Committee Transcript 1991-Aug-28 | Legislative Assembly of Ontario

The Vice-Chair: Good afternoon. The standing committee on general government will come to order. The purpose of this committee is to hold public hearings on Bill 121. The committee has spent a large amount of time sitting in Toronto and other centres across the province, and we are most happy to be here in Ottawa this afternoon to hear the concerns of the people of Ottawa.

Our first presentation today will be from Tony Mancini of Levinson-Viner Ltd. Mr Mancini, you have 15 minutes to make your presentation. The committee appreciates it if you reserve some of that time to allow the members some opportunity to discuss that presentation with you. You may begin by introducing yourself and your organization for the purposes of our Hansard recording.

Mr T. Mancini: Thank you. My name is Tony Mancini and I work for Levinson-Viner Ltd as a property manager, a company that manages over 3,000 units for 150 investors here in Ottawa. It is on behalf of these people that I am speaking when I say we are not happy with Bill 121. These are honest landlords. These are very hardworking people. Many have already been unfairly hurt by the retroactivity of Bill 4. Why they must suffer further with this bill we do not know. What have these honest landlords done to deserve it?

The landlords I speak of are your average citizen. I am such a landlord. I work full-time. I am not any richer or better off than you, or many of my tenants, just because I invest in real estate while everyone else chooses stocks, bonds or RRSPs. I should not be penalized and neither should the many other small landlords who like myself just did not have the resources to do what Bill 121 wants us to do. We do the best we can with the rents that are charged. Now you want us to do more with less. How can we make you understand that the cash flow is just not sufficient to maintain the properties properly?

Bill 4 is a tough act to follow. Bill 121 should therefore be an act which will motivate. It should provide strong incentives to let landlords willingly and proudly maintain their properties. It should provide strong incentives to promote more construction. Profit is the motivation we want. Bill 121, however, is a bill with a cash-flow problem and we just do not have the cash flow to make this dream come to life. Your shortsighted vision will definitely take tenants into a future of run-down accommodation.

The bulk of the properties we manage are already over 30 years old. They are well looked after, but repairs can only continue for so long and then capital improvements are required. That is just a fact of life. These improvements must all be done in a relatively short period of time. The handling of this rapid deterioration is completely ignored in this legislation. The annual guideline increase has never been more than what is required to meet annual operating costs. It is a fallacy to even suggest that 2% of it should be considered as available for capital improvements.

Fifteen years of rent controls kept rents so unrealistically low that it is just impossible to do capital improvements with the current rental stream plus 3%. Why else would most landlords get average increases of 11%? It is not from unnecessary work, but because rents have remained too low for too long while costs have escalated.

It is this kind of wishful thinking and immediate implementation of poorly considered policies that have discouraged all real estate investors both in and out of this province. Does Premier Rae think Ontario can afford more public housing while the private sector looks elsewhere for investment? His other policies are already discouraging other businesses from investing in Ontario. When will the government realize that Ontario does not have the cash flow to make all his dreams come to life? Does he have any idea how much tax revenue has been lost because of these depressed conditions? The loss of revenue from land transfer tax, capital gains, out-of-work tradespeople and real estate agents and foreign investment has to be considerable.

Real estate investment has such a great impact in our economy that these negative policies are hurting all citizens of Ontario. The existing system was not ideal, but was to some extent there and did not need a complete overhaul just because a handful of landlords abused it. The honest landlords did not abuse it and do not deserve to get punished. If so, then all welfare recipients should have their payments reduced, because a few of them abuse the system also.

It has become extremely difficult to get financing, especially when capital improvements are required. Banks are becoming much more critical because of these negative policies, depressed conditions and uncertain future income streams. We small guys just do not have the extra cash available to meet these unexpected and major policy changes. Unlike tenants, we do not have the security of government assistance if we run into trouble because of the consequences of Bill 4 or Bill 121. Is it this government's goal to eliminate us and all private sector real estate development and saddle the province with non-profit housing?

These policies have already strained landlord-tenant relationships. Landlords will no longer give favourable concessions to long-term or older tenants. The honest landlord did not deserve to be penalized for doing a good job. The honest landlord was in it for the long term and does not need to have such unmanageable conditions placed on him.

In order to restore good landlord-tenant relationships and keep private investment alive, we suggest that Bill 4 be voided, that changes in mortgage interest rates should be allowed as a cost pass-through, that the cap for capital improvements must be increased, that negative changes to the rental structure should be for major violations only and that higher-priced units should be exempt from rent controls.

Bill 121 just does not make sense. It is not good for the landlords, it is not good for the tenants, as it certainly does not provide them with better maintained or new housing to take them into the future, and it is definitely lousy for Ontario. So why is it being proposed? The changes I suggested should be immediately implemented in order to restore faith in the housing industry and to ensure that tomorrow's tenants are not all tenants of the government, unless that is exactly what it is striving for.

Mr Grandmaître: As you know, the government has committed to build 30,000 units within the next five or six years. What are your thoughts dealing with small developers, small owners? Do you see the small developer interested in this kind of partnership the province is trying to create?

Mr T. Mancini: With the government? No, I do not think so. I feel the government has with these policies scared just too many people away. They do not trust it any more. They have lost all confidence that no matter what they do they would have to watch that the government does not introduce legislation to change it, especially retroactively. So I do not think anybody is interested in going into housing right now on the private development side.

Mr Grandmaître: Rental housing.

Mr T. Mancini: Rental, that is for sure.

Mr Mahoney: With the recent announcement, although it does indirectly impact on Bill 121, of the new guideline announcement -- I am sure you saw it, 6% -- under the new formula you would be allowed to apply for an additional 3% if you were able to justify the backup 2%. So it is really 4% plus 2% plus 3%. We would get some complaints from tenants groups in some parts that this 9% increase is quite outrageous and is a betrayal by the government of its promises to the tenants. I just wonder how the landlords feel about it?

Mr T. Mancini: The 6% may seem high, but it is not, considering we have gone through, last year or the year before, a major jump in the water costs. This year we have had GST hit on us. The 3% just is not enough. I find that the annual increases we get in the properties we manage just seem to cover the regular operating costs to manage the properties.

Mr Mahoney: So if you look at the items that are driven by public policy decisions, such as municipal taxes or water costs or hydro costs, that type of thing, driven by public policy that you have no control over -- nor do the tenants -- what do you do when you face perhaps double-digit increases in either utilities or in municipal taxes and you are only allowed to apply for a 3% increase in the rent? How are you going to handle that? Are you going to close your buildings?

Mr T. Mancini: That is the question we would like to get answered.

Mr Mahoney: Have you thought about it? Have you sat down with your advisers to figure out how you can --

Mr T. Mancini: We are worried. Basically, the only way to do it, if you cannot get it through the rents, is to try to cut back on something else so that your net effect comes to the same.

Mr Mahoney: What could you cut on?

Mr T. Mancini: With this new bill you cannot cut on anything, because they will reduce the rent if you cut back on anything. What can you cut on? I do not know. If you decide to paint a hallway this year, you forgive that if your costs have gone up somewhere else.

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Mr Tilson: The government has indicated, not only with the introduction of Bill 4 but with the introduction of Bill 121, that the purpose of that type of legislation is to stop the terrible abuses of landlords. Flipping and marble foyers were the favourite examples given by the former minister, Mr Cooke, some of which were true, but statistics show he was exaggerating. I would like you, as a property manager and obviously an advocate for landlords, to tell me what sort of abuses there are that concern you with respect to tenants and what sort of legislation could be implemented or amendments made to this specific bill that might deal with abuses by tenants.

Mr T. Mancini: I do not know what wording I would put in to prevent the abuses.

Mr Tilson: I am not looking for wording, just theories, I suppose. Obviously you have not thought of it. I do not mean to be providing a trick question.

Mr T. Mancini: I know. I do not have an easy answer for you. Just speaking for ourselves, we did not abuse it; we only did what we had to. It is hard to say put a cap of 10% or 3% or 8%, because some rents are unrealistically low so the percentage does not mean anything because the cost is still there.

Mr Tilson: Let me try another question. You have indicated that you will not have enough capital funding, yet the government, in this legislation, has confirmed that obviously it is going to encourage the increasing of municipal and provincial bylaw enforcement officers to step up the improvement of some of the landlord abuses, and there are some. There is also a new threat, this issue of neglect. We do not know what it means. If there is neglect, if it can be defined, rents will be reduced, yet you and many other landlords are saying, "We simply can't afford those capital improvements." You have indicated you are asking the question, what will happen with respect to mortgage people calling in the mortgages, but what will happen with respect to those situations, with respect to the work orders, with respect to the reduction of rents that may or may not come?

Mr T. Mancini: A landlord, if the worst comes to the worst, will just walk away. If they do not have the money, they just do not have the money. It is going to be hard to define neglect. That is a very tricky one.

Mr Tilson: Have there been any signs of that at this stage, of possibly landlords walking away from it because they simply do not have the financial resources, in this area specifically?

Mr T. Mancini: I do not know of any, no, not personally.

Ms Harrington: I would like to tell you what we see as our mandate as the Ministry of Housing in Ontario. It is a big picture. It is more than just rent control, but that is an important part of it. We want to provide a large number of options for housing in Ontario. That is our mandate, to ensure that there is a selection for people, whether they want to own homes, whether they have to be in the Ontario Housing Corp, whether they have a mobile home or whether they are part of non-profit housing or co-op housing. A very big part of ensuring that there is affordable housing in the future is the private rental market, which is exactly why you are here today. Our government believes this is a very important part of the future of Ontario's options in housing and we are willing to work with you. I think that is very clear.

Mr Tilson gave an answer as to why this bill was brought in. I would like to explain to you just why this bill was brought in. First of all, the basic reason is stability of rents so that people's rents will not escalate beyond their means without any control and their homes are taken from them under their feet. I think landlords can understand this. Landlords want stability. They do not want their tenants moving any more than the tenants do.

The other reason -- the previous legislation was a shambles -- is that maintenance is a very important part of this bill as well. We honestly do believe regulation in this market is important, is called for, is needed and is wanted in this province. Regulation is there in many other consumer areas. We think housing is a basic thing in your life and needs to be regulated. We will discuss the various percentages. I was going to ask you about some of the increases you have gotten in the past, but I will hand off to my colleague.

The Vice-Chair: Perhaps Mr Mancini could respond, although I did not hear a question.

Mr T. Mancini: I did not hear a question either. She just gave me their policy.

Ms Harrington: I was going to ask about your increases in the past, but maybe I can ask you afterwards.

Mr Perruzza: I just have a very quick question. One of the arguments that is traditionally made by landlords and developers is that if you removed rent controls, new rental housing stock would quickly be developed. Do you feel that is an accurate assessment? Second, what would be the market value levels in this area for new rental housing?

Mr T. Mancini: Would new apartments be built? That would only happen if the developers were confident that in a few years rent controls would not be reinstated. They need that confidence. Right now it is not there. What is the rental range for new stuff? For a two-bedroom I would say probably $750.

The Vice-Chair: Thank you, Mr Mancini. The time has expired. We appreciate the time you have taken to come before us today.

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SEIGNIORY TENANTS ASSOCIATION

The Vice-Chair: The next presentation will be made from the Seigniory Tenants Association, Margot Doble, president, and Kim Walsh. Good afternoon. Welcome to the committee. You have 15 minutes to make your presentation, if you would commence your presentation by identifying yourselves for the purposes of our Hansard.

Mrs Doble: My name is Margot Doble and I am the president of the Seigniory Tenants Association.

Ms Walsh: I am Kim Walsh and I am the general counsel for the Federation of Ottawa-Carleton Tenants Associations. This presentation is primarily Mrs Doble's, but I am here to answer some questions if need be.

Mrs Doble: I am here mostly to address this new rent control bill, Bill 121. As a healthy and active senior citizen living in a complex where the majority of tenants are in my position and living on fixed incomes, I would like to address the cost of the 2% allowed to the landlord, Urbandale Realty Corp. Although this bill is certainly a step in the right direction, certain amendments must surely be made to be fair to us all. The government is seemingly forgetting that the 2% has been compounding since 1987 and will do so until about 1992. This should have been a one-time increase and should not have been allowed to build up in the rents, as it is grossly unfair to the tenants. This government, before election, made many promises to the tenants, and now that it is in power it seems to be reneging on its promises. We feel we are not much further ahead in trying to get the government to listen to the tenants.

In all fairness, I should say that maintenance at the Seigniory has improved substantially, but the tenants in our complex, as compared to some other Urbandale properties, are responsible for the cost of our hydro. There is no air-conditioning supplied, nor are there any dishwashers. In addition, new tenants are responsible for the painting of their apartments. With the implementation of the GST, which augments the cost of our telephone, hydro, cable and any goods and services we purchase, why should we also have to pay the landlord's cost for his GST charge? This is double taxation as far as we are concerned and relieves the landlord's burden at our expense.

If these above-the-guideline increases continue, only the wealthy will afford apartments which were formerly occupied by individuals who had saved for their retirement so they could enjoy their golden years living independently and comfortably in the manner to which they were accustomed. If the escalating costs continue, these tenants will be spending the major part of their incomes on rent. It simply is not fair that they should be living from year to year in a state of uncertainty, not knowing what their rent will be the following year.

While I have addressed the senior group in our complex, I do not wish to exclude those who are still working. During this period of recession, some of them have been or could be laid off from their jobs. Others are getting no increases or a very small increase in salary, such as civil servants who are facing a 3% wage cap. Costs for these people are also escalating. Each year transportation goes up, the cost of gas, clothes, hydro and food and the like, but their salaries are not keeping pace. Tenants want to live in clean, safe surroundings, but what will be affordable to them if they continue to pay increasingly high rents so that the landlord can realize his profits?

In light of the foregoing, I feel amendments must be made to Bill 121 that will ensure fairness and affordability to all tenants and cease subsidizing the landlords for their extra costs. This bill, as its predecessor, provides relief not for the tenants but for the landlord. We ask, therefore, that great consideration be given all amendments put before you this day. Thank you.

Mr Tilson: As I understand it, your concern is what we have heard from many tenants' associations, particularly tenants' associations which consist of seniors, people on fixed incomes and people who are poor, who cannot afford any increases whatsoever. Of course this legislation provides for automatic increases, whether they are justified or not, or whether there may be situations where there perhaps could be reductions, but it does not allow for that. It allows for the landlord to continue getting those automatic types of increases.

I guess the concern our party, the Progressive Conservative party, has is with respect to the unfairness of that situation as opposed to the wealthy tenant. The wealthy tenants can afford all kinds of increases, if necessary, because many of them are living in luxury-type apartments and paying good rents and of course are just laughing at the system because they can continue to absorb very minor increases proportionately to what they are paying. My question to you is, realizing that inequity, should we even be putting forward this type of legislation? Should we be perhaps allowing for subsidies or allowances to individuals such as seniors who are on fixed incomes and cannot afford any increases whatsoever?

Mrs Doble: Most of the people in our building have been there many years and it is an old building. It is very well kept, actually, but I do not see that it is fair that the landlords have been getting increases all the time. Just as I have said, it is not fair. Anybody could see that, I think, because it is the landlord who keeps paying for whatever he has to do, which he gets at a very much lower cost than the tenant ever could.

Mr Tilson: This legislation will allow that to continue and that is why I am asking the question, why are we even having this type of legislation and how do you feel about that?

Mrs Doble: I still think it is unfair. I think the tenants have been getting it all the time and the landlords have been getting their fair share. There are no two ways about it. The tenant has kept paying and paying, and when I first came there we had to fight an awful lot to even get decent repairs made.

Mr Tilson: Do you feel the relationship between the tenant and the landlord in this particular area is deteriorating? You have seen an adversarial system even between committee members, the government's side and the opposition's side, and that adversarial system continues to increase and escalate even among people who come before us, the landlord position or the tenant position. Do you think that is the way to do things or are there other ways of resolving it?

Mrs Doble: No, I do not. I would certainly like to see the property managers meet with the tenants or the presidents and try to get to the points and see if we could not communicate a little better. But sometimes it is very difficult to get the property manager. They are always too busy or they are doing something or other because they want to avoid the issue, and when they do repairs in our complex, for instance, they are very shoddy. There is no follow-up at all.

Ms Harrington: I want to clarify one point that has been raised. The opposition has asked you whether you would be interested in a subsidy especially for people who are in need, such as seniors. On the surface that sounds quite feasible, but when you look at it the landlords are asking for a free market system in this province and then asking for a subsidy. This would be a pass-through directly from the government, not touching the tenants' pocket at all, but through to the owners of the buildings, and this would cause a $1.3-billion cost to the government. We have looked into it. I just want to clarify that point. It may sound like an option, but this is certainly not a fair system.

Mr Tilson: Good question, Margaret.

Mr Duignan: Thank you for coming along here this afternoon. I just want to get into amendments to Bill 121 a little bit. What would you like to see amended in Bill 121? What would be your first priority?

Mrs Doble: First of all I certainly do not agree with 6%. I think that is really exorbitant and it never seems to end. It keeps going up all the time and the tenants are getting really fed up. If you want to keep things on an even keel, some of this money, this 2% I was speaking about -- I do not know why that should never have been used, in other words, to make these repairs in buildings and so on and leave the rent as it was before.

Mr Duignan: You would want to see the annual increase just basically roughly at the rate of inflation.

Mrs Doble: I would like to see it back to 4.6%.

Mr Duignan: Around the rate of inflation.

Mrs Doble: And let them use some of the money they already got from us in the last few years. We keep paying and paying and the rents keep going up and there seems to be no end to it.

Mr Abel: You are on a fixed income, is that correct?

Mrs Doble: Yes.

Mr Abel: What percent of your income goes towards rent?

Mrs Doble: I do not think that is any of your affair. I have got my own financial affairs to look after and I do it, but I do not see why I --

Mr Abel: I was not trying to intrude. My point is, being on a fixed income and having to pay a large amount of your income on rent, how does that affect you personally?

Mrs Doble: I still do not think that is any of your concern. I have my own finances. How do you manage?

Mr Abel: If I had to pay high rents, I think I would find it very difficult. Thank you.

Mrs Doble: There you are.

Mr Grandmaître: Mrs Doble, I know you people have been going through some very difficult times for the last two, three, maybe four years, and I was very surprised at some of your remarks, Margaret, saying that $1.3 billion was a lot of money. I wonder where your government is going to get the money to provide us with 30,000 rental units in the next three, four or five years. But going to back to you, Mrs Doble, how many people or how many couples in your building are retired, 20%, 30%?

Mrs Doble: I would say more like 50% or 60%. They are mostly widows or widowers like myself. I am a widow. Now we are beginning to get younger people in. Some of the older ones have been there since the place was built. Of course some of them get ill and some die or they move into retirement homes. It is beginning to affect even the younger people because they are working and they are trying to get their food and they cannot go to work unless they look half decent. There are cleaning bills just the same as when I was working. It is very tough on them, and that is why I do not think it is quite fair.

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Mr Grandmaître: Your last rent increase was close to 20% or more?

Mrs Doble: Yes.

Mr Grandmaître: What was it before, let's say in 1988? Was it between 4% and 5%? What was the average before?

Mrs Doble: I think it was -- no, it was not 5.4%.

Ms Poole: Was it 4.7%?

Mrs Doble: Yes, something like that, Ms Poole, I believe.

Mr Grandmaître: But last year you were hit with --

Mrs Doble: Last year it was a little more, and then this year it was a little more again.

Mr Grandmaître: But 50% of your tenants are retired or very close to it?

Mrs Doble: Yes, perhaps even a little more, Mr Grandmaître. I see them coming and going, but a lot of them are, and a lot of them are not too healthy, you know. They have all lived there so many years.

Mr Mahoney: Just similar to the question I put to the last group, which was representing landlords, the costs that are passed on as a result of public policy decisions in areas like utilities or taxes, whether they are passed on to a home owner or a landlord and subsequently to the tenant, do you have any thoughts on some of those costs perhaps being paid directly by tenants, as opposed to through the system where the landlord simply absorbs it? Really, the problem I am getting at is that if you get double-digit increases -- we have got projected 44% increases in Hydro, we have seen double-digit increases in local taxes -- it is not something that you or the landlord can control or have any direct input in. How do you deal with that in the overall situation in this bill?

Mrs Doble: In our complex we pay our own hydro, of course, and then if the landlord decides that if the hydro goes up, which it certainly will, and he decides, "We'll put it on to the rent," then we are paying double hydro. The same thing with everything else. If you have a house, you do not go to your neighbour and say: "My hydro bill went up. Here's half of it." It is not fair. He has got the money, there are no two ways about it. In our case, he has had that 2% there for quite a few years, and we do not know where anything has gone. We are never told anything except that the rent goes up.

The Vice-Chair: Thank you very much. We appreciate your presentation today.

CLINIQUE JURIDIQUE STORMONT, DUNDAS AND GLENGARRY LEGAL CLINIC

The Vice-Chair: The next presentation will be made by the Stormont, Dundas and Glengarry Legal Clinic, Etienne Saint-Aubin.

At this point I would like to acknowledge that we are pleased that the Minister of Housing has joined us and she is in the audience. Good afternoon, Minister.

