Committee Transcript 1991-Jan-23 | Legislative Assembly of Ontario

I am Yvonne O'Neill, the member for Ottawa-Rideau. I am sitting in for the Chair and Vice-Chair who, for various reasons, have been unable to meet the deadline of 9 am this morning, but I am sure they will be along shortly.

FEDERATION OF LONDON TENANTS ASSOCIATIONS

The Acting Chair: The first deputation this morning is the Federation of London Tenants Associations. I would like to invite Mr Bouillon, the president, to present himself with whoever else he has in attendance this morning. Mr Bouillon, would you please begin?

Mr Bouillon: Good morning. My name is Leo Bouillon. I am a representative of the Eastview Gardens tenants committee. Also, I am with the Federation of London Tenants Associations.

My initial reaction to the proposed bill was that of great delight. The idea of having a freeze on rental increases seemed to be good at the time. I do, however, believe in equality and fairness. If we are to have landlords who keep up their properties on a regular basis and do preventive maintenance, we would be satisfied with occasional, reasonable rent increases. However, in our city alone, there are many buildings which are in a state of disrepair. It seems many landlords leave these buildings until they are no better than slums, decide suddenly to make large changes such as roofing, and then decide to double their tenants' rents.

Considering the fact that many of these tenants are low-income families and cannot afford to move or live elsewhere, they are forced to accept these increases and deteriorating conditions such as those on Cascade and Mornington. Because of the action of the tenants' committee on Mornington and the co-operation of the property departments at city hall, work was finally completed on one of three buildings. Cascade, however, is still in a state of disrepair. Very little if any work has been completed.

My fear is that although the bill is meant to protect the tenant against large rent increases, the wording in many areas is vague. I feel this could be used by landlords as a loophole to prevent them from even keeping up necessary maintenance. If it were possible to strike a balance between landlords and tenants, it would not be necessary to implement any legislation. If landlords were to keep up maintenance to livable standards without attempting to make large profits and tenants were protected against large increases, legislation again would not be necessary. Legislation in fact is needed to protect tenants against regular exorbitant rent increases.

However, I wonder what kind of protection Bill 4 will afford a tenant against landlords who will refuse to maintain a building. Many of the laws which are in place today are not very effective. For instance, in London a year ago, a landlord was fined by the city for defying a work order. This did not prevent this landlord from refusing to clean up his property; tenants are forced to reside in deplorable conditions.

Is it the intention of this commission to suggest that Bill 4 be passed as is, or make changes that will be necessary to protect tenants against living conditions which may be allowed to deteriorate?

The Acting Chair: Is that all?

Mr Bouillon: Yes, thank you.

The Acting Chair: You have been brief, Mr Bouillon. I am sure we have some questions. Who would like to begin? I do not know where we left off yesterday, so whoever puts their hand up first today, we will start the rotation that way.

Mr Tilson: I guess one of the questions we have is: How do we keep up? How do we have fair rent at the same time? I think tenants are prepared to pay a fair rent, those who can afford it. There are many across the province who cannot afford it, and that is another problem, but let's take the average tenant. How can we encourage landlords to maintain the buildings? We have heard, specifically in Toronto, of many landlords who have abused the process. They simply are not maintaining the buildings, and rents are going up and tenants are having difficulties.

One area I perceive is that perhaps provincial regulations for property standards can be tightened up. There are municipal bylaws that can be enforced. Perhaps tenants' associations such as yours can be encouraged to inform the tenants about the processes of having those bylaws enforced, about their rights under the provincial property standards regulations, the requirements under the Ministry of Labour, the requirements under proper health standards or fire regulations that are not being met by many landlords. I am wondering whether it is a matter of educating tenants to enforce their already existing rights. I do not think a lot of tenants realize the rights they now have. Do you have any thoughts on that?

Mr Bouillon: I agree that a lot of people do not know their rights. It has been my experience over the last couple of years when I did get involved, finding it extremely difficult to have the process changed.

A prime example is a place on Cascade, where a lady has been a resident for the past 15 years. Her place has never been painted, the carpets never shampooed. This lady called me in September. When I got to her unit, I could see through the living-room wall; I could see completely through her unit outside, daylight coming through. It is very unfortunate. There are five of these buildings, and they are, as I said, in deplorable condition.

Mr Tilson: You will recall that the Treasurer indicated there would be $700 million to help people through the recession. The Minister of Housing, as you may or may not know, announced that $35 million of that would be directed towards the housing industry. I forget the specific figures, but a certain percentage of that, I think 15%, was to be directed towards low-rise housing. That, to me, indicates his acknowledgement that perhaps there is a downfall in Bill 4 in not encouraging landlords to proceed with capital expenditures.

Should there be a subsidy program for low-income tenants? There are some tenants who cannot afford rent no matter what it is. Similarly, perhaps there should be a tax reduction to certain landlords whose only way of doing capital expenditures is to raise rents. At either level, should the government get involved in any of those programs?

Mr Bouillon: I would think that what we are looking at is basically helping tenants. To go back to what I had been discussing about Cascade, this case is unique. The building has gone into receivership, so it has complicated things on that level. Possibly subsidizing tenants would help.

The Acting Chair: Mr Tilson, it has been brought to my attention that the other deputant also has a presentation, so I would like to inform you that you have about three or four minutes left in your questioning. You may want to hear the rest of this presentation.

Mr Tilson: I was not aware of that.

The Acting Chair: I was not either, until just a few moments ago.

Mr Tilson: Depending on her statement, I may wish to ask her questions.

The Acting Chair: Okay, then. I am sorry I do not have your name, but perhaps you can begin.

Ms Eagle: Thank you very much. My name is Susan Eagle. I am a community worker, and I work for the United Church of Canada in the Cheyenne part of London, which is the east end of London, where there is housing for low-income families. They invited me to be part of this presentation today. We decided we would make separate presentations, because I am not sure whether we have some philosophical differences in how we would go at some of the solutions to tenant problems.

I have worked for the last six years in the Cheyenne area. During that time we have spent five years trying to take a landlord to court to get repairs done on the buildings there. We tried through the municipal bylaws and we also tried through the Landlord and Tenant Act to get repairs done. I am not sure if that is the reference Leo was making to a landlord who was finally fined $6,000 last year when he was taken to court under the Planning Act, before we got a significant fine against him. The repairs have been done but have still been done badly.

Out of that experience we learned a lot about how poor our laws are at insisting on repairs being done and how unprotected tenants are. From a personal perspective, I do not believe any landlord should be making profit at the expense of poor people. There may be a place for landlords to make profit from the affluent, but I do not believe that poor people who are struggling to make ends meet and to feed their children at the end of the month should be putting profit into the pockets of landlords.

To take that one step further, it ought to be in the interest of any government not to have that happen either, because for people on social assistance, those are tax dollars that simply pass through the hands of the poor straight to landlords.

I would support any freeze on rent, because already low-income people cannot afford the kind of housing costs they have. That is not to say that I do not think landlords should make enough money from housing so that they can do proper repairs, but our experience has been that the landlords are not using that money for repairs anyway.

In terms of enforcement, I would hope that there would be significantly more done by the government around enforcement. The Landlord and Tenant Act basically puts the onus on the tenant to make sure the repairs happen. They have to go and access the law, they have to find out what the law means, they have to find a lawyer, they have to go to court, they have to prove that the landlord has been negligent. I do not understand why it is the responsibility of the tenant to prove that a landlord is delinquent.

I am not sure if it is naïve to propose something like this, but when we are talking about restaurants, if it appears that a restaurant owner is providing a service to the public that is not healthy, it seems to me that that restaurant gets shut down pretty fast. It may be that what we need is some kind of licence for landlords, so that their licence is not renewed if their building is not up to standard.

When I thought about that, I wondered how many inspectors you would need to go around and make sure that repairs were done, apartments were up to standard, so that licences could be renewed. Then I calculated the cost to the public in the last five years of trying to take a landlord to court in this city. It is two small buildings, and during that time we have made extensive use of health inspectors, city inspectors, the city's legal department, the fire department, Ontario Hydro, the tenants' association, the police department, court time, legal aid, legal clinic time.

When I add up the cost of all that and spread it over five years, much of it happening almost on a weekly basis, I know it would be cheaper for this government to license landlords and have inspectors who go around once a year and say: "Sorry, your building is not up to standard. You don't get your licence renewed."

That does not mean tenants would be evicted. It means they would live there free until the landlord did the repairs. I think that would be motivation enough for landlords to maintain standards in the buildings without having to take five years of court time to force them to do that.

0920

The other thing I would like to suggest is in reference to making profit from poor people in housing. Philosophically, theologically, I do not believe that when people have a need for housing and for shelter someone should make profit from that. I think that means the government makes a much more significant commitment to non-profit and co-op housing. The Cheyenne tenants, when they began this process five years ago of saying, "We've got to force this landlord to do repairs," at the same time began to look at other housing.

In the last four years they have built co-op housing and are just about to finish 75 town house co-op units in the city. It took them four years, though, to build that because of all the hoops they had to jump through in order to build co-op housing, going back and forth with the Ministry of Housing.

They wanted to put in day care, but that was under the Ministry of Community and Social Services. There were different kinds of requirements that had to be taken into consideration. There were limitations on where they could get land, how much money they had for land, working with developers. It has been a tremendous struggle over that four-year period to build that co-op housing. It needs to be made easier. It needs to be made faster. It is going to take more of a commitment of government dollars for that to happen.

Again, in the long run I think it is in the best interests of the government to take the profit out of housing for low-income people. It may be an expense at the beginning in getting that housing built, but after that the profit is gone and you are simply getting service for your money.

I have probably talked too long, so thank you very much.

The Acting Chair: No, you are well within your time. Mr Tilson, would you like to continue your line of questioning?

Mr Tilson: Yes, I would. I congratulate you for coming. I agree with much of what you say with respect to the plight of many tenants. There are stories across this province of extreme poverty and how the government is going to address that. This hearing is designed specifically to deal with Bill 4. I do not know whether you have had a chance to direct your thoughts directly to Bill 4. A lot of what you say, I think you would have to agree, Bill 4 does not address.

Ms Eagle: That is right.

Mr Tilson: It simply does not address those problems, and those are very serious problems. One of the disadvantages, I suppose, of rent-freezing, from another side of the coin, is that rents can become so low in poor areas, whether it is London or any other city, that there would be no incentive for landlords to not only make maintenance improvements, capital expenditures, but even more important reinvest in newer, better apartment housing stock. I guess that is what I am looking at. Can a government be too restrictive in encouraging private enterprise to get into the housing market?

Ms Eagle: I think your choice is either to take the profit out of housing for landlords for low-income people or you significantly increase social assistance income and minimum wage. I think that is the choice you make and that is a hard choice.

Mr Tilson: Perhaps I could ask the same question of you that I did of Mr Bouillon, and that was, dealing specifically with that, should the government devise the subsidy programs specifically to low-income tenants, which could be very expensive of course, or should it perhaps even get into a tax reduction to the owner or landlord, which is specifically what the Minister of Housing has done in a way as a result of this most recent announcement, not a tax reduction but an incentive to landlords?

Ms Eagle: I guess my problem is a philosophical problem. I am not sure that people should make profits from the plight of poor people, and that is where I start. In terms of tax reductions and incentives. I am really not sure that ever solves the problem because there has to be some guarantee that landlords are maintaining the place in the first place. As I said, the way the system is set up now, it takes you five years to prove that they are not, and even then they get a really minimum penalty and still are not forced to do the repairs.

I think once you get into saying, "We want to give you an incentive," there ought to be some kind of incentive in a landlord who wants to provide that kind of service to the community. I think a far better incentive is saying, "We are going to prevent you being a landlord if you do not do a good job of it."

Mr Mammoliti: Two items that you talked about are two items that have been suggested to this committee consistently; that is, a licence for landlords and enforcement. Enforcement seems to be a priority to tenants out there as well, and two items that we have taken note of as well, just so you know that.

The whole issue around maintenance and repairs and making profit off of that is an issue that I am personally concerned about. I will read something from today's Globe and Mail. It is a quote from one of the lawyers in Toronto who has represented tenants for a number of years in and around rent review. I want to know what you feel about this particular quote. Richard Fink happens to be one of the busier lawyers in Toronto.

The Acting Chair: He appeared before us in Toronto.

Mr Mammoliti: Yes. It says that he is representing 3,000 units per month. That is how busy he is. He said yesterday in response to the minister's release about money: "Landlords aren't interested in the physical structure of buildings unless it can generate revenue. Repairing them is not going to help them generate revenue." That is something I am concerned about. If we give landlords money to do that and they are not going to do it because there is no revenue for them, then we have a problem on our hands. How do you feel about this particular statement?

Ms Eagle: I can only speak of the experience that I have had in east London. I want to say that I have also been a renter myself, and I have had good landlords so I am not here just to bash landlords. But my experience as a community worker has been with landlords who really were derelict in their responsibilities. You could hand those landlords all kinds of money and they would just use it for a trip to go south. I think unless you are serious about providing good housing for people -- you do not do it through the landlords. You are saying, "We are going to give you the money upfront and hope that you do something with it." Yes, I agree.

Ms Harrington: Thank you both for coming here this morning. We appreciate finding out what the situation is here in London, especially, I guess, south London. You mentioned the story of trying to get co-op housing. I have been involved for over four years now with a women's group in Niagara Falls, the Young Women's Christian Association, which is trying to get housing. In fact the actual okay for the project was a week after I was elected, so maybe we should all get involved politically. It might help.

Mr Mahoney: That is what did it, absolutely.

Ms Eagle: We thought we did.

Mr Tilson: Margaret left and things improved.

The Acting Chair: Never underestimate the power of a woman.

Ms Harrington: The problem is getting your voice heard and making sure it is heard. I would like to start off by saying that I think what you are saying, both of you probably, is that the rent regulation system we have now, which is the Residential Rent Regulation Act legislation of 1986, does not protect tenants, because obviously the situation you have described is not protecting tenants. It is also a problem for small landlords. It is a bureaucratic nightmare. You have tried to get things changed with all legal means, and it has been years. So I think that is clear enough.

I would like to turn your attention to the proposal, which is Bill 4, and explain to you that as far as our government is concerned it is a breathing space only, to stop the situation in its tracks and to have both landlords and tenants come together and say: "What is the future? How can we make this work?"

0930

What we are asking for -- I have written down some of your suggestions; we have our ministry staff here as well, who I believe are writing down all suggestions -- is to look to the future. What we are really trying to do by rushing these hearings is to get this permanent legislation in place as soon as possible for the sake of both the tenants and the landlords, because we know that for a healthy business climate you have to have definite rules so that people can work with those rules. We are hoping to have that permanent legislation by the end of the year, which is very hopeful.

I would like just to state that you talked about a change in philosophy. I think that is why this government was elected -- the idea that an apartment is more than an investment. It is in fact a home for the large percentage of tenants. That is what we are dealing with. We know that historically it has been an investment. Even buying a family home is a very huge, important investment for every one of us in Ontario. But it is much more than that and we have to look at it as someone's home.

I wanted to go back to Mr Bouillon and ask him, in your building, what has been the increase in the last year?

Mr Bouillon: In the case of Mornington, there have been increases of anywhere from 10% to as high as 28% that have, again, been brought to my attention. Unfortunately, in this case, when a moratorium came down they were in the process of going into the second building. As I mentioned, the first building is completed and there are two others. The landlord chose to stop the work after the moratorium, as I mentioned.

Ms Harrington: I see.

Mr Bouillon: That is a case of the landlord not fulfilling his obligations.

Ms Harrington: Ordinary maintenance, we understand, was supposed to be covered in the guidelines, but you are saying that it is not really, that people are not doing maintenance.

Mr Bouillon: No. I guess the key word is "preventive" maintenance.

Ms Harrington: Right.

Mr Mahoney: The issue of bad landlords is something that I do not see being addressed in Bill 4 in any way whatsoever, and yet it is the main issue when we have tenant groups coming before us. We are hearing very much what you are saying to us, that they are simply not spending the money that should be apportioned as part of the rent, whatever percentage that happens to be. They are not spending it on maintenance. What we are really going around the province doing is trying to determine whether or not there is support for Bill 4, or whether or not there are amendments. I hear some suggestions about it.

By the way, taking the profit out of housing for low-income people is something that I think was basically done through the non-profit housing program, a bilateral agreement between Ottawa and the provinces. In the last government we unilaterally started to do that through Homes Now in taking the profits. I agree with that philosophy. That is not something, with all due respect, that any government can specifically lay claim to.

I would suppose non-profit housing was probably started in the days of the Tories, whenever that was, eons ago. It is a philosophy that is very valid. There is a process in place to do that, through co-ops, through non-profit housing. I believe the minister has reannounced the 20,000 units. That is great. I wish him well in delivering those.

I have not heard one tenants' group -- including Councillor Gardner yesterday, with her very dramatic presentation in Toronto -- tell this committee what Bill 4 does to force a bad landlord to be a good landlord. I wonder if you could tell me if the bill does.

Ms Eagle: I have a couple of responses to that. One is that the tenants are always feeling threatened by rent increases. There is always the threat of a rent increase about to happen, particularly in bad housing situations, even a feeling of, "If you go after me for repairs, I am going to make sure you pay through the nose through rent." So some tenants are even holding back, saying, "Well, gee, if I go and ask for decent conditions, I am going to have a significant rent increase," because that is in the message with the rent review legislation, "As soon as there is a repair done, boy, you are going to pay for it." For one thing, a rent freeze is going to take some of that fear out of trying to get repairs done.

I just want to respond too to your comments about the co-op and non-profit housing. I do not care who started it, but I hope the New Democratic Party is going to make it effective. Right now it is not effective. It is not enough. There is not enough housing. It is not happening in a proper and effective kind of way. That is one of my hopes from the new government, that it is going to make this thing work, not just work on paper, but work in neighbourhoods.

