dealing with funny numbers. But there were only 200 or 300 non-subsidized private rental starts in the greater Vancouver area over this entire 20-year period. So there is no relationship with whether or not you have controls or lack of controls.

That is why my preface of why I told the Thom commission back then that there is something seriously wrong with the rental market. It started in the late 1960s and early 1970s and continues to this day. The housing starts that we have are of course the owner sector, owner-occupied housing, because that is where supply and demand works. In fact, there is a glut of condominiums, the investors and all that during a boom period getting the condominiums, and they are for rent at the moment. When there is another boom they will be sold like the MURBs were. Many of the MURBs were sold off as owner-occupied housing quite quickly once the economy picked up.

So there is just no relationship that I could find in relating all this data to periods of control or decontrol. All the swings relate to ownership housing and relate to macroeconomic conditions, which are closely linked to net migration.

Vacancy rates: There can be claims about vacancy rates this or that, and little percentage point changes here and there. They drift between zero and about 2.5% during this period. Again, no clear relationship to periods of rent control or rent decontrol, but when you do the graphs -- and they will be in my study -- they are clearly linked to net migration. When you have -- when you are dumping 70,000, 60,000 or 50,000 new people, mainly in Vancouver, vacancy rates are going to go down to 0.1% and 0.2%. When they stop coming and you have a net out-migration of 1,000 or 2,000, which you had in the severe recession in 1983 or 1984, vacancy rates will go up, but only by about 2% or so. It has nothing to do with new supply or old supply or anything like that.

So my findings, to get to the end of that piece of research, is that I can find no link between private rental starts, that is, private, non-subsidized rental housing investment, and periods of rent control or periods of rent decontrol. So this BC case study is yet another example of empirical research which tried to establish that link, as opposed to theoretical supply and demand curves -- there just is not that link.

In a recent issue of the Journal of the American Planning Association there is an article on this topic. It is an American article, but they have a summary of about 75 studies of rent control by what I would call credible researchers, either academically based researchers or by government, so leave out some of the sort of fringe think tanks and all that. Investment in rental housing, new construction: There are something like 10 studies under that category that could find no link between rent controls in certain American cities and states and new construction. The list goes on, and I have extra copies of this and the literature here. But there is a lot of very credible research along this line and the BC case study is extremely clear.

In sum, residential rent regulations are indeed, as we all know, a highly charged political issue and I believe always will be. Any market regulation, especially a price regulation, is controversial, and in housing is especially crucial. It is home and an investment, both very emotional and practical items.

Once again, I want to say I am one of many researchers now who have carried out empirical research, that is, testing -- you will not find any theoretical supply and demand curves in my work -- finding there is no link between private rental starts, private investment in rental housing, and periods of rent control or rent decontrol. What this means is that the provision of new affordable rental stock is a major housing policy problem -- it is separate from what this committee is dealing with, I feel -- whereas the maintenance of the affordability of the existing housing stock is a major regulatory problem because the rental market is not working; there is not supply and demand.

Again, the reason there is not supply is you cannot make money at building new rental housing. Ask developers. Bring developers here and ask them, "Why aren't you building? What rents would you have to charge?" They will tell you "A thousand and some, 1,500 bucks or so." What per cent of renters could afford that? Well, 2% or something, and it does not work. This is why the smart money, the big developers, Cadillac, back when it was Cadillac, and now Cadillac-Fairview, in the 1970s, noticed these trends. They have their analysts. It was in the early 1970s and mid-1970s they all got out of the rental sector. You cannot make money in it in new supply.

So this is what I am saying. It is very important for this committee's work that there are in fact two issues that should not be mixed up: There is a housing policy problem, which is how to get new rental housing supply; then there is a regulatory problem, how to maintain the existing stock. It is a declining stock, it is an aging stock, it is a stock I feel lots of people are playing games with. If somebody bought a rental building in the 1980s, you have to ask why. They bought it knowing there are rent controls. So I have problems when they come to a regulatory body, which is in effect what the Legislature is here, and saying, "We can't make money." Maybe you paid too much for that building. Maybe that building is older and has many problems. Why should we subsidize a bad investment you might have made? People are not asking that question, separating the two issues, the rental supply problem and then the regulatory problem relating to the existing stock.


Could I ask how many of the existing owners of rental apartments are in fact investors in new rental stock? What little I know of British Columbia is that the answer is almost none. They own them for other reasons. Here in Ontario, what is the answer? I am not sure.