Hon Ms Gigantes: Good afternoon.

Mr Mahoney: Invite her up, Mr Chairman. The water is nice and warm.

The Vice-Chair: Actually, we had already made that offer.

Ms Poole: She is shy.

Mr Mahoney: I heard that. She has great confidence in her committee members.

Ms Poole: Or something.

Mr Mahoney: Or something.

The Vice-Chair: Good afternoon. The committee has allocated you 15 minutes. I will keep very close track of that. You make your presentation. The members would like you to reserve some of your time for questions and answers.

Mr Saint-Aubin: We appreciate the opportunity to have a few words to say about the legislation. We appeared before the committee when it considered earlier this year the temporary legislation, and obviously, because of the work that the legal clinic does in our community, this legislation is pretty well the most important that we have to deal with. We have summarized what it is we have to say today in the written material we have distributed. In essence, we support the legislation and feel that the committee and the government have done an excellent job at drafting legislation which in our view meets what we feel should be the main objectives of the reform in this area.

J'ai avec moi ma collègue Mme Bernadette Clément, qui est également avocate à la clinique juridique et qui apportera une autre dimension que nous trouvons importante pour le comité.

The four objectives that we feel should be uppermost in the minds of those who are reforming this legislation are: making the law simpler and more easily used; providing greater certainty to tenants and protection from increases substantially higher than the rate of inflation; and, very important, ensuring that landlords find it worth while to stay in the business of providing rental housing. We made that point when we appeared before the committee last February. We consider that there is a mutual interest in terms of landlords providing the housing. They will continue to do so if they find it worth while. Last, we have felt, and we were pleased to see that the legislation deals with this area, that a reform should more effectively promote quality in housing by providing incentives for adhering to property standards -- incentives both positive and negative; in other words, incentives both to create penalties, but also to make some sort of positive reinforcement. On the whole, we feel the legislation has met these objectives.

Dealing with the first one in particular, making the law easier to understand and easier to use, we recognize that the moment one embarks on an attempt to effect controls but also be fair to various parties, it is going to be very difficult to come up with legislation which is perhaps two or three lines of law. It is certainly going to be a difficult task to achieve, but in this area we do repeat that greater care has to be taken administratively, and in that connection I would defer to my colleague, because I do think that in this area our province has a lot to learn from the province of Quebec.

Ms Clement: My name is Bernadette Clement and I am a lawyer with the legal clinic in Cornwall. My comments will address the issues of administrative implementation of the legislation, and the understanding that the public will have of the legislation.

I think it is sometimes useful to compare the system we are trying to create here in Ontario to existing systems in other provinces. I am referring specifically to the system in Quebec. I have a background in civil law and some personal experience with renting accommodation in Quebec, specifically Montreal, and I think that the agency they have there, la Régie du logement, has gone a long way towards making the law accessible to tenants in terms of their understanding of what their rights are.

The Régie in Quebec is seen as an agency where people, including tenants, can go to find out what their rights are. For example, the Régie has a standard lease on which landlords must indicate the previous rent that was charged for the apartment, so tenants know right away what increase there has been and they can monitor it more closely and can question the landlord even before they move into the apartment, without the necessity of going to have research done at the rent registry to find out what the past rent was.

Many of the questions we get at the legal clinic indicate to us that there is a problem with the understanding of the law. We get a lot of questions that go to very basic elements of the law that show that the public does not have a clear understanding of what their rights are. This just underlines the fact that a lot of effort has to be put into the education and into making the law simpler and easier to understand for people.

The rent review services should be seen as a place that gives out comprehensive information and where tenants can go to find out what their rights are under the various pieces of legislation. We would hope that along with the new legislation comes a greater commitment to educating the public and simplifying the law.

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Je crois que nous pouvons nous inspirer du système au Québec lorsque nous essayons de créer un nouveau système ici en Ontario. En ce qui a trait à l'accès à l'information, nous pouvons beaucoup apprendre de la province de Québec. Les locataires au Québec ont beaucoup recours à la Régie du logement et ont beaucoup d'informations de cette agence-là. Les propriétaires indiquent directement sur le bail quel était le loyer demandé avant, donc le locataire est directement au courant de toute augmentation.

Nous espérons que, avec la nouvelle législation, il y aura un effort accru en ce qui concerne l'éducation du public et la simplification de la législation.

Mr Saint-Aubin: Just before leaving this point of making the system simpler, I must make the comment that it is hoped that the rent officers and the apparatus which is to be adapted to the new legislation will ensure that it does not get bogged down in unnecessary -- I use the term "legalistic fussiness." It is a growing trend among many administrative bodies to feel that they have to render judgements along the lines of Supreme Court of Canada judgements. What they are doing in this way is harming the public confidence in the ability of these bodies to give speedy answers to problems that people face. I recognize this is not the particular task of the committee, but I think the real proof of the success of the legislation will be in the hands of those who must administer it.

Moving perhaps to other areas, in terms of the protection of tenants, it will obviously be very necessary to more adequately explain the issue of maximum rent and how it relates to the cap of 9%. I think there is going to naturally be great surprise in some instances. We recognize and respect the concept of maximum rent, but this is going to be a sore point in many instances.

I think the objective of ensuring that being involved in this business is worth while has been met. I acknowledge that certainly that will not necessarily be the view of all landlords. Necessarily, one can understand that when there is some limitation on what one can make in this field, there will be naturally a certain displeasure there, but I think the legislation has done what it has to do in this area.

As a similar comment with respect to the question of providing incentives to adhere to property standards, although we would urge that the provision in clause 15(3)(a) -- there is a provision that prevents the recovering of capital expenditures for those that became necessary as a result of neglect in maintaining a residential complex. We think that all that provision will do is engender numerous disputes as to whether a repair is caused by neglect or whether it is ordinary maintenance. It is clearly going to be such a fine line to discern as to already take up a good chunk of the case load of a hearing officer. In the final analysis, if the objective is to make sure these premises are maintained and are of high quality, or of at least adequate quality, there really is not any point in that provision when you really analyse it.

The other issue of the rent registry is that we perhaps do not fully understand the rationale for excluding smaller units, because that is where the problem is. The problem is not so much with the larger premises. The problem in terms of finding out just what the basis for a rent increase is -- if cost is the issue, I think it would be legitimate to recover some costs through the charging of some modest fee to have access to that information.

We also feel that municipalities should be required to file the orders which they issue so that there is a closer intertwining of the efforts at upgrading the quality of housing.

We recommend as well a provision that is certainly in effect in Quebec, again, in this fundamental issue of knowing what the previous rent is, that this form part of the procedure of renting an apartment. I repeat that a lot of these simple, basic things are now in the public domain. It is now part of life. Even the least-informed person in Quebec knows this. That is not the case here. Rent review remains a mystery for most people here. Again, in conclusion, the success of this effort will be what administratively is done to put it right. Those are our submissions.

Mr Winninger: I would like to thank you first for your very constructive recommendations. Like Bernadette, I studied law in Quebec and I seem to remember they had a system there, similar to what is proposed in this bill, of pre-hearings. I wonder if you can share with us your experience as to whether those pre-hearings tend to cut down on the amount of time and expense incurred in the rent review system.

Ms Clément: I did not have very much direct contact with the pre-hearings. I know just from keeping in contact with some people who are still in Quebec and living in Quebec that, yes, it does cut down and it is very helpful. People feel they can get a solution much quicker. They do not sit back and say, "Well, there's no way we are going to deal with this because we won't have a solution before 8, 9, 10 months down the line." So, yes.

Ms Poole: Thank you very much for your presentation. I remember your presentation quite clearly under the Bill 4 proceedings and it was, I think, probably one of the most balanced and sensitive we had before our committee, recognizing the difficulties from both sides in this issue.

I would like to ask you about the property standards issue, which you also covered when you were before us last time. At that time, if I recall correctly, you talked about the carrot-and-stick approach and you said the problem with the RRRA was that it was all stick and very little carrot. While I welcome the government's effort to look at the maintenance issue in Bill 121, I read the provisions in here in sections 38, 39 and the other maintenance provisions as being all stick, stick, stick, and no carrot whatsoever. Many landlords have said they are in absolute fear that legitimate work which they are in the process of and goes into non-compliance for extenuating circumstances such as a construction strike, seasonal things, an underground parking garage that takes much longer -- in those instances they will be penalized. Have you analysed the sections in here relating to work orders and rent penalties, and do you have any comments on them?

Mr Saint-Aubin: I would limit our comments to the removal of the provision that will, I think, cause complications to parties when they are trying to put things right. I think the cap and being able to pass through most of the costs, at least to some reasonable extent, does adequately address the carrot side of things.

Mr Tilson: Mr Chair, I do not have any questions, but I do wish to put a motion on the floor as a result of the comments made by these two speakers.

The Vice-Chair: Mr Tilson moves that the clerk of this committee make arrangements for a presentation to be made on the Quebec process of rent control.

Mr Tilson: That is my motion, Mr Chair, if I could speak to that motion.

The Vice-Chair: Do you have questions for the presenter, Mr Tilson?

Mr Tilson: No questions.

The Vice-Chair: We will deal with your motion, then, in a moment. Thank you very much for making your presentation today. Mr Tilson has made a motion and before considering it I think we should consider our time, whether we want to back the presenters up at this moment, whether we should deal with it at the conclusion of hearings or deal with it right now.

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Mr Tilson: My comments are very brief, Mr Chair, as to why I am making the motion. We heard yesterday a presentation as to the process in British Columbia. Obviously the last two speakers have put forward some very good, sound reasons -- the committee would be irresponsible to report to the Legislature without hearing the process in Quebec, the very simple reason of trying to avoid a registry system. The idea of having the last rent listed on a lease or documentation would perhaps cut down if not completely eliminate the need for a registration system, which will indeed prove to be very costly to the taxpayers of this province.

Obviously these two speakers appeared to be sold on the process, at least in Quebec, and we should hear more about the Quebec experience.

Mr Mammoliti: I just wanted to ask Mr Tilson when he expects us to do all of this. Tomorrow is our last day. I understand the schedule ends tomorrow and we stop the hearings. I would like to know when you plan on doing this? Is it midnight tonight? Is it 3 o'clock in the morning? Tell me, I certainly would like to know. It was not reflected in his motion and it is information I would like.

Mr Abel: Yes, along with my colleague, I have some concerns about the time element, but there is certainly a lot of merit to Mr Tilson's request. I think we would all benefit by having somebody of that background come and speak to this committee. I would support the motion provided there is some kind of time frame or guidelines set out so we all understand in which direction we are going.

Ms Poole: I too support Mr Tilson's motion in principle. I do see a time constraint and perhaps when we go into the first week of clause-by-clause we could consider it then. The second thing I bring to the committee's attention is that during the Bill 4 hearings, when we had these presenters before us, they gave us some written information about the Quebec system which is on file with the clerk. If we could ask her to file that with us when we get back to Toronto that would be also helpful.

The Vice-Chair: It appears to me that there is general agreement on the committee that we would like to hear someone expert on the Quebec system. May I suggest to the committee that the subcommittee attempt to schedule that person at the earliest possible date, whether tomorrow or some time in the future.

Mr Tilson: Just to respond to some of the questions that were asked, specifically Mr Mammoliti's, I do not intend to suggest we interrupt the presentations made to this committee, but this type of presentation, I feel, could be made at any time, certainly prior to the clause-by-clause, perhaps immediately prior to the clause-by-clause discussion. It might also assist committee members in considering whether there should be any amendments to the legislation. I do not think the scheduling we have put forward should be interrupted, and this presentation could be made at a later date.

The Vice-Chair: Mr Tilson has made a motion that the committee invite a witness to testify regarding the Quebec rent control or review system.

Motion agreed to.

Ms Poole: I would like to make a brief request of the Ministry of Housing. The presenter mentioned that in Quebec they have a standard lease which contains the rent the previous tenant was charged. In my estimation this might fall under the Landlord and Tenant Act. I just wondered if the ministry could confirm whether this would be within the scope of Bill 121 or whether it would have to be an amendment to the Landlord and Tenant Act?

Ms Parrish: Of course, I would have to look into that further, but my view is that it would require an amendment to the Landlord and Tenant Act because, unlike Quebec, where rent review and landlord and tenant relationships are governed by one statute, in Ontario they are separated because of the court jurisdiction issue. So it would be a different statute in my view. I will look into that further. In Quebec people are actually required to have leases, whereas in Ontario they are not, and many people in fact have month-to-month tenancies in Ontario. Again, it is a different system, but we can look into that.

LEXINGTON TENANTS ASSOCIATION

The Vice-Chair: The next presentation will be made by the Lexington Tenants Association, Mr Hooper. You have 15 minutes to make your presentation. I think you have been here for a few minutes and you have seen the way the committee operates. I will let you introduce yourself and begin your presentation.

Mr Hooper: My name is Ken Hooper and I am the chairman of the Lexington Tenants Association, which is a tenants' association of a relatively old apartment building built in 1960 at 507 Riverdale Avenue.

The purpose of this submission is to correct the present inequitable state of the law where some tenants who are paying market rents are denied the protection of the law because the landlord is a government. I give the Lexington as an example of this.

This apartment building was purchased by the city of Ottawa non-profit housing corporation in July 1989. As a result of this change of landlord, the tenants lost the protection of the Residential Rent Regulation Act and the Landlord and Tenant Act.

Subsequently, tenants have been charged a 6% annual rent increase in 1990 when the Ontario guideline was 4.6% and a 6% annual increase in 1991 when the guideline was 5.4%.

Furthermore, some tenants were charged more than one increase in a 12-month period. Thus, tenants paying market rents for units which are by definition profitable to the landlord and are not subsidized by the taxpayer are paying annual increases in excess of the government's own guideline.

According to the compendium on rent control sent to me by the government of Ontario, Bill 121 will continue the above inequity. I refer to page 1, paragraph 5, in the compendium.

Therefore, the present brief proposes that equity be restored through the following amendment to Bill 121:

"That in the case of units attracting market rents in non-profit housing corporations financially supported by federal, provincial or municipal governments the landlord may only increase the rent once every 12 months and the increase in rent will be limited to the guideline increase."

That is it.

Mr Grandmaître: Can you brief this committee or explain to us how your people were charged or were asked for more than one increase in a 12-month period? Were these tenants under a lease?

Mr Hooper: Some were, some may not have been. The point is that about two years ago when the building was taken over all the tenants had leases. The building was taken over in July. Some tenants' leases had expired. They had taken out new leases and so they had in fact paid and they had paid a rent increase in the year for the period immediately before the building was taken over. Then when the building was taken over -- CityLiving runs to a different set of rules. Come January, CityLiving applies its increases, 6%, and some people got the increase in March, but still, within the 12-month period they had had two rent increases. Then the next year, 1991, some people who had paid an increase in the previous March were now due for an increase in January, less than a 12-month period, so they had paid two rent increases in less than the 12-month period.

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Mr Grandmaître: In other words, when the city of Ottawa, the non-profit people, took over or bought the building, no new leases were demanded by your tenants or your group, you just went along with the existing lease?

Mr Hooper: We did get new leases, but the curious thing about our new leases is that they are only made out for one month.

Mr Grandmaître: That is what I am -- okay, thank you.

Mr Mahoney: Generally, in the non-profit sector -- as a member of the board of Peel non-profit for nine years -- we made our decisions for rent increases based on cost pass-through to the tenants. We would calculate the costs to the corporation and pass them along. This bill treats the private sector in a sense where they are saying there is no relationship to cost pass-through. You can apply for 3% above the guideline for extraordinary costs, as an example, yet they give no such requirement in the non-profit field. So in essence it appears it is a double standard for government-operated facilities and a hammer being brought down on private-sector-operated facilities.

I just wonder, if your corporation operates on the basis of cost pass-through, does it justify that cost pass-through to you? Do you know what the costs are when your rent is increased, and do you think it is fair that there be a double standard? Who is on your board?

Mr Hooper: I have tried to find out what the formula is, specifically what the formula is, not just to be told in a rather paternalistic fashion, "The government of Ontario consults appraisers who base your rent increase on what the appraisers consider to be the market rent."

Mr Tilson: Obviously, non-profit housing corporations such as the one you are involved in are legally a separate unit. I do not know how long you have been on this particular board, but can you tell us what influence the Ministry of Housing or its representatives have in making decisions with respect to your building?

Mr Hooper: It is difficult for me to say, actually. I know that for rent review, as far as the Ontario government at 10 Rideau Street in Ottawa is concerned, when we were taken over by CityLiving, we ceased to be of any interest to them.

Mr Tilson: That is what I had heard, and that was the purpose of my question.

Mr Hooper: Yes, we ceased to be. However, recently, as a result of my writing a letter to the minister, I have received a phone call from them.

Mr Tilson: What did they say?

Mr Hooper: It was pertaining to the business of trying to find out the formula that is used to decide on our rent increase. But I have not had any luck, not specifically; I am just told, "Well, it's appraised and that's the opinion of the people who appraise."

Mr Tilson: I have a feeling after your appearance today the minister will be co-operating, hopefully. Those are my questions.

Mr Mammoliti: I just want to ask a quick question, then I am going to hand it over to my colleague. Have you been living in the building? Have you noticed a drastic change, whether it is positive or negative, when we talk about maintenance?

Mr Hooper: That is a very complex question, surprisingly, because the maintenance situation has changed more or less year by year. If we go back to the period before CityLiving took over, the situation changed yearly as the building changed hands. The building has been flipped about five times in five years, and on each occasion pandemonium reigned. As the new owners took over, they either did things or did not do things.

Mr Mammoliti: Has response time been better since the city has taken it over, as far as maintenance calls are concerned?

Mr Hooper: In some respects better, but it always takes a lot longer. We do not have the situation where the owner of the building was informed of the death of a tenant whom we could not get to because the apartment was locked from the inside and the owner's keys were not available. We do not get the owners telling us that he is completely indifferent to the death of the tenant, it means nothing to him, and he does not really care wither it takes an hour or a day to get to the body.

Mr Winninger: Thank you for your submission. I would like to explore with you a few of the differences between private housing and social housing. Of course, there are many more forms of social housing than non-profit like you live in, in the co-op and publicly owned housing. There are many reasons why rents, for example, might rise twice in one year if you are dealing with the individual rent payer rather than the unit itself, because if the rent payer's income goes up, then he needs less assistance on his housing.

Mr Hooper: Yes, but that does not apply to the tenants I am representing here. The ones I am representing are the ones who are paying market rents.

Mr Winninger: Okay, let's look at the market rents, then, for a moment. Given that there is a waiting list for social housing right now and that people at the top end of the scale who are paying market rents have the choice to remain where they are and be exempted from rent controls or to move to a rent-controlled building, why then would we want to impose the same restrictions on residents of social housing that we do in private housing?

The other thing I would point out is that some of those tenants, who may, for example, be on family benefits, would have received a 10% increase in the housing component of their family benefits to cover just this kind of increase that you have referred to. Other people may of course work, and their income for housing may not have gone up as much. Then they would have to decide whether they would want to move out or not. Maybe you have some response to that?

Mr Hooper: Well, yes. My response is that I am only referring here to those tenants who were in the building when it was taken over and therefore are paying market rent. I know nothing about the formula that CityLiving uses in order to decide on the rents for those other persons who are being subsidized.

Mr Winninger: Mr Mahoney said it comes down to passing through the costs of running the building, and if they do not pass through the costs, where is the money going to come from?

Mr Hooper: Apparently it is going to come from us. The tenants who are not subsidized are going to be subsidizing the subsidized tenants.

Mr Winninger: Are we out of time?

The Vice-Chair: Unfortunately, the time for your caucus has expired. Thank you, Mr Hooper, for presenting to us today.

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OTTAWA REGION LANDLORDS' ASSOCIATION

The Vice-Chair: Our next presentation will come from the Ottawa Region Landlords' Association, Elat Lerner. Good afternoon, welcome to the committee. You have 15 minutes to make your presentation. I would appreciate it if you would leave some time for the members to have a discussion with you. If you would identify yourselves for the purposes of Hansard, that would be appreciated.

Ms Lerner: I am Elat Lerner. I am the president of the Ottawa Region Landlords' Association. With me today is Angela Del Giudice. I guess between the two of us we represent a major force in the Ottawa Region Landlords' Association.

We are a volunteer organization. We were founded in 1987. Unlike tenant associations, we are not funded by taxpayers' money. Both of us here today are taking time off work at our own expense to appear before this committee. At the moment we have over 300 members in our association. We are growing fast. Most of our members are very, very small landlords.

There are about 42,000 landlords in Ottawa-Carleton. Some 40,000 of those are very small landlords. They own one or two units. There are only about 2,000 landlords that own three or more units. Despite what you might hear, we are not well financed, and we are not well organized, obviously. Most of those 40,000 people are working people and retired people. They own single homes that they rent out, garden homes or condominium apartments.