Mr Mahoney: This is probably a comment that is not necessarily related to Bill 4, but in response to that comment I find it is not the government that makes those programs work. It is groups that actually do it. I am a past president of Peel Non-Profit Housing Corp. I spent nine years on the board. It is the people out there on the street who make these programs work. All the NDP can do, or any government, regardless of political stripe, is to buy into the philosophy of providing the funds, the unit allocations, for the groups to deliver them. Whether they are YWCA groups or whether they are regional, non-profit housing corporations or church groups or whatever they happen to be, it has to be a co-operative thing. But anyway, I doubt that we would disagree.

My question was, can you tell me how Bill 4 does anything? Your answer was that it prevents rent increases and therefore if you go and ask the landlord for a repair job to be done, he will not come back and say, "I'll do it if you give me a rent increase." My fear of Bill 4 is that what he will say is, "I won't do it, plain and simple, because the government has taken away my ability to fund it." That really frightens me. We have seen examples. We saw photographs. We have seen deputation after deputation before us, who have come before us and said: "We've got cockroaches. We've got mice." I assume they have those same problems in London as they have in Toronto.

The Acting Chair: Would the deputants care to respond?

Mr Mahoney: Where does this bill address that issue?

Mr Bouillon: I have to agree with you that there are some major problems, although as Susan mentioned, this is a beginning. It does protect tenants for the time being until some form of legislation can be introduced that will protect tenants further.

The Acting Chair: I thank you both very much for coming so early this morning. We appreciate your presentation.

PARK TOWERS TENANTS ASSOCIATION

The Acting Chair: Would the members of the Park Towers Tenants Association rent review committee please come forward.

Mr O'Grady: Good morning, Madam Chair and members. Thank you for coming to London and offering us the opportunity of appearing before you.

The Acting Chair: We are happy to be here.

Mr O'Grady: I think the presentation I will be making this morning is slightly different from those that you have heard. I feel that I am within the context of Bill 4, because I believe Bill 4 is a draft bill. You had discussions last Thursday, as I recall, as to whether or not a certain memo that had been circulated indicated that when this bill is passed -- I think the purpose of these hearings is to hear from landlords, hear from tenants and see what is missing in Bill 4 and what it does not contain. That is what my comments this morning will be addressed to and I hope you will take them within that context.

I am a member of the rent review committee of Park Towers Tenants Association. We are a 193-unit building. There are two units that are occupied either by the building superintendent or the assistant building superintendent. Therefore we have, net, 191 rental units, composed of bachelors, one-bedroom, two-bedroom, three-bedroom. I guess three-bedroom is the highest we have. We have about a 69% membership in our association.

0940

What my first concern is about is the method of increases for capital expenditures. I do not know whether they are going to be outlawed at all, entirely or whether amendments to the bill are going to revise and say there is some scheme on which we must allow capital expenditures to continue.

In any event, we have had three orders affecting our building since 1987. The first one was a minister's order retroactive to 1 May 1987. Then that was appealed by both the landlord and tenants, and the minister's order gave an increase of 14.9%. A minister's order gave an increase of 21.4%, again retroactive to 1 May 1987. Then in 1990, we had a further order, which gave an increase of 9.9%.

What happens within the present system is what I am concerned about. We got an increase on the first minister's order of 14.9%. That was made retroactive. The landlord elected to take the retroactive provision of that bill and collect back to 1 May 1987, approximately a two-year period. Then he took his statutory increase for that year. Unfortunately, under the present system the amount of the capital expenditures in that first order, which totalled $86,224 on an annualized amount at 12.20%, were included in maximum rents. We were already paying interest on that money, on those capital expenditures, at 12.20% and there was no reason why at the next increase we should pay the annual allowed under the provisions of the act. That is double jeopardy. It is interest upon interest and I suggest to you it is unconscionable and perhaps illegal.

Within that order the amount of their capital expenditures is annualized or capitalized over certain amortization periods: 5, 10, 15 years. We have a debt there after the appeal order of some $43,830.65, which should be repaid one year from now, approximately on 1 May 1992. There is no provision in the act, or in Bill 4, by which this can happen. I know Martin O'Connell made reference to it last Thursday when I was watching this televised meeting in Toronto. I do not think the wording that is in the prologue of the bill, that the minister will review upon a further application -- what landlord is going to make an application and lose all this extra money that is flowing in? It is a cash flow and I think it is illegal.

We are of the opinion that the ministry has made a grave error in incorporating the capitalized allowance for capital expenditures in maximum rent. The allowance for capital expenditures has been determined in accordance with the procedure set out in the regulation.

There are two concepts which you must understand and they are sometimes difficult when advising first-time home buyers. First, when interest on a mortgage is said to be calculated at a specified rate for a fixed term -- amortized, that is -- it is calculated not in advance. That is, you borrow from the lender at the first of the month and you make your mortgage payment at the end of the month for the use of the money for the month. It is neither calculated nor paid in advance. The monthly payment is constant during the amortization period, and if all payments are made on time, the mortgage debt will be repaid in full at the end of the amortization period.

The second matter that must be understood is the contrary of the above. Rent is paid in advance. That is, a tenant pays rent at the first of the month for the privilege of occupying the premises for the coming month. Capital expenditures are treated as a mortgage within the meaning of the act. Rent is paid in advance. These are separate, distinct entities. You cannot mix them. When a person buys a new home he generally finances the greater portion by a mortgage at a fixed, constant monthly figure. The other part of the owner's budget to carry the house fluctuates from year to year, ie, heating, utilities, taxes etc. These are operating costs. That is what section 100c of the proposed bill addresses. But you cannot mix a variable with a constant.

We have attached hereto in schedule 1 a brief history of the application presently used by the ministry of how increases each year apply. In schedule 2 we have put in one by which the annual increase applies only to the operation costs, and then you add to that, as a fixed sum, the capitalized, amortized amounts for capital expenditures.

The Acting Chair: Mr O'Grady, you have one minute. Would you like to summarize, please?

Mr O'Grady: Yes. At the end of that time we find that we have overpaid the landlord almost $41,000 in extra interest. There is no possibility of a two-minute extension?

The Acting Chair: I think that would be unfair, Mr O'Grady. We have kept, as you know, very close to our time.

Mr O'Grady: The other one part I would like to address to you is that we feel and we have made a submission on it within the material, that the form of notice that is given to the tenants is illegal and contrary. It does not follow the prescribed form in the statutes that are prescribed and therefore it is illegal. We do not know where it came from. We have suspicions, but we do not know where it has come from and we have set out in our brief reasons why that is not good.

The Acting Chair: Some people bring that point to our attention and, as you know, the minister has made comments on that as well.

We begin with Ms Harrington, and Mr Mammoliti is also wanting to speak.

Ms Harrington: Thank you for this very substantial brief. It is going to keep us busy for quite a while here.

Mr O'Grady: I hope so.

Ms Harrington: I wanted to ask you, you first mentioned the amounts of the increases and the retroactivity. Going back to, say, 1990 and 1989, what were the total annual increases that you experienced in the last couple of years?

Mr O'Grady: Let me put it more personally. I moved in there in 1985 and I guess my rent was just under $400, and I think it is $750 I will be going up to with this year's increase. So I am about, I do not know, whatever that works out to.

Ms Harrington: That is over a five-year period.

0950

Mr O'Grady: That is right. Well, no, the first increase was 14.9% by the minister. That was taken. The 21.4% was not taken by the landlord retroactively when the minister's order came out. They took just the balance of the 21.4% and took it from that date on, and they took the statutory increase that year. Then in 1990 they took their 9.94%, I think it was, that they were granted.

Ms Harrington: Can you describe to me the state of the maintenance of your building? Would you say that the maintenance is in good condition?

Mr O'Grady: One of your presenters yesterday afternoon was from Realstar Management. They have an arm, I believe, in this, Realstar property management. Since they took over our building, we have absolutely no complaint as to the maintenance and that. We are quite pleased. That is my personal opinion and I have discussed it with several tenants.

There is only one thing as far as their maintenance is concerned and maybe it is not germane to this discussion, but when they fix up the building and they redecorate it to their colours, that bugs me, although it does look beautiful.

Ms Harrington: So maintenance should be covered.

Mr Winninger: I think I know that a good portion of your increase was due to a certain one-time capital cost for a parking lot for your building. Do you have any concerns about the manner in which that capital cost was allowed? I ask you that because a lot of the landlords are complaining that they are not being allowed their capital costs under Bill 4.

Mr O'Grady: The capital expenditure was in the neighbourhood of $450,000. When you look at the material, you will see the difference between the minister's order and the appeal order, and that accounts for that increase.

The landlord did have before -- I need to go back. He bought the building in July 1986. He did get, prior to purchasing, a consultant's report. When they got to the question of garages, the consultant said -- I do not have it with me, but anyway basically he said, "Look, your organization knows more about repairs to garages than anyone in Ontario and so I am not commenting further, except to say to do nothing would be dangerous."

They did do something. We made submissions on that. The minister agreed with our submissions and that was sufficient notice to the landlord as to the condition of the garage. It is not a regular garage. It is just a covered -- no door on it; you drive in. When you go in there and you have plastic sheets hanging down over the parking spaces so that drip does not come down and ruin your car, then I think it is quite obvious to anybody buying a building and seeing that, if he inspected it. Then the report was given within the one-year period -- I am sorry, prior to his purchase.

The Rent Review Hearings Board, I guess it is, thought that was not sufficient notice to the landlord of the condition of the garage, even though that landlord had filed with the board -- although one day late pursuant to an undertaking -- material showing that they were one of the largest parking lot and parking garage operators within the Metropolitan Toronto area.

Mr Mahoney: Madam Chair, it seems to me that we should be charging a committee of the Legislature with the responsibility of going around the province to investigate the property standards in all of the different municipalities, and what the landlords indeed are doing with regard to repairs, or not doing.

That is not what we are here for. We are here for Bill 4. Forgive me if I missed it, but I would like to know your position on Bill 4 in relationship to how it will solve the problems that you have put forward. Just before you answer, let me just tell you that I am hearing, particularly from the government members, that in some way this bill is going to resolve all of the problems people are coming forward with. If it does, I just wish someone would tell me how. I am certainly open to hearing.

Mr O'Grady: I do not think it resolves anything. It just puts a stop order on a few things. It gives us a breathing space and gives me the opportunity to come up here and express my opinion to you. Hopefully, it will fall on open ears and might result in amendments to the act.

I do not think that the bill, as drafted, should be passed. I think it must have serious amendments among them.

I indicated that we have a loan, or I do not know what you call it. We are paying a capital expenditure through the landlord over a five-year amortization. We have several of them in there. We now have six, over different amortizations. But on 1 May next year one of them will be paid off. I expect that the operating cost allowance of the landlord will be reduced by what was allowed originally for those improvements.

There is no way or there is no place in the act, other than that, if he might make an application I can appear, and I do not think that should be. If there is a flow-through for the landlord, the flow should go the other way for the tenant.

The Acting Chair: I am sorry, Mr Mahoney, your time has expired.

Mr Mahoney: How much time did I have?

The Acting Chair: Three minutes. It goes very quickly.

Interjections.

Mr Tilson: The clock is running and I would like to ask my question.

I do appreciate your comments and I think that this committee will review them very carefully, and I hope the government will, because you certainly made some good points.

We are here, as you know -- and you seem to be very informed with these proceedings and I appreciate that -- to deal specifically with Bill 4. I think of course the government has been rather cute, to put it politely, because it is introducing this green paper which no one sees. I think that hopefully the government should be listening to people like you before it writes the green paper, which I suspect, listening to the minister and the parliamentary assistant, may be already written.

That process will take place at the end of February, as I understand it, or the middle of February. The green paper will be prepared. The minister himself will then go around the province and perhaps you will have an opportunity to speak to the minister on general rent legislation. Then the minister has indicated that there is going to be yet another series of public hearings to deal with the rent regulation system, so I think that all of your comments will be appreciated at that time and you will probably have at least two other times to speak.

My question is the same as Mr Mahoney's, directing your attention towards Bill 4. I appreciate your honesty by simply saying it should not be passed.

I would like to hear your comments, simply because you seem very informed, on the subject of retroactivity and the comments made by some of the people in the investment business as to how it is going to impact the overall economy of the province.

Mr O'Grady: I have in my briefcase a copy of a contract which is dated in January and to be completed the December before, which was presented to the Rent Review Hearings Board as a contract covering the garage restoration. You need to put some teeth into producing the guidelines, say, such as saying you have to produce a contract, you have to produce that you have bids, etc. I think maybe the new regulation that came in in 1990 covers that partly, but you have got to give something else so that the tenants can look at it. As for the retroactivity part of it, I think they have gone in there and done their work. Maybe there was some, as you say, a committee that goes around. Take a look at them, but examine them closely and make sure that what they did was necessary.

Mr Tilson: Sir --

The Acting Chair: I am sorry, Mr Tilson, but I think you have had the answer to your question. We now have with us both our Chair and our Vice-Chair. I would like to invite Mr Howe to come forward, and Mr Mancini will take his place in the chair.

LONDON HOME BUILDERS' ASSOCIATION NORQUAY HOMES LTD

The Chair: Good morning, everybody. Moving right along, the clerk informs me that Norquay Homes is next on the agenda. You have been allotted 20 minutes by the committee. I am assuming, if you were here for a short period of time, you know the procedure. You are allowed 10 minutes for an oral presentation, followed by 10 minutes of questioning by the committee. The floor is yours.

Mr Howe: My name is Michael Howe. I am speaking today on behalf of the London Home Builders' Association, and of course my own company, Norquay Homes Ltd.

From an industry-wide perspective, the implementation of this legislation in its present form is going to have a devastating effect on the residential construction sector. With no indication of how capital expenditures will be dealt with in the new legislation, except that the new legislation will in all likelihood be more restrictive, it is unlikely that builders will proceed in the next two years with construction plans for new rental apartments and town homes.

Who, for example, would commit $10 million or $15 million to the construction of a rental high-rise without being able to make meaningful repair, replacement and operating cost projections for the next 15 years, especially when it will require 30 or more years to pay off the financing required to construct such a building?

London, unlike Toronto, has the benefit of a vacancy rate of almost 3%, a level considered to be healthy by most public and private sector analysts. This vacancy rate amounts to some 1,109 suites according to CMHC figures. It may sound like a lot, but bear in mind that the marketplace in London has absorbed between 1,200 and 1,500 new suites a year for the past three years. That tells us that we have about a one-year supply of vacant units, and as a builder, that tells me that if I start a 200-suite apartment complex today, next spring when those suites are completed and ready to rent, there should be a strong demand and the project will be a success.

While this is only one of the considerations, interest rates, labour supply and land availability are the other major factors. Let's take a look at those other factors: First, interest rates are dropping and will continue to drop over the coming year to levels that make a new building financially viable; second, with the present recession we have a good supply of labour, an indication that our costs will be stable; and third, there is still a reasonable supply of serviced multifamily land in the city.

It would appear then that the time is ripe to start rental buildings all over the city, but that is not happening and will not happen with owners and lenders unsure of whether these buildings can ever be made financially viable. A call to London's chief building official indicates that his annual survey of builders, architects and owners forecasts a start of some 350 private sector apartments, and of these only one 40-suite project has been applied for to date. This is in comparison to forecasts of 1,400, 1,500 and 1,200 for the years 1988, 1989 and 1990 respectively.

This legislation in its present form would prevent those who have completed, in good faith, structural improvements to their properties in accordance with the present legislation the ability to recover the cost of those improvements. This legislation evolved from long and tough negotiations between representatives of both landlord and tenant groups, and while it may be imperfect and require amendment, it is patently unfair to penalize those who have made expenditures or taken on financial obligations based on the law as it existed and as it presently exists.

It is simply a matter of fairness and equity, principles that this country is founded on, that those who would be caught in the transition to new legislation are grandfathered, and this legislation ought to be no exception. One simply cannot ignore the plight of small and medium-sized owners who have borrowed money to make needed repairs on the expectation that rents would be increased sufficiently to pay the interest on those loans and retire the debt over the expected life of the improvement. The stories of financial hardship and disaster are very real.

While it is fine to make a lot of generalizations about what may happen or what could happen, I would like to look at how this legislation has affected my own company and how it may affect us in the years to come.

We have constructed in excess of 1,400 rental units in the last six years. All but 39 of those units have been what is commonly described as affordable housing, largely a mix of family-style town homes, low-rise apartments and larger high-rise, high-density urban developments. Given the uncertain climate of what the new operating rules may be, we have suspended construction of the fourth and final building in a 540-suite rental complex and other smaller rental projects planned for the coming year, representing some $15-million worth of work. While they may be completed in the future as rental buildings depending on the outcome of amendments to the rent review legislation, they may well be completed as owner-occupied condominiums.

This will impact on the supply of affordable housing in two ways: First, had we continued to build these rental buildings, they would have contributed to the ongoing supply of rental housing units coming on to the market, helping to keep the balance of supply and demand and thereby moderating price increases; second, if they are built in the future as owner-occupied condos, then they are for ever denied to the public as affordable rental housing.

While I do not have any illusion that my actions alone will have much effect on the supply of housing in London, I do believe from conversations with local members of the industry that my reaction to this legislation is consistent with the cautious approach of many other builders and owners in this city and that their collective action will have a major impact on the supply of affordable housing in this city.

As a government, the last thing you want to do is make it so unattractive to build rental apartments that the industry simply builds condominiums for owner-occupiers because it is easier. This will compound the shortage of rental accommodation that presently exists throughout Ontario.

The effect of our decision to discontinue rental residential construction is that some 16 employees in our residential construction division have been laid off in the last few weeks, and we anticipate that an additional 18 employees will be laid off over the next few weeks and months as projects under way are completed. These are permanent layoffs in most cases, as we see little opportunity for the construction of new rental housing in the near future. It is estimated that an additional 100 employees of our various subcontractors and suppliers will be similarly affected.