So given the failure of the supply and demand market mechanism in the rental sector, the aim of legislation such as Bill 121 should ultimately have, as I said back in 1984, four objectives here.

One is to help protect security of tenure, because when the market is not working, you have economic evictions, somebody just raising rents, and then you can override security of tenure legislation.

Second is to help maintain the affordability of existing rental stock. It is not to help increase the affordability or lead to new rental housing or anything like that, it is just to maintain the affordability.

Third is to help prevent a regressive income redistribution. Not all landlords are wealthy, not all tenants are poor. WQ know the data on that. But in general, more owners of apartments are a bit better off than most renters. When the market is not working, what protection is there for somebody in a marketplace where, again, it is not a choice -- you must have housing. The majority of renters in Ontario -- you all know the figures -- cannot become home owners. CMHC releases these studies of what per cent of renters can become home owners, and it is 7%, 15%.

The Acting Chair: I do not want to interrupt you, but I would just tell you that you have five minutes left. If there are to be any questions from committee members, they are either going to be very brief questions, which is an impossibility, I think, or there are going to be none.

Dr Hulchanski: The fourth and final reason is to help mediate conflicts relating to rental tenure -- the most important conflict that arises there is the price, the rent -- and to keep that out of the court system. That is the problem British Columbia had, that if tenants wanted some redress, they had to go to the court system, which is clogging courts more. Of course, they do not have the money to do that, so there is some injustice there, relying on the court system instead of setting up some kind of system as Bill 121 does.

Mr Brown: There are some things that puzzle me about this. If controls or no controls mean the same number of buildings being built and the same sort of situation, if controls or no controls equals about the same in price increases, if controls or no controls equals --

Dr Hulchanski: No, I did not say that.

Mr Brown: I am looking at the CMHC statistics and that is what they say to me. If you find that is wrong --

Dr Hulchanski: Go ahead. I am sorry.

Mr Brown: That is exactly what the CMHC statistics say, that there is no relationship either. Maybe that is not true. The vacancy rate in Vancouver is actually a little bit better over time, at least it appears so, looking quickly at it. The price is the same.

The Acting Chair: You are over time.

Mr Brown: The whole thing puzzles me.

The Acting Chair: You had better make your point, because the doctor is not even going to get a chance to respond to you.

Mr Brown: I would like him to respond if he could. Why would you have rent controls if none of it makes any difference?

Dr Hulchanski: The question is why do you have rent controls. The claim is there is a link between rental supply and rent controls, and that is what cannot be established.

Mr Brown: There is also a claim that affordability is a function of rent control, which is not there.

Dr Hulchanski: That rent control regulations help maintain, if they are carefully constructed, the affordability of rental stock, yes.

Mr Brown: But those statistics do not show that. The British Columbia statistics do not show it.

The Acting Chair: I have to intervene. Mr Turnbull, and then Ms Harrington, one minute each. Actually, I will give you a little more, as Mr Brown got a little more than that.

Mr Turnbull: Do you believe in private sector housing? If you do, tell me the motivation. Should the return to the investor be greater than bank interest rates, since there is risk involved?

Dr Hulchanski: Eastern Europe and the Soviet Union are teaching us that you cannot run a society without markets, and the markets have to work. That is why in home ownership and condominiums, it works -- the people with money -- so there is a good rate of return, a competitive rate of return with other investments.

Mr Turnbull: But there are loads of people who are not making any money on apartment buildings. You were talking about them making bad buys. I have some expertise in the evaluation of buildings and I can tell you they did not make bad buys as compared with any other real estate investment. They were typically buying at 40% of replacement value.

The Acting Chair: That is a confession and it needs no answer.

Ms Harrington: I really appreciate all of this information. I have tried to take notes on it all. Did you say there were only 200 units built from -- that is not per year?

Dr Hulchanski: I can leave some numbers of this, but you have the numbers for the 1980s certainly. One year is 1988, the 300, 275, numbers like that.

Ms Harrington: So it is per year?

Dr Hulchanski: Yes, per year.

Ms Harrington: You said 75 studies of rent control in the US. What was their conclusion?

Dr Hulchanski: Similar to mine about the link between investment in new construction and rent controls. What is the link? They have not found a link. I can leave studies of this with a bibliography and identify those studies.

The Acting Chair: It will have to remain a missing link, I am afraid, because we are finished. Thank you very much. We appreciate your information and the illuminating questions from the members. We are adjourned until Ottawa, tomorrow at 2 o'clock.

The committee adjourned at 1658.