We have been accused of buying properties at inflated prices and passing on rent increases to tenants. Let me give you some facts about small landlords. In Ottawa-Carleton today, if you are buying a unit to rent out, if you bought a condo apartment, the starting price is about $70,000, town homes start at about $90,000 and single homes go for about $140,000. You might say that they are inflated prices, but it is really not up to us. We are competing with home owners out there, and with home builders who demand that kind of price for their property. If we want to buy property, that is what we have to pay for it.

I would like to just go through a little mathematical exercise with the people here today. Let's say I had $70,000 and that I worked and I saved and I want to make sure that my future is protected. I have $70,000. I can take the $70,000, put it in the bank, GIC, get maybe $7,000 a year in interest. It is totally risk-free. It is totally hassle-free. All I have to do is make one trip to the bank, put the money there, and just sit back and get $7,000 a year. On the other hand, I could take this money and buy a condominium apartment. That is probably the most modest unit I can buy today -- $70,000 is what it would cost me -- and rent it out. When I do that I immediately let myself in for a lot of hassle.

Just to give you a few examples of what a typical landlord goes through. You have to rent the unit, so you have to show it to prospective tenants. I live in Kanata. My property is in Gloucester. I have to run back and forth many times until the unit is rented. I set up appointments with tenants. Many of them do not show up for the appointments and I have run back and forth for nothing.

People are calling me at all hours. I work during the day. I have a regular job. In the evenings, instead of spending time with my family, I answer the phone for all those people who are calling for my ad in the paper. This is happening evenings and weekends, when I really would like to spend time with my two-year-old son. But I have to do it because I am a landlord.

Then, when the unit is finally rented, I have to collect the rent, I have to go and put it in the bank. Every once in a while there is an NSF cheque. I have to contact the tenant, go through the whole story of getting another cheque. I have to appease my disgruntled neighbours, because sometimes the tenants have wild parties and the neighbours are a little bit upset about it. So I have to spend my time trying to make everybody happy.

There are repairs that need to be done to the apartment. Sometimes those repairs are just ongoing repairs -- the fridge, something happens to it, and you have to call the repairman. At other times it is deliberate damage caused by tenants. When there is a lot of deliberate damage caused by tenants, obviously the tenant usually will not want to pay for it. You have to go to court. As a small landlord you cannot afford a lawyer, so you have to take time off work again and go to court and try and prove your case. Some tenants break their lease. You find out that your tenant has taken off on you in the middle of the night, and here you are -- you have to rent the unit again. That is just a little taste of what kind of hassles are involved in being a small landlord.

Let me tell you about the risk of being a landlord. Tenants will tell you that there is no risk; it is just money in your pocket. There are acts of God, there are fires, floods, whatever, and then there is the odd tenant who does not pay his rent. You still have expenses, you still have to pay everybody else, but your tenant has not paid rent. Sometimes the unit is vacant because you cannot rent it for one reason or another. You cannot collect rent. Sometimes the tenant damages the unit and you have to repair it at your own cost. Sometimes, when you are finally sick and tired of the whole thing and you just want to sell it, you can sell it for a loss. You can sell it for less money than what you paid for it originally. This is just a little taste of what it is like to be a small landlord.

Let me tell you about the costs that are involved in this purchase of a $70,000 unit condominium that we are just now renting out. A typical condo fee is about $1,800 a year, taxes about $1,200 a year, painting the unit and repairing the odd things that go wrong is $500 a year. The landlord's time for doing all those chores is provided free of charge. No cost to that -- that is free. Total cost per year is $3,500 for this typical modest unit.

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We have to rent this unit out and we have to set the rent for it. What is affordable rent for that unit? The average rent in Ottawa/Carleton, according to the latest statistics I am aware of, is $580 per month. This is for all types of units, not just your modest little condo apartment that we just bought for $70,000. This is the average rent in this region. The tenants tell us that is too high, $580 is way too high. So let us provide it at an affordable rent of $500. Again, I am sure the tenants are going to tell you that is way too high.

Let us say we do that, $500; $500 is $6,000 per year in income from rent. A little arithmetic here -- income $6,000, expenses that I just explained to you, $3,500. What is left in your pocket is $2,500. You could have taken your $70,000, put it in the bank, risk- and hassle-free, and gotten $7,000. But, no, you invested in real estate and you rent it out and you get $2,500 per year. Again, if you put it in the bank, there would have been no risk, there would have been no midnight calls, nobody would call you on Sunday, and you could spend time with your little son.

So, everybody asks me, "Why do people invest, why do people become landlords?" We find that landlords belong mainly to three groups of people. One group of people is new immigrants to this country, without proper skills or language, and they think that is the best thing to do with their money. A second group of people, a large one, is women. Women are used to working very hard for nothing. We are conditioned to do that.

Ms Harrington: I agree.

Ms Lerner: There is also a third group of people -- and those were the many people who were lured in by all kinds of glossy promotions of tax shelters. They were told they were doing the right thing. They were taken in by that, and the government is supporting that. They like people to buy those tax shelters.

As a matter of fact, I would say that the NDP government of this province is --

The Vice-Chair: You have three minutes left.

Ms Lerner: Okay. The NDP government probably would like to promote this too. How else would you explain the fact that this coming legislation has exempted only one group of buildings, and those are the new buildings. They are not under rent control for five years. Why is that? Landlords that are already in it, many of them had no idea what they were getting into, and they are now stuck holding the bag.

In closing, I would just like to say that this issue concerns all Ontarians. It concerns landlords, it concerns tenants, and it concerns mostly taxpayers, because they will be the ones holding the bag when all small landlords decide not to be landlords any more. There are 60,000 units out there that are owned by little guys, and those units are disappearing off the market at an alarming rate. They will have to be taken up by government-provided accommodations -- and that is going to cost the taxpayers through the nose. I guess I will open it up for questions.

Mr Tilson: I listened to you tell us how your organization is increasing, obviously to protect yourselves from the complications of rent review and rent control. People are hiring lawyers just to understand the forms, let alone the need for accountants. It is mind-boggling.

Since you do represent the small landlord, I would like you to give me your comments very briefly as to the need to register the small unit. As I understand it, even one unit, a tenant who rents a house, for example, or a basement apartment, could insist that a particular unit be registered.

Ms Lerner: I guess we have no problem with the philosophy. The only concern we have is for the taxpayers. Obviously it is going to cost a lot of money to the taxpayers, and we do not like to see that.

Mr Perruzza: There are a few issues that I wanted to explore with you. I would like to thank you, first of all, for the lesson in simple mathematics. If we were to take your rather simple mathematical formula, it would cost about $1,000 a month for someone to rent out your $70,000 condominium unit, and that would probably carry a mortgage of about $90,000 a year. I would not need to rent my condominium unit from you, madam. With that kind of money, I would go out and buy my own.

Mr Tilson: Or get a co-op.

Ms Poole: Virtually every presenter who has come before us has commented on the double guideline and has said it is needlessly confusing. This is whether it is a tenant or landlord who has made his presentation. They have said the operating costs for a small landlord and a large landlord are not significantly different, that it would really be a difference between, say, old and new buildings that would be more significant. Can you make any comment on that? Do you like this idea of a double guideline, where small landlords get one, and anything over seven units -- which many people would argue are still small landlords -- they get a smaller guideline?

Ms Lerner: Really what is happening here is not that the smaller landlords have been awarded a larger amount, but the small landlords are being awarded the same amount that they were awarded before, and the large landlords are being offered about 20% less. As a small landlord, are you asking me, am I just very pleased with the idea that the large landlord is going to be socked even more than we are? The answer is no, it does not make any difference to us.

The Vice-Chair: The time, unfortunately, has expired. We appreciate your presentation today.

HOUSING HELP

The Vice-Chair: The next presentation will be made from the Housing Help/Aide-Logement, Lisa Jamieson and Robert Garrod. Good afternoon. The committee has allocated 15 minutes for your presentation. I believe you have been here for a few minutes, so you maybe know the procedures we will follow.

Mr Garrod: Thank you, Mr Chairman, for giving us the opportunity to come before you again. We were able to respond to the green paper, and in our opinion the legislation is a considerable improvement over the old one.

Housing Help is a community-based information assistance agency that tries to help people who are suffering considerable housing distress, principally in the middle of the city. It also takes on an advocacy position in order to help these people.

We deal with about 20,000 contacts a year in this city and about 900 of them are really housing-crisis cases, which need very strong individual attention. There are 81% of our clients who live in market rental housing who have an affordability problem. About half of those, at least, are paying more than half their income in rent. So we are really dealing with tenants at this level. The rent legislation is a very important concern for them, and for us in trying to assist them.

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When we wrote a brief on this before, we felt that the legislation should go through a number of tests. They were: simplicity, user friendliness, responsiveness, efficiency, fairness and accountability. We are not at all sure that the legislation in fact meets our test on these accounts.

I am going to ask Lisa to respond to these items very briefly one by one. I think our staff have put together a very excellent brief on this subject and I do commend it to you.

Ms Jamieson: The first point, then, is simplicity. Just as Dianne was saying, our major concern with this piece of legislation is that it is not simple, and the double guidelines are one of the major reasons. Another major reason is the differences in carry-forward between the different size of buildings. Third, there are all of these regulations still outstanding that need to be presented and we need to be assured that those, as well, would be simple or simpler than what the legislation is indicating they might be.

Simplicity and user friendliness go quite well together, actually, and because it is not simple we do not think it is going to be terribly user-friendly. First of all, we are afraid that tenants are going to be somewhat at a disadvantage because of the complexity. They are going to require assistance to get through this and they are going to, therefore, require some kind of fund to be able to understand the legislation or services that are not at their disposal, or at least not as available as to landlords who could afford it better.

We are concerned about the potential of user fees being set. There is a provision in the legislation to prescribe user fees. Again, this is not going to make the system user-friendly. It is going to make it inaccessible.

In terms of the regulations, tenants and landlord groups need to be consulted to provide input to whatever forms are being established, whatever kind of guidelines are being established, and there need to be comprehensive public education campaigns that use a variety of languages and mediums in order to get at the whole of the Ontario population. That needs to be done by the province in order to ensure that people actually understand what this is all about.

As well, there are going to be additional resources necessary at rent review services. Right now, we can phone for days on end to the one line at rent review services and not be able to get through. If we are having a new system and whole new rules to follow and more registered rents and everything else, we are going to have to make sure that we can have that system accessible to people.

In terms of responsiveness, Housing Help indicated in its original document that we needed a system that was responsive to both landlords and tenants. I think the legislation indicates that, yes, capital expenditures for landlords are being well considered. It is in the annual guideline and then they are able to go for increases above the guideline. Tenants, on the other hand, are being considered in terms of claiming rent rebates for illegally charged rents or for a decrease in services, etc.

Although there seems to be some attention to tenants' concerns, I still think that there are some things missing. For instance, appealing the landlord's application for increases above the guideline still places the burden of proof on tenants to show neglect or to show that the replacement of whatever it may be is necessary. Landlords can apply for whole building reviews but tenants are left to individually fend for themselves, basically. So if there is an illegal rent, they have to fill out the form. Although the rent officer might add other people's names to the form, it is still very individualistic that the tenants are left to fend for themselves. So what we are saying in terms of responsiveness there is that we need to have a more proactive system which picks up on illegal rents. Things like that I can discuss a bit more in detail, because we have a situation to tell you about.

Efficiency is another item that needs to be a part of this rent control system. What we mean there is a system which minimizes bureaucracy and delays. We have a feeling that Bill 121 in the property standards section, sections 34 to 41, is going to be very problematic in terms of the efficiency element. That is because there is nothing clearly stating how municipalities are to go about forwarding work orders. Who in the municipality is going to be responsible? What is the time frame that municipalities are going to have these work orders in to the province? All of these things are unclear, and we do not think this is going to work unless they are clarified.

As well, in terms of efficiency, we do not think that the rent penalty is going to be a particularly strong method of making landlords comply with outstanding property standards orders. A 6% claim that you can have one year is not going to do a lot if the landlord is not willing to do the repairs. What needs to be in the legislation is something which actually ensures that the work gets done. The penalty might be there but there is still nothing to ensure that the work will get done.

In terms of fairness, we think that Bill 121 is not totally fair to tenants, because capital expenditures are being paid for twice. It is relying totally on a cost pass-through system to tenants to pay for capital expenditures. We do not think that that is a fair system, and I can speak to that again in a little more detail later.

Accountability: We are saying that the rent control system needs to be accountable to the public and to its users. From our review of the system, we do not think that a single level of hearing system is going to be terribly accountable. There is no level for appeals on administrative errors and factors such as that, and we think that a second level of hearings is necessary if it is really going to be accountable. As well, the other problem in terms of accountability we see with Bill 121 is that landlords are not being made to be accountable for the 2% of the capital expenditures they are receiving annually and they are still able to go ahead and apply for an increase for capital expenditures without really accounting for what they did with all their 2%s in the years previously.

In terms of specific comments, there are a few things that Housing Help has dealt with a bit more personally that I wanted to emphasize. The maximum rents concept is quite a difficult concept, and we had proposed in our consultation response that we look at getting rid of the maximum rents. It is still in Bill 121, and what we are seeing is that landlords are of course going for the maximum rents. So right now we have seen quite a few tenants who are having increases beyond the guideline because landlords are catching up with their maximum rents.

What we would like to see in Bill 121, if there is not going to be an abolition of maximum rents, is at least a cap so that if landlords are going to catch up with their maximum rents you place a cap on how much they can take at a time. The cap principle seems to be coming out in the capital expenditures. I think it could be also carried over to looking at maximum rent increases.

Second, in terms of increases for capital expenditures, as I said, it is a system that relies totally on a cost pass-through system to tenants and we do not think that is fair. The definition of capital expenditures in itself is unfair because it contemplates rent increases for tenants without considering the common financial structure of rents. What we mean there are the costs of normal maintenance, the provision of replacement reserves, and the cost of modernization and improvement. The first two factors are already a part of the rent. It is only the latter, the modernization and improvement, that should be eligible for increases above the guideline. We are saying that prudent landlords who purchase buildings, when they are contemplating the price, would be deducting whatever costs are necessary to bring the building up to repair.

While depreciated capital expenditures caused by neglect are not eligible for increases above the guideline, we must argue that it is an overwhelming contradiction in this whole section of Bill 121. If a structure has not been maintained to municipal health and safety standards or has been allowed to lose its physical integrity, or if the essential services have not been maintained in a serviceable condition, then one can conclude there has been neglect. Furthermore, if section 15 is maintained in its present form, we feel that it is going to become the burden of the tenant to have to prove this neglect.

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What we are recommending is that section 15 be altered, quite radically actually, to limit eligible capital expenditures to those items which are not already included as a part of the rent, which would leave only modernization and necessary improvement work to be covered by increases above the guideline.

The next point we are going to talk about is reduced rent based on decreased operating costs. While we applaud the provisions of Bill 121 which enable tenants to apply for rent reductions based on decreased operating costs, we do not really think it is going to work terribly well. The first reason for that is that the tenants do not have access to the landlords' costs -- their figures for their hydro and their taxes, etc.

The second reason for that is that in present economic times it seems pretty unlikely that landlords are going to actually experience a 50% decrease in these costs; so what we are suggesting, first of all, is that landlords need to file with rent review services this section of their costs. They need to file their taxes, their hydro, their heat, and their water for the year, annually. Then what also is needed is that the legislation be changed to reflect a more reasonable number in terms of what the decrease in costs should be before tenants should be eligible to apply for a rent rebate. We are suggesting that that might be 10%; 50% of a decrease in operating costs for these things just does not seem reasonable. The landlords can claim capital expenditures over 2% when they have something but the tenants have to wait until it goes down to 50% on the landlords' costs before they can apply.

The one thing that we wanted to say about illegal rent increases is that we have been very strong in terms of trying to advocate for a system which is proactive for tenants. Just to give you an example of what we see: We had a tenant come in who was considering moving from his unit because his rent was going up and he could not afford what the new rent was going to be. Just as a routine check that our case workers do, they checked into the maximum rent.

The tenant was being charged higher than the maximum rent, so the whole process of making a rent rebate was pursued, but what Housing Help did and what we would like to see the rent review services do in the future is take a proactive stand. We went out to the building and we contacted people door to door and we contacted them in writing as to what their maximum rents really were. It was a 22-unit building. We got 11 contacts. About half of the people there had illegal rents. So we have opened up this process where they have been informed and they are applying for rent rebates. The rebates that are coming to these people hopefully range from somewhere between $50 and there is one that is over $7,000, which is not even going to be able to go through rent review services. He has to take it to court. He has been living there years paying too high a rent.

We are suggesting very strongly that the rent rebate system needs to be a proactive system.

Finally, the section on compliance with work orders and sending the work orders, as I mentioned, we do not think is going to work terribly well because there is nothing clearly in the legislation which says "This is who has to do it at the municipality; this is when it needs to be done," and so we we are suggesting that these regulations have to be clearly prescribed in the documentation.

Second, I think it has to be considered that municipalities, under this legislation, are going to be under an additional burden in terms of paperwork. There are things they are going to have to do that they did not have to do before. As well, there are municipalities out there that are not even doing any property orders. They might have the municipal bylaws but they are not actually issuing the orders. So in order for this to work, the province needs to make sure that municipalities are actually complying with their own property bylaws and they have to also ensure that the municipalities have the resources to effect the things that are in this legislation.

I think that is probably all I am going to say, so I just want to say thank you. Bill 121 is definitely an improvement over the RRRA, but there still are things that we need to see changed.

The Vice-Chair: Thank you very much for taking the time to appear before us today.

Ms Poole: Any time for questions?

The Vice-Chair: No time for questions. Actually, they had about a minute and a half over.

MINTO TENANTS' ASSOCIATION, PARKWOOD HILLS AND NAVAHO PLACE

The Vice-Chair: The Minto Tenants' Association, Parkwood Hills and Navaho Place, Bob McCormick. You have been allocated 15 minutes by the committee. You can use it as you will, but we always appreciate some time for questions and answers.

Mr McCormick: My name is Bob McCormick and I am speaking on behalf of the Minto Tenants' Association, Parkwood Hills and Navaho Place.

I wish to speak on behalf of the tenants of the roughly 2,600 rental units owned by Minto Developments Inc in Parkwood Hills and Navaho Place in the riding of Ottawa-Rideau. Back in February of this year our association made a presentation to the committee to show our support for Bill 4. Tenants in our community were well satisfied when they learned of its passing, because many would have faced an increase of as much as three times the guideline amount. Bill 4 gives tenants much-needed temporary protection from such large increases; some would have faced an affordability problem and would have strongly disapproved.

Bill 121 allows for a guideline increase each year which will help protect tenants from large increases. Part of this guideline, the capital cost component, sets aside 2% of all rents to be used for repairs as needed. This amount compounds each year, continuing to increase in value. In some years the landlord may do repairs which require the use of this amount. In other years perhaps only some of this amount will be used, or maybe even none at all. The other component of the guideline allows the landlord to recover his operating costs. This arrangement is fair; we agree with it and encourage the enactment of this provision.

We are concerned about the possibility of rent increasing as much as 3% above the guideline. The previously-mentioned capital cost component of 2% has been compounding over the years. A landlord ought to prove that this accumulated amount has already been used for previous capital costs or extraordinary operating increases before being allowed the extra 3%. In some cases an above-the-guideline increase of only 1% or 2% may be all that is justified to cover the extra expenditure. Once the above-the-guideline increase has been approved it continues to remain in the rental amount in succeeding years, even if the extraordinary operating cost decreases or the cost of a particular capital expenditure has been recovered.

Even more troublesome to tenants is the possibility that an additional 3% above-the-guideline increase could be approved for the following year. Once this increase is in the rent, it too will compound, even after the landlord no longer bears the extraordinary costs. We recognize a landlord's right to be able to recover extraordinary expenditures in a reasonable amount of time and to earn a fair profit, but we are aware of the potential of his receiving windfall profits in future years, years in which he might not make large expenditures. The rent review office ought to carefully consider such factors before allowing above-the-guideline increases.

We are fortunate to have a landlord who acts responsibly in carrying out necessary major repairs which ensure a building's structural integrity and the tenants' safety. We are confident that Minto will continue to do so in the future. At the same time we wish to emphasize the importance of affordability and that above-the-guideline increases only be allowed if the landlord can prove he would be in financial difficulty or face bankruptcy without them.

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Also in the interest of affordability we recommend that the Bill 4 retroactivity be maintained, as tenants only expected the guideline increase and have budgeted accordingly. An additional increase will lead to disappointment, insecurity, financial difficulty and, in some cases, economic eviction. Many tenants wish to remain in their present units and are willing to pay reasonable rent but do not approve of large increases for one or several years. We could more readily accept above-the-guideline increases if the 2% capital cost component were eliminated, which would in turn reduce the annual guideline. Under these circumstances, however, rent review's workload would be much greater.

We would like to make several other suggestions that will help ensure that we do not encounter any unpleasant surprises. We approve of this bill no longer allowing a landlord to apply for a rent increase due to such factors as changes in interest rates and below-market rents. We support the strengthening of the rent registry, as this will encourage consistency in the setting of rents and will protect tenants from being charged illegal rents. Tenants in our community are again fortunate to have a landlord such as Minto, for both the actual rent and the maximum legal rent are usually equal. There ought to be an amendment to ensure that they always are in order to protect tenants from an unjustifiable and unexpected increase. When the actual rent charged is less than the maximum legal rent, tenants run the risk of a landlord asking for an increase larger than the guideline.