In addition, we had made plans to make cosmetic improvements to flooring, carpets, cabinets and so forth in some of our older rental suites after a survey of tenants indicated that they would welcome this work on the understanding that there would be a small increase in rent as permitted under the rent review guidelines.

Unfortunately, with the suspension of rent review rules as contemplated by this legislation, we have had to abandon any thoughts of doing this work now and providing full-time employment for some of our staff. This legislation will result in additional layoffs and the cancellation of over $200,000 worth of improvements planned for this year in one of our developments.

As I have stated earlier, one of the most unfair aspects of this legislation is its retroactive nature. On 3 May 1990, I and other members of my staff held a public meeting with tenants of our oldest complex, a 20-year-old, 135-suite town house project, to advise them of proposed repairs that we were planning to undertake during the coming summer months. The work consisted of replacing all roofs at a cost of $146,822, replacement of exterior lighting at a cost of $28,272, and exterior painting of window frames, door frames, soffit and fascia at a cost of $47,165. This would result in a total expenditure of $222,260.

This work was commenced in May 1990 and completed in its entirety in September 1990. Submissions were made to rent review services as required and we have been advised by rent review services that no action will be taken on our application as a result of the announcement by the government of Ontario that legislation suspending rent increases for capital improvements was imminent.

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The work undertaken by our company consisted of needed structural repairs required to protect and preserve the complex, was made in accordance with the rules that were in place at the time the work was done, was not for luxury improvements and would have resulted in a rental increase of 4.1% or approximately $24 per month. It is unconscionable to retroactively change the rules under which we operate and under which the expenditures of vast sums of money are made annually by this industry.

At the time that the public meeting was held to discuss these improvements with our tenants, it became apparent that many of the tenants were far more concerned with having new and updated carpets, flooring, kitchen cabinets and such. For example, the lime green, gold and dark brown shag carpets that were popular in the late 1960s and early 1970s are in most cases still serviceable, but many tenants would like to have them updated to today's off-white plush-style carpets and would be prepared to pay a reasonable cost to have this improvement. On the other hand, there were an equal number of tenants who were content with the interior finish of their suites and did not wish to have any interior work done and certainly were not interested in paying for such work.

The existing legislation allows us to do cosmetic work for those who wish it and not to do it for those who do not wish it. In addition, the owner is able to complete and finance the cost of major structural repairs in order to maintain the integrity of the building. Unfortunately, we have now had to advise our tenants that we are unable to complete the cosmetic work they requested as a result of the freeze on rent increases resulting from capital improvements.

I am sure you have all heard of the taxpayer revolt that took place in Kent county as a result of large tax increases there. Last year, in the city of Chatham, as a result of a wide range of circumstances, the municipal taxes on a 98-suite building that we owned were increased from $86,452 to $109,463, an increase of 26.6%. Almost one fifth of each tenant's rent is paid directly to the municipal government in the form of municipal taxes, and increases of this magnitude are not recoverable in the normal inflation-type annual rent increases, especially when they are taken in conjunction with the increases in utilities, supplies and general maintenance costs. In addition, we do not have the luxury of withholding taxes like some other taxpayers in Kent county, as this would constitute default under our mortgage financing.

In our particular situation, we decided to absorb the increase while we undertook an appeal of the taxes with the belief that there would be some relief. The appeal was heard in October 1990, almost a year after the taxes were increased, and it was denied. At this point, we had no alternative but to pass the tax increase on to our tenants, as we are expecting another large increase in taxes in 1991, and it was felt that, along with anticipated utility increases of up to 15% in 1991 resulting from the imposition of GST, we could not continue to absorb this increase of over 26%.

In this situation, the present rent review legislation has permitted the pass-through of the extraordinary portion of the tax increase. Had this remedy not been available, these types of increases would soon bankrupt us, as our expenses would quickly reach the point where they exceeded revenues.

In summary, I would like to suggest to you the following:

1. That no changes to the rent review system take place without the input of both tenant and landlord groups and that any changes be the result of fair and equitable negotiations.

2. That the retroactive nature of the present legislation be modified to exempt work which was undertaken or under way prior to the announcement of Bill 4.

3. That any amendment to the rent control legislation should include provision for the recovery of costs related to capital improvements of a structural nature and provision for the recovery of expenses related to capital improvements of a cosmetic nature where the tenants and landlord mutually agree to the cosmetic improvement.

4. To amend Bill 4 to permit structural repairs to take place under the present rules, so that owners can take advantage of the general slowdown now being experienced while the government completes its review of the present legislation.

These recommendations would permit the government to complete its review in a timely manner without the fear of large rent increases resulting from real estate flips and luxury improvements, while allowing the day-to-day operation of our buildings to continue in a fair and equitable manner in conjunction with the existing legislation.

The Chair: Thank you very much for your presentation.

Mrs Y. O'Neill: I have two very short questions. Could you tell me the kind of labour, the skills of the people you laid off?

Mr Howe: They range from general labourers to skilled concrete finishers, concrete formers and carpenters to project superintendent.

Mrs Y. O'Neill: So it is a broad range of people you have had to release.

My second question has to do with your statement that you were advised -- it was the London office of the Ministry of Housing that you were dealing with regarding the application. Is that correct?

Mr Howe: That is correct.

Mrs Y. O'Neill: And you were told that no action would be taken on your application?

Mr Howe: That is correct.

Mrs Y. O'Neill: Were you given the option to file or not file?

Mr Howe: We did file, but we were advised that there would be no action taken.

Mrs Y. O'Neill: So you have got an application in place at the present time?

Mr Howe: That is correct.

Mrs Y. O'Neill: Thank you very much.

Mr Tilson: Incidentally, I have copies of this.

Mr Howe: I have copies for you.

Mr Tilson: I think we would probably all find them very useful. You obviously thought it out and I appreciate your remarks.

The most notable observation that I have with respect to your remarks is the fact of your describing the situation in London. Information given to us by the Ministry of Housing yesterday indicates that vacancy rates in London, at least of the cities that we have been considering attending, are the highest in the province of Ontario.

Mr Howe: That is correct.

Mr Tilson: As well, the building permits that have been issued for the city of London -- I presume it is the city of London, I do not know whether it includes the area or not -- since 1987 have been halved. That backs your comment that people are simply getting out of the housing area. These calculations are for multiple building dwellings, and they have been halved.

I suppose, considering the vacancy rate -- I get the impression from this government that it believes that the sun rises and sets in the city of Toronto and I guess my question is with respect to the overall legislation as it affects other areas of the province. In other words, what is good for Toronto may not necessarily be good for the city of London. The problems in Toronto, and I am sure you are aware of some of them, may not exist in the city of London or London and area. Do you have any thoughts on that?

Mr Howe: There is an all-time cheap joke down here, that a lot of people in Toronto think that Ontario ends at Highway 10. Unfortunately, it is a feeling that we do get. Some of the legislation that comes out of Toronto is tailored to deal with major problems in the Toronto area, and we understand that. Unfortunately, we do not have those problems in London and North Bay and Kingston and places like that. For example, in London we have a very active group of builders of rental apartment buildings and, left to our own devices, we will have the vacancy rate up to 10% very shortly. In 1981 we had a vacancy rate of over 6% in this city. Toronto was sitting at zero. They are not always the same situations down here.

Generally, as a rule, we do not seem to have the major conflicts with our tenants that you find in Toronto. Most builders, most developers, most owners in this city are responsible. We have our bad apples, just like everybody else, and we want to get rid of them just as badly as you do. But the main situation here I think is that we have a different situation. Even the man who spoke before me, while he may not be happy with the situation or with the way all his rent increases have gone, still said to you, "Yes, but they look after the building and it's nice." That is the thing you will find down here, that most of the tenants will say that.

Mr Tilson: With respect to remedies for the situation, many of the jurisdictions in the United States do not have state-wide rent controls. Some of them do, some of them do not, some of them are zeroed in specifically on cities. I guess I am thinking out loud and looking for some sort of reaction from someone like yourself. If vacancy rates rose to a specific level in specific areas, and I do not know what level that would be, it might not be healthy to have rent controls in those specific areas. Do you have any thoughts on that?

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Mr Howe: That again is a possibility that we have suggested to past administrations, and locally I think there is some support for it. Whatever we say, any action that is taken on rent review, because it is such a major effect on the economy of this province, should not be done ad hoc. It needs input from both industry and from the tenant groups. They cannot be left out either. They have a very important say in what goes on here. I think equally the industry has a lot of input. There are a lot of pitfalls in any hasty legislation. My recommendation to you is, do not do anything other than try to protect yourself from the major problems that we see out there. Those are the real estate flips and the luxury improvements. Let's work with you.

Ms M. Ward: I would like to ask you about the new-building-start drive. You say in your brief starting on page 2 that it appears this is a good time to start building. Then you say, "But that isn't happening, and won't happen, with owners and lenders unsure of whether these buildings can ever be made financially viable." My question is how this legislation relates to new building. I think it is a different argument if you are talking about older buildings where you want to make major repairs that, at least in the interim, will not be allowed to be passed on. What relationship does that have to a new building, which is not affected by that type of thing at all?

Mr Howe: Mr Chairman, through you if I may, when we start up a large apartment building we set our rent in accordance with the market around us. The market includes a large proportion of units that are rent-controlled and therefore the rent is down much lower than it needs to be for a new building, given today's cost. I think if you are familiar with the non-profit housing, you are looking at unit costs in the $75,000 to $125,000 range. We look at most buildings as being in a financial loss position for the first five years. In other words, we deliberately set the rent low to be competitive within the marketplace. Otherwise we would never rent the units.

By rights I need $1,000 a month for a two-bedroom apartment today on basic, sound financial planning. I cannot get it, but I can get $750, so I rent at $750 knowing I am going to lose money for three or four years, but also in my financial projections I know that 10 and 15 years down the road, when I am into my major capital expenditures, I am not going to drive myself back in the hole again by borrowing $2 million to go out and replace all my fridges, my roof, make major repairs to my parking garage, this sort of thing. I have to know those things when I start, because once I commit myself to that opening day rent I am tied to it by the rent control system, to those simple increases of whatever they may be. So my opening rent is extremely important and this legislation does have a lot to do with that. Since I cannot get $1,000 a month, I cannot build.

Ms M. Ward: But the market right now, if you have, what did you say, a 3% vacancy rate, that vacancy rate is going to be depressing the rents too and it is the market rent that is setting your rent for your new building then. That is what you are telling me.

Mr Howe: Effectively, yes, the market forces are working, but as I said earlier, in 1981 we had a vacancy rate of 6% in this city and we would be there again in a minute, if it were not for this legislation, by the end of this year. That is the direction of --

Ms M. Ward: At 6% vacancy?

Mr Howe: Yes.

Ms Harrington: I would like to recognize the home builders in Niagara region. I have sat on the regional committee with our home builders.

The Chair: This is committee time now.

Ms Harrington: I would just like to mention, over the past few years in the Niagara region, at least, the home builders have made a very good living because they have been building a lot of large homes. Now they are looking towards various levels of government to work for affordable housing, because that is where the market is now, and they are looking for subsidies.

You mentioned all the units you have built over the last six years and that many of them have been affordable. I think that is very commendable. You mentioned also that, left to your own devices, you would be building. Is that right? Of course, this is a good time to build. I know that. Over the past, say, six years that you mentioned, how many of those units have involved government dollars to get them built, say, out of 1,000 units?

Mr Howe: I am picking a number off the wall; I hope I am correct. I would say about 30%. We have been involved in CORSP, the Canada-Ontario rental supply plan, and under the convert-to-rent program. So we have taken advantage of those programs. I think it is a direction the government should look at. It is not absolutely necessary here. The majority of the buildings we have done in the last three or four years have been totally without any government involvement simply because those programs do not exist any more.

Ms Harrington: I just wanted to briefly mention that the municipal tax is a pass-through in this Bill 4 legislation. I am sure you realize that.

Mr Howe: I am aware of that. I just wanted to make sure it did not get changed. What I wanted to draw to you is just an example of what happens to us. It is frightening when it happens because you have no warning.

JOSEPH HOFFER

The Chair: Next on our agenda is Joe Hoffer. Sir, if you would just please come forward and state your name for the record and whom you are representing; the committee has allotted you 20 minutes, 10 minutes for your presentation.

Mr Hoffer: My name is Joseph Hoffer. I am a lawyer here in London with Cohen, Melnitzer. I represent a number of landlords who are my clients. I am here basically to touch on three points. I will expand after I list them to you, but the first point I would like to make is that the manner of imposition of this legislation and its retroactive nature is punitive and it is grossly unfair. I will go into some particulars on that. The second point I would like to make is that it potentially contains, within the ambit of the proposed legislation, economic disaster for the housing industry.

The third point I would like to make -- and I understand that one of the driving forces behind this legislation has to do with the government's mandate and promises made prior to the election -- it is my submission that there is no mandate to retroactively impose punitive measures on people who have, for the last four years, been obeying the law of the province. It strikes me as extraordinary that this government would change that law retroactively and punish people as a result. I am going to go into some particulars.

Bill 4, as it is proposed, retroactively affects applications; not applications filed 1 October or not applications that were filed when the NDP were elected, it affects applications in some cases that were filed years ago. For example, we have an application that was made in 1989 that is directly affected. I have given an example of that in the handouts that either will go to you or have gone to you.

Another application was filed by a landlord in April 1990. That application had a first effective date of February 1991. The landlord filed it in April 1990 so that there would not be a big time delay before he got the order in February 1991. The NDP proposals completely wipe out that application even though it was made in good faith many months ago and many months before the NDP was elected.

I have a case that I hope has been handed out to you. It is a handout. The first page says, "List of Lost Contracts Together with Lost Value of Contract" and so on. I hope you have those materials. As part of that material I have given you, you will find what is called a conditional order that is issued by the Ministry of Housing. That conditional order, if you look at it, was actually made or applied for in May 1989. What the landlord essentially said was, "If I do these things, what sort of rent increase can I obtain?" This was filed under the act; it was a perfectly legitimate exercise.

The minister, while taking nearly a year to consider this application, ultimately issued an order. If you look at the first page, it is very official-looking. It says, "It is hereby declared...the amounts set out will be allowed in a subsequent application." Then it goes on to list ranges and refrigerators, balcony repair and so on and so forth; if you look at these things, no reference to gold doorknobs, no reference to marble lobbies, nothing like that. These are bread-and-butter expenditures to an older building. This is what the landlord was told he would receive if he did the work.

The landlord did the work and spent the entire summer doing the work and was still in the process of doing the work when the NDP announced Bill 4. The landlord immediately stopped any work on the building and for a very good reason, because Bill 4 said that the administrators were to ignore the conditional order that he had received. As a result, if you look at the first page of this handout -- this is the building I am referring to -- a lot of the work was done. That is going to be a windfall for the tenants and a severe loss for the landlords, but there are a number of other people who are going to experience losses and a number of people who are not going to be working on this building as a result of the NDP proposals. Before I run through this list, I would like to remind this committee that Mr Cooke, when told by a contractor that he would lose his job, stated to the press and stated publicly that he did not believe that contractor. Hopefully, if he ever sees this he will believe that some people are losing work.

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This property is at Ouellette Avenue in Windsor. The contract for the purchase of 125 fridges and stoves was cancelled. The 1989 price of that contract was $104,000. The party who has lost the contract is Inglis of Mississauga. That is a manufacturer and that includes, of course, the people who work in the Inglis plant. Those fridges and stoves will not be bought.

There is plumbing -- risers that were going to be replaced in the building, a contract for $125,000. There is a shared loss here of $125,000 which is the 1989 price. The shared loss is between Atrium Construction in Windsor, Essex County Plumbing and Heating in Chatham and Albert Lussier, who is a tenant of the complex and who was hired by the landlord to do a number of jobs related to the plumbing work. He will not be working, as well.

Roof replacement, $85,000 -- that contract was lost by Rauth Roofing of Windsor. Window caulking -- that contract was lost by Dencol Contracting and Atrium Construction. That is a $40,000 contract.

The next three pages contain examples of other applications where the landlord was proposing to do the work and in some cases had started to do the work and as soon as Bill 4 was announced the landlord stopped. These relate to buildings in London and you will see Jerry Damen Installations lost a $79,000 contract. Stacey Plumbing and Heating lost a $44,000 contract.

The list of suppliers goes on throughout. These few examples, and I should point out that these are just a few examples, were immediate responses when Bill 4 was announced. If you look through these you will see that on four buildings there are over $1 million of contracts that have been lost. It is not the landlord who is losing these contracts; it is the tenants and it is the contractors and it is the subtrades who are losing these contracts. While it is all very nice that we are going to have fixed rents, the fact is that there are a lot of people who are not going to have jobs and there are a lot of people who are not going to be living in very nice conditions until something is sorted out.

Probably the most unconscionable aspect of it all is that all of this work was planned and, in the case of the first building, it was actually carried out on the strength of a promise by the provincial government that this is the law and if you do this, this is what you will get. So the person did it and he did not get what he was supposed to get. In my submission, if this committee recommends a retroactive imposition of these controls, you are bringing the administration of justice into disrepute. You are saying to people: "We don't care if you follow the law. We don't care what your circumstances are. We are going to punish you even though you followed the law." On the other side of it, landlords who go in front of the hearings board and say, "Well, I didn't understand that this was the law," are very condescendingly told, "Well, you're a landlord; you should know what the law is." You can see, when you look at the proposed retroactive effect of this bill, that it does not matter what the law is. What you are saying to people is, "We are going to change it whenever we feel like it." In my submission, that is wrong.

In terms of whether or not the NDP has a mandate to do this, I am well aware of Mr Cooke's statements prior to the election, and Mr Rae's statements. Nowhere have I seen statements where they have said: "When we get elected, we are going to change the laws backward in time. We are going to change the rules after the game has been played." There is no mandate, in my submission, to do that and that, from anyone's sense of fairness, should be completely outrageous, that they even contemplate doing this. Those are the submissions that I would like to make.

Mr Tilson: I appreciate your thoughts, sir, if anything because you provide not necessarily philosophical points but facts. That is appreciated. As a lawyer, I might tell you that we have had a number of applicants talk about potential lawsuits and even literally threaten the government with potential lawsuits as a result of Bill 4. You may have been following the proceedings and it may be unfair; it may not even be your expertise.

But I would like to hear some of your thoughts on the legal implications as to (a) is this legislation possibly unconstitutional; (b) has there been misrepresentation by the government comparing it to the types of cases where a building inspector says, "This is the state of a specific property," a builder goes ahead and does the work and then it turns out it is not and the building inspector and the municipality have been held liable; (c) the possibility of third-party proceedings of breach of contract as a result of the retroactivity you have spoken of. I would like to hear some of your thoughts or whether there are any other legal implications that you might think of as against the government and what that will cost the taxpayers of this province.

Mr Hoffer: Certainly from my clients there has been great interest in whether or not this is lawful. The obvious unfairness of the legislation on its face encourages that type of question to lawyers. I know that a number of other people are looking into the question of whether it is constitutional or not, but I also know, having looked into the question of retroactivity when Bill 51 came in, that the government can basically do what it wants.

The problem I have with this particular situation with Bill 4 is that there has, in the research that I did -- and I did it extensively -- never been a case where the government has come in and said, even where you have an order under the past legislation, "We're going to wipe that out." I can tell you that, whether it is legal or not -- and I am sure that it will be tested -- the courts that administer justice in this province severely limit the effect of retroactivity because of its inherent unfairness to people. All I can say is that in the course of research I have never seen tested a piece of legislation that is so punitive and so harsh as this one.

Mr Tilson: Thank you. Those are my questions.

Mr Winninger: I happen to know, Mr Hoffer, that you probably know as much about rent review as any lawyer in the province and the principal in the law firm you represent was in fact one of the architects of Bill 51. You would agree with me, would you not, Mr Hoffer, that when Bill 51 was enacted it was retroactive for a full 17 months, back to August 1985? A lot of those landlords who bought apartment buildings that were not covered by rent review that were erected after 1976 or where the rents were over $750 were affected by that retroactive legislation, as were tenants who faced increases retroactive to 1 August 1985. My point is, Mr Hoffer, why are you complaining about retroactivity now where it benefits the tenants when you did not complain about retroactivity when it benefited the landlords and in some cases was injurious to the tenants when Bill 51 came in?

Mr Hoffer: First of all, thanks for the compliment. Second, given the expertise that you have attributed to me, I would like, in response to your question, to point out a couple of the inaccuracies in the speech which preceded your question. First of all, I agree that Bill 51 was retroactive; however, there was a provision in Bill 51 that the Legislature put in recognizing that retroactive legislation was unfair, and that provision was section 73. So what they said to landlords of post-1976 buildings, of complexes with rents of $750 or more, was, "We are going to impose this legislation on you retroactively; however, if you do certain things you can make an application and justify the increases that you took."

You did not mention that in the speech which preceded your question and that is very important, because it is a remedy in recognition of the unfairness of the retroactive nature of the legislation. Landlords availed themselves of that remedy and the ones who did not were restricted to the statutory increases. With the ones who did, there is one case where the landlord received a 0.28% increase, not a statutory increase and not the 100% increase Mr Cooke outlined at the start of this entire committee. So that is one thing. It was retroactive, but there was a remedy in recognition of the unfairness.

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The second point you make is that tenants were faced with retroactive rent increases. That is absolutely untrue. A tenant cannot receive a rent increase greater than the notice of rent increase that the tenant has already received. In 1987, all of these tenants had already received notices of rent increase. Their rents could not retroactively be increased beyond what they had already been served with. The only retroactive aspect to the increase came about as a result of an increase they may have been awarded in their maximum rents above the guideline. The hearings board has clearly said: "We're not going to give you any increase above the maximum. We're going to give you whatever you charged back in 1985 and 1986."

Mrs Y. O'Neill: I just have one question. I would like to bring you back to your first exhibit on the Windsor situation. This is a conditional order. Has there been application made by these people to the --

Mr Hoffer: For the work they have already done. They were actually still in the process of completing the work when Bill 4 was announced. They stopped doing the work. They cleaned up the loose ends. They had to replaster things.

Mrs Y. O'Neill: What is the state of their application at present?

Mr Hoffer: It is going to be filed by the end of January 1991.

Mrs Y. O'Neill: So you are going to proceed to file in London?

Mr. Hoffer: Yes.

Mrs Y. O'Neill: Have there been any instructions from the London office regarding that application?

Mr Hoffer: Not that particular application.

Mrs Y. O'Neill: Can you tell me about what you know is happening in the London office?

Mr Hoffer: Yes. I filed applications for the last three or four months with the London office. When Bill 4 was announced, any applications filed after that announcement, the tenants received a letter basically saying -- first, there was no letter that said, "You have so many days to make submissions," which always came with an application.

Rent review services did not solicit submissions from the tenants or the landlord. Instead, they sent a letter saying, "Bill 4 is coming along and it's going to change everything, so we're not going to do anything for the time being." I subsequently wrote and asked rent review services to proceed with the application because Bill 4 was not law. They wrote me back and basically said that regardless of what this other letter said they were in fact proceeding with the application, but it is caught in a backlog and they have other priorities and so on and so forth; so nothing has happened with those applications.

Mr Mahoney: I only have time for one question. Could you, with your expertise, make a suggestion about what kind of remedy might be put into this legislation to deal with retroactivity?

Mr Hoffer: I think what should be done is what the law, what the courts have always recognized is the fair thing to do, that for work done prior to the announcement of this legislation, the landlords and tenants should be treated under Bill 51, when the announcement was made of the intention to change the legislation. Any work done after that time or started after that time should be treated under the new proposals, but you should not completely change the rules after people have relied on the past legislation.

In terms of the quick fix, which Mr Cooke purports he needs to do, there is no reason why a cap cannot be placed on the allowances generating under Bill 51.

The Chair: Thank you. We appreciate you coming before the committee.

Mrs Y. O'Neill: Mr Chairman, as the next deputants are coming forward, I did request information from the ministry of what was actually happening in the offices. I wonder if that question has been placed to the ministry. I asked for the answer in writing -- another weekend is quickly approaching -- so we could go back to our constituents and tell them exactly what the situation is.

The Chair: Very good. The clerk is going to doublecheck on that.

MARSHALL RESOURCES (ONTARIO) LTD

The Chair: Would you please identify yourself and the organization you are representing and whatever position you hold within that organization? You have approximately 20 minutes.

Mr Schnurr: Thank you. My name is John Schnurr. I am president of Marshall Resources (Ontario) Ltd, which is an agency that acts for small landlords in southwestern Ontario in rent review matters and in landlord-tenant disputes. We act as mediators. I am here today hopefully to assist in averting a travesty with respect to rental housing in Ontario.

I myself am a small landlord in this province. I am a voter and I am a taxpayer. I have in the last 12 months reduced my portfolio of apartments from 65 units to one duplex. I have no intention of re-entering the marketplace in Ontario until I see a dramatic change in the direction of the provincial administration in this province.

In so far as my remaining duplex is concerned, I gross a total rent of $750 per month. I purchased the property for $51,000 in 1989. I have replaced the roof, the plumbing and the porches at a cost of $14,000. The building requires siding, insulation, windows, rewiring and a modern heating system, at an estimated cost of $35,000. The taxes are currently $1,400 per year and the utilities are running approximately $2,700 per year. My mortgage payments on this property are $7,200 per year. In the last 12 months I have had 8% vacancy and 12% in bad debt. A quick tally will tell you that this duplex shall become a single-family dwelling for resale as soon as I can possibly do it.

The rental housing industry is the basis of my service business, Marshall Resources. Since 1984, we have handled evictions and rent review services primarily for small landlords in southwestern Ontario. Currently, we are agents for some 560 small-to-medium-sized landlords in this area, so I am speaking not for the corporate giants but the mama and papa landlords, the people who have purchased rental properties as a retirement project.

I speak with reasonable knowledge of the rental situation in this area. I can tell you that because of this legislation, speaking specifically of Bill 4, more and more small landlords are leaving the industry. Approximately a year ago I was retained to manage a 75-unit complex in Sarnia. This building had been purchased by a Toronto investor who, after a review of the existing legislation, decided he could improve the building and over the long term pay for the building. It is his retirement fund. This man mortgaged his home and his business. The building itself required extensive capital costs in the form of new bricks, windows, a roof, refit on the elevators and a general cleanup in the common areas. The work was estimated at approximately $750,000.

The building, on closing, was under review from 1988 showing an operating loss of approximately $158,000 for the base year. This application was approved, giving the new landlord an 11% increase in the rent and a phase-in of 5% per year until the loss was retired. Based on the order, the new landlord was prepared to execute the capital improvements as outlined. However, all work has been cancelled as a result of the announcement of the minister in November.

The phase-in would have brought the building to a break-even position in the fall of 1992. With the increase in debt load as a result of the capital costs expended to date and the increase in financing costs as a result of the purchase, combined with the wait for the recovery as proposed under Bill 4 of the GST and the increase in vacancy in the Sarnia area, bankruptcy for this investor is all but guaranteed.

The minister in his remarks to this committee cited a number of cases of what amounts to abuse of the system as it currently functions. To take his remarks literally, every landlord in the province must be a corporate giant making a fortune. I am sorry to say this is not the case.

Investors who put their dollars into the market since the inception of the Residential Rent Regulation Act did so with the assurance of the province, through the legislation, that a reasonable return on investment could be obtained over time. Those who abided by the law with that understanding have now found themselves being penalized for their co-operation.

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It is a matter of fact that the existing legislation is fair and reasonable and a reasonable means of dealing with rents in this province. It is a matter of fact that less than 75% of the units in the province have ever been to rent review. It is a matter of fact that less than one half of 1% of the units in this province received increases in excess of 30%. It is a matter of fact that half of 1% of the units in Ontario received increases in excess of 100%.Where, I ask you, are the abuses? The facts indicate to me that the system is working in its present form. It seems to me that the only problem with the present legislation is the political aspect.

Government originated in an attempt to find a form of association that defends and protects the person and property of each with the common force of all. Bill 4 in its present form merely guarantees the deterioration of the housing inventory in this province as well as the bankruptcy of the small landlords. It will assure the tenants of substandard housing in a diminishing supply. It will assure unemployment and funnel investment to other markets.

The minister speaks of this as temporary legislation. I have to wonder if his definition of temporary legislation is the same as that of Bill Davis in 1975 when he introduced his temporary rent control measures.

Over the last 15 years, I have watched provincial politicians buy and sell votes at the expense of both the landlords and tenants of this province under the guise of protection for all. Here we are again discussing protection. Why are we continually beating the issue to death? Give the existing system a chance to work before you amend it. Quite simply, if it ain't broke don't fix it. Over the last 24 months, I have witnessed a healthy marketplace, investors participating in the market and an even keel in terms of vacancy in the communities throughout southwestern Ontario. I see a number of rental units renting at substantially less than the legal maximum.

I do not hold myself to be anywhere near as qualified as the members of this committee, but it is my opinion that the whole need of controls or rent review legislation emanates from the problems currently being faced in the city of Toronto and other such centres where population growth has exceeded the supply of housing. Towns and cities such as London, Sarnia, Chatham, Windsor, Wallaceburg and Leamington, according to the latest CMHC statistics, indicate a vacancy in excess of 2% -- in the case of Wallaceburg 10.9%. It is my opinion that when the market in these areas is experiencing that kind of vacancy, controls are not needed in any form because the market will keep the rents within reach of the majority in order to maintain cash flow. The local economy dictates the need for controls, not the shortage of units in Toronto.

I believe the only realistic approach with the least possible damage to the economy is localization of the issue. If a given community has a problem with supply and price, perhaps controls are in order and provincial input is justified. However, if the market is healthy -- which can be identified by a vacancy of 2% or more -- any intervention is damaging not only to the tenants and the landlords but also to the community.

My father and my grandfather were both in the rental housing market. They advise me that they never took rent increases on a regular basis until 1975, when they were guaranteed increases by the introduction of rent review.

My point is very simple. As opposed to introducing new rules, let's work with the existing system, amending it so that the municipality can play a role in determining the necessity of rent controls in their economy. This direction would show the investment community that the government is addressing the situation in a realistic manner by opening the doors to future development in the areas that require it, as well as assuring the financial sector that there is in fact a future in rental accommodation in this province. Establishing a universal policy across the province to satisfy the shortfalls of one jurisdiction is not only shortsighted but dangerous at best.

Since the minister's announcement, I have personally witnessed the cancellation of not less than $13-million worth of capital costs in Sarnia alone, a reluctance on the part of lending institutions to finance buildings and the collapse of the resale market. I have seen shaken confidence in the investment community lead to investment in the United States and an overall decline in the service and maintenance of the existing inventory. More important, I have seen the aspirations of the small landlord community wither and die.

In closing, I implore you of the committee to dramatically alter the direction of this legislation or be prepared to see the province take over the rental housing industry, in short, and deal with the losses on its own. For I do not believe that any sane investor will remain in an industry that guarantees a loss and a constant change in rules, so that his return on investment will depend on the whims of whoever happens to be in power at the time.

Ms Harrington: Thank you for coming. There are quite a few words there. It is hard to grasp it all without having it in front of you.

You talked about the rent review system. Did you say it was actually working now?

Mr Schnurr: In my opinion, the existing system is working very well.

Ms Harrington: I would ask if you realize that 30% of the tenants in this province pay more, and much more, than 30% of their income for accommodation and that this is a serious problem.

Mr Schnurr: I can appreciate the concerns in that direction. However, if that is such a big concern of the government, perhaps it should look at direct subsidy as opposed to wasting money on controls. The people who need the benefit of rent controls and rent review are not receiving it. The guy who is on social assistance and renting my basement apartment in Sarnia at $250 a month -- tell me he is receiving the benefit of controls. He cannot afford any more than $250 a month to begin with. He could not afford to move to better accommodation. Even if he had more money, he would still end up in the same situation.

Ms Harrington: If more money were given to them, it would be directly handed over, passed through to the landlords. It would not improve their accommodation at all.

Mr Schnurr: Not necessarily.

Ms Harrington: You mentioned that 75% of landlords do not go to rent review.

Mr Schnurr: That is correct.

Ms Harrington: Would you also agree that the best-kept buildings belonging to landlords do not need more than the guideline of 5% this year?

Mr Schnurr: I would say that the 75% would like to go to rent review, need to go to rent review, but are very much afraid of rent review.

Ms Harrington: What we have found in speaking to various people in the last week or two is that it is generally stated that many landlords who care about their buildings and who are in there for the long term can maintain their buildings within the guidelines; we are talking maintenance. The only question you brought up, and the previous speaker, is about capital expenditures, which we are looking at.

Mr Schnurr: I do not mean to be rude, but I would like to find out who the people are you were speaking to and what they were smoking, because I would like to buy some.

Ms Harrington: I will pass to my colleagues.

The Chair: Mr Winninger, you have time for one question.

Mr Winninger: To pick up from where Ms Harrington left off, you made the point that instead of having blanket rent controls we should be subsidizing some people's housing costs. Would you agree with me that a 20% annual increase in rent is just as draconian for someone earning $35,000 a year as for someone earning $10,000 or $15,000 a year?

Mr Schnurr: I can appreciate what you are saying, yes.

Mr Brown: This is the first day this committee has actually been going out through the province. We have had some hearings in Toronto. I think you make a very telling point when you talk about London, Sarnia and Windsor being different from Metropolitan Toronto.

I represent a riding where I would suspect, although I do not know the exact figures, that the vacancy rate would probably be 25% of affordable, good housing. We need rent controls in my riding, but landlords are able to get almost half of their allowable rent in the actual marketplace. The important thing here is that we are out in the province and starting to hear some of these things and not just reacting to "Toronto difficulties," although they are important. You seem to indicate that you thought municipalities or regions could perhaps do a better job of this sort of thing.

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Mr Schnurr: Section 124 of the Landlord and Tenant Act allows for the establishment of landlord and tenant advisory bureaus. During the last hearings on Bill 51, I made submissions to that end. I met with Mr Brandt at the time in Sarnia and we did in fact establish a landlord and tenant advisory bureau in the city of Sarnia. It consisted of four landlords and four tenants and one representative of the city who was an attorney in the city.

It is my position that the municipality through the landlord and tenant advisory bureaus, perhaps fortified from what the legislation currently permits, would be the direction to go in. You then have participants from the municipality who are aware of the problems in the municipality, and the input from both the landlords and the tenants to decide on a course of action, as to whether or not they need rent controls, and perhaps even go so far as replacing the city representative with someone from the province so that they can conduct hearings addressing the rent review applications in that community, should they choose to have controls in the community. I feel that would enhance development in those communities.

Mr Brown: The government has brought up the point of economic eviction. I think we are all very aware that we do have some major problems in terms of affordability in the rental housing stock. I was really wondering, in your experience -- you say you represent approximately 560 landlords -- if you could give us any idea of how many people actually have to move out in a year because they cannot afford to pay the rent or are put under some unreasonable hardship by paying the rent.

Mr Schnurr: I do approximately 2,000 evictions for non-payment of rent in any given year, and have done so for the last six or seven years. I can tell you without a doubt that less than 5% of the evictions I effect are individuals who cannot afford the rent. The balance of evictions is people with, perhaps we might term it as, mixed priorities. If we go to effect an eviction and someone has a case of beer, tailor-made cigarettes, a colour TV and a stereo, there is something wrong with this picture if they cannot pay the rent.

By the same token, if I am dealing with a single mother or somebody on assistance, we go the extra mile to work it out and try to prevent the eviction. Economic evictions are the result, in my experience, of poor planning and poor priorities.

Mr Turnbull: You have talked about eviction and you have said that it is your experience that the majority of these people who you actually go through with the eviction are people who -- it is a mis-sense of their priorities. Clearly there are cases in this province where people are effectively economically evicted; there is no doubt about it.