The other major issue of interest to tenants is maintenance. Here again Minto is to be commended, for, based on what our association has heard, it generally does well in carrying out normal maintenance and minor repairs. A majority of tenants in our community believe that upkeep and service are satisfactory, although a few would like to see more attention to specific cosmetic items.

We support the provisions made in this bill that ensure adequate maintenance will be performed. We anticipate very few incidents of a tenant needing to have a work order issued to Minto, if any at all, for maintenance because of the thorough program our landlord presently follows.

We support this part of the bill which ensures that the units of all Ontario tenants will be acceptably maintained. We will be able to count on continuing good maintenance and will be able to have problems effectively resolved if we encounter any.

We approve of the provision made for the Minister of Housing to appoint a director of rent control, provided that a suitably impartial individual is chosen. The other officers and inspectors ought to be impartial as well. Our association appears to have a good rapport with Minto and is confident that it will continue to. We are in favour of resolving matters without a hearing.

Still, a hearing may in some cases be necessary and we would hope that a conscientious and unbiased individual will preside over it. Perhaps an amendment could be made that would allow a decision of a hearing to be appealed to an equally unbiased individual prior to it being appealed in court. Tenants and tenant associations cannot easily acquire the same legal representation as can landlords.

We at the Minto Tenants' Association, Parkwood Hills and Navaho Place, appreciate your giving us an opportunity to express our opinions of this vitally important bill. We strongly support some of the provisions in it and encourage you to consider amending some of the others so that tenants can look forward to years of affordable and well-maintained housing. We give our full endorsement to the presentation to be made at six o'clock this evening by Mr Dan McIntyre of the Federation of Ottawa-Carleton Tenants' Associations and strongly encourage you to adopt his recommendations.

I thank you, committee members, for your attention and I thank the tenants who came here to show their interest and support.

Ms Harrington: I think, as you have stated, the tenants in Ottawa are indeed fortunate to have some good landlords, hopefully all of them, and also some people here who have done a lot of work and who know what this proposed legislation is all about. We thank you for that. We keep hearing it.

I would like to let you know the situation we are facing. We know that the people of Ontario want regulation in the housing market and that is what we are doing here, but there has been a speculation in the last few years, with land prices increasing so much that it has caused a problem for people, ordinary people like the woman a couple of presenters ahead of you, who were led to believe that this was a guaranteed investment. And certainly that system they bought into was wrong, and in aging apartment complexes across this province, 20 to 30 years old, which need major repairs. We are trying to deal with all of these in a fair and simple way, and that necessity for simplification we keep hearing, and it is very important. Why? Because we want tenants and small landlords to understand it, be able to work with it in order to empower people. That is what our government is all about. So we thank you for your presentation.

Ms Poole: Thank you, Mr McCormick, for your presentation today. You and your tenants' association appear to be very fortunate in your relationship with your particular landlord. You have mentioned five or six places where you approve of Minto's program of carrying out the major necessary repairs, the maintenance, the maximum rent and this type of thing. I was a little puzzled, and maybe it is because my memory is serving me incorrectly from the Bill 4 hearings. I thought at that time that Minto had undergone a major necessary repair program that had been caught under Bill 4, so it would have been in line for increases above the guideline and yet, although you praise your landlord in many instances, here in this brief you say, "above-the-guideline increases only be allowed if the landlord can prove he would be in financial hardship or face bankruptcy without them." So I just wondered if you could resolve the confusion I am facing with that particular issue.

Mr McCormick: I would not expect, in the case of the capital expenditures that Minto had performed, that they actually had to borrow any money to carry out those works. I also suspect that the amount could have been taken out of retained earnings and that the law was set up at that time to, yes, allow Minto to apply for an above-the-guideline increase, but this increase would not have been necessary. It is extra money that Minto could have received and, as I mentioned earlier, tenants in our area were very happy to hear that their rent was going up only 5.4% instead of 17% or 18%. This affected several of the older apartment buildings in our community.

Mr Tilson: The system we have with respect to property standards is that if a municipality has passed a bylaw, it proceeds and issues its work orders or whatever is necessary to get things done and, as you have indicated, Nepean does not have property standards bylaws.

Mr McCormick: I learned later that they do and it applies in our case, in our community. It was a misunderstanding on my part. This is why I did not actually speak that out.

Mr Tilson: That is fine. I guess my point is, is the system that the province of Ontario now has with respect to property standards adequate?

Mr McCormick: For the amount of time that I have been on the association, I have not heard of any cases where tenants had to bring any difficulties to the attention of property standards. I could only speculate that my suggestions would be a good insurance policy for us tenants. I cannot tell you from anything I have heard whether that is sufficient.

The Vice-Chair: Thank you, Mr Tilson, and thank you, Mr McCormick, for coming today.

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MINTO DEVELOPMENTS INC

The Vice-Chair: The next presentation will be made by Minto Developments Inc, Guy Godin. Good afternoon and welcome to the committee. You have been allocated 15 minutes which you can use at your discretion, but we always appreciate some time to discuss the presentation with you.

Mr Godin: Thank you, Mr Chairman. Good afternoon. My name is Guy Godin. I am the vice-president of the resident management group at Minto. First of all, I want to set the record straight. Mr McCormick, the previous presenter, is not on Minto's marketing team, but I thank him very much for his kind words about Minto.

Over the past 35 years, Minto has built and continued to own and manage over 10,000 residential rental units in the regional municipality of Ottawa-Carleton. This makes Minto the largest private landlord in the region. As a matter of fact, we still own our first small 10-unit building in Vanier that we built in 1955.

In the past three years we have not built a single residential rental project and have none in the planning stages. Bill 4 and now Bill 121 are clear signals that the NDP government no longer wishes the private sector to satisfy the housing needs of Ontario tenants. As a result, the government is going to have to mount an enormous construction program which can only be financed through massive subsidy programs. This must be considered in the light of the record projected deficits.

The government states that there are presently 44,000 households or families waiting for socially assisted housing. Under the present system of integrating these units among market units, approximately 110,000 units are required. According to the government's own statistics, it will cost Ontario taxpayers an additional $1.32 billion per year to support these units for years and years. As shown in appendix 1, the Ministry of Housing's annual operating expenditure now totals $764 million.

We are founding members of the Fair Rental Policy Organization of Ontario and the Eastern Ontario Landlord Organization, and we fully support their submission to this committee.

We are opposed to the thrust of this legislation. However, we recognize the reality of the NDP majority government and wish to comment on a number of key issues.

First I will comment on the five-year exemption from rent control for new construction. This is too short a period to be much of an incentive for the private industry. A case in point is that Minto's Aventura apartment complex in Nepean, which was occupied in 1983, is still losing money each year even though it was built, and I emphasize this, to modest specifications -- no central air-conditioning, no marble lobbies -- and the project received an interest-free second mortgage as part of the government program to encourage residential rental housing. That program, by the way, was that 33% of the unit had to be rent-geared-to-income units.

Over the long term, the only way we can recover our losses and achieve a return on the investment is for the rents to produce a profit in future years. This is not an atypical pattern for rental accommodation, and it can hardly be claimed that the tenants have paid for these apartments through their rents. Our only reason for keeping these apartments and sustaining these losses is our faith in the long-term health of the economy and the belief that at some point we will achieve a reasonable return on our equity. This faith and perseverance have, however, been badly eroded as a result of government policies which will make it impossible for landlords to recover their investment and maintain a vibrant business.

An exemption must extend at least for a period to allow the cumulative losses to be recovered.

My second point deals with capping increases for capital repairs. Since the introduction of rent review in 1976, rents have increased by 48% less than the Ontario CPI. There are simply insufficient funds for landlords to pay for major repairs. The proposed system will mean that items such as major garage repairs will have to be spread over many years, resulting in greater costs and inconvenience to both tenants and landlords.

To ensure adequate major maintenance, a cap of at least 5% per year above the statutory guideline increase must be allowed. The proposed two-year carry-forward provision must also be extended to at least three years. However, we fully support the idea that tenants should not pay for luxury renovations and upgrades to existing rental housing.

My third point is on the treatment of capital expenditures completed in 1990. When Bill 4 was passed, the then Minister of Housing, Dave Cooke, promised that landlords who were caught in the moratorium would be treated fairly. As a matter of fact, I attended a private meeting with Minister Cooke and he made that promise right at that time.

In 1990, Minto spent $7 million on necessary repairs under the previous legislation. These were necessary repairs. They were not marble lobbies. Rent increases for these major repairs would have been between 1% and 11.3%. Under Bill 121, two years after we spent the money, the increases will vary from 0% to 6%. How is this fair?

Capital expenditures caught by Bill 4 must be recognized in their entirety, subject to a 15% cap. We have attached, as Appendix 2, two examples of major repairs Minto completed in 1990, and a comparison between the rules that existed at that time -- and therefore our expectation for recovery -- and the proposed treatment under Bill 121.

The fourth point I would like to address is that of no hearings board for appeals. During the almost five-year regime of the Residential Rent Regulation Act, 1986, we filed 60 applications for rent review. Of the 60 Ministry of Housing orders received, we appealed 23 cases to the Rent Review Hearings Board, and in every single case the appeal panel overturned the administrator's order, primarily as a result of the administrator's misinterpretation of facts.

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These numbers indicate that there has been a very serious problem with the quality and consistency of the orders issued by the administrators. We are concerned that the government is committing a grave injustice by placing tremendous power in the hands of sometimes unqualified, potentially biased individuals, with no recourse for landlords and tenants except on points of law. To ensure fairness, a right to appeal to an independent body on a question of facts must exist.

Reducing the guideline increase: The original guidelines formulas were developed after extensive review and consultation between tenant and landlord representatives. We are not aware of any further serious research or review having taken place to support this reduced guideline increase. Furthermore, we understand that there will be many items classified as operating costs which were previously considered to be capital expenditures. Also, under Bill 121 a landlord is being told that 2% of the reduced statutory guideline is now deemed to be its contribution to major capital expenditures.

The government forgets that since the introduction of rent controls in 1976, rents have increased 48% less than the Ontario CPI, as shown in Appendix 3, attached. How are landlords supposed to properly maintain their buildings if the statutory guideline is reduced by 20% over what was acknowledged by the tenant and landlord committee, known as the RRRA committee, as being fair five years ago, and more items are classified as regular maintenance under Bill 121?

There should be no change in the current formula unless it is based on a sound, serious and correct study which would consider all the proposed changes of the bill as well as the age of buildings. You cannot take things out of context. You have to look at this whole bill, look at the age of buildings, and then come up with the answer.

The rent reduction provision: Bill 121 is drafted in such a way as to require the rent review services staff to look for reasons to reduce rents. The grounds for a rollback include the undefined issue of "inadequate maintenance." Moreover, even when initiated by one disgruntled tenant, an application for rent reduction can be turned into a whole-building review by the decision of the rent officer.

Related to the concern about rent reductions is the unprecedented provision of police powers to inspectors. One must wonder if this provision has been included for the sole purpose of intimidating landlords. As was pointed out to this committee a few minutes ago, there are thousands and thousands of small landlords in this region. We have always been proud of our level of maintenance, but we ask ourselves a few questions, some of which are:

1. How will "adequate maintenance" be defined?

2. How will the level of maintenance be compared between a modest building and a luxury building?

3. How will the ministry's staff be trained?

4. How will the ministry's staff determine wilful damage by tenants versus landlord neglect?

We recommend the following:

1. Amend section 13(7) so that the rent officer "may" consider rather than "shall" consider if a rent reduction is warranted.

2. Penalties for frivolous claims must be provided, because it is too easy to make a claim.

3. "Inadequate maintenance" must be clearly defined.

4. Reduction should apply to the applicant only.

To conclude, it is very apparent that the NDP government is not now, nor has it ever been, interested in having the private sector contribute to the residential rental housing industry. Bill 4, and certainly now Bill 121, confirm this.

It is easy for the Minister of Housing, past or present, to say that Bill 121 is good for tenants, but is this really the case? Is the government capable and willing to accept the fact that the only residential rental builder in the province of Ontario will be the Ministry of Housing? We know that when government builds, it is always more costly than the private sector. The provincial deficit will grow by over $1 billion each year as a result. There will be a steady deterioration in the existing housing stock.

We believe very strongly that the government should abandon its present course of action and instead address the real issue: How do we assist those people who truly cannot afford adequate housing? That is the crux of the issue. We feel the solution is by means of a direct shelter allowance to those in need. This way, everyone in Ontario will benefit. Thank you.

Mr Grandmaître: You are objecting, or you do not feel good about the five-year exemption that would be given to new construction. On the same page, "An exemption must extend at least for a period to allow the cumulative losses to be recovered." What would be that period, given your past experience in the rental business?

Mr Godin: As stated in the brief, we gave an example of one modest building. After eight years we have yet to break even, and this is with an interest-free second mortgage. The minimum has to be well over 10 years.

Mr Tilson: We will now have a new rent police force as a result of this legislation. I would like you to comment on that section as to specifically how this police force, the inspectors, can enter your premises and seize almost anything.

Mr Godin: First of all, the old system had a standards board. I do not see any reason why this system would not continue. I think the standards board was quite appropriate, and it should continue that way. I am not aware of any rent review legislation in Canada -- having been involved, somewhat briefly, with the rent review legislation in Quebec -- where a police force would go into a landlord's premises and seize things. This is incredible.

Mr Winninger: You mention that Minto spent $7 million on necessary major repairs under the previous legislation and you were expecting between 1% and 11.3% a year on that. You of course would have to acknowledge that given that you can get from zero to 6% over the first two years after the bill passes, that becomes compounded as an integral part of the rent year after year and that you will be repaid your capital repairs, certainly over the useful life of the repairs. Does that not seem a reasonable way of passing through your costs?

Mr Godin: Sir, does it seem reasonable for somebody to spend money, abide by the rule of the land at that time and the government should decide to change the rules retroactively? Sir, would it be reasonable for you to go down to the Queensway at 100 kilometres an hour and the police would see you going at 100 kilometres an hour, but that is the speed limit today and tomorrow they change the speed limit to 80?

Mr Winninger: Stuart Thom will tell you that the last three bills have been retroactive, so this is nothing new.

The Vice-Chair: Thank you, Mr Godin. We appreciate your presentation today. Time has expired, unfortunately.

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REGIONAL GROUP OF COMPANIES INC

The Vice-Chair: The next presentation is from J. M. Gould of the Regional Group. Good afternoon, sir. Welcome to the committee. You have been allocated 15 minutes for your presentation. The committee always enjoys asking some questions, so if you could reserve some time for the committee, that would be appreciated. Introduce yourself and you may begin.

Mr Gould: Thank you. Mr Chairman, members of the standing committee, my name is Jeff Gould, and I am senior vice-president with the Regional Group of Companies.

One of the focus areas of the Regional Group is property and asset management. In Ottawa and the area we manage, on a fee basis, several thousand residential rental units. Most of these units are pre-1975 and are suffering the devastating effects that rent control creates.

Being active in property management for over 20 years, I remember the introduction of the temporary rent control measures and in fact recall travelling to Toronto to make a presentation to the then standing committee on the legislation. I am troubled when I think of the hundreds of hours I have spent contemplating, preparing and making presentations to committees on rent control matters, and to what avail?

Just in the recent past, when one considers hearings on Bill 4 and responses to the green paper, Rent Control: Issues and Options, the position taken by the government seems to be crystal clear. Recommendations were completely ignored in the case of Bill 4 and the legislation passed unchanged. Now with Bill 121 we see the "preferred options" which the minister had presented. The proposed act ignores the recommendations made.

I challenged the minister in March 1991 to be honest and forthright with every landlord, tenant and property owner in Ontario. I challenged the minister to review the green paper to understand what it said, but most of all I challenged the minister to be honest. What were the intentions of the act to be, what were the intentions of the government and what is to happen with rental housing in Ontario? None of these questions were answered.

Ontario's residential rental stock is aging. A great percentage of the rental buildings are in excess of 20 years of age. I need not tell you people how deterioration increases at a proportionally greater rate as things get older. Research carried out by and for the Ministry of Housing has estimated the cost of doing repairs to the existing residential rental housing stock to be approaching $7 billion in 1990 dollars. When you consider that in 1990 rent paid in all of Ontario's 1.3 million rental units totalled approximately $8 billion, it is not difficult to see that these repairs simply cannot be paid out of existing rents.

It is interesting that at one time the rent control laws, as they existed, differentiated between pre-1975 and post-1976 buildings, the creation of different standards. Now we see the introduction of the seven-or-more, six-or-less residential unit concept. Why not go further and say you recognize that older buildings may require more ongoing maintenance and repairs than newer buildings -- maintenance and repair not due to neglect but due to aging. If this concept is understood, then a differentiation could be established between newer and older buildings which contain residential units. Maybe we should go back to the pre-1975, post-1976 concept.

I think we all agree that those who are needy deserve the help and assistance of those who are better off. Why then have the controls on those units which are occupied by those people not in need? Let's have a distinction between needy and non-needy units. You could therefore, through rent control guidelines, recognize the difference between large and small rental complexes, as well as newer and older buildings and units for the needy and not the greedy.

This leads to another thought. We have private and public sector ownership of residential rental housing. Let's do away with the different classification altogether. Let's allow all residential rental housing to operate under the same guidelines. The Ontario government, through the Ontario Housing Corp, operates rental residential housing. Why not utilize their operating costs and capital improvement costs as the basis for guideline rental increases? In any event, regardless of how you proceed, why not be forthright and honest?

Over the years, we have seen how rent controls have become tighter and tighter. We are now going to have a whole new series of restrictions added, and we have not yet even seen the regulations. What is the point of making presentation after presentation when we continually see things getting worse? What future do you want for the private rental residential sector in Ontario? Is it fair to have private individuals invest their hard-earned dollars, dollars which may be used for their retirement, into residential real estate when it is the intention to place more of the financial burden on the landlords? Is it fair to have individuals invest their time and effort in completing the necessary repairs and maintenance within their own buildings, only to reduce further the return which they are trying to achieve?

Let us know. Let the people of Ontario know either that you are proceeding to socialize residential housing in Ontario, the cost for which will be borne by all property owners in the province -- and a heavy load that will be -- or are you prepared to let the landlord go back to the free market system, a system which is economically sound, a system which can provide affordable housing to those in need?

The landlords of Ontario are prepared to talk with the government, to formulate and put into action plans to help those who need the help and to take on the responsibility for reducing the deterioration we are now encountering in our residential stock. Let us know what you are doing and how you propose in the end to deal with this most pressing problem without the lies, deceit and political jargon we have been plagued with by all political parties since 1975. Thank you.

The Vice-Chair: Thank you. Mr Tilson, you have about three and a half minutes.

Mr Tilson: I think the plan of the government has been quite clear ever since the notorious interview by Michael Melling, which probably made it more notorious than he ever dreamed, where the now Premier indicated that essentially the government will take over housing, that the private investor will be gone. I think their green paper, which I have quoted at these hearings several times, states that after 1991 virtually all anticipated new rental housing will be social housing, non-profit or co-operatives. Person after person comes to these hearings saying: "We have no intention of building. Why should we?" I think the government's grand plan is that this type of legislation will result in depressing rents so that any land owner or landlord can no longer afford to operate or build housing accommodation. That is the grand plan of this government. I challenge them right now. There are three over here to deny it. Those are my comments.

Mr Gould: I am not really answering, because I do not know the question, but we have managed largely syndicated properties, properties where we are putting together anywhere from three to 25 or 35 individuals to purchase a property. They are not large landlords; they are small investors. In the last five years, we have not syndicated one property in Ontario, okay? I am saying this. It was a little bit in jest, maybe, but I am serious in so far as we have a lot of small investors who do not know what to do. They do not know where to go. They have put their potential retirement funds into residential rental real estate and they are asking us: "What do we do? Do we take our money out? Do we put it in GICs and make a 10% return? What do we do? How do we go?" We do not have the answers.

Mr Winninger: Thank you for your presentation. I hope you do not get the erroneous impression from Mr Tilson that we are trying to preclude the private housing market from delivering housing.

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Mr Mahoney: We get that from the bill.

Mr Winninger: That is one good reason why the five-year exemption from rent controls was put in place for new construction.

Mr Tilson, who seems to be a maverick in his own caucus, because just down the hall they are saying we are spending too much money, seems to feel we should be taking money and paying a subsidy to the landlords. On the other hand, he does not want us spending money on social housing because that might put people like you out of business. Do you not think the public and private sectors can live together harmoniously, each delivering housing as it is required?

Mr Gould: No doubt they can. However, over the years, and especially since rent control has come into play, I think the private landlords have proven and shown they are very capable, very diligent and very good operators. My feeling is to let the private sector run it. Do not keep adding to the public sector housing stock, the cost of running it and the cost of building it. Let the private sector run it. Let the private sector do what it has shown in the past it can do. Let them do it properly.

Mr Winninger: So the private sector then can continue to deliver housing with a rent control regime, is that what I am hearing?

Mr Gould: No, I am not saying that. I am saying that if it is geared properly and if the legislation is such that the returns are there, then any developers will know they can build and get a return on their investment dollar and they will build. Right now they do not. You even come out with a summary, and all the summary says is that it is for the protection of tenants, nothing to do with building new units, nothing to do with creating more units.

Mr Mammoliti: What is a fair return?

Mr Gould: I am not a builder; I am not a developer. I said at the beginning I am a fee manager. I have never done any building and I have never done any developing, so I do not think it is fair for me to answer for those who have developed.

Mr Mammoliti: Yet you have told us you should get a fair return. We are asking you what a fair return would be.

Mr Gould: Our investors, I feel, are entitled to anywhere from a 10% to 12% to 14% return on their investment dollar, which is what they can get on other investments. There is no reason why they should get a lower return on real estate than they can in other investments.

Mr Mahoney: Perhaps you can appreciate some of our frustration. We certainly sense yours. From Mr Tilson's comments, in paraphrasing the Premier's comments, I think the answers to your questions are quite obvious. Even though the government mouths platitudes about wishing to have the private sector involved, it is ultimately interested in not having you involved. They ultimately wish to --

Ms Harrington: Come off it, will you, Steve?

Mr Mahoney: If I could see something other than the parliamentary assistant's wonderful statements about wanting the private sector to stay involved in the provision of private rental housing of some sort, I would be happy to retract that kind of statement, but I have yet to see anything; and yet absolute pigheadedness on the part of the government in refusing to put forward its actual agenda. We have the Housing minister in the room today acting like a fly on the wall rather than participating in the hearings.

Mr Mammoliti: Oh, come off it, Steve.

Mr Mahoney: Well, that is what I see. It would be nice to have the Housing minister come up here and answer your questions directly. I highly doubt that that is going to occur, but I would be delighted to give up the balance of my time if the minister would care to come forward.

The Vice-Chair: Ask your question, Mr Mahoney, please.

Mr Mahoney: My question is on the five-year so-called exemption to new housing. Would any of your clients be predisposed to taking advantage of that, building some new rental housing and taking advantage of that wonderful five-year exemption period?

Mr Gould: As I mentioned before, in our position with the firm we are not developers and we are not builders.

Mr Mahoney: No, your clients, I said.

Mr Gould: Our clients are individual investors. They are basically small, syndicated investors. If there were any means to see the return on their investment by developing, then it would be discussed with us at our meetings. If it was felt it could be done and they could get the return, we would do it.

Mr Mahoney: But you have come here criticizing, and I would like you to give us a straight answer. Would you advise your clients to invest in the construction of rental housing in this province, given Bill 121? Given the statements of the government of the day, would you advise them to take advantage of that wonderful five-year exemption and invest their money in that kind of project?

Mr Gould: I have been involved in property management for over 20 years. I have built my reputation on being honest and forthright and there is no way I could honestly direct any client I have to build at this time under the legislation we have or that is proposed.

The Vice-Chair: Thank you very much for your presentation.

I bring to the attention of members that we have a letter from the Ministry of Housing. The letter indicates 15 questions the committee has asked the ministry to look into. I ask that you carefully peruse that and let the Chair know tomorrow if there are additional questions or if some have been missed so that we can provide the ministry with a complete, up-to-date list.

Mr Tilson: I trust you as Vice-Chair or the Chair will be discussing scheduling with the clerk prior to clause-by-clause discussions so that the ministry can come to us and we can discuss those issues.

The Vice-Chair: I am certain there will need to be some discussions regarding clause-by-clause and opportunities in the future. At this point I do not think we can really do that, but I think you can take it as granted that the committee will decide those things.

Ms Harrington: On a point of order, Mr Chair: With regard to the questioning in the last round, I would like to point out that I believe this afternoon a report from Dr Hulchanski was distributed to the committee, which came out yesterday.

The Vice-Chair: That might be a point of information, but it is not a point of order.

JOHN DICKIE

The Vice-Chair: The next presentation will be from John Dickie. You have 15 minutes to make your presentation. We would appreciate if the committee could have some time to ask questions and discuss your presentation with you. If you would introduce yourself for the purposes of Hansard, you may begin.

Mr Dickie: My name is John Dickie. I am a lawyer and have been acting either exclusively or primarily on rent review matters for about 10 years. On page 1 of my brief I have listed my qualifications to speak to you, which I will skip over. I propose to try to deal with four issues this afternoon. The first is the allowances which this bill proposes to give for major repairs caught by Bill 4. The second is the question of the adequacy of the allowances that will be available in the future for major repairs. The third is the intended discontinuation of the justification procedure. The fourth has to do with retroactivity concerning financial losses.

First of all, if I could draw your attention to the table at page 11 of the brief, what I have attempted to set out here are the allowances the bill would allow a landlord. You can see the assumption is that we are dealing with the building of seven or more units and that the rent is $200,000 per year. One thing I have not set out is that, depending on the location of the building and that kind of thing, the value of this building would probably be about $1.5 million; so in terms of the money being spent on it, figure that this building is worth about $1.5 million.

The way the system works, both previously and with Bill 121, is that the first thing you have to do when a landlord does major repairs is to work out what allowance is necessary to repay the expenditure over the useful life. To get that, just as an estimate, one can use 18% of the cost of the work. In fact, in many cases under this bill it would probably be lower because we are talking about purely structural work. If you look at the first line as an example, if this particular landlord spent $11,000-odd on work, that would be spending 6% of the rent. The gross allowance the landlord would need to pay off the work would be about 1% of the rent. Under this bill and under the Residential Rent Regulations Act there would be no allowance given, because it is eliminated when the guideline is reduced.

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If you would look at line 5 on that table, the amount of work is $55,000 and change. The work as a percentage of the rent would be 28%. That would produce a gross allowance of about 5%. Because of the reduction in the guideline -- and I am going to come back to this and speak of this in a minute -- the actual rent increase that produces for the landlord is about 3%. When you translate that into dollars, the landlord gets back $6,000 extra in his rent to pay off $55,000 worth of work. I am looking across at column 10. It is not very much money. That is the first point I want to try to make to you.

Under the old system the allowance would have been $8,000 or 4% in the rent. The difference there is not that great, but if you look at the bottom of the table, the last line in the table, because of the way this new bill works, what would have gotten the landlord $40,000 to recover the cost of the work under your bill will only allow $12,000. This is only 30% of what the landlord would have been allowed under the former system. The reason I emphasize that is that there are a significant number of people out there -- there are not many of them, fortunately for them -- who have spent the kind of money that should have got them that kind of allowance under the old act, whereas under this bill that allowance is not to be given to them, not in 1990, not in 1991 and not ever.

My point to you is that landlords made decisions to perform work under the old rules when those rules promised certain extra rent increases. Bill 4 and this bill deny the landlords those extra rent increases. I concede to you that there is one important element of the cure for retroactivity that is included in Bill 121: It allows claims for work that do not meet the test for eligibility. There are certain types of work that will not be allowed extra allowances under Bill 121 that were allowed allowances before and for the retroactive period they are to be allowed them. That is proper and fair and I commend the government for that and trust this will stay in the legislation. But there is an element lacking and that is an allowance for the amount of work some landlords performed.

My submission to you is that the most fair solution is to eliminate the cap of 3% for this work that is caught by Bill 4. You may not like that because it may produce a rent increase which is too high. If that is the case, then the fair thing to do is to compensate the landlord for the rent shortfall. Then you will have taxpayers as a whole paying for the changes in the rules, not the landlords who got caught in the rule changes. Fine, change the rules, but let us as a society pay for changing those rules. Do not stick a few poor landlords who are out there. I would note that the compensation costs could be kept down by being phased out as a 3% cap on increases flows through.

There is an alternative solution, which is to let landlords be subject to the categories of eligibility but without a cap on the total increase. There are different ways you can do it, but my point is that the rule changes should not have been retroactive in the first place. Since they have been retroactive, full compensation should be provided, not what amounts to a partial and minimal compensation.

As to the allowances for the future, as I understand it Bill 121 tries to walk a tightrope. On the one hand you want rent increases never to exceed a certain amount, defined as a percentage, not as dollars, and that makes the problem worse for people with low rents. You also recognize that there are certain costs of rehabilitating buildings and they have to be paid. For many buildings the rent revenue would not carry the operating costs, the financing costs and the rehabilitation costs. In many cases we have buildings out there where the revenue is not carrying the first two, let alone the third. One of the major reasons for that is because of the past statutory rent increases and the way they have held rents below inflation. There are other reasons, including the fact that many major buildings were built with new technology at the time, and we have learned since then that the new technology was not, in some cases, the brightest. You had people throwing down shovelfuls of salt into the cement to make it set better, except by doing that, you immediately cause the steel bar reinforcements to rust.

All that being the case, major repairs need to be funded in large measure by extra rent increases, and to refer again to the table briefly, I would just like to be sure everyone realizes that when you combine the 2% deduction with the 3% cap, you automatically wipe out 40% of the normal allowance. In other words, if a landlord spends so much money he has a gross allowance of 5% of the rent, but if you take away the 2%, he is left with 3%; that is 60% of the cost of the work. Now, if anyone has any kind of choice, they will choose not to do that because they are not recovering the cost. People will say, "Well, the 2% is there for capital." Well, it may be there for capital except there are all kinds of capital items that are not covered, not eligible any more, like painting units, like recarpeting, like kitchen counters, cupboards, all the things tenants want in their units and that need to be in place for there to be good rental units.

The other thing is you are making no allowance for financing cost increases, for financial losses. There are all kinds of things wiped out, and I say to you the 2% will barely cover those. So, what you are doing when you take away the 2% when a landlord applies, is that you are taking away 40% of the allowance, and that is the minimum you are taking away. If you look at my tables, you will see the landlord has to be bang on 5% or 10% to lose only 40%. If the landlord spends an amount in between those amounts, or greater than those amounts, the landlord loses more, does not recover, in other words, the cost of the work that was done. Let me -- and my evidence to you is that major elements of work will be postponed until after the next provincial election, and that will simply be because landlords cannot believe that the allowances they will be entitled to after the next election could be worse than these allowances. There is no financial incentive for landlords to do the rehabilitation work that is necessary on many buildings.

Now, let me skip ahead to the question of financial losses on page 8 of the brief. Bill 4, you may recall, recognizes increases on financing costs of 75% financing. Every fair-minded person, who knows the way rental business is conducted in this province, would realize that 75% financing on a rental building is a modest financing level. Now it is unfair that people should be forced to continue to carry losses at that financing level. People bought buildings expecting to have losses eliminated, and the rules were changed under their feet. I suggest the way to cure that defect is to allow the losses to be passed into the rent, subject to the previous 5% cap, or if you prefer this 3% cap that is in this bill, and base the financial loss allowance on a purchase or a value of the building in July 1990.

The government has alleged there is a flipping of apartment buildings. Personally, I doubt that from my experience in the Ottawa market, and what I have read of Toronto. Certainly buildings are sold, but if flipping is the problem, and that is what the government has said it is, then if you fix the value in July 1990 you are not going to have any more flipping. But, to me, it is unfair that people bought buildings based on rules in place, and the rules have come along and been changed to take away what they were entitled to. It is simply unfair to them, and people say, "It is unfair tenants should face a higher rent increase," and to me the answer is then you subsidize the ones who cannot afford it. Two unfairnesses do not make a fairness, is what I am trying to say.

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Mr Winninger: I find your table quite helpful, Mr Dickie. I wonder if you would agree with me that the effect of Bill 121 is simply to slow down the number of years over which a landlord can recoup the cost of his capital repairs? That is, if you have 3% cap in year 1, and 3% cap in year 2 -- excluding, for the sake of argument, the 2% included in the guideline -- it is just a question of how many years it is over which the landlord recovers his cost, because by year 2, you have got 6% increase compounded as a factor of the rent. So if the landlord does not recover his costs as quickly, but he recovers his cost probably over the useful life of the repairs --

Mr Dickie: He would never recover the cost if he spends more than 10% of the rent, because anything more than 10% is thrown away. Like, there is 3% in the first year, 3% in the second year, and then nothing more. So, anything more than 10% is thrown away.

Mr Winninger: But that gets compounded into the rent, it continues over time --

The Vice-Chair: Thank you, Mr Winninger.

Mr Dickie: Well, no it does not get compounded because you are paying the first part, the first 10% out of that 6%, and then you spend more and get no more money. You cannot possibly be paying for it.

Ms Poole: You have stated in your brief the major work will be delayed until after the next election, and that there is no financial incentive for landlords to put money into their buildings if they are only getting back 60 cents on the dollar. When I had discussions with a number of tenant groups, and we have talked about this, their answer is, "Yes, there is a financial incentive for the landlord to maintain the equity in the building, and when the landlord sells the building, this will all be very helpful." The question I have is that I am under the impression that when a building is sold, it is based on a formula tied to the rents for those units in the building. Obviously, the kind of condition the building is in would have some effect, but the primary focus is on the income from that property. If this is so, then where is the financial incentive to put a lot of money into the buildings if you are not going to have cost pass-through?

Mr Dickie: That is exactly my point. You are right, it is primarily based on the rent revenue, and if there is no cost pass-through, then there is no incentive to do work unless otherwise the building would literally fall down, whereas Bill 51 struck a balance in terms of keeping buildings upgraded to some extent.

Mr Tilson: I would like you to clarify your comments with respect to subsection 16(2), which is the transition section dealing with retroactivity. I believe you appeared to be complimenting the government for some form of compromise enabling the rent officer not to consider a capital expenditure if it became necessary as a result of neglect. We have received testimony from different people that is not a good subsection because, again, it is changing the rules in mid-stream, it was at one time granted and now it is taken away, and second, and more important, we do not even know what "neglect" means. Do you have any thoughts on that?

Mr Dickie: You have mistaken my meaning, in that the section that I am praising is subsection 16(1), the fact there is no test to the work if it was done before a certain date, whereas under subsection 15(2) there is a test according to whether it is necessary for the structural integrity, blah, blah, blah, blah. Now, there are still defects with subsection 16(1) in that there is a cutoff date at the beginning as well as at the end, and to me the cutoff date at the beginning makes no sense because someone in certain circumstances could have done work earlier and been entitled to claim it. There is no sense to that beginning cutoff date. It should just fall under the regulations for dealing with the financial --

The Vice-Chair: Thank you, Mr Dickie. We certainly appreciate your presentation.

URBANDALE REALTY CORP LTD

The Vice-Chair: The next presentation will be made by Peter Burns of Urbandale Realty Corp Ltd.

Mr Burns: It seems that we have all been through this many times over the years.

The Vice-Chair: I think so. You have 15 minutes allocated to you.

Mr Burns: Peter Burns, I am vice-president of Urbandale Realty Corp. At the start of my brief are some of things I have done. That is to impress you with my great knowledge as to why I should be here.

I am not going to read the brief, although I kept it short. You have heard from so many saying much the same things from the landlords' perspective, and not just the landlords' perspective, of some of the problems that we see with the bill. I decided to deal with specific matters of items that might be changed; that if the bill is to be adopted, and my feeling is there will probably be very little change, there are some items that I think will make it easier to work with. Do not take that as an endorsement of the bill as such.

If you do not mind -- and I know from previous experience the members of the committee read faster than people speak and you do have my brief there -- I will just go through a number of sections. So I am getting into detail, rather than philosophy.

Starting off at subsection 12(1), and this has been mentioned many times, older buildings cost a lot more to maintain. There is more wearing out and the quality of construction vis-à-vis the Ontario Building Code and the construction techniques were not what it is for today's building. So there are some built-in problems as well as age. As such, we think you should recognize old versus new -- maybe 25 years is the breaking point -- as you took some account into small versus large.

Subsection 15(2): I hope in the regulations or in your clause-by-clause you will look at this for clarification, that when you are doing work sometimes you will have to do it to the building code if you have taken out a building permit, and certainly common sense dictates that you go to today's building practice and not the original standard.

Clause 15(2)(b): Hopefully this does not infer that a municipality must issue a work order before you can show the need to do that kind of work and that you can use the standards in the municipal bylaw or in the provincial standard as the basis of your application.

Clause 15(3)(a): I think there is going to be a lot of grief over trying to deal with neglect in a ruling. Something is going to fail eventually. Did it fail this year instead of next because you did not do something? Sometimes it is cost-effective to let something wear out and replace it because the labour is more than the component, and so it is not worth getting in to oil it.

Clause 15(3)(b) again brings up the problems of judgement as to whether it should not have been replaced. Provision should be made for bringing in technical evidence to satisfy this concern, the argument of whether you patch it or if you have really run out of steam patching the roof and it is time for a new roof and the opportunity to possibly add some insulation.

Section 16 is of particular concern to my company because we were one of the ones, unfortunately, having done quite a bit of work, $3.6 million, who just missed the deadline and were able to be caught by the moratorium of Bill 4. The cap I can see, in that the government is trying to say tenants should not receive an undue rent increase in any one year. In other words, they can look forward and budget. It seems to me that for Bill 4 to work, when you reapply, which is now permitted, consideration should be given to not imposing the carry-forward. In other words, the work was done in good faith, let it carry forward until whatever has been justified comes back to you. Based on the present legislation, where we spent $3.6 million, we will probably be lucky to recover but $1.7 million, which is quite a kick.

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In section 21, and I touched on that, the transitional work caught by Bill 4, the effect of the cap and the one-year carry-forward, and even beyond that, once you have dealt with the transitional for new work, from what I can see from my arithmetic, on a typical $400 rent, which outside of Metropolitan Toronto is not unusual, you can do about $1,000 of work per year per unit. I spent a lot of time documenting for the standing committee costs of some of the non-profit and Ontario Housing in my brief on Bill 4, and I am not saying they are spending too much money. They are going through the realities of a lot of projects built in the 1960s, the problems with roofs, brickwork, concrete garages, and the private landlord has no secrets that Ontario Housing does not have in doing that kind of work at about a 10th of the cost.

Section 25 is a concern in that if a tenant is challenging the standard of maintenance or repair, on what basis: What the tenant has been used to in that building, which is fair, or saying it is not as well kept as one down the road, which may be fairly new and could be at four or five times the rent? I would like to see some further guidelines coming out under section 25.

I am not going to go into the figures that are in my brief, pulling out again some of what we had with the non-profit, the Ottawa-Carleton Regional Housing Authority, some of the findings of the city of North York. I think you have heard them many times, and will, as you continue to go around the province.

I think we all realize that Bill 121 has been brought forward as legislation for the protection of tenants, but surely some of the changes would make for better administration, provide a little more fairness and afford a good landlord some opportunity to provide adequate maintenance for his tenants. I think most of the landlords you are hearing from, certainly around Ottawa that I know, want to be good landlords, have been landlords for many years, have a relationship with the tenants and would like to keep that. Our worry is running out of money in the major repairs as the older buildings come forward with major work and not being able to do it satisfactorily.

I will leave it at that, Mr Chairman.

Ms Poole: Thank you very much for your comments today and your specific suggested amendments to the legislation, which have been quite helpful.

I want to talk to you about the Residential Rental Standards Board. I happen to agree with you that that board should be reinstated. One of the problems with the standards board under Bill 51 was that it had to utilize the rent review process in order to do its job, which really bogged it down and created the backlog. So instead of going to the source of the problem, what the government has done is put it in rent review, which I think will mean that maintenance will take a back seat.

I want to ask you about one of the most contentious parts of the rent penalties in the work order section. That relates to the substantial standards and the fact that the landlord does not have any opportunity to prove extenuating circumstances. The way this legislation is drafted right now, it does not go after the abusers of the system, like I think they should; this goes after every landlord, even ones who are genuinely attempting to get work done on their building.

Would you like to comment on the kinds of safeguards that were in Bill 51, such as the fact that the director had to look at extenuating circumstances, the financial picture, whether the work was seasonal, all that type of thing, and whether you would like to see that incorporated in this legislation?

Mr Burns: I do not think the Chairman is going to allow me enough time to get into these sections of the bill.

The Vice-Chair: You are probably correct.

Ms Poole: Good guess.

Mr Burns: I am worried. There are a lot of traps there. The standards board was able to examine a municipal work order and pull out the substantive non-compliance, and that would flow through for a rent penalty. It was very slow at first. It is fairly well current now.

I am worried about the automatic items that are in the bill, like he has 30 days. A garage takes two years. A landlord can ask for a review of the notice of rent penalty. The review is by a person who reports to the director, which is not a fair review. That is just another one. Certainly the 30-day and the automatic process. A lot of municipal orders are very minor: paint, what have you. Others are very serious. They need culling. I do not see discretion in these sections and I hope that is looked at.

The Vice-Chair: Thank you. I hope I allowed you enough time. Mr Tilson.

Mr Tilson: I do appreciate your suggestions for amendments, because that will be the next stage that we will be proceeding with, and I certainly find your comments very helpful.