Mr Schnurr: No doubt.

Mr Turnbull: You have spoken about this being really a Metropolitan Toronto problem. I think to a great extent you are correct. I represent a metropolitan riding and I know that the kind of rent we are talking about and the situation in Metro is vastly different to here. Go back to the question of economic eviction. You suggested that shelter allowances, which is what we have suggested so far -- the NDP's knee-jerk reaction, and it was very eloquently put by a witness the other day, was, "I get to touch the money as it flows through to the landlord."

It seems to me that the basic problem we have with rent control is that we have some people who can afford to pay reasonable rents who are in buildings which, for whatever reason, have very depressed rents -- of course the chronically depressed rent clause was never proclaimed in Bill 51 -- whereas other people who are under great economic hardship have the problem that they are paying very large portions for their rent. How would you reverse this?

Mr Schnurr: That would be a tough one to address, other than perhaps if someone were entitled to a subsidy, then mobility of residence might be a factor that would have to be considered. I will share a story with you. I had a client who had a building in Sarnia that was empty. He was a Toronto landlord. He was experiencing 70% vacancy. This was back in 1981. He ran an ad in the Toronto Star: "Apartment to rent, $350 a month. We'll move you." He loaded people up in transport trucks, brought them from Toronto and put them into Sarnia where there were vacancies. The people were happy to move. They got a better lifestyle.

That is a pretty dramatic case, but if someone living in Toronto in a high-rise is paying too much and cannot afford it, maybe low-rise or moving them to cheaper accommodation would be in order.

Mr Turnbull: I think certainly the idea of loading people up in a truck and moving them to another part of the province smacks of the same kind of social engineering that the NDP are involved in at the moment.

Mr Schnurr: Granted, and I appreciate what you are saying.

Mr Turnbull: Tell me something on this legislation. Could you live with this legislation, with two provisos: get rid of the retroactive aspect of it and also guarantee that it will not be in place for longer than two years?

Mr Schnurr: I would have difficulty living with changing the rules in the middle of the game.

The Chair: The time has expired. We thank you for appearing before the committee today.

SIFTON PROPERTIES

The Chair: Next on the list, I believe, is Sifton Properties. You have been allocated 20 minutes, 10 for your oral presentation and 10 minutes for questioning. For the record, could you identify yourself and who you are representing.

Mr Parker: Good morning. My name is Barry Parker. I am vice-president of Sifton Properties Ltd and I am responsible for its portfolio of company owned and managed residential rental properties. Sifton Properties is headquartered here in London and has been active in the shelter industry for the past 60-odd years. We develop lands, build and sell single-family homes and condominiums, as well as develop and manage shopping centres, commercial properties and office buildings.

In all areas of our company, we strive for quality in the production and the management of our real estate holdings. We believe that the long-term success of any company lies in its ability to identify and satisfy its customers' needs by supplying product, space or accommodation that offers value for what it charges.

In our rental housing division, however, it has become increasingly difficult to balance our desire to supply quality rental housing to our customers with our need to obtain a proper return on our investment appropriate with the risk and the nature of the investment. In our rental housing operations, we have been subject to the full impact of Ontario's rent control system on every single unit which we own and manage, and this system provides no incentive for us to provide our customers with anything other than basic service.

We do not like that system and our company has responded. We have not constructed a single unit for our own account since the inception of rent controls in 1975. Prior to that time, however, we developed, built and still own and manage 2,700-plus units that were constructed in the 1969 to 1976 time frame. Therefore, as I talk to you today, please remember that we are not apartment flippers, that we own a stock of mature buildings, that we have been subject to rent controls since their inception on our entire portfolio, and that we operate clean, well-maintained properties of which we continue to be proud.

Before I talk about Bill 4, I would also like to say a few words about the history of our properties. First of all, during the mid-1970s when rent controls were initially introduced, London had a glut of rental units, which was gradually eliminated by the early 1980s. During the late 1970s, however, it was not possible for us to obtain even the basic annual 6% rent increases which the old system permitted. Therefore, our rents today do not even reflect the basic statutory increases that have been in effect since 1975.

In inflation-adjusted dollars, our rents in most cases are actually less than they were in 1975. Since that time, we have had to pay increases in operating costs that rose with or exceeded the rate of inflation. For example, here in London we own about 1,000 rental town houses for which we pay the heat for the tenants. During the last energy crisis, we absorbed double-digit increases in the cost of utilities. When wages, taxes, electricity, water and insurance increased by double-digit rates, we absorbed those amounts as well.

In London we did not make any rent review applications for our buildings to recover these costs because the market simply would not have allowed us to charge the ordered rents anyway. When the market would allow us to charge the higher rents, we could not apply because the losses and increases in costs had occurred in previous years.

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While during this time at least we said, "If the income statement for our properties does not look so hot, perhaps we can take some comfort in the balance sheet, that the value of our buildings will improve over time," but Bill 4 has eliminated overnight much of the value which we have built up in our properties over the last 15 years. There can be no argument that Bill 4 has reduced the value of our properties by millions of dollars in the name of stopping flips.

The NDP says that there has been a problem with most of those sales. Mr Rae tells us that over the last several years we have had building flip after flip after flip. He also says that we have had tenants pay and pay and pay again. I can assure you that our buildings did not flip, even once, and yet the NDP has seen fit to confiscate millions of dollars in value from our company for a problem that exists only in a few isolated cases.

If the government is so concerned about flips, why not deal with them in a manner that is clear and direct? Why not, for example, deal with the issue by means of a speculation tax where regulations would limit pass-through provisions if the sale took place less than five years ago? There are many alternative ways to solve the problem, but Bill 4 has indiscriminately slashed values for everyone who holds rental properties in this province. In that, it was unnecessary and unfair.

In the case of capital expenditures, Bill 4 has used the same type of overkill to stabilize the market, in the words of the minister.

As I pointed out to you earlier, Sifton Properties Ltd's rental portfolio was built in the 1969-76 era. This means that today they are 15 to 22 years of age. During that time we have done our best to maintain our properties and we are proud of their condition. Notwithstanding our maintenance programs, however, many major components in our properties have required replacement in the past three years, and we have made capital expenditure applications for a number of our older units.

The work which we performed included parking-deck restorations, roof replacements, plumbing system replacements, heating system overhauls, furnace replacements, repaving of parking lots, replacement of windows, replacement of appliances, replacement of kitchen cabinets, new flooring, installation of exterior siding, upgrading of common areas, lobbies and numerous other items.

Before every capital expenditure application we met with our tenants and we often amended our scope of work to take their concerns into account. The increases which we received ranged from 17% to 24%, including the statutory increase. In the cases where the increases exceeded 20% we voluntarily limited the increases to our customers to 15% in any one year in order that they could absorb the increase in a gradual way.

Why did we do this work? We did it because in many cases the major building components are simply worn out. The work was not necessitated by our neglect. The fact is that roofs wear out and the cost of a typical high-rise roof is around $100,000. Parking decks are deteriorating due to salt corrosion, as are countless bridges and other structures across North America.

The cost to repair is often in the hundreds of thousands of dollars. Yet no amount of preventive maintenance can prevent domestic hot water risers from wearing out and plugging up, nor can we stop appliances from becoming obsolete. Lobbies and common areas get worn out and need to be updated.

With the introduction of Bill 4, however, we have stopped all capital expenditures. We have put on hold our plans to perform millions of dollars of work in our town homes and apartments, work that we want to do and work that has already, in most cases, been pre-approved by the Ministry of Housing and our tenants. The reason we have cancelled this work is that we simply cannot afford to do the work without extra funds.

Usually we spend in excess of the entire annual rent roll of a building to address the problems which require correcting in our older properties. It is not difficult to spend $6,000, $7,000 or $8,000 per unit on capital in an older building. For the past 15 years, there has been no allowance for setting aside funds for us to do this work in the rent increases allowed by the government, and as I said to you in most cases we were not even able to take those increases because of the market here in London.

In effect, what the government has said to us over this time is, "We will give you enough money to meet your increase in daily operating costs and if you need any extra funds for capital, prove the need for those funds and we will increase your rents accordingly." Yet now that we need the funds, we have our Minister of Housing saying in connection with this issue: "What is basic rent supposed to pay for? You would expect that some of that cost is going to go into maintaining and operating the building."

We have also cancelled our policy of performing in-suite capital expenditures on a unit-by-unit basis. Under the Residential Rent Regulation Act, landlords and tenants could jointly apply for a rent increase if a tenant wanted a new kitchen or new carpeting, for example. The increase affected only the unit where the work was performed and this type of application was used only if the tenant agreed to the work, and quite often initiated the request for the work.

It seemed to be a fair and equitable approach to customizing the work which we perform to each tenant's situation, but we have also had to cancel this work as well. In fact we now suggest that our customers talk to their MPP to find out why the government now does not want us to perform this type of work, since we cannot provide them with any rational explanation.

What has Bill 4 managed to tell us at Sifton Properties? It is telling us that we are going to have to delay the proper timely replacement of many of the major components of our buildings. In the interim we will patch or repair as best we can, but with our units now over 20 years of age, this Band-Aid approach will not solve the problems which require our attention now. Once the new permanent system is in place, we will have to review it to ensure that it provides the appropriate increases to finance our expenditures. If it does not, some of the work will not be performed, a prospect which very much concerns us as we have a history and a strong desire to continue to properly maintain our properties.

Bill 4 also tells us that we can expect an increase in the adversarial atmosphere that exists between ourself and our customers. What we need today is a government that says it will encourage us to properly operate and maintain our properties to ensure that our housing stock is in place for the future, a government that will not obstruct us at every turn. Bill 4 accomplishes exactly the opposite.

It is without a doubt the most disastrous, oppressive piece of legislation in the history of rent controls in this province. As I said earlier, it has confiscated millions of dollars of value from our buildings. It is preventing us from performing necessary work on our property, most of which has already been approved by the Ministry of Housing.

In addition, Bill 4 has permanently upped the ante for doing business in the rental housing industry. The retroactive components of Bill 4 and the arbitrary manner in which they have been introduced have added an element of risk that previously existed only in theory. Now that landlords and others who supply the capital for this industry have experienced not only Bill 4 itself, but this government's strident offensive rationalization for its actions, things will never be the same.

We are very concerned about the lack of any balance or proportionality in this bill and the lack of any evidence from the government to support its claim on which it has based the legislation.

Mr Brown: We all here are concerned about flips and the effect they have had on the market. We have had great difficulty on the committee, however, getting a response from the government in defining, first, what a flip is -- Is it five years? What exactly is a flip? -- in having it provide any evidence whatsoever that this is an increasing problem or a widespread problem. It just patently refuses to give us that information. If you are not being kind, I might suggest it is totally for political reasons.

I wonder, in your experience -- you manage a large portfolio -- if you could tell me just in the general market, not in your particular business, do you know of a number of flips in this area?

Mr Parker: No, I do not. The only information I have seen on that is that there was a study done by the city of Toronto. You may have seen it already. I think that is where the hotbed of flipping was supposed to be. In fact, as I understand, it is not even a problem there.

Mr Brown: My second question is, you tell us that there is major capital work you are not going to do this year. It occurs to me that we are in the midst of a recession in this province, that we have many construction workers who are out of work, and that business landlords could get more bang for the dollar right about now during a recession and provide much more employment by doing the work right now, because the market is --

Mr Parker: You are exactly correct. Prices are better now than they have been for the last three or four years.

Mr Brown: Therefore, the tenants would receive the benefit of lower rent increases because the work would be done.

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Mr Parker: Not only that. Interest rates are low as well and they would receive the benefit of that.

Mr Mahoney: The government, in my view, has led tenants to believe that somehow Bill 4 is going to solve all of the maintenance problems they have been experiencing; I think you and others have said it focused on the Toronto market but perhaps is focused here to a certain degree. I have combed this bill from front to back and back to front to try to find out how anyone could ever arrive at such a conclusion. The only conclusion I have been able to come up with is that they are being misled. Do you have any comments on that?

Mr Parker: As I mentioned in my presentation, we have many situations where the tenants have requested work to be done. We are prepared to put up the funds and do the work in their units, yet we are frustrated even under those circumstances to do the work.

We do not believe it is in anybody's interest to have a system that allows our rental stock to deteriorate. Our company, in particular, does not want our stock to deteriorate. Yet we cannot properly manage it under a system such as this.

Mr Mahoney: Much of the discussion centres on the extremes and the so-called luxury renovations. What kind of renovations are your tenants looking for and do you normally do? Do you have golden doorknobs in your buildings?

Mr Parker: I am going to tell the committee that we are guilty. We just put some marble in a lobby. We do not believe our lobbies should have Spanish beams from 1968 and shag carpeting. We are not going to apologize for keeping the lobbies of our apartment buildings up to date. This has to be put in perspective, however. The cost of those lobbies when amortized over 140 or 150 units is infinitesimal on a per unit basis; it is a fraction of a per cent increase in the rent.

About 98% of the work has been structural work, hard things that need to be replaced such as roofs, parking decks, windows, appliances, boilers, mechanical systems and things like that, which are simply worn out.

Mr Turnbull: I am going to have to ask you for quick answers because I want to get a lot of questions in.

It has been asserted in these hearings that the offset to the very low net cash flow which comes out of apartment buildings, which you alluded to, is capital appreciation. I think it is a fair statement that that is what you hoped for. You have a very large, diversified portfolio. Has your apartment component performed as well as the other components?

Mr Parker: No, it has not. There are lots of studies done for the Ministry of Housing that confirm our position. Values have just kept up, and as a result of Bill 4 have probably now not kept up with inflation.

Mr Turnbull: Would it be technically possible to have any capital appreciation unless you can see a flow-through of additional financing costs, given that this is a controlled market?

Mr Parker: No, it is not. That is the point. If you suppress the rents, you suppress the value. It is as simple as that. There is no reason people are going to pay a lot of money to own an apartment building that cannot possibly make any money. It does depress the value.

Mr Turnbull: In view of the aging stock we have in housing, is it reasonable to expect that there should be an acceleration of renovations as opposed to a deceleration?

Mr Parker: Our holdings are typical of many other holdings in the province. They are simply at a point in their life, after 15 or 20 years, where some money has to be plowed back in, and the money is not there because that same stock has been under rent controls for 16 years.

Mr Turnbull: Would you consider that it is going to be increasingly difficult, if not impossible, to refinance these buildings?

Mr Parker: Yes.

Mr Turnbull: Have you already had any discussions with financial institutions?

Mr Parker: We have not had any on our own portfolio, but we have clients for whom we manage properties and they are having tremendous difficulties even replacing existing first financing -- not second and third financing but first financing.

Mr Turnbull: So they could lose their properties.

Mr Parker: Yes. They cannot get refinancing.

Mr Turnbull: Last question: If we could manage to persuade the NDP to get rid of the retroactive aspect of this bill, could you live with it for the two years it will be in force?

Mr Parker: I think business people and landlords are entitled to have some order in the manner in which we run our businesses. At least, if they are going to change the rules, the first thing is to eliminate the retroactivity. It is grossly unfair, not only on capital expenditures but for those people who bought buildings under the old rules and structured their deals under the old rules and are counting on phase-ins for financial loss that have already been ordered by the Ministry of Housing. These things should not be taken away from people; it is unfair.

Mr Winninger: Just briefly: I have been sitting here rather impatiently listening to how good a corporate landlord you are. You have not said anything about the hundreds or thousands of illegal rent increases your company had to pay back to tenants who moved into your buildings, overcharges for new tenants, some in excess of $3,000 which I know personally about. And all that while Mr Sifton was on the advisory committee that made recommendations for the implementation of Bill 51. How does that policy of charging tenants illegal rent increases accord with your submission today that you are looking out for the interests of tenants?

Mr Parker: Our rent roll is completely legal, as you know. We registered all of our rents on 1 August 1985, and our rents are completely legal with respect to the amounts we registered at that time.

Mr Winninger: Prior to 1985, for many years you were overcharging tenants thousands and thousands of dollars that had to be paid back.

Mr Parker: I disagree with that. We have not overcharged.

Mr Winninger: Do you deny that?

Mr Parker: Yes, I do.

Mr Mahoney: On a point of order, Mr Chair.

Mr Tilson: This is outrageous.

The Chair: Only one member can speak at a time. I have heard Mr Mahoney on a point of order.

Mr Mahoney: I think Mr Winninger should apologize to this witness for these outrageous accusations. I do not think they are relevant to Bill 4, which is what we are here for, and I do not think we want to hear about your local political problems.

Mr Winninger: I will not apologize for the truth. These are all documented claims.

Mrs Y. O'Neill: On the same point of order, Mr Chair.

Mr Mammoliti: Mr Chairman, I would like to speak on it as well.

The Chair: We are going to make a list.

Mrs Y. O'Neill: We are talking about the Residential Rent Regulation Act, even an amendment to that. That act came into effect in 1986, and Mr Winninger is talking about 1985. I am sorry, this is not a courtroom.

The Chair: Okay. Mr Mammoliti.

Mr Mammoliti: This individual comes here and says he is looking after the best interests of tenants and he sincerely believes that. I believe Mr Winninger's comments are just, and that that is not the case at all. If this man has a track record of not being trusted, then it is relevant and I would suggest that we hear Mr Winninger and what he has to say.

Mr Turnbull: On the same point of order, I would suggest that, given the fact that the members of the committee have legal immunity but the witness does not, if these members wish to continue this line of conversation they repeat this same accusation outside of this room where the witness can take the appropriate legal action if he wishes.

The Chair: Thank you. I would remind all committee members of what they reminded me early in the week. Committee members wanted me to ensure that all members ask questions concerning the relevant sections and subsections of Bill 4. I am going to give the same advice to the committee, so I hope the committee members take the advice they gave the Chair. It is very difficult for the Chair to rule questions out of order. Many of them are borderline. We would get into numerous procedural wranglings if I started to do that, and I am counting on the members of the committee to ensure that does not happen and I am not put in that position.

Mr Abel: Have any of your tenants ever had to pay their rent retroactively?

Mr Parker: On rent review orders, yes.

Mr Abel: Referring to your deputation, you think it is unfair for Bill 4 to be retroactive. From that I would conclude that you are saying it is okay for retroactivity to apply to tenants but not to landlords. Is that a correct assumption?

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Mr Parker: That is not what I am saying at all. Tenants are not obliged to pay anything above the notice of rent increase they receive. They receive a notice of rent increase, say, for 15% when the statutory amount was 4.6%. If they wish to pay 4.6% while their application is being processed, we advise them in writing to make sure they set aside the funds for when the order comes down. At that point they have to pay the funds, but there is no retroactive element to it. They have been given a notice of a rent increase for the amount which we intend to charge.

In fact, I think it is a great benefit to tenants that they can hang on to their funds for a year or two years or however long the ministry takes to deal with our applications before they actually have to turn the funds over to the landlord. The landlord does not have that advantage. He has to put his money out and pay his trades months in advance of even filing his application. So this can hardly be construed as a situation that has any benefit to the landlord.

Mr Abel: You indicated that Bill 4 prohibits the ability to recover costs for improvements.

Mr Parker: Yes.

Mr Abel: So you are saying it is fair that the tenant pay for the landlord's capital investment. Is that what you are saying?

Mr Parker: That is not what I said. I said the committee has to look at the bill in the context in which it is presented. Our buildings have been subject to rent control since 1975. Even if we took the statutory increases, we have not even kept up with inflation on our rents. In that context, tenants are paying less rent than they were 15 years ago, in inflation-adjusted dollars. I do not think it is out of line, when the building has to have major capital work done to it, that the funds have to come from the people who are enjoying the benefit of having the rent suppressed for the last 15 years.

Mr Abel: So what you are saying is --

The Chair: Very good. Thank you, sir, for coming before the committee. I am sorry your time has expired. You have generated a lot of interest. I wish I could allot you and the members more time, but I am unable to. Thank you for appearing.

DAVID SOUTHEN

The Chair: David Southen, I think you are familiar with the procedures we have been following this morning.

Mr Southen: Right. Thank you very much for giving me the opportunity to speak today. I do appreciate the efforts of Mr Turnbull in extending the hearings to London. I think I was going to be deprived of my opportunity to speak had I only been able to go to Windsor, so let me first thank you for your assistance in this matter.

I would like to tell you who I am. I am a Londoner. I am employed as a real estate salesman with Royal LePage. I am involved in selling residential property, small income properties and a limited degree of commercial experience. I live in London in a triplex very close to here.

I would like to relate to the committee my experience with a particular property that I and a group of partners purchased a couple of years ago. My partners included my father, who is an independent businessman in the grain and feed business in Forest; my brother, who is a military policeman; another partner, who is a nurse with a Middlesex health unit here in town, and the final partner is a financial analyst with London Life.

In late 1988 we purchased a property in London that is comprised of 16 residential apartment units and 6,600 square feet of retail office space. At that time we paid what was the market value for the property, about $880,000. This was confirmed by an independent appraisal needed for financing, of course. Our down payment was $240,000 or about 27% of the total deal, so it was not a high-leveraged transaction, by any stretch of the imagination.

At that time cash flow was dead break-even. Actually, it was probably operating at a bit of a loss, but for all intents and purposes it was not really that significant. It was our intention to buy this property and hold the property for the long term and gradually improve the property over the course of our ownership. So we pooled our life savings, essentially, and made what for us was a very large investment. We are no Sifton Properties or anything like that; we are just small landlords. Nevertheless, the legislation impacts on all landlords in an equal manner.

The property itself had not been particularly well managed when we bought it, and it was our hope that we could improve the quality of life for the tenants who were there by taking an active management interest in the property and improve their situation that way. Because I am in the service industry and my father is, we have a real belief that our tenants are our customers and that in order to serve them better we are going to try to do everything we can to make their living accommodation as good as we possibly can.

The committee no doubt has heard a lot about the plight of older buildings. Ours is the same sort of thing. Our property was built in 1972. While this does not seem particularly old, 19 years, the property nevertheless was not constructed of particularly good material to start with. The reality is that building components wear out and many of the components of the building are reaching the end of their useful life.

Immediately upon assuming ownership of the property we started on a maintenance program. Included in the first year were a major roof replacement and ongoing, in-suite cleanup programs. In the second year of our ownership we engaged in major plumbing replacement. Our building was constructed, as I said, in 1972, during the copper shortage of the early 1970s. Consequently, our building was constructed using galvanized plumbing and aluminum wiring. We spent approximately $20,000 last year replacing the main feeds that distribute water to all the apartments. We have yet to replace the risers, but they are galvanized and they are definitely reaching the end of their useful life. We also continued with our in-suite cleanup program. We also instituted a landscaping service to make the exterior of the property look good, and we just bought new laundry equipment because of problems with the leased equipment we had.

Since we bought the property we have received many compliments from our tenants about how much better the property looks since we have taken over ownership. Our rents are very inexpensive -- I think our building is actually in your riding -- less than $450 a month for a two-bedroom. They are quite spacious, probably around 800 square feet, and all the utilities are being paid by the landlord.

We are kind of up against a brick wall, though. Our major plumbing work was, as I said, just completed. We borrowed money to do this work. We are caught in the middle. We have filed no application to rent review about this. If this legislation had not been proposed, we would probably have gone ahead anyway because it was work that needed to be done, but we had a major capital expenditure plan in mind.

As I said, our building is 18 years old. The kitchens and baths are simply reaching the end of their useful life, for a couple of reasons. Materials, as I said, really do not tend to be that great. This one is no exception. Second, some tenants do not take much pride in the appearance of their kitchens and baths and consequently they deteriorate; obviously, it varies from tenant to tenant and we have some terrific tenants. Anyway, we estimated a cost of $72,000 will be required to replace the kitchens and, at the time, we would also replace the galvanized plumbing that is in the risers. We figure it will about $16,000.

The appliances are 18 or 19 years old and again they are reaching the end of their life expectancy. We would like to purchase new energy-efficient appliances for our tenants at an approximate cost of $20,000. As well, the carpets and flooring are older. While our in-suite campaign to replace these things has been an ongoing concern of ours since we bought the property two years ago, nevertheless there is still a lot of work to do. We assume that about $32,000 will need to be spent on that.

Windows need to be replaced, but we currently cannot afford to do that. In total, we hope to spend $140,000 next year to make what is effectively a like-new unit for the tenant, about $8,750 per suite, which would not translate into a huge rent increase for those tenants. It would still be a very affordable building. As I said, our rent range is from under $400 to -- I think $446 is our top rent. Even with doing those capital expenditures, our rent would be most affordable.

I had arranged to do this work with a contractor in town who had done some work previously for me, such as snowplowing. Unfortunately, we have had to cancel all of this work, so he is out of work, his subcontractors are out of work, the appliance manufacturer no longer has an order, and the effect trickles right on down through the economy. I talked to the contractor as recently as a week ago. He still has no work lined up for this year.

It is also unfortunate that we as owners are out of luck. An appraiser recently spoke to a landlords' group I belong to and advised us that property values in apartments have declined 25% since the NDP pronouncement. As a real estate sales person, I would have to agree with that. I would make one exception to that: If they are in Toronto, I imagine the decrease is probably more in the 40% range.

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Needless to say, it is having quite a devastating effect on me. In a little over two years' time, the 25% decline in property values essentially wipes out all the equity that we have in the property, so we are really back to square one. We invested $250,000. We are out of luck. Also, the money that we borrowed to do the improvements that we have already done is gone for ever.

There are a lot of other stakeholders in this too. I would like to point out that our tenants are out of luck. We have established a good relationship to them and I am going to be very sad when I have to go to them and tell them that I cannot do the repairs that are necessary to maintain this property because the government that is elected really is not interested in seeing us be able to do that.

The financial institutions are out of luck too. This is something that I would really like to speak about for a minute or two, if I could. Everybody thinks of banks and trust companies as being big monoliths. Really all they are is a collection of small deposit holders that guys like me put our paycheques in, and shareholders, that are owned by and large by pension funds that guys like me have invested money in to set aside money for my retirement. So I really object to saying, "The banks can afford to lose this money." They cannot. I should very much hate to see a run on the banks such as is going on in the United States right now.

Pension holders of course are stakeholders too here, for the reasons I have already talked about. Who is going to hold the bag? Is it going to be the taxpayers? They are already taxed to death. In London last year we had property tax increases of 11%. The GST has just come in this year. Obviously, as a real estate sales person, last year was a very brutal year in terms of earning money, and this year promises to be the same, and yet my taxes continue to go up.

This legislation, from what I understand, was targeted to eliminate a number of abuses as the NDP saw them, massive rent increases in a single year, flipping of buildings, luxury renovations and so on.

Interjection.

Mr Southen: Phase-in orders make plenty of sense.

Flipping of buildings: Again, I do not know what this means. As a real estate sales person, this is a very uncommon occurrence. People own properties for the long haul. They do not send them over. You have heard Barry Parker from Sifton Properties speak about this matter. The other London landlords, I can assure you, are essentially the same thing.

Again, luxury renovations: Replacing kitchens and baths that are worn out is hardly luxury renovations, in my opinion.

The most offensive thing about Bill 4, as you have already heard, is the retroactivity. Why the NDP would propose such legislation which is going to destroy people's savings in such a notorious manner is really beyond me. When the NDP was elected, I must say, and no offence to the Liberal members here, I was not particularly displeased that an unresponsive government was turned out. I thought that a chance for a new party that promised to be responsive to the needs of their constituents would be a good idea. However, I can tell you that if the first piece of legislation that is put in destroys my life savings, I am thinking twice about it.

The Chair: Thank you for your presentation.

Mr Tilson: I would like to ask a question of you, the same question that I asked an earlier speaker -- I do not know whether you were present or not -- in that in my assessment of Bill 4, as introduced by the government, it seems to be designed specifically for a landlord-and-tenant problem in the Toronto area, although I am sure evidence could be produced that could show it province-wide to a degree. But when you look at the vacancy rates as being the highest in the city of London and other facts with respect to this specific area, I suppose my question is, should this type of legislation be province-wide or should it be perhaps more sensitive and compassionate in many cases to the local needs of areas such as London?

Mr Southen: There is no doubt that we in London do not have the same situation that is going on in Toronto. I do not know how many people live there, but the reality is the bulk of Ontarians do not live in Toronto and you certainly have the tail wagging the dog here. I think that it would probably be a legislative nightmare to have regional differences in place, but I can tell you in London it is certainly not necessary to have rent controls of any form right now. Rents are dropping out there, there is no doubt about it. When you go and look at buildings you find them 50% vacant and landlords are just bending over backwards to do anything to try to get tenants in right now. I have two vacancies in the property that I live in personally and I just cannot get a tenant in them.

Mr Tilson: I am certainly not in favour of downloading that has gone on in the past, although at the same time there are cities in the United States, the large cities at least, which specifically deal with their city problem as opposed to a state-wide problem. I am not necessarily advocating; I am looking for some sort of reaction outside the city of Toronto as to how people would feel about that.

Mr Southen: It is interesting that you talk about that. The reason Toronto is in the situation that it is in is not the population pressure.

It is interesting and instructive to look at what cities in the United States have done. I think Las Vegas is a prime example. The population there has doubled over the last 10 years. They have 8,500 people a month coming into a city of 800,000, and yet there are apartments everywhere, piles and piles of apartments, and rents are very, very reasonable there. You can rent an extremely luxurious two-bedroom apartment there for $500 a month, so call it $550 Canadian, and they have just handled it through the market rather than some things. It is well known that rent-controlled markets provide the highest rent prices for tenants anywhere.

Mr Tilson: The Minister of Energy has encouraged repair work that would make buildings more effective for an energy-efficient nature. In my view, Bill 4 has made that more restrictive. It has been contradictory legislation.

Mr Southen: Right.

Mr Tilson: Have you had any thoughts as a small landlord on that contradiction?

Mr Southen: It was one of the things that we had originally intended to do, of course, when we were shopping for our appliances. Energy conservation is a very, very important consideration to us, not only to minimize our costs but also to effectively lower our taxes too because the cost of bringing new generation facilities on is so prohibitive. If we as taxpayers can do something to alleviate that problem, I am only more than willing to assist to whatever degree I can.

Mr Abel: I was going through your list here of your proposed changes for this year to the tune of $140,000. Were your 16 tenants willing to accept these changes? Were they against any of these proposed changes? Were they asked? I will put it that way.

Mr Southen: Let me be very upfront with you. We were in the very early stages of our discussion. I realize the legislation that was previously passed required us to have a tenants' meeting. We were not at that stage. Those tenants whom we did approach on an individual basis did not mind. Like I say, the rents are quite reasonable, and again as I was saying, the facilities are getting very close to being worn out.

Mr Abel: You said that you planned on spending $72,000.

Mr Southen: For kitchens and baths, right.

Mr Abel: Kitchen cupboards? Is that correct?

Mr Southen: That is right. The cupboards are 18 years old, and you have seen what particle-board cupboards are like. They are shot.

Mr Abel: I would like to put to you that I was a cabinetmaker, and believe me, if those cupboards have to be replaced after 18 years, you or whoever put them in was ripped off. My house was built in 1921 and I still have my original kitchen cupboards.

Mr Southen: I can tell you this, if particle-board construction --

The Chair: Order. We are not going to turn this into a debate about cabinets. We have two other colleagues on the list.

Mr Abel: I just have one more question.

The Chair: Well, your colleagues will not get on. That is the answer.

Mr Abel: One short one. I am sorry. Would these capital improvements increase your equity in the property?

Mr Southen: Would they increase our equity? Obviously, if we are not going to get an increase in the property, they would do the opposite.

Mr Abel: Would they increase your equity if you put these improvements in at the expense of the tenants?

Mr Southen: I hardly see it as being really at the expense of the tenants.

Mr Abel: You did say your rent was going to increase.

Mr Southen: If there was some sort of a flow-through, it conceivably could. It depends really on the amortization of the thing and what sort of rate of interest we can cut on the deal. I am not certain.

Ms Harrington: You have certainly given a clear picture, a very personal picture and a very good picture of your situation. Personally, I would like to say that you sound like a great landlord and what you are doing is certainly correct as far as I am concerned. We need more people like that.

Mr Southen: I appreciate that.

Ms Harrington: I would like to start off by looking at the big picture. First of all, investment is up and down. We all know that. Even without this government or whatever, a year ago real estate was going down. I have lost equity in my house, and so has George, by a vast percentage this year. It has nothing to do with the government.

Mr Southen: Right. I would like, if I could, to address that for a little bit. The rental housing industry is less subject to those cycles because for all intents and purposes it is a regulated industry. It is not subject to the same sorts of forces that the other ones are, so I think it would be incorrect to say that this decline has happened exclusively because of the market. I think it would be instructive to look at what properties were selling for, what apartments were selling for, prior to the pronouncement and after the pronouncement. That really is the test, because what was happening in the economy in September, October, November is really no different from today.

Ms Harrington: Okay. All I am saying is that there is a larger picture out there of real estate across the province.

The business that you are investing in, I would say, is a very safe business, normally speaking, in this province, if you contrast that with, say, starting a clothing business or a restaurant business or something with your partners. So there are certain good things about the real estate market, as we all realize.

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I would like to put to you that the system of rent review that we have had in this province is patently unfair to small landlords and to the tenants of this province and that is why we are trying to change it. Capital expenditures are something that we certainly are looking at, and we do want to have in place as soon as possible a long-term solution which includes some of your points. We want to work with you to get a workable system for you and for the tenants.

The Chair: The time has expired for this witness. Thank you for coming before the committee. We appreciated your comments.

Mrs Y. O'Neill: We did not have any questions.

The Chair: Oh, I am sorry, I goofed. I want you to know this is the first time it has happened in all our hearings. It happened to Mrs O'Neill and I feel really bad.

Ms Harrington: Put Yvonne in the chair.

The Chair: You have three minutes.

Mrs Y. O'Neill: Mr Southen, you are a young man, you have made a commitment to this province and I want to commend you for that, both in your life savings and you are knowledgeable about the effects of Bill 4 on financial institutions, and you emphasize that financial institutions are made up of real people. You have brought to the attention of this committee the effect on small appliance manufacturers -- I think that is very important -- and on property investors such as yourself who have their life savings.

My question to you is, yesterday there was an announcement by the Minister of Housing regarding low-rise rehabilitation. I think your building would fall under those criteria as I knew them before.

Mr Southen: Our building was built in 1972 and the old low-rise rehab program was 1960 and earlier, so I am not certain.

Mrs Y. O'Neill: I am not certain of the criteria yesterday either, but I would certainly ask you to try to be one of the first people in line for those loans, since you are having trouble to reinvest. I thank you for your presentation.

Mr Southen: Right. If I could make one final point, please, Mr Turnbull, regarding refinancing, we have just been caught in this bind in terms of renewing a first mortgage, and if it were not for the exceptional relationship that I have with that particular banker on my real estate business, our loan would have been cut back.

Mrs Y. O'Neill: Thank you for being involved with energy efficiency as well.

TENANTS PROTECTIVE ASSOCIATION

The Chair: The last presenters for this morning will be the Tenants Protective Association. Sir, I noted that you were watching the proceedings and I think you are quite familiar with how we are organizing ourselves this morning. You have been allotted 20 minutes and you have 10 minutes for your oral presentation.

Mr Armstrong: I will keep it brief. Unfortunately, I only found out that this meeting was taking place late last week, so I have not had much time to prepare.

The Chair: Please identify yourself and your organization.

Mr Armstrong: I am Bill Armstrong, the Tenants Protective Association. I act as agent for tenants and I have acted as agent for tenants since 1984, under both this act and the previous act. Again, I have been involved representing tenants under this act in full building reviews and in rent recovery, specifically where a landlord has overcharged tenants or charged them illegal rents.