One of the concerns that I have, and I would like to hear your thoughts, is that the Ministry of Housing has indicated to us that it is unlikely that there will be any regulations or draft regulations put forward with respect to this bill until after the bill has received royal assent. My response to that is that I do not know how we can properly answer many of the questions that you have put forward when we do not know what the guidelines are to assist some of these individuals making these decisions, or worse yet, we do not even know what some of these words mean.

Mr Burns: I hope that you will correct much of it in the bill, because the regulations should flow from an understandable section of the bill. So I hope your work is now, and not worrying after regulations come out, which are not subject to the same scrutiny.

Mr Tilson: The difficulty, of course, is that you ask for guidelines, for example, to assist individuals in making decisions. Normally those types of things are put forward in regulations, as are in many cases the definitions, and that is the concern that I have.

Mr Burns: I hope you can tighten up as much as possible "neglect" and "unnecessary" and items like that.

Ms Harrington: Mr Burns, you are certainly a unique presenter -- I remember you from before -- because you have a background in realty, the standards board, property standards for the city, as well as the Ottawa housing authority. I have not seen anyone with that --

Mr Burns: It just means I have been around too long.

Ms Harrington: Well, I would like to make use of some of your expertise. First of all, I wanted to state that our government, as you know and everyone knows, I believe, is very serious about addressing the maintenance problem. We need to work with the municipal bylaw enforcement people, and that is a direction that we are definitely going to go.

The question that I wanted you to reflect on for me is, the question has been raised today and many other days with regard to the connection, if any, between the housing supply and rent control. We have been told that the housing supply problem is quite different from any regulatory problem relating to existing stock, which is what we are dealing with in this bill. We have been told that the American planning institute -- there were 75 studies done on rent control in the USA, and there was absolutely no link between these two things, the supply of rental housing and the regulation of the rental market.

The Vice-Chair: And the question is?

Ms Harrington: I would like to propose that there are many other factors that have come into play.

The Vice-Chair: Mr Burns is not going to have an opportunity to reply.

Ms Harrington: The market forces were not working way back from the 1970s, and the high-income renters have now owned condominiums and they are gone. Therefore, you cannot build rental at the high end of the market. So I would like you to comment on that, if you could.

The Vice-Chair: We would like Mr Burns to comment also, but the 15 minutes have expired.

Mr Burns: There is an ebb and flow in the market, and rent control does cut across that, and that is certainly one of the problems.

The Vice-Chair: Thank you, Mr Burns.

Mr Abel: I guess the 75 studies are wrong.

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SOCIAL PLANNING COUNCIL OF OTTAWA-CARLETON

The Vice-Chair: The next presentation is from the Social Planning Council of Ottawa-Carleton, Jim Zamprelli, executive director.

Ms Moriarty: I am Jim Zamprelli.

The Vice-Chair: Hi, James.

Ms Moriarty: Welcome to the world of non-profits. My name is Cindy Moriarty -- I am sitting in for Jim Zamprelli -- and this is Terry Gilhen.

The Vice-Chair: Thank you. You have 15 minutes.

Ms Moriarty: It will be brief. The social planning council is an umbrella group. We do not provide housing services or direct services of any kind, but we are made up of 109 local agencies and over 200 individual volunteers who are involved in those issues. So we are the planning branch, the advocacy arm and the co-ordination body for a lot of community agencies that come together in Ottawa-Carleton. Therefore, we treat this rent control legislation from a policy framework perspective and our comments will be based on that.

As an organization that is committed to affordable housing and as an organization that believes the provincial government should share that commitment, we support rent control legislation. We will speak specifically to pieces of that, and we see that as essential. We also recognize, however, that it is just a small piece of the framework. We are going to limit our comments to the rent control part, but I think it needs to be said that there are other issues that come into play.

Our clientele largely is low-income groups, very few of which are in subsidized housing. When you get into the numbers games of rent control, it does not do a whole lot to help the person on a fixed income of $400 a month if there is not access to affordable housing. In terms of a context, I would like that to be understood from the outset.

I am going to defer to Terry, who is the author of our brief, to go through our specific comments, and then we would be happy to answer any questions.

Mr Gilhen: As Cindy has suggested, we are in general agreement with the thrust of this rent control legislation. We believe in rent control as one part of a comprehensive housing policy which will afford access to affordable housing.

That being said, the method for determining annual rent increases we feel is fair. Using inflation as a balance seems to provide a fair way of giving landlords return for their costs as well as protecting tenants from extreme rent increases.

It has been said already this afternoon, and we are going to say it again: We do have some problems with the two-guideline system. As others have said, our problem with that is that it is going to add to the complexity and therefore confusion will result.

The council therefore recommends that a one-guideline system be used, and in recognition of the fact that there are equity problems between smaller and larger land owners, that other measures be instituted.

In relation to capital expenditures, we do have a number of concerns. The council is fundamentally opposed to paying for capital expenditures solely through a cost pass-through system. This legislation appears to do that. Under Bill 121 we have a 2% cushion identified specifically for operating costs. Nowhere in the legislation are landlords being asked to account for that 2%. We feel there should be some measure put in place whereby landlords do account for those costs.

That is particularly important when you look at the eligibility criteria for rental increases above the guideline. Among those criteria are allowances for ongoing maintenance responsibilities, such as the provision of plumbing, heating, mechanical and electric ventilation systems. Those, we contend, are already covered by the operating index, which is used to determine the annual increase.

We are recommending, therefore, that the eligibility criteria not allow for the cost of providing maintenance which is already covered within the operating cost index.

We are also recommending that the Ministry of Housing provide funding to tenant groups -- and a number of them have presented themselves here today -- in order to conduct consultation around tenant involvement in the decision-making process. We are concerned at this point that tenants are not involved in decisions relating to capital expenditures, and well they should be.

On the subject of residential standards and building maintenance, poor building maintenance has been a problem which previous rental housing legislation failed to control. The crux of the matter is enforcement tied to clearly defined lines of responsibility and efficient processing. At present, municipalities fail to adequately enforce bylaws governing building maintenance, and the province in turn fails to monitor the performance of the municipalities. Far too much is assumed to be happening when in reality it is not. We would like to see the provincial and municipal areas of responsibility for work orders related to property standards clearly defined and that a maximum 15-day turnaround time be set for the forwarding of these work orders from the municipality to the province.

We would also like to see some proactive measures taken with regard to maintenance of property standards, and we are suggesting full building reviews whenever an individual rent rebate is granted and the institution of a provincial review of property standards is called for.

Rent registry: We are generally pleased with the improvements made to the rent registry. We would again, however, like to see tenants given more power. We feel that tenants should be entitled to register rents. It is very important, and I do not think this has been brought up or emphasized enough this afternoon, that public education campaigns be instituted. We have recommended this specifically under the rent registry. We feel tenants should be made aware of their rights within the registry, and again we would suggest that there are a number of tenants' groups which can be a resource to the government, providing ways and means of getting that information out.

On the decision-making administrative structure, the social planning council has pushed for an accessible and non-threatening system. Again, the legislation fails to provide us with that. The council recommends a two-level hearing system, one for the termination of applications for rent increases above the guidelines and one for appeals. Under the suggested one-level system, landlords would appear to be given an advantage in that they will have access to the funds required to cover legal costs incurred, which would definitely deter tenants. A number of decisions could easily be made, we suggest, at a lower and less formal level of appeal.

We are opposed to fees being charged to tenants or landlords for accessing information in the rent control system and for applying for an increase above the guideline or a rent rebate. We are also recommending that funding be provided for enhancing access to rent review services. It has proven here in Ottawa-Carleton to be extremely difficult if not impossible to get through. More direct telephone lines and more staffing resources are called for.

I am going to come back to the public education that has been mentioned, and we recommend that once again for the general public, when we are talking about education, we would ask you to remember that among Ontarians there are many who have communication difficulties that need to be recognized. When we do an information campaign we have to remember that some of us require alternative media, some of us require Braille, some sign language. There are a number of different languages and media we should consider. As well, remember there are resources in the community to help to do this. The social planning council, through its shelter forum and its member organizations, is there.

In conclusion, I would like to bring us back to the original statement we made. Rent control is a necessary component of a comprehensive public housing policy which is necessary to provide affordable housing to Ontarians. Thank you.

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Mr Tilson: One of the major issues in these hearings is where the money is going to come from to complete capital expenditures to a housing stock that is quite old, generally speaking, throughout the province and I am sure here in Ottawa specifically. We heard from the bankers' association on Monday, who told us that the financial scheme being put forward by this bill simply will not allow for them to provide mortgage financing or any other financing to enable capital expenditures to be made. We have tenants saying they know they cannot have any more of these 30% increases or whatever they might be. We have landlords who are saying they do not have the money. It is just not there.

You are supporting the bill, but a bill that is going to result in the quality of life of tenants of this province deteriorating, because capital expenditures -- we have had several speakers here this afternoon who have said, "We are not making any more capital expenditures until after the next provincial election." I guess I am asking you to go one step further in supporting the bill. Do you accept those statements?

Mr Gilhen: I accept those statements. I would suggest there are other ways to recoup the costs incurred, capital expenditures. The government has to be involved. We would recommend government-assisted programs such as low-interest loans for providing for those expenses. It is just not acceptable to expect tenants will bear the total costs for those.

Mr Tilson: The taxpayer is speaking, too. We are having taxpayers' revolts all across this province.

Ms Moriarty: One of the issues is accountability and fairness. We are not saying that landlords should have to suffer for capital expenditures. We are questioning how those allowable expenditures are determined and what kind of input into that process there is. If I start getting into a numbers game, we have sort of lost it. We are looking at those principles and guidelines that have to be built into the legislation. I think we also have to differentiate between profit-making enterprises and non-profit housing provisions. There are differences in levels of service, you know. There are management issues; if you are out to make a profit, there are certain responsibilities in how you handle that, and it has to be done fairly. I trust the landlords to be ethical and fair. When you are dealing with non-profit services, it is different.

Ms Harrington: First of all, I would like to thank you for these detailed recommendations. You have done a lot of work; you have discussed the importance of tenant involvement and communication with tenants, and certainly that is important to our government. One example that was before us earlier, the housing help centres, I believe, are a good example of how they serve both tenants and landlords and bring them together in the community. I know it was a Liberal initiative, but it certainly was a good one.

Ms Poole: On a point of order, Mr Chair: Did she say something good about the Liberal government?

The Vice-Chair: No, no.

Ms Harrington: I believe, and maybe this is too idealistic, but somehow landlords and tenants have to form a team to deal with the housing problems with the government in this province.

I want to come back to the issue Mr Tilson was discussing with you: Where do the moneys come from for the capital costs that are necessary facing us this decade? They are massive. That is a very legitimate question.

The Vice-Chair: Are you hoping for an answer?

Ms Harrington: We believe as a government that the landlords, the tenants and the government share in this. The government has programs, like the low-rise rehab program. The tenants certainly want good conditions around them and it is the landlord's building. Would you comment on how that responsibility could be divided up?

Ms Poole: You have 10 seconds.

Ms Moriarty: I think I will just end up repeating what I have just said. I cannot tell you in terms of a package program that tenants should do this and landlords should do that. Yes, I agree there should be a partnership, and I think there are good resources among the community and groups such as Housing Help and the Social Planning Council and other groups that can work together to come up with those models. I cannot today. I do not think we are prepared to say this is how it should happen.

Ms Poole: Thank you very much for your presentation today. I was quite interested in your section on decision-making and administrative structure, particularly your recommendation that we have a two-level hearing system. We have had a fair number of presenters who have criticized this legislation because it does severely restrict the right of appeal. I wondered if you could just give me an idea of how you would like to see this work out. Are you suggesting there be actually two hearings, one hearing then the right of appeal, or that it be administrative tribunal first and then a right of appeal? How would you see that work?

Mr Gilhen: Again, you are asking us and I would like to be able to give you the kind of detailed answer to that question you deserve. I am suggesting that having the one hearing system seems to provide, or seems to create, a barrier for tenants who are not going to be able to afford the legal costs incurred, as I have said. There needs to be a less formal method of dealing with decisions which do not require that level of formality.

Ms Moriarty: I think there are other resources available. There are legal clinics and paralegal services that are quite capable. The Federation of Metro Tenants' Association will probably speak to that. I got a preview of their brief. There are other avenues available that make it accessible, and the barriers are imposed not just through finances but through the whole magnitude of a structure that can be very onerous for a tenant and very comfortable to the big landlord.

The Vice-Chair: Thank you. We appreciate your presentation.

EASTERN ONTARIO LANDLORD ORGANIZATION

The Vice-Chair: The next presenter is the Eastern Ontario Landlord Organization, Mr Luigi Caparelli. Good afternoon, sir. As you know, you have 15 minutes allocated by the committee to you. If you would introduce yourself you may begin your presentation.

Mr Caparelli: I am here today as a representative of the Eastern Ontario Landlord Organization. We represent virtually every major landlord in the area along with a couple of hundred of the much smaller landlords. EOLO is dedicated to educating the public on the importance of a properly functioning rental housing market to the economic wellbeing of the people of Ontario. We also devote a great deal of resources to educate landlords about their rights and obligations as owners and managers of residential rental property.

Unfortunately, we have spent most of the nine months attempting to correct misconceptions in presenting the position of landlords to the government of Ontario. While we appreciate the opportunity to make our views known to this committee, we are quite frankly frustrated and disillusioned by the entire process. You see, Mr Chairman, we presented a major brief to this very committee when it was holding hearings on Bill 4. We met with the former minister and we researched and wrote a detailed response to the minister's green paper, Rent Control: Issues and Options, all to no avail. The government's intransigency on the issue of rent control has been made abundantly clear. After the government was forced to hold public hearings on Bill 4 it ignored every recommendation made to it. The government used its majority in the House and on this committee to ram Bill 4 through, virtually unchanged.

Former Housing minister David Cooke then released his green paper which clearly identified the issues and presented several possible alternative options to deal with the problems. In most cases, the minister also indicated his preferred option. Despite universal objections from the landlord community across this province to his preferred options, Bill 121 incorporates all of his preferred options and all but ignores objective suggestions, not only from landlords, but from virtually every expert in the field.

It is with this background in mind that we are once again before you. The government has already made its position crystal clear. It is not prepared to compromise on any of the principles enunciated in Bill 121. In view of this, we believe it would be pointless to go through Bill 121 point by point and attempt to offer constructive suggestions as to how it could be improved. Past experience leads us to believe that Bill 121 will become law virtually unchanged.

Instead, we will use this time before you in an attempt to educate both this committee and the public as to the disastrous consequences of Bill 121 and to present the present and future costs of this government's housing policy to the taxpayers of the province.

One of the things we looked at were the costs the government of Ontario incurs in running units owned by Ontario Housing Corp through the Ottawa-Carleton Regional Housing Authority here in this area. Figures for the past few years show that operating costs have been increasing at the rate of more than 10% per year. On top of this, the Ottawa-Carleton Regional Housing Authority spends an additional $7.5 million, which is approximately 17% of its budget, each year on capital improvements. That is in addition to the 10% increase in its operating budget. In short, while the Ministry of Housing cannot operate its rental properties with increases of less than 10% per year, the private sector is expected to do so.

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A 1986 study by the city of Toronto unequivocally states that the province's 334,000 high-rise rental units, out of a total of approximately 1.2 million rental units, will require $6 billion of capital repairs in order to be properly maintained. This compares to total annual rents generated by these 334,000 high-rise units of approximately $2.225 billion. As you can see, the funds simply are not there to carry out needed renovations.

Why do landlords not have funds set aside for these required renovations? Surely, like the homeowner, a prudent apartment building owner would put aside a certain amount of his revenue each year so that funds would be available to carry out this inevitable work. Tenant advocates have often said that there is plenty of money in the existing rent structure to support all the maintenance and capital improvements that are necessary. This is often accepted as self-evident truth, even though there are no objective facts to support it.

The answer is quite simple. For the past 15 years, since we have had rent review in this province, the rate of increase has fallen significantly below the rate of inflation. If you use 1975, the year rent controls were introduced, as your base, rent increases have gone up 48 points less than the rate of inflation. Clearly, landlords have fallen far behind in the rents.

What does this mean? The average landlord, small and large, will have no choice but to cut back on maintenance. Capital repairs will be postponed indefinitely. This will result in the loss of billions of dollars and thousands of jobs to the economy of Ontario. Of even more importance to the taxpayers of this province is the fact that all of these billions of dollars were coming from the private sector. Landlords required absolutely no assistance from the provincial or federal treasuries.

There is a clear and irrefutable correlation between the introduction of rent controls and a drastic decline in the number of rental units constructed by the private sector, despite a steadily decreasing rate. I am not going to tell you that rent controls are the only issue that caused this, but they were certainly a major issue.

If you look at the figures, and I have provided them for you in the brief, in the three years prior to the introduction of rent controls, the private sector was constructing an average of 26,700 rental units per year, or approximately 76% of all rental units built during those years. In the three years following the introduction of rent controls, the private sector built only 16,100 rental units. Even more significant, that represented only 33% of all rental units built. Not only does this represent a dramatic loss of economic activity in the form of forgone construction, loss of municipal taxes and loss of subsequent work for trade and maintenance people, but it means that the public sector must continue to build taxpayer-subsidized rental units in order to meet the demand. It is here that one gets to the crux of the matter. Just how much does providing all this publicly assisted housing cost the citizens of the province of Ontario?

There are three major sources of social housing in the province, funded in various portions by the federal and provincial governments. Public housing, through Ontario Housing Corp, has some 103,000 units, which cost approximately $421 million to operate in 1990. Non-profit and housing co-operatives include some 84,000 units at an annual cost of $663 million. The rent supplement program, which places low-income tenants in private apartments, has approximately 17,300 units, at an annual cost of $87 million.

In total, these programs will cost the two levels of government in excess of $1.1 billion. We see no need to differentiate between federal and provincial funds. That discussion, I believe, would be an insult to the intelligence of both tenants and landlords. Ultimately all funds come from the same source, the taxpayer. Besides, the federal government has made it abundantly clear that it intends to reduce all transfer payments to the provinces, and has in fact begun to do so.

Today, there are approximately 44,000 households on waiting lists which would qualify for socially assisted housing. The provincial government has given clear indication that its preferred approach to providing housing for these core needy households is through the creation of non-profit and housing co-operatives. In fact, the government has announced its intention to provide funding for some 20,000 non-profit housing units in each of the next two years. The NDP has estimated that the operating subsidy alone for the initial 20,000 units would amount to some $190 million per year, or $9,500 per unit annually -- and those are 1987 costs.

Based on the present distribution of 40% core needy, 30% moderate and 30% market rents, the provincial government would have to subsidize the creation of 110,000 units in order to house the 44,000 core needy on present waiting lists. At an average subsidy of $9,500 per unit, the solution chosen by the NDP government will cost the taxpayers of this province in excess of $1 billion every year, and these again are 1987 dollars. If updated to 1992, which is when the first of these units will come on stream, the cost will be somewhere in the neighbourhood of $1.32 billion. This, you have to keep in mind, is an operating subsidy. That cost will be incurred each and every year.

It is important to note that this is an average subsidy only. It includes a subsidy to those units which are rented at market rates. The private market would build these units with no subsidy from the taxpayer. If one looks at these costs, it can be seen that in order to provide housing to the 44,000 core needy, this program would in effect be providing each of those 44,000 units a subsidy of approximately $2,000 per month. Are these the actions of a responsible government in touch with the desires of its electorate?

Another thing we would like to look at is, who actually benefits from rent controls? Why is the government spending more than $1 billion annually on housing programs and why is this government prepared to more than double this spending commitment? The government contends that rent controls are required to ensure affordable housing. The government is constantly informing the citizens of Ontario that far too many tenants are paying a disproportionate amount of their income for rent and that rent controls help people at the lower end of the socioeconomic scale.

We have included a table which does not seem to confirm this. All information comes from Statistics Canada. What we see is that housing affordability is loosely defined as paying less than 30% of one's income to meet housing needs. The table brings home the astonishing fact that the average tenant in the province of Ontario pays only 7.9% of his income in rent. Only 25.6% of Ontario tenants are paying more than 30% of their income for rent. The inescapable conclusion that any objective observer would reach is that rent controls are a tremendous transfer of resources from the average taxpayer to wealthy tenants, with poor tenants continuing to suffer. The 44% of tenants at the top of the income scale in the province are paying 17% or less of their income in rent. Are these the people that the NDP wants to help? Clearly, these are the people who benefit the most from rent controls.

To landlords, it is these facts which should and must be the death knoll of the present rent control system. Why should landlords and the average taxpayer subsidize someone who only pays 17% of their income in rent? Surely the government's scarce resources should more properly be directed at the 26% of tenants who are paying more than 30% of their income in rent.

Our organization advocates a simpler and more effective and much cheaper solution, which has been raised by many other groups and virtually every economist who has studied the problem. Average rents across the province of Ontario are roughly $550 per month. The province could easily fund the 44,000 core needy families at an average of $300 per month, with the needy family contributing the remaining $250 per month. This would cost the provincial Treasury approximately $159 million annually, for a net saving to the taxpayers of almost $1 billion per year.

The government must announce the phasing out of rent controls, coupled with the rent subsidy to all those who require it. This would provide the only required incentive for the private market to build rental accommodation. It would result in a badly needed investment in the province's housing industry and would create thousands of urgently needed jobs in the construction industry, as well as provide thousands of jobs to trades in the repair and renovation industry.

[Applause]

The Vice-Chair: This is a proceeding of the Legislative Assembly. There can be no interjections or other demonstrations from people attending. I would ask you help the Chair in maintaining the decorum necessary. Each caucus will have one question. Succinct, please.

Mr Abel: I will try to be as succinct as I can. Just yesterday, this committee received expert testimony. In that testimony, Dr David Hulchanski stated that the supply and demand in the rental market simply does not work. He went on to define rent controls. He said they are not a solution to the housing problem. They are not a subsidy to tenants. They are not even a housing program. Rent regulations are housing-related consumer protection legislation made necessary by failure of supply and demand in the private rental market. He concluded by saying that Bill 121 is absolutely necessary for consumer protection in a market that is not working. What are your comments to that expert testimony?

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Mr Caparelli: We have charts from federal and provincial sources which show that prior to rent controls the private sector was building an average of 26,000 units per year. Immediately following the introduction of rent controls, that dropped to 16,000 units per year. More recently, it has dropped to about 5,000 or 6,000 units per year. I do not know where the figures come from; I do not know what this expert was basing his findings on. Those are figures of rental starts in the province of Ontario. I do not see how you can argue with them.

Ms Poole: Thank you very much for your presentation today. We have, as you realize, an aging housing stock, where the vast proportion of our housing is at least 15 to 20 years old. Many of the units are much older than that. My concern is that if we do not have fair provision in Bill 121 to ensure that maintenance and repairs are taken care of, then it is not going to happen. I know you have said you did not want to concentrate on changes to Bill 121, but what could be done to it to ensure that the landlords of this province will put money into our aging housing stock and make sure that tenants have a decent place to live in?

Mr Caparelli: The first thing that has to be done is that a more realistic cap has to be looked at; second, rolling forward of the cap for more than one year. The simple truth is that two years at 3% is simply not enough to pay for major repairs like garage restorations and roof replacements, or even recladding the exterior of buildings. That is simply not enough. Rents have fallen some 48 points below the consumer price index in the last 15 years, so landlords do not have the moneys to spend on it. The money has to come from someplace, and that 3% cap for two years simply is not realistic.

Mr Tilson: I tend to agree with your initial comments. I do not think this government has the slightest intention of making substantial amendments to this legislation. We will hope that they will, but I doubt if they will. What do you anticipate will the standard of maintenance and repair in this area, and throughout the province, if the legislation and what it is putting forward continues?

Mr Caparelli: There is little doubt in my mind that the standards will deteriorate across the province. That will result in the ministry attempting to enforce higher standards through its inspectors and through its standards, which will result in more strife between landlords and tenants. The end result is that I do not think you will actually see an improvement in the standard of maintenance and you will see a deterioration in the relationship between landlords and tenants, which does not benefit anybody.

The Vice-Chair: Thank you, Mr Caparelli, for appearing before us today.

CRAIG HENRY TENANTS ASSOCIATION

The Vice-Chair: The next presentation will be from Stephanie Venator Paul of the Craig Henry Tenants Association. You have been allocated 15 minutes by the committee. If you would introduce yourself, your position within the organization, and the organization for the purposes of Hansard.

Ms Paul: My name is Stephanie Venator Paul. I am one of the founding members of the Craig Henry Tenants Association. For an introduction, we would like to say that Bill 121, the proposed Rent Control Act, is by far the best rent act that tenants in this province have seen in a long long time. Although we find that we have more protection, we also see we have some of the same nightmares.

Maximum rent: Under the old rent control act, maximum rent was initiated. Unfortunately, to tenants, it is still fact under this legislation. The tenants whom I represent are directly affected by this. In today's rental market, with a vacancy rate of 1.5% for Ottawa-Carleton, tenants will still be hit with rent increases above the guidelines. A large percentage of tenants in my development are public servants, whose employers, as we know, are practising wage restraints. Some, like the military -- about 40% of my tenants are in the military -- are not getting any raises this year and others are getting well below the 3% that we are all hearing about.

Rent increases based on the legal maximum rent will put undue hardship on these families. In my complex this is very good news. Our landlord is contracting out maintenance and outside work -- the lawn cutting, the snow removal and the garbage cleanup. We found a decrease in service being provided for us. For instance, the grass in my backyard is long enough for me to lose my dog in.

We have had tenants who have been seriously hurt in the winter because of improper snow removal in common areas and laneways. We also have tenants paying for garages to park their autos in; they have not been able to use them for the last six months, and we are still counting.

In Nepean, where my complex is located, we have a property standards bylaw. Fortunately, my complex is covered by this bylaw, so we have access to the provincial standards. But there are thousands of other tenants in Nepean who are not covered by this bylaw, meaning they do not have access to the provincial standards. We hope this government will clear up this problem and make it just for all tenants.

Tenants' organizing rights: We, as a relatively new tenants' organization, are happy to see that we will have greater protection under this act, although we feel we must acknowledge that to date our landlord has not given us any problems in the forming of our organization. We feel that all tenants will not have an easy time of it, and for them we are grateful for the steps this government has taken.

At this time, I would like to thank you for the time allotted to me and also I would like to decline from answering questions. As I stated earlier, the Craig Henry Tenants Association that I represent is only one month old, and we feel the time could be used by other organizations that have far greater concerns, problems and/or suggestions that we do, and we just wanted to have a say.

The Vice-Chair: Thank you. We appreciate your presentation.

Ms Harrington: On a point of order, Mr Chairman: I would like to thank the woman for coming forward; I appreciate it. The previous presenter, Mr Caparelli, gave us a very detailed report and --

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

Ms Harrington: I just wanted to let you know that it was impossible, as I am sure all of us would agree, to deal with all the information in it in the 10 minutes that we had. So I am wondering if it would be possible to refer this particular report to our ministry staff to have a look at and to bring back any comment they might have to us tomorrow. I found it very difficult to deal with in the short amount of time, and I do want to deal with it.

The Vice-Chair: Well, I agree with the suggestion. I think all members of the committee agree with the suggestion. I am just wondering whether the ministry can deal with it by tomorrow.

Ms Harrington: Well, they could at least read it and if they have a comment, get it to us.

The Vice-Chair: We could ask for their comments on the brief.

Mr Grandmaître: I think every presentation should be submitted to the minister.

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BAYSHORE TENANTS' ASSOCIATION

The Vice-Chair: The next presentation will be from the Bayshore Tenants' Association, John Wood.

Good afternoon, Mr Wood. You have been allocated 15 minutes by the committee to make your presentation. We always appreciate some time for questions and answers if that is possible. If you would introduce yourself and your organization, you may commence.

Mr Wood: Thank you very much. Mr Chairman, members of the committee, my name is John Wood. I am president of the Bayshore Tenants' Association.

Bill 121 has been introduced by the provincial government as proposed legislation to replace the Residential Rent Regulation Act of 1986. It is supposed to establish a permanent system of rent control. Since it is to be permanent, it is important that it should be well-thought-out in terms of its impact not only now but also in the years that lie ahead.

In the short time that has been allotted to me to speak I would like to express some of the concerns of the members of the Bayshore Tenants' Association. I will not comment on the bill in a clause-by-clause format as that would be very time-consuming. Rather, I will address selected issues from a broad perspective, emphasizing fundamental concepts rather than specific details. It is my hope, however, that consideration of these fundamental concepts will lead to changes in some of the specifics of Bill 121.

As mentioned, I am speaking to you as the representative of the Bayshore Tenants' Association. The points of view expressed will therefore reflect the thinking of tenants living in a very large residential complex owned and managed by a large, influential landlord, Minto Developments Inc, formerly known as Minto Management Ltd.

The residential complex to which I refer is known throughout the Ottawa area simply as Bayshore. Minto refers to it as the complete community. It consists of 10 apartment buildings containing 1,209 apartments, 332 garden homes and 654 town houses. There is a common playing ground, two schools, a common country club providing both indoor and outdoor recreational facilities. Its physical location is such that there are only three ways of entering it, one from Carling Avenue, one from Richmond Road and one from the Queensway via Bayshore Drive.

I have spent a little time in this brief description of Bayshore because I wish to discuss the concept of a residential complex as expressed in Bill 121 and hopefully establish the fact that Bayshore is a residential complex and should be treated as such in rent review decisions. This is an extremely important issue. It is vital that the definition in the act leave absolutely no room for misinterpretation by rent review officers or commissioners at the Rent Review Hearings Board.

I would like to speak about the concept of a residential complex. Bill 121 defines a residential complex, among other things, as a building or related group of buildings in which one or more rental units are located, or a related group of sites each of which is a rental unit. It includes all common areas and services and facilities available for the use of its residents. We are not certain that this definition is adequate for a large, integrated complex such as Bayshore or that it is sufficiently detailed to assure that rent review officers will not have any doubt as to its real intent.

We are therefore suggesting that the definition for a residential complex be reviewed by the experts and revised so as to leave no doubt as to its intent, and a visit to Bayshore may be of help if you have trouble visualizing this.

You may ask, why are we so concerned with this definition? I will try to explain. Bill 121 allows a landlord to apply for rent increases over and above the guideline for capital expenditures, subject to the 3% cap. Well, even with the 3% cap an increase of 8% to 9% is entirely possible. You have just announced the guideline increase for next year as 6% and if the landlord can get 3% on top of that my tenants will be looking at a 9% increase.

With rents already averaging $700 to $800 per month, an increase of that magnitude is significant, especially if you are a senior citizen with a fixed pension, or no pension at all except the old age pension, Canada pension and some guaranteed income supplement. In a large complex such as Bayshore the 2% allowance for capital expenditures will be collected on all units in the complex. It is most unlikely that capital repairs would be done on all units in the complex every year. If the total amount collected each year is applied to the actual capital repairs done, it is unlikely that an increase above the guideline could ever be justified. But if the landlord is permitted to sever or unbundle the complex and argue that it actually is comprised of several smaller subcomplexes, then the 2% collected on a smaller subcomplex may not cover the capital repairs done on that subcomplex, and an increase in rent for the units in that subcomplex may appear to be justified. In the meantime, all the moneys collected on the rest of the complex are simply pocketed by the landlord.

The process I have just described could be repeated year after year. There would always be several applications before the rent review officers for increases above the guideline for a portion of the complete complex. Their workload would be needlessly high. Tenants would live in an unstable environment.

We suspect that this situation is just what Minto has in mind. They have been in the process of severing Bayshore for some time and, as of now, they seem to be succeeding. The situation should be studied in detail and Bill 121 should be worded to ensure that this is not allowed to happen; that is, if you agree with our reasoning. Bayshore was built as a single, large residential complex. It was originally managed that way. I have been living there since 1971 and I know. It should remain that way.

Now I would like to say a little bit about capital expenditures. Bill 121 proposes to add 2% to the calculated guideline increase to allow for capital expenditures, but it does not impose any controls on the portion of the money so collected. It simply says that a landlord must demonstrate that the 2% has been used for capital expenditures before any increase above the guideline related to capital expenditures will be permitted in any year. It is our view that this puts too much leniency in the act and opens up the whole question of interpretation by rent review officers once more. The bill makes provision for carry-forward of capital expenditures but does not appear to say anything about carry-forward of unspent funds collected in previous years for capital expenditures.

We are not convinced that an arbitrary percentage should be added to the guideline specifically for capital expenditures, but given that it is, we offer the opinion that money so collected should be segregated in the landlord's accounts and set aside in a special reserve fund to be used solely for capital expenditures. Funds should not be borrowed for capital expenditures unless this capital expenditure reserve fund has been depleted. The money in this reserve fund should be invested so that it earns interest from year to year.

This approach, combined with proper auditing of the accounts, should make it a lot easier for a rent review officer to ascertain if the 2% has been used for its intended purpose. It would also ensure that money collected from tenants for capital expenditures on the residential complex in which they reside is not used by the landlord to finance other ventures.

In a residential complex the size of Bayshore we feel that controls of this nature are absolutely essential. Furthermore, in calculating a permissible rent increase for capital expenditures, no increase should be allowed if the expenditures are fully covered by funds from the capital reserve fund, because that, after all, is their intended purpose.

We find it somewhat puzzling that in paragraph 20(5)1 permission seems to be given to calculate interest on a capital expenditure at prescribed rates, regardless of whether the expenditure is financed by borrowings, by the landlord's own funds or by both. It seems that a landlord, having been allowed to collect an additional 2% per annum, compounding, for capital expenditures is then to be allowed to collect interest on the expenditure. We hold the view that capital expenditures should be financed out of a capital reserve fund made up of the 2% bonus with interest.

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Bill 121 also makes transition provisions for capital expenditures. Forgive us for making the observation that these provisions appear to negate the effect of Bill 4. Minto has an application before the rent review services office in Ottawa requesting permission to raise rents by as much as 23%, based on capital expenditures made in Bayshore during the transition period. So this provision in the bill is of tremendous concern and importance to Bayshore tenants. We are under the impression that provisions in the Residential Rent Regulation Act and the Residential Tenancies Act include allowances for projected capital expenditures, but the entire process is so involved and complicated we have no way of determining just how much money Minto may have collected in previous years for capital expenditures in Bayshore, or whether the moneys collected were actually used for this stated purpose.

The Vice-Chair: If I could interrupt you; you can take a breath for just a moment. We have set up a speaker in the hall. If there are people who would like to be seated in the hall, they may do so. Maybe that will be more comfortable and a little less disconcerting to the proceedings of the committee. Unfortunately, we just cannot blow out the walls, so I guess this is the best option. I am sorry that we interrupted. Perhaps we could just take a minute or two so that anyone wishing to have a seat out in the hall could do so. I am sure you are finding this a little disconcerting, Mr Wood, but it might help.

Mr Wood: It disturbs the trend I am trying to establish.

The Vice-Chair: It was at the point that we could not hear you. I am sorry for the interruption, Mr Wood, but hopefully the room will be a little quieter now.

Mr Wood: I would like for you to adjust the sound system so there is no feedback, please.

I was speaking about the concept of placing more controls on moneys collected for capital expenditures, because quite frankly, we are not convinced that landlords are in a bind to find the money for doing capital repairs on their buildings. We heard all the arguments; we are not convinced. The point I am leading up to is to stop giving us things based on estimates, averages, cost price index, building cost index; give us some facts and figures, file some statements of account, income statements and balance sheets and let us see some dollars. Let us see what your rate of return is and then maybe we will believe you, but right now, we are from Missouri.

It is clear that while they may have collected such moneys in the past, they now intend to collect them again, and Bill 121 will permit them to do that. We find this unreasonable and unfair. The role of government includes the responsibility to regulate and control. The transition provisions in Bill 121 should be re-examined and reconsidered.

We may have overlooked it -- we are not experts, we do not have legal training or anything of this nature -- but we have been unable to find any evidence that capital cost allowances permitted by the Income Tax Act have been taken into consideration in this whole process. We stand to be corrected on this point, but we would like somebody to investigate it and see that it has been taken into consideration. If you built something 20 years ago and you have been taking your capital cost allowance every year on your income tax return, then you should have some money to do some repairs.

It should also be noted that once an increase in rent is introduced, it elevates the base on which subsequent guideline increases are calculated. Even after the costs of capital improvements have been recovered by a landlord, the rent increase granted to cover those costs continues to compound. We consider this grossly unfair to tenants. I wish to stress this point.

Now, I never submitted it, but last year I prepared a paper to submit to rent review about Minto's increase for that 23% increase. I did a rather thorough financial analysis, and I can show you where, had they been allowed to get that 23%, they would have done handsomely well in comparison to an investment in the market at 11%.

My allocated time has just about expired and I have barely scratched the surface. In closing, allow me to say that the entire procedure involved in the Residential Rent Regulation Act, 1986, is too complex and complicated for the average tenant to comprehend. We had been hoping that the new act would have embodied a fresh and somewhat simpler approach. We find that it seems to perpetuate the existing system, with some modifications. We appreciate the cap that has been placed on rent increases, but note that rents will still be increasing in an ever upward spiral.

We appreciate the intent to enforce better maintenance, but we have some reservations about what will actually happen when the act becomes law and it is left to municipal authorities to enforce it. We believe there is still some room for improvement. We have taken the liberty of attaching an appendix with a few suggestions for changes we feel would be beneficial. Even if they cannot be implemented within the current time frame for having this bill enacted, we ask that they be given serious examination for possible future implementation.

Is it really necessary for you to do this while I am speaking, or are you deliberately trying to distract attention from my presentation?

The Vice-Chair: Mr Wood, if you would just please continue.

Mr Wood: We have taken the liberty of attaching an appendix with a few suggestions for changes that we feel would be beneficial. Even if they cannot be implemented within the current time frame for having this bill enacted, we ask that they be given serious examination for possible future implementation.

The inflationary effect of rents that continue to increase has to be slowed. In fact, the whole economic system needs a thorough examination to determine why we have to pay more and more for the same goods and services with no value added.

The next presentation is being given by the Federation of Ottawa-Carleton Tenants' Associations. The Bayshore Tenants' Association is a fully-paid-up member of the federation, and has endorsed its presentation. Many of the issues that I could not address for lack of time will be covered in that presentation that will be given by Dan McIntyre. Thank you very much for the opportunity to make this presentation, and for listening so patiently.

I did not read the appendix, because it does suggest some pretty radical changes in the approach to controlling rents. I doubt whether the government would be prepared to consider them now, but I wanted to get them before the government for consideration. If I have the time, I will read them for the benefit of the audience.

The Vice-Chair: Actually, you are a little bit over time at the moment, but if the committee wishes, you have been under a little bit of duress making this statement to us, and we can either have one question from each party, or you can finish what you wish to do.

Mr Abel: Finish, please.

Ms Poole: Mr Chair, I would very much like to ask Mr Wood some questions if he does not mind.

Mr Wood: I do not mind, but I would like to read this to finish the paper.

Ms Poole: I do not think the Chair will let us do both. Well, maybe I will have a chance to chat with you later, then.

Mr Wood: Sure, I am available. You can phone me, write me, I will come to Toronto, whatever you want me to do.

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Ms Poole: This will not be on the public record.

Mr Wood: The appendix says this: The rent control procedures, as presently defined in the RRRA, 1986, are too complex. They involve the use of several formulae, based on indices which are themselves the product of averages and estimates. Rent control procedures should be based on known facts and figures obtained from actual accounting statements filed by landlords wishing to raise rents. The following principles are suggested for study:

a) Tighten up the definitions in the act. They are too vague in many instances, and leave too much to the interpretation of rent review officers and officials sitting on rent review hearings panels.

b) Stimulate efficient and cost-effective management on the part of landlords by not permitting pass-through of costs incurred as the result of deliberate neglect, inefficient design, poor workmanship, lack of skilled and timely maintenance, and similar practices.

c) Reduce, or even eliminate, the use of indices such as the cost/price index, the residential complex cost index, the building operating cost index, etc. Base decisions on facts such as are embodied in actual audited financial statements.

d) Define, in the act, the accounting procedure that is to be used by landlords. Ensure that moneys collected for capital expenditures are segregated and kept in a capital expenditure reserve fund for the residential complex to which the fund applies.

e) Establish a maximum permissible rate of return on investment for the rental industry which takes into consideration the low risk involved; given that people must have shelter and vacancy rates are low, the market is virtually assured.

f) Specify that applications for rent increases are to be accompanied by an income statement, a balance sheet, and supporting financial statements, all duly audited.

g) Require full disclosure of all information needed to justify a rent increase. Increases which only increase the profit of the landlord beyond reason are inflationary and create financial hardship for many tenants. The landlord has to make a reasonable profit -- that is an undisputed principle, we do not argue with that -- but he has to do it not only by raising rents, but by efficient management as well. The act must not encourage persons to enter the rental industry expecting to finance their venture by exorbitant increases in rents.

Mr Duignan: A point of information, Mr Chairman: I was just wondering, on Mr Wood's presentation, maybe the ministry staff could answer this question. Would the Bayshore complex be considered a residential complex under Bill 121? Would you be able to answer that at this point?

Ms Parrish: That is indeed a very complex question. My understanding is that Bayshore was found to be a residential complex under the Residential Tenancies Act. Under the RRRA, the landlord can designate a complex, and there has been quite a bit of litigation, I understand, on this issue, and there was a decision of the hearings board which segregated part of Bayshore, as I understand, to various residential complexes.

The current statute does not have the approach in the RRRA designation. Mr Wood has made the point that we should look at the exact drafting as to how we drafted the term "residential complex" and how it would affect this kind of situation. I think his advice is well taken, and that we should go back and take a look at the exact drafting. What is in the statute now is not the same as what was in the RRRA, but there is sort of a homogenation of the RTC and the old act, so I think we need to look at the points he has to make about this.

Mr Duignan: And a final point of information: There is an item 3.5 that Mr Woods brought up in relation to the capital cost allowances. Would you be able to supply some information on that?

Ms Parrish: On the income tax and the capital cost allowance?

Mr Duignan: Yes, have they been taken into consideration in the process?