My personal involvement as far as this act is concerned and my understanding of it is that this will allow time for the government to develop new legislation that will be a little fairer to both landlords and tenants. Under the previous act, I have seen that many tenants have been left in a situation where quite frankly they have been economically evicted from their homes or have had to move because of the rent increases that were being okayed by the rent review services.

I think this legislation is needed. I think it is a good idea. I realize it is an interim piece of legislation in that hopefully over the next year or two years the government, landlords and tenants will be given an opportunity to work towards a fairer piece of legislation that will keep rents affordable but allow landlords a reasonable profit. Again, because of the number of inquiries I have had through my agency about these massive increases that have gone on over the last couple of years, I think this legislation is needed and should be passed in its format as it is now.

Mr Mammoliti: Thank you for your presentation. You touched on economic eviction. It is something that has concerned us. We have a lot of people come to us who have told us that they are forced out of their units because of increases. Some of those people are forced to go to shelters and food banks because of this. I would like you to elaborate on how you feel about how fair it is for tenants to have to pay two and three times more than the cost of living. That is happening -- two and three times more. The previous witness talked about a $180 increase per suite. I am not too sure about the increase, but I am willing to bet that it is more than the cost of living even in London. How do you feel about that?

Mr Armstrong: I think London may be a little different from Toronto. I have seen rent increases averaging from 20% and as high as 60% in London. The norm is when these proposed increases come along and tenants are given the notice of these increases. I am talking about what has happened the last couple of years. Obviously things have changed in the last couple of months. Quite often, what would happen is that people would be forced out of their apartments. They knew they could no longer, if the proposed increase passed, afford to live there, so they were forced to move. It costs quite a bit of money for tenants to move. That is one cost incurred, not to mention many people had been in these units for years because they felt secure because of the rent controls. Suddenly they are facing a notice of 20%. Again, most of them are forced to move.

So here we have a province of people whose tenant population, on average, from what I have seen in London, moves every two years. That is how it has been. This is for the last couple of years. You can imagine if you had to move out of your home into another home every other year.

Mr Winninger: Mr Armstrong, you have been a former small landlord as well as a tenant, so you have seen both sides of the picture. Do you see any benefit in interim legislation like this that makes the whole rent review system less complex for tenants who lack perhaps the financial wherewithal or knowledge to fight complex rent review issues?

Mr Armstrong: This has been another problem. A lot of these rent increases that were proposed have gone basically unchallenged. A lot of landlords were getting away with expenditures or costs that they should not have, in my mind, but only because most tenants do not have the wherewithal to fight these increases or at least get professional help to fight them. So, again, they were forced to move out.

More recently some tenants would stay in the apartments, not realizing that if these proposed increases were passed, they would have to pay this money back retroactively. This has in fact been happening quite a bit. I have had a number of calls over the last year and a half where tenants have been approached by their landlords, and quite often after they have moved, for this retroactive money and usually ended up in the thousands of dollars, because the rent review system, from what I can see, basically collapsed over the last year and a half. It took a year, a year and a half to get a full building review through. These people have been left up in the air. Probably the situation would not have been as bad if these rent increases, if they were to be approved, had been approved in, like, 30 or 60 days. And quite frankly, most landlords encouraged them to drag on a year and a half or longer because in the meantime most tenants would pay these proposed increases.

Again, I think that we need this legislation now. I hope that over the next year or year and a half or however long it takes, the government works with tenants and landlords as they were supposed to work under the last act, which I do not think they did.

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Mrs Y. O'Neill: I just wanted to add one short question if I may, Mr Armstrong. You talked about tenants moving every two years. You said you had statistics on that that the city of London has collected?

Mr Armstrong: No, I have my own information that I have collected. As I mentioned to you, I have been involved in this field for two years. I do market research. Again, that would be a very rough estimate.

Mrs Y. O'Neill: Does this include all tenants in the city of London?

Mr Armstrong: I would say middle- or low-end rent tenants, not high-end.

Mrs Y. O'Neill: Okay. I think we all know that London has a major university. I think most of us know that students do not make a commitment for more than a year or two and are certainly unable to.

Mr Armstrong: I will qualify that. Less than 90% of the people I have contacted in the last five years -- tenants only, of course -- were students.

Mrs Y. O'Neill: Less than 90%? Okay, thank you. I just wanted to verify your statistics because I think they should be qualified and I would certainly like to have them as accurate as possible.

Mr Brown: Mr Armstrong, we have heard a lot from tenants' advocacy groups about conditions in apartment buildings and maintenance, upkeep of the buildings, etc. From your practice, is that a major problem in London, that buildings are not maintained, kept well, kept the way tenants would like them? Is that a problem in this particular part of the province, would you say, generally?

Mr Armstrong: In London, on average, I would say most buildings are fairly well maintained. I cannot talk about Toronto or any other cities, but in London buildings are fairly well maintained. As far as the last act and the way it worked are concerned, what I saw was not poorly maintained buildings but things that were left for 20 or 30 years were not renewed. Some landlords would leave things 20 or 30 years, then they would turn around and suddenly do massive renovations and ask for 60% increases and obtain them. That is where I thought this last act failed to address the problem.

Owning property is obviously a long-term investment. It should be an investment. They should have a return, but for people to turn around and neglect buildings -- we have had standards -- we are not talking about slums, we are just talking about not keeping buildings up for years, not renewing them when things need to be renewed. Suddenly, all at once tenants are forced to face a large rent increase in one year to make up for all the taking-out of the profits and nothing being put back in the building, which I think is something that should be required. Something should be put back into the building on an annual basis to ensure that things are kept up.

Mr Brown: What in Bill 4 will do this?

Mr Armstrong: As I already stated, I think Bill 4 is an interim measure. I do not have the answer to all the questions, but I think there needs to be consultation between the government, landlords and tenants, not as we had last time for Bill 51.

Mr Turnbull: Mr Armstrong, you mentioned at the outset of your comments that you believe permanent legislation should lead to fairer legislation to both the tenants and the landlords. You also explicitly said you thought it was reasonable that a reasonable profit be allowed to the landlord.

Can you reflect for me for a moment on how you find the retroactive aspects of Bill 4, which will mean that expenditures that landlords went into within the guidelines of the law -- and indeed, in some cases, they have got provisional orders from the ministry -- now, having spent the money, frankly, while the Liberals were still in power and while that legislation was in force, landlords are being told that they cannot have that, because you are talking about fairness for both the tenants and the landlords.

Mr Armstrong: Again, I guess one thing I would want to look at is these expenditures and what they were. Seeing what I have seen in the last year and a half or two years, the types of expenditures that have taken place, I appreciate that argument and I can appreciate both sides of the story and I would have to say that I can see both sides to that story.

Mr Turnbull: Do you approve of retroactive legislation of this nature?

Mr Armstrong: I would have to say I do not fully understand that part of the act, that Bill 4, and I am not 100% sure, on top of that.

Mr Turnbull: The concern, and it has been the concern that has most consistently been expressed by both the Liberals and the Conservatives with respect to this legislation, is the retroactive aspect of it, the fact that landlords within the framework of the law have gone out and they have undertaken capital renovations. You must have substantially completed capital renovations before you can apply for the rent increase and, as you know, you must give three months' notice to the tenants. These are things that occurred in some cases a year back and they have spent the money, they have raised the money at the bank.

Mr Armstrong: Just a little while ago I mentioned to you that some people neglected buildings. I do not mean they are slums, I just mean they have not put anything back into them for 20 years. Again, this is a situation -- I would want to look at each and every one of those situations.

Mr Turnbull: We have had expert testimony from the ministry in terms of what the distribution of expenditures was and also from contractors who do this work, and it has been identified that something in the order of about two thirds of all of the work is of a structural nature that could not have been cut off by any maintenance procedure. It is just the aging of the housing stock. What would you do about that? These people have entered into these renovations. You say that suddenly the landlords come forward and want to do these, but it is a function of the fact that the building has got to a certain age and needs these capital expenditures. Now they have spent the money and the government is saying: "Well, you're out of luck. It's tough that you borrowed the money at the bank. You can't get it back."

Mr Armstrong: Again, I think that each one of these situations would have to be looked at. I appreciate government statistics. That particular section, I cannot say that I understand it 100%. It is a new piece of legislation, as I mentioned earlier to you today. I have not had ample opportunity, because I found out about this meeting very late last week, to properly prepare and study this situation 100%.

Mr Turnbull: No, I understand that. You prefaced it by saying --

Mr Armstrong: I realize where you are leading, but again --

Mr Turnbull: I am not leading you. I am just asking in the interest of fairness, because you started out by saying "fairer to both tenants and landlords."

Mr Armstrong: Exactly.

Mr Turnbull: In fact, the Minister of Housing, when he opened up these proceedings, suggested that in the permanent legislation that will replace this there will be a provision for flowing through those capital costs again. But in the meantime, those landlords who have expended money after the fact of being told, "You can't have that" -- I am not talking about the ones --

The Chair: Time has expired and I do not think we are getting anywhere on this point. I appreciate the questions and the answers.

Mrs Y. O'Neill: You do not usually make that comment.

The Chair: I want to thank all the presenters who were here this morning. We are adjourned until 2 o'clock this afternoon.

The committee recessed at 1209.

AFTERNOON SITTING

The committee resumed at 1402 in the city hall, London.

The Vice-Chair: I see a quorum.

Mr Turnbull moves that the president or other senior official of the Trust Companies Association of Canada be invited to appear before the committee to provide an assessment of the financial implications to landlords and financial institutions of this legislation and its implications for the financial wellbeing of the province.

Mr Turnbull: That is the motion. The background is that we have heard a lot of testimony about the inability to replace mortgages, and I think it is important that we be able to gauge the validity of that information from expert testimony.

Mrs Y. O'Neill: I certainly feel that would be very helpful information. I do think the banks and the trust companies must be beginning to feel some of the impacts of this legislation. We have had anecdotal reports of this, and I hope they would come before us with some firm data and can share their experiences with us.

Mr Tilson: I agree. We have been hearing a considerable amount of evidence, hearsay evidence basically, from property managers and those types of individuals, who have spoken to someone who has spoken to someone. I think it is time this committee got more specific facts. I think there was a broker who gave us specific facts, but information from the people who actually make the loans, the people who actually fork over the dollars to assist the people of this province, is badly needed. For that reason, I wholeheartedly support the motion.

Ms Harrington: We certainly feel that we want to hear on this committee any information with regard to the effects of Bill 4. If the clerk feels there is a spot, any person is free to come to this committee and we would invite them. If you can find a suitable person please invite them and we will try to give them their 20 minutes or whatever is appropriate.

Mr Tilson: I am glad to hear those encouraging remarks from Ms Harrington. I guess that is a realistic question. We are receiving different types of information from applicants around the province, whether they be people who are providing jobs or tenants' groups or landlords' groups or whatever but no specific expert testimony. I am wondering whether you and the clerk have set aside any specific day, if indeed a day is available, to hear not only the type of testimony that Mr Turnbull is suggesting but perhaps the type of evidence that Mrs O'Neill and others have suggested from the ministry. We have yet to hear the ministry people come and speak to us in detail.

The Chair: We have received no mandate for the committee to set aside any time whatsoever other than the schedule that has been presented to the committee. After receiving instructions from the committee, I had the weeks of hearings, the times and where we would be meeting put on a calendar so that members could see when, where and how we would be meeting. That is a matter for the full committee to decide.

Mrs Y. O'Neill: Some time late last week we were talking about having the minister return. As you know, I have some outstanding questions, as others do. We know now -- I think we were told yesterday -- that ministry officials are coming on 12 February at noon. Have we had a response from the minister? As I say, we were going to have him come at 5 o'clock last Monday night. That was not convenient to some of us. Do we have a new time slot when the minister will be able to come?

The Chair: There is a motion on the floor. We are now moving to a different subject. Can we deal with the motion first, and then we can move on to other matters.

Mr Mahoney: I was going to move that the question be put and we take a recorded vote.

The Chair: Okay, there is a motion on the floor that the question be now put. There is absolutely no discussion allowed under our standing orders.

Mr Mammoliti: I just wanted to find out what the motion was.

The Chair: The clerk will read the motion before we vote.

Clerk of the Committee: Mr Turnbull moves that the president or other senior official of the Trust Companies Association of Canada be invited to appear before the committee to provide an assessment of financial implications to landlords and financial institutions of this legislation and its implications for the financial wellbeing of the province.

Ms Harrington: On a point of clarification, Mr Chairman.

The Chair: A point of clarification is allowed.

Ms Harrington: This is obviously within the time lines that the committee has established. As I mentioned, we would ask --

The Chair: There is no free time. I have said that over and over again. There is no free time.

Ms Harrington: On the original schedule I looked at yesterday, I believe there were some spaces that said "unconfirmed" etc.

The Chair: The only reason we would see space like that is because the organizations had not by that time got back to the clerk.

Ms Harrington: I am just clarifying that we do have a deadline with this committee. This committee has also said it will meet over lunch, it will meet in the evenings etc, but we certainly --

The Chair: Order. We cannot have a debate on the motion. The schedules are all imposed on the Chair by the committee. All of us have to realize that.

Mr Mammoliti: Mr Chairman, we cannot properly vote unless we get clarification from you about what we have available, if we are willing to take advantage of some of those slots that are available.

The Chair: Mr Mammoliti, let me repeat, we have no time at this moment.

Mr Mahoney: On a point of order. Mr Chairman: It is my understanding that under the standing rules, if a motion is put the vote shall take place.

The Chair: You are correct. The Chair was being very lenient.

The committee divided on Mr Turnbull's motion, which was negatived on the following vote:

Ayes -- 5

Mr Brown, Mr Mahoney, Mrs Y. O'Neill, Mr Tilson, Mr Turnbull.

Nays -- 6

Mr Abel, Mr Duignan, Ms Harrington, Mr Mammoliti, Ms M. Ward, Mr Winninger.

The Chair: Okay, that has been dealt with. I believe Mrs O'Neill had a second point.

Ms Harrington: A point of clarification: Just to answer Mrs O'Neill's question, I believe the minister will be appearing tomorrow. I have not had it on paper to give to you, Mr Chair, but he will be available tomorrow.

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The Chair: When will he be available, Ms Harrington?

Ms Harrington: During the whole day.

The Chair: We have a full schedule.

Ms Harrington: He will be an observer and if you have questions --

Mrs Y. O'Neill: Are we being asked, Mr Chair, to talk through our lunch-hour?

The Chair: I want to see the schedule for Windsor, please. I want to draw everyone's attention to Thursday's schedule. As members can see, the hearings commence tomorrow morning in Windsor at 9 am. We go through, as we are doing today, until 1 and then we commence again at 2. With the regular time overruns we have been normally experiencing, I am assuming the committee will probably wrap up somewhere around 5:20 to 5:30. Unless the minister had intentions of speaking to the committee at 5:30, there is no place on the schedule. I received no instructions from the committee to allocate time to the minister. I do not want anyone to think that tomorrow we are going to be cross-examining the minister when we have already informed delegates that their time has been allotted.

Mrs Y. O'Neill: Mr Chairman, we have to go to Toronto tomorrow at 7:05. Many of us have connecting flights to get back to our constituencies.

The Chair: I think it is great that the minister is going to be there as an observer, but I do not want to leave the impression here today that this schedule can now be diverted from. I am only following the committee's instructions.

Ms Harrington: Fine. I just wanted to make you aware that I believe the minister will be available.

The Chair: Available for what? I am confused.

Ms Harrington: Whatever you want.

Mr Tilson: On a point of order, Mr Chairman: It is nice to have this dropped on us literally 24 hours before. He has announced he is available. The government is not prepared to hear anyone else, but it is prepared to go at the beck and call of the minister. I am prepared to hear the minister, but surely at the appropriate time.

Mrs Y. O'Neill: Mr Chair, as it is my request, I would certainly ask again and I am certainly willing to hear the minister over a lunch-hour. Tomorrow is 9 to l, though. It is an extremely heavy day. I do not think tomorrow is the right day. Maybe you and the clerk want to discuss if there is another lunch-hour in the following week we have together when he would come, because I think many of us have quite a few questions.

Mr Turnbull: On a point of clarification, Mr Chair: I would like to understand what exactly is meant. Ms Harrington has sort of indicated that she thinks it is a good idea that we get the expert testimony, and then all of the NDP in the recorded vote have said they will not make any time available or they will not hear that expert testimony. This must be Newspeak. I would just like to understand how this works.

The Chair: That matter has already been dealt with. The committee has duly taken a vote and the matter has been dealt with. The votes were counted and the matter was defeated. I cannot change those results.

Mr Turnbull: Thank you, Mr Chairman.

Mr Mahoney: Nor understand it.

The Chair: Do not put words in the Chair's mouth, please.

Mr Mammoliti: I do not know what the opposition has eaten for lunch, but I certainly would like to continue the progress we have witnessed here today and call the next witness and go to it. We are wasting time here, as far as I am concerned.

The Chair: Order. Members have the right to raise legitimate points of order and the Chair is obligated to hear those. The Chair has an obligation to hear legitimate points of order and dispose of them as quickly as possible. We had a legitimate motion put forward for a vote and we disposed of that as quickly as possible. When debate was commenced on the same matter, I cut it off. We are going to proceed.

Mrs Y. O'Neill: May I ask if the clerk has been able to get hold of the other cabinet minister who made a representation to this committee, the Minister of Revenue?

Clerk of the Committee: No, but I will do that this afternoon.

Mrs Y. O'Neill: I would like the results of that phone call, if we can, today.

The Chair: The clerk informs me that she will try to call the Minister of Revenue this afternoon on behalf of the committee.

LONDON PROPERTY MANAGEMENT ASSOCIATION

The Chair: London Property Management Association is the first presenter for this afternoon. We would ask that you state your name and the position you hold with this organization. Your organization has been allocated 20 minutes. You are allowed 10 minutes to make a presentation to the committee and that will be followed by 10 minutes of questions by the committee members. The floor is yours.