Ms Parrish: We do know what it is and we know that it exists, but it is not a deductible item, if that is what you mean. It is not deducted from rent increases, for instance.

Mr Duignan: Okay, maybe you could take a look at this point in the brief and get back to us with some information.

Ms Parrish: Yes, sir.

The Vice-Chair: Thank you.

The Vice-Chair: The next presentation will be from the Federation of Ottawa-Carleton Tenants' Associations, Dan McIntyre. Perhaps we could pause just for one moment while the room settles.

Clerk of the Committee: Two minutes.

The Vice-Chair: Two minutes. We will see if we can sort out some of the technical bugs we seem to have. The committee will recess just for two minutes.

FEDERATION OF OTTAWA-CARLETON TENANTS' ASSOCIATIONS

The Vice-Chair: The standing committee will come back to order. Good afternoon. The committee has allocated you one half-hour for your presentation. Would you begin by introducing yourselves for the purposes of Hansard and then begin your presentation. We would appreciate some time for conversation with you following your presentation.

Ms Keasey: My name is Marie Keasey. I am the chairperson of the Federation of Ottawa-Carleton Tenants' Associations. Sitting next to me is Mr Dan McIntyre, who is the executive director of the federation, and he will be presenting our brief this evening.

The federation represents over 40 tenant associations in the Ottawa-Carleton region. On August 15 we held a general meeting and most of those 40 associations were represented. At that meeting we discussed the brief; there was quite a lengthy discussion, as a matter of fact. That brief was approved unanimously in principle, and that is the brief that is being presented tonight.

Mr McIntyre: I will go through the brief. I am hopefully going to take about 15 minutes, to allow time for questions at the end.

In general, Bill 12l, the proposed Rent Control Act, is the best permanent rent act this province has ever had, although it is far from the best possible legislation. There are several flaws that require substantial amendments.

The changes we seek will not violate the principles of the bill but will make it more fair, more practical, more explainable, and more in line with what tenants should expect from this government and this Legislature. Specific amendments have been appended to the brief, 41 in all.

We are following the order of the brief and I am going to be skipping some parts for time.

Maximum rent: Under the RRRA, the concept of maximum legal rent was initiated. This meant that a landlord who had not taken all the generous rent increases he was allowed could catch up and take a big rent increase without any application any time in the future. This bill continues this provision.

Because of the rate of return allowances in the RRRA, the maximum legal rent would often be set well above what the landlord could reasonably charge for the units. At any time, tenants in these units could face massive increases. This directly contradicts the statement of this government that "no tenant will face a increase of more than 3% above the guideline."

Tenants in these units are deterred from seeking their rights, as a landlord can execute an economic eviction by simply using the maximum rent provision.

We prefer the approach of the Residential Tenancies Act where the actual rent was the legal rent, provided it was in fact legal.

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Residential complex: Mr Wood put it beautifully. I have worked with their group for a number of years. In fact, I used to be part of the Bayshore Tenants' Association. This definition is subject to abuse, and a decision of the board last week causes greater concern on this entire issue. But the government should be concerned about it as well, because if complexes are allowed to be severed what you will have is multiple applications where you previously would only have one. Think of the workload that is going to create on the ministry, think of the confusion, think of the difficulty in tenants responding to this, given minimal resources on our part.

It goes against public policy because it creates more work rather than less, and it deals with a situation where the landlord can simply cherry-pick which complex he wants to define. That is it for that week, and that is the one that gets the rent increase. Everyone else, he pockets the money.

The other thing is, if you are going to stick with this split guideline -- we will get on to that later -- and if a landlord owns two fourplexes side by side, which rules apply?

Social housing exemption: We believe that more aspects of rent control should apply to public housing, period -- maintenance provisions, once-in-12-month provisions, rules of that nature. It is unfair to exclude people.

The five-year exemption: We would not have a major problem with the five-year exemption on new complexes if there was provision for review of an increase more than 3% above the guideline in the last two years of the exemption, if the maintenance provisions of the act applied to these complexes, and if the question of maximum rent was addressed.

The guideline -- big issue: Just like the RRRA, the proposed guideline formulae are flawed and a continuing cancer on affordability. Both acts give landlords an extra 2% increase each year built into the guideline. This act assumes that this 2% compounding increase will be spent on capital. That is a large and untenable assumption.

This act forgets a number of things that go into the guideline discussion. They are all listed in the brief -- to save time, I will not enumerate them now -- including the fact that when I was on the Rent Review Advisory Committee in 1986 that was the first item I dissented from in that report. By the way, no tenants I know of support the RRAC agreement.

If this government would want to take the approach of a clean sheet to forget the past, even as tenants pay for that every day -- we will be turning over $670 million on 1 September, the end of this week, to landlords and $8 billion across the province -- you should recognize that the 1992 guideline announced last week contains the same 2% bonus provision, and you should recognize it is not allocated to any cost. If you continue with this system, then in 1993 you add another 2%, what you should recognize is that 4% has newly been built into the rents for capital, and in 1994 it would be 6%. That is forgetting the 13% built up under the RRRA, which we dealt with in Bill 4.

We call on the government to end this 2% compounding and unfair giveaway by the end of 1994. A simple sunset provision is required to section 12 of the act. I want to tell you, I think I am a pretty tough tenant advocate, but my members are telling us that we are too soft on this point. Enough was enough in 1989 when the guideline was supposed to be reviewed, but please, not forevermore.

It should be noted that by the end of 1991 tenants will be making an annual contribution of over $400 million for capital works within current rents because of the residential complex cost index formula. By the end of 1994 this will be $900 million, and this does not take into account another $400 million which is completely unallocated rent built up from the RCCI formula.

We also disagree with the split guideline provisions between small and large complexes. First, it needlessly complicates things. Second, we see no evidence that a small landlord has more per-unit operating costs. These buildings have no superintendents, no elevators, and they do not pay municipal tax at the multi-residential rate.

Finally, the government must educate the public about the 2% giveaway, must put the facts on the table and on the record as to where that money is, where it is going, and why it is already covering substantial amounts of money for capital works currently.

Landlord applications for bigger rent increases: First, it should be recognized and stated that the limitation for extra rent increases to extraordinary cost increases in matters beyond control, to necessary capital costs and to a limit of 3% over the guideline is vastly superior to the RRRA. It is unfortunate, however, that the government missed out on an opportunity to bring in an even more superior system based on a capital reserve. Tenant organizations from around the province showed you how that could work.

It is also unfortunate that there are significant problems with the system chosen by the government.

Extraordinary cost changes: I am going to cut a lot of this. There are some problems here in Ottawa. We already went through market value reassessment and what happened is, every landlord who had an increase went to rent review and got a rent increase. Those who got a decrease put it in their pockets. So we would like to see you deal with that concern going back to 1987.

Capital cost: First, necessity. It is supportable that capital cost allowances are limited to necessary expenditures. The defining of this in section 15 would appear to be left to some discretion. We hope that rent officers will be people committed to rent control and to the retaining of affordable rental stock.

We also applaud the dropping of the onerous requirement for a tenant to prove ongoing deliberate neglect, as that rendered the concept of neglect useless. It is the landlord who seeks the benefit of a rent increase; the landlord must prove that it is merited under all the circumstances.

Bill 4 renegation; we use that word deliberately. This act will allow landlords who completed capital works between January 1, 1990, and June 6, 1991, to claim these expenditures under this act. These were works done under the so-called Bill 4 period. Bill 4 told tenants and landlords that enough was enough and that there would be no further allowance for these works. Bill 4 got the landlord lobby all worked up. They paraded a few hardship cases before this committee and before the minister. This provision in this act means that that landlord lobby paid off and tenants will have to pay for it.

There are about 5,000 units in Ottawa-Carleton which were saved by Bill 4 from paying larger-than-guideline increases. All of these tenants will now face these increases again upon proclamation of the act. These tenants, like thousands of others around the province, will be very angry when confronted with these applications. There will also be an instant backlog at the rent increase office.

But what about the hardship of landlords caused by Bill 4? Nonsense. The landlords that make up the vast majority of the 5,000 units in our area include landlords like Minto, Urbandale, Levinson-Viner, etc. These capital costs were paid for out of retained earnings and can be demonstrably shown to be paid for out of built-up rents from the generosities of the previous laws. If Bill 4 caused any legitimate hardship on landlords, let them make application based on that hardship and let us look at it in a fair way there. Instead, Bill 121, unless amended, will simply make the rich richer.

Interest on capital expenditures: Mr Wood touched on this very well as well. The RRRA was exceedingly generous, particularly in situations where capital was financed from existing rents and retained earnings. Interest may not be necessary when you take into account the compounding effect of rent increases. It becomes even more grievous if a proper costs-no-longer-borne system is not implemented.

Useful life periods was another bad part of the RRRA and that looks like it could be continued. No regard has been had for the actual history in buildings, and there was a blind acceptance of industry-produced "useful life periods" which favoured the industry.

Costs no longer borne: Some of us Elinor Mahoneys here have gotten grey hairs on this one over the years. Any system that does not automatically take past increases out of the rent when the triggering cost has been fully recovered is unfair. The case for costs no longer borne has been made by tenants over the years, and it should be beyond doubt that costs no longer borne are automatically out of the rent. There is no argument to the contrary.

I might also add, our members reminded us of interest costs that have been added into rent that are no longer borne as well, and they are not coming out of the rents either.

Carry-forwards: The provision of carrying forward will lead to consulting practices on timing and costing of capital expenditures so as to maximize rent increase awards. These carry-forwards add needless confusion. Yes, tenants are only exposed to an increase 3% above the generous guideline, but it is constant and perennial exposure.

The extra phase-in year for small buildings is again unsupportable on the facts and is also needlessly more confusing. Make the cap real -- no phase-ins, no carry-forwards.

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Maintenance requirements: The government is to be commended for bringing in a system that ties rent increases to the adequacy of maintenance. For years, tenants were faced with a double whammy: more rent, less maintenance. This act sends a clear message that maintenance is a critical component of rent.

One landlord appeared before this committee -- you all know who it was -- and suggested that landlords will not apply for rent increases because they will then have their maintenance scrutinized and that may lead to a rent decrease. We sure hope he is right.

There are significant concerns of implementation of these stronger maintenance provisions. One is a recurring concern dealing with the type of people who will be deciding rent increases. There is much room for discretion, and people are required who will take a strong stand in making the maintenance sections of this act meaningful and real. Another concern is that landlords may cut back on maintenance immediately after they get their rent increase. Another concern is the frequent reluctance of property standards officers to issue work orders. Finally, there is an outstanding concern in the city of Nepean that some people find themselves in an undesignated area and are not covered.

Illegal rents: another one that tenant advocates have got grey hairs over. They are still with us. We support the increased maximum rebate in this bill to $5,000, although we prefer there be no limit at all. We also support the attachment of interest to illegal-rent rebates.

One serious difficulty does remain. Tenants can recover rebates by deducting the moneys from the rent unless there is a new landlord. This protection for new landlords is unnecessary, and we go into a number of ways that their interests can be protected.

Adding or discontinuing services: This is one of those things you read and it looks real fair until you realize what you are saying is the landlord and the tenant have to agree. So a senior citizen decides that he can no longer afford a car or does not want to drive a car or wants to be energy-efficient or better for the environment. He wants to take public transit. He goes to his landlord and says, "Can we agree to give up my parking space?" "No, we don't agree. Keep paying for it forevermore." Parking should be discontinuable upon proper notice, similar to notice on the unit itself under the Landlord and Tenant Act.

Rent determination and the right to a hearing: The applicant can ask for a hearing at the time of making the application, but respondents only have 15 days to notify, in writing, that they want to exercise their rights to a hearing. The clear consensus of tenants is that a hearing is preferable. However, with only 15 days to make a decision, tenants will have to automatically demand a hearing as there is inadequate time to determine if a hearing is unnecessary based on the application.

We call for a 30-day provision that would make that more workable, and again we are calling for a high quality of people who will be making these rent determinations. There must be a commitment to rent control, not rent increases.

Appeals: It is a little scary that the only avenue of appeal is to the courts. We have come up with the suggestion that there can be appeals to the director of rent control based on an issue. I think what the government wants to do is get rid of appeals where it is whether the landlord spent $8,000 or $8,100 and it just clogs up the system. But if there is an issue, deal with it.

I am going to skip over the rent registry, because that makes me older too, and just finish up by talking about the fact that there are 41 matters to be prescribed under the bill. That is a lot. The RRRA had 43, and the regulations killed us in that particular act.

Again, we would call for the appointment of directors of rent control who are dedicated to the right principles. We also commend the beefing up of the tenant organizing sections, and we finish with a call for licensing landlords, which we have called for before.

Attached to our brief, in our attempts to bring about a law that we all can take pride in, that will be permanent, that will be something that we can live with for a number of years, we also attach our Bill 4 presentation because it has some workups on what happens with rents, and a clause-by-clause analysis on each and every clause, with 41 suggested amendments that would make this bill a better bill.

We hope the Legislature will deal with those and come up with the best rent control bill possible. Tenants need it. We deserve it.

Ms Poole: Thank you for your presentation today, and particularly for all the work you put into possible amendments. I have about three hours' worth of questions. I will try to compress them.

First of all, cost no longer borne: Under Bill 4, the Liberals produced an amendment on cost no longer borne which the ministry rejected, saying it would look at it for long-term legislation. Under Bill 121, it was not in there. On August 1, I tabled a request to the ministry to give an explanation of why not. Yesterday I got the explanation that it was too complex, that they could not figure it out.

My submission is that in this day of computerization, there should be absolutely no reason why at the time the rent officer makes the order they cannot have it on the computer to automatically notify tenants 10 years hence that their rent will be reduced by a certain amount.

Can you comment?

Mr McIntyre: There is an old expression: Give a monkey a typewriter and an eternity, and eventually it will write a novel. Give me three hours with a bureaucrat and we will figure it out. It can be done.

Ms Poole: I will pass that invitation on to the ministry. Mr McIntyre is going to solve your problems.

Second, the split guideline: I agree wholeheartedly with you, and I think virtually every presentation we have had has supported that it makes no sense to differentiate. Do you have a suggestion for that guideline, what it would be?

Mr McIntyre: Our position on this has been consistent, going back to 1985. The guideline has to be a percentage of inflation, somewhat higher than the part of an operating cost compared to rent. Right now it costs about 50 cents on the dollar to operate a rental property, so it has to be slightly higher than that. Two thirds can work, but we can only deal with that if you get rid of the 2%, because otherwise you are just adding a high guideline.

That is the real problem in the RCCI formula. That is what we have been saying since 1986; it is a 2% giveaway. They should be equalized, perhaps at 60%, but I am not giving you a figure on that. It is a contingency kind of recommendation based on getting rid of the 2% compounding.

Ms Poole: Your comments on hearings and the right of appeal are well taken. Fifteen days simply is not adequate to allow tenants to have an opportunity to indicate they want a hearing. But I would like to ask you about the right of appeal.

I was somewhat surprised that you were suggesting an appeal to the director of rent control rather than an independent body. I think that is the first suggestion we have had along that line. Everybody else seemed to distrust the rent review bureaucrats and would like to really get an independent opinion on appeal.

Can you comment, or is this again a compromise where you think this might be what the government would accept?

Mr McIntyre: I took some of the minister's comments to heart -- the previous minister, that is -- when he suggested that they would entertain changes to the bill but not changes to the principle. If the principle is to get rid of an appeal mechanism, I think we have come up with a way that would be better than what they have done.

In a perfect system, frankly, we would have a capital reserve, one guideline and no rent increases above the guideline; then we do not have any problem whatsoever. But if we are going to go to a system that does allow landlords some increases over the guideline, there ought to be an ability to review that without the onerous provisions of going to court.

The Bayshore association was involved in a court case that cost thousands of dollars in legal costs and everything else. It is just an onerous process for tenants to go through. If that sort of comes down the middle, well, sometimes we can think of compromises. We are open on that.

Mr Tilson: I thank you for your presentation and also for giving us your presentation in advance in Toronto. I am sure all of us will be looking at your organization's recommendations. I notice that you did attend a number of the hearings in Toronto, and of course have had some experience in rent review and rent control.

The question I have for you is, having heard submissions as to how rent control has failed in other jurisdictions -- Sweden, New York, many of the American jurisdictions, England -- I assume you would acknowledge that one of the solutions would be to encourage more housing to be built to build a greater supply.

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Mr McIntyre: I do.

Mr Tilson: I assumed that.

Mr McIntyre: Non-profit housing, residential intensification; there are a number of ways to do it.

Mr Tilson: Would you encourage private enterprise at this particular time, with this particular bill, to get into the market of building new housing for rental accommodation?

Mr McIntyre: You cannot write a rent regulation law when you cannot deregulate rents, and you cannot take any action that will spur private-sector developers to put housing for profit on the rental market because it simply costs far too much to put the product in the ground. They cannot gain a rent that would gain them an adequate rate of return. The issue of regulation is moot.

The issue of regulation is, how do you treat tenants fairly who live in apartment buildings, who have a certain set of expectations of fairness? How do you protect them from losing substantial ground on their ability to keep a roof over their heads and a reasonable quality of life?

I might say, in terms of your study, you had Professor Hulchanski come before you yesterday who also showed that removing rent controls does not work. And there are several studies -- and one of the members here alluded to them -- in the United States showing very little difference between regulated and unregulated markets in terms of supply-side issues.

There is conflicting evidence. Most of the evidence on the decontrol side is produced by those who would profit by decontrol.

Mr Tilson: Why then is no new housing being built?

Mr McIntyre: Because it costs too much money to do it and get a rate of return. You can build condos and get an immediate rate of return. You can build family housing for ownership and get a rate of return. The other problem we have, and I do not think this has been touched on here, is that we have a lot of underutilized housing. Municipalities should be intensifying the use of existing housing to create more rental stock. But that is a municipal issue, unfortunately.

Mr Mammoliti: Thank you very much for coming out. I cannot agree with you more. Tenants do deserve a good piece of legislation, and we intend to deliver.

There was a statement you made that I can agree with you on as well. It was near the close of your remarks. "More rent, less maintenance." I can tell you about that in my riding. It happens. It has been happening, and even with the Liberal rent review, heaven-sent legislation for landlords, which existed prior to Bill 4. With all the profit that landlords are making they still neglected the needs of the tenants.

Mr McIntyre: I do not want to paint with broad brushes here. There are two ways to increase your profits: One is, you increase your rents; the other is, you decrease your cost. Every business will do whatever it can to pursue that interest. So if they can get away with it, if there are not adequate sanctions -- and this frankly where this bill does a lot more, although I think --

Mr Mammoliti: As you know, we have addressed the work order issue and we have addressed the fact that landlords will no longer be able to apply for an increase unless those work orders are completed, through Bill 121, yet the landlords have been coming in front of us and actually accusing the tenants of breaking things in their units and destroying their units to not be subject to an increase in their rents.

Mr McIntyre: Do any of these people look like they would destroy property?

Mr Mammoliti: I have been asking this question --

The Vice-Chair: Mr Mammoliti, just for your information, you have two colleagues.

Mr Mammoliti: Yes, thank you.

I have been asking this question in almost every city I have been in. What do the people of Ottawa have to say to those landlords who are accusing them of this?

Mr McIntyre: It is a scurrilous thing, but I think what tenants need is an ability to enforce their maintenance rights based on the principle that current rents clearly pay for maintenance. And if you pay for something, you ought to get it, and the laws of this land ought to ensure that.

Mr Perruzza: I do not think I am going to get my questions off. I will try, but first of all, I would like to take this opportunity, and I think I speak for all members of the committee, to thank the Honourable Evelyn Gigantes, who has taken the time out of her busy schedule. I know that she is a newly appointed minister and there is a lot to catch up on. She is sitting on our hard floor and has listened to all parties present their case, and I would like to thank her on behalf of the committee.

I will allow Margaret to have the remainder of the time.

Ms Harrington: I just want to assure you that all the things you have mentioned will be taken into consideration. As I have said to every other group, the reason we are here is to look at amending the bill to make it the best possible bill. I will not go into details on that.

The transition time: This is a problem. How would you recommend dealing with small landlords who do have a hardship case? They have bought in an inflated market. What would you suggest?

Mr McIntyre: What has happened over the last few years is landlords have voluntarily purchased properties where they could simply add up the cost of running that property, the current rents and the cost of financing, and they knew before they signed on the dotted line they would be losing money. What they expected was there would be an ability to raise rents as much as they would take so they would make money. That was allowed under the previous law and it was wrong under the previous law.

It does leave some people in a spot, does it not? But the answer to it is not raising the rents of the people of Ottawa and throughout Ontario to pay for that error, no matter how honestly committed, but to look for more creative solutions, including -- let's take a look at how these projects are financed and how well the financiers are doing on the deal. Let's see if we can get them in a partnership.

Again, frankly, that is -- I do not want to say it is not my problem. I am happy to try to address it with one and all, but clearly the answer is not to make tenants pay more rent and get nothing for it.

The Vice-Chair: Thank you very much for coming before the committee today. We appreciate your presentation.

The committee adjourned at 1847.