Mr Shillington: Thank you, Mr Chairman. I am Ken Shillington, president of the London Property Management Association and I am wearing two hats today. I am also a landlord who is directly affected by the retroactive legislation.

I will tell you a little bit about our organization. We have approximately 170 members representing about 2,700 units; 85% of those landlords have less than 10 units. We have monthly meetings October through May, with speakers such as someone from rent review, fire department, human rights, accountants, lawyers, credit bureau, to assist us better in the day-to-day operation of our business.

To give you a little background about myself and my situation, I have been a landlord in the city of London since 1971, even when it meant less yearly income than many of my tenants were making, such as 1981 through 1983, when one mortgage payment jumped in excess of $4,000 per month and we had to sell our home at a bargain basement price, move and disrupt our family, sell our car, truck and snowplow and lay off our son who was employed full-time by us. I had to find full-time employment elsewhere myself, while still managing our real estate investments, because we could neither sell them nor give them away, short of declaring bankruptcy.

During April 1990 I started in excess of $200,000 worth of capital expenditures on a 23-year-old building; no luxury expenditures, just replacement of a 23-year-old leaking roof, with added insulation so that the tenants on the top floor are now toasty warm for the first time since the building was built; replacing the carpets in 41 apartments; replacing 23-year-old kitchen countertops and taps; replacing the chipped vanity sinks and taps and bathtub taps. The control entry door, which could be opened with a heave from your shoulder, was replaced. The lobby was renovated with ceramic tile, not marble.

A bench and planter with shrubs was installed, which the tenants have taken great pride in showing off to their friends and relatives ever since. A broken, deteriorated sidewalk, where you walked through three inches of water after a rainstorm, was replaced. Twenty apartment walls at the ends of the building were insulated and drywalled. Walls and ceilings where there had been chronic cracking problems were strapped and drywalled, involving 11,300 square feet of drywall.

Prior to the start of the capital expenditures the tenants were kept informed through my superintendent of work that was being contemplated and the approximate cost, with no negative feedback. The work was substantially completed by the end of July, at which time the figures were compiled and the appropriate application made to rent review services for a 17% increase. That was including the statutory increase.

The increase was to start 1 January 1991, continuing through the calendar year 1991. In July 1990 I had to borrow $200,000 at 14.25% to finance the expenditures. The tenants began to immediately enjoy the benefits and in a majority of cases would have the benefits for a year and more before the rent increase started. I was supposed to get my money back over the next 20 years.

On 28 September 1990 I received a letter from rent review services stating that it was in receipt of my application. All of the above renovations and application were made as a prudent business decision in accordance with the Residential Rent Regulation Act, 1986.

For a government to come into power and attempt to pass retroactive legislation to disallow legitimate applications to recover over the next 20 years a financial obligation made by a landlord shakes to the very foundations any respect that a voter has for politicians, at a time when politicians in this country have a serious credibility problem to start with.

It was not as though I had asked for rent increases for all capital expenditures. I did not ask for an increase two years ago when I spent $6,000 to expand the parking lot, not for my benefit but for the benefit of my tenants. I did not ask for a rent increase when I had all the balconies scraped and painted twice in the last six years. I did not ask for a rent increase when I installed storm windows at a cost of $8,000. I did not ask for an increase when I upgraded the parking lot lighting to cut down on automobile vandalism. I did not ask for an increase in rents last year when I changed the lawn service to twice a week from once.

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Now that I have stated my situation, I would like to say that there are landlords in this area who should be speaking here today who are afraid to because they do not want their friends, relatives and neighbours and most of all their lenders to know the plight they are drifting into because of this piece of legislation.

Personally, if Bill 4 is enacted as proposed, completely and retroactively disallowing any recovery for my capital expenditures, it leaves me with two choices. Number one is to reduce the level of services to that which is mandated by a standards board, such as that the lawn will no longer be as carefully kept as in the past. Instead of plowing automatically on a two-inch fall, snowplowing will be done by financial discretion. I will no longer paint apartments. My tenants for the past four years have had a superintendent for whom they made a recommendation to the London Free Press for the award as a person who makes a difference around here and who also is probably the highest-paid superintendent in the city of London on a per-unit basis and worth every cent of it. I will not continue and cannot afford to continue to pay for the same high calibre of service, but I will have a superintendent. The aforementioned will not be done through vindictiveness, because my tenants deserve better and were prepared to pay for better and I take pride in the condition of my real estate holdings. It will be done so that I can attempt to repay the borrowed money I have spent.

Alternative two is to sell the building so that I do not have to hire expensive lawyers and accountants to handle difficult, time-consuming legislation. The sale would likely be to someone who would have it fee-managed for one consideration and one consideration only, that being the bottom line. In neither of these two options are the tenants or the building going to be the beneficiaries.

I am sick and tired of hearing a political broken record of marble foyers and over 100% rent increases. Some of these situations may exist, but I believe they are a very small minority and they are mostly a Toronto problem, and that most tenants are well served by responsible landlords and satisfied tenants are not going to take time off work to make a submission to this panel.

I keep hearing about a standards board that is going to force landlords to maintain apartment buildings. I could save a lot of money if I only had to maintain my apartment building to the level that I was forced to, but I believe most tenants expect a lot more than minimum standards and are willing to pay for more than minimum standards. Landlords, for the most part, have been treating their tenants and buildings in a responsible manner and the capital expenditures required are for building systems at the end of their useful life and not neglect.

We would like to see Bill 4 rejected in favour of an approach where all parties to the problem are consulted to resolve their problems based on a long-term approach. If luxury renovations are a major concern, they can be handled with regulations that define the type of work for which we can get prior approval from rent review. If large rent increases really are a major concern and not just a political ploy, that can be resolved by putting a cap of 5% to 8% a year above the annual guidelines.

We feel that any new restrictions should apply to capital expenditures started after 28 November 1990 and financial loss provisions should affect sales agreements from the same date forward. We feel that Bill 4 will do more to damage landlord-tenant relations than all that has collectively transpired since the inception of rent controls 16 years ago.

Finally, we feel that landlords are going to be badly damaged by Bill 4 as proposed, some driven to bankruptcy, but the tenants are going to be the ultimate losers.

Mr Mahoney: Mr Shillington, thanks for your presentation. Could you tell us a little bit about the association? We have heard from some rather large, substantial landlords. There has been an attempt, on the part of the government, I think, to paint a picture of all landlords, along with the issue of the marble foyers, etc, as being huge Greenwin Property types, and when we get someone like you who puts a face on the landlords we like to know a little bit more about you, about your business and about the association you represent.

Mr Shillington: I have 66 apartments and two offices. The bulk of those apartments are in the one building that I alluded to with the capital expenditures. I have been a landlord in this city since 1971. As I said, I almost went bankrupt trying to support the buildings in 1981 through 1983. Our association has approximately 170 members, a lot of them small landlords with 10 units and under. We hold monthly meetings for management advice. We provide the members with legal forms, leases, applications, inspections. We have a hotline for our landlord-tenant problems. At our meetings, we regularly have people from associations to help with our problems. We have people from the fire department regarding fire codes and building codes.

Mr Mahoney: Would it be safe to say that the majority of your members are simply small business persons?

Mr Shillington: A majority of them are, yes.

Mr Mahoney: We are not dealing with the proverbial numbered companies or offshore investments or that kind of thing. They are local London business people.

Mr Shillington: I must say that my company is a numbered company.

Mr Mahoney: The suggestion also that is being put forward to many of the tenant groups that come before us and tell us their problems with some of their landlords is that Bill 4 will in some way solve these problems. I refer primarily to maintenance problems. The majority of the problems we have seen have been in the city of Toronto. We have seen very little evidence, if any, of that here in London. Frankly, it has just been more or less generalities about those kinds of problems. By the way, I think on this side we totally agree with the sense of the difficulties of the retroactivity etc, but do you see anything in Bill 4 that will solve problems for tenants, whether it be here or in other parts of the province, with regard to motivating their landlord to fix problems or increase levels of maintenance?

Mr Shillington: I see nothing of that nature. In fact, it is all to the contrary. As I said in the last statement, I think the tenants are going to be the ultimate losers. We have bad landlords in London too, but I do not think perhaps to the degree that they have in Toronto. We do not have the vacancy rate problem that tenants have in Toronto. We have a very, very healthy vacancy rate in this city and there is nothing in this world that makes a better, more conscientious, responsible landlord than a 3% vacancy rate.

Mr Turnbull: Mr Shillington, if you have been following these hearings as they were being televised, you will have noticed that the greatest number of questions we have been addressing ourselves to are with respect to retroactivity. You have mentioned the need for capital expenditures and you have mentioned that for many, many years you did not go for any increases, but clearly in certain years when you had major expenses you went to this. Is it your experience as a long-term owner of residential property that there has ever been any suggestion in rent review that it was not to be added on, the cost of capital expenditures?

Mr Shillington: No.

Mr Turnbull: That was always clear, was it not?

Mr Shillington: Yes, it was.

Mr Turnbull: It has also been suggested that for landlords, to the extent that they get a poor rate of return on an annual cash-flow basis, that is offset by capital appreciation.

Could you tell me, in your estimation, is it possible to have capital appreciation without being able to flow through those costs of refinancing from time to time?

Mr Shillington: The only thing that increases capital appreciation is increased cash flow.

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Mr Turnbull: So unless you can flow through those costs, it is impossible to increase your cash flow and therefore impossible to increase your asset value.

Mr Shillington: That has been my experience.

Mr Turnbull: You mentioned you had two offices. Is that within those buildings or two separate office buildings?

Mr Shillington: They are separate to the building I have been alluding to here.

Mr Turnbull: What has been your other expense in terms of return on investment? Have the offices or the apartment buildings performed better?

Mr Shillington: The offices are two offices in conjunction with two apartments.

Mr Turnbull: I see, they are integrated with it. So that does not have any relevance. Could you live with this legislation for a maximum of two years if they would take away the retroactivity?

Mr Shillington: Yes, I could.

Mr Turnbull: Could you expand on that?

Mr Shillington: It is the retroactive part that is going to hurt me because I borrowed a substantial amount of money to do the renovations. I thought I was acting as a prudent businessman when I did it, because the legislation of the day said that if I did it the way I did it, I would get the increases I was asking for.

Mr Turnbull: Can you tell me, had you gotten the increases, would you consider these apartments still to be affordable? Maybe you would tell me what the rent levels would have been if you had gotten these increases.

Mr Shillington: Current rents are $522 for a two-bedroom and about $460 for a one-bedroom, including all utilities.

Mr Turnbull: Would you know what the income level of typical people in the building would be?

Mr Shillington: That is difficult because you have such a broad spectrum, from retired people to --

Mr Turnbull: But it certainly sounds as if it is affordable accommodation even if you had gotten this increase.

Mr Shillington: In comparison it certainly is.

Mr Turnbull: So you are being penalized. Thank you very much.

Mr Winninger: You have painted a picture of yourself as a very responsible and caring landlord. I have no reason to dispute that, in fact. If I accept that and the evidence is that you have maintained high levels of maintenance and services, you have the highest-paid superintendent in the city. I believe you said --

Mr Shillington: On a per-unit basis.

Mr Winninger: On a per-unit basis, and yet you also indicated that you did not have to go to rent review for the last few years.

Mr Shillington: No.

Mr Winninger: When did you last apply for rent review?

Mr Shillington: For 1 January 1988.

Mr Winninger: Has that been dealt with now?

Mr Shillington: Yes, it has.

Mr Winninger: Did you make any other applications for rent review since Bill 51 was enacted?

Mr Shillington: No, I have not.

Mr Winninger: So other than --

Mr Shillington: Are you talking about this particular building?

Mr Winninger: Yes.

Mr Shillington: No, I have not.

Mr Winninger: So other than the one increase where you had to apply for a rent hike more than the statutory increase, you were able to maintain a high level of maintenance and services and only increased your rent by the statutory guideline each year.

Mr Shillington: With two applications, one in January 1988 and one for 1 January 1991.

Mr Winninger: And the one for 1 January 1991 is the one you are complaining will not go through because of Bill 4.

Mr Shillington: That is correct. The previous application was for 11%, including the guideline.

Mr Winninger: How much of an increase were you applying for in your 1 January 1991 application?

Mr Shillington: For 17%, including the guideline.

Mr Winninger: How did you honestly expect your tenants could afford to pay a 17% increase in one year?

Mr Shillington: Because the rents were still well within the realm of anything competitive, in fact better than a lot of competitive apartments.

Mr Winninger: What is your range of rents?

Mr Shillington: It is $522 for a two-bedroom and $460 for a one-bedroom.

Mr Winninger: My colleague has a question.

Ms Harrington: I just want to point out that if your income normally goes up, let's say, 5%, how can you pay out the 17%? I think that is what we are dealing with.

I wanted to let you know very briefly the position of our government, just to clarify a few points. First of all, we believe very honestly, and a lot of people are telling us this from all walks, that the present legislation on rent review is plainly not working for a majority of people in this province. You mentioned a building being lost by a landlord or bankruptcy. I would just like to point out that for every bankruptcy of a building to a particular landlord, there are hundreds of people being "economically evicted," the term we have been using, being turned out of their homes because of the rent increases. That is what is happening in this province and that is what we are dealing with. I believe you agree that maintenance is done within the guidelines of the 5%, say, this year.

I would like to let you know that the two issues you raise -- first of all the capital costs, which were very clearly identified this morning by one of our presenters, and the other issue of the retroactivity -- are things that we are looking at very carefully. That is why we are out here listening.

I just wanted to end by saying that this is short-term legislation. We are working very hard and almost desperately to try to get permanent legislation through by the end of the year and we want to have landlords and tenants and everyone else involved, the bankers, the rest of this community work together to get really good, long-term legislation so everyone knows the right rules to follow.

The Chair: Sir, I am sorry, time has expired. I wish I could give you more time, but I am unable to do so. Thank you for your presentation.

JALNA TENANTS ASSOCIATION INC

The Chair: Next is 1095 Jalna Tenants Association.

Mr Rupple: Good afternoon, ladies and gentlemen. I am Bert Rupple, president of the 1095 Jalna Tenants Association. You will see in our brief to you people that we, the tenants of 1095 Jalna Tenants Association Inc, in the city of London, feel that the bill to review the Residential Rent Regulation Act of 1986 should include a subsection protecting tenants from the practice by builders who build poor structural complexes.

As an example, a complex which is only 10 years old should be in nearly new condition, but because of poor workmanship, poor materials and poor maintenance, these buildings become shambles of residences which are later costly to maintain and repair. These same builders then keep the buildings in their names at arm's length by formation of another numbered company of which they are the principal owner, personally purchase the property at a much higher price than they built it for, depreciate it, sell it again at a much higher price and/or apply to rent review for a phase-in of ridiculous rent increases to cover the often exaggerated rents required to cover the losses they incur. These same landlords then leverage these properties with higher mortgages to build similar properties and the practice repeats itself again and again.

Another area needing attention by the bill is the practice to allow landlords to phase in increases at their discretion. What is happening is that the landlords apply for huge increases of phase-ins, then knowing they cannot rent these units at these rents or knowing they do not need these high rents to make a profit, they can increase the rents any time down the road without applying to rent review for further increases. Meanwhile, these landlords reinvest their capital into their own mortgages on the property at higher interest rates than they could achieve elsewhere and pass these costs on to the tenants. An example is a 20% third or fourth mortgage. This is allowed by the rent review as acceptable because of the volatility and the insecurity of these instruments. If owners of a business invest in their own business or property and have no trust in themselves, why should they be allowed to lend themselves money at such high interest rates?

On the subject of phase-ins, landlords should be allowed this practice in any one year and not over a period of years or the total maximum. A solution would be to set phase-ins in any year for which they are entitled, be voided if they were not phased in in that year and any phase-in in the following year be based on the previous year's rent or the current annual rent.

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Another practice landlords entertain is to leave buildings vacant for long periods to increase their losses prior to applying to rent review for increases, with intentions to recover the losses by higher rents later. Landlords should be required to account for the vacancies and the length of their vacancies when applying to rent review for increases.

In the area of coverage of residences by agents and tenants' associations, live-in superintendents should have more protection and be allowed to be covered by tenants' associations representing the complex. Landlords should be prohibited from forming similar associations that represent the landlords' interests or allow the landlords to pay superintendent fees for memberships, honorariums to tenants' associations or donations of any kind that may be construed as a bribe or a payoff.

There is also another area that neither the original bill nor the current bill being considered covers. Increases of rents according to the guidelines should be limited to the current rent and not the maximum rent allowed by the minister, as these encourage landlords to attempt phase-ins that are unnecessary.

Where a municipality has no bylaw setting out maintenance standards and uses the provincial guidelines, as the city of London does, these regulations should be upgraded to a higher standard and reviewed periodically since they set out only the bare limits for maintenance.

Rents set out to be paid to the landlord should not be made retroactive as set out by the proposed subsection 100h(2) as this would provide extreme hardships to single parents and low-income residents. These rents allotted under the social assistance programs are higher rents than those allocated for rent under social assistance programs. In turn they have to budget from some other source, eg, food, clothing, etc, in order to cover these rents and pay the individual's rent, and so they are short in the end. If this is allowed to happen, this is only going to increase the hardship.

Hardship relief costs should not be included in managerial fees included as operating expenses. This would encourage landlords to take more interest in their own properties and reduce the losses they may incur. Also, structural repairs due to neglect, poor maintenance and poor building quality should not be a part of the operating expenses.

Where rebates from landlords are not forthcoming by the deadlines, under statutory evidence, higher fines should be allocated. For example, most landlords will not pay interest on the last month's rent unless the tenant requests the interest in writing, even though contrary to the act. This requires time off from work for an individual tenant and appearance in court in order to enforce an interest payment. Another alternative might be that the interest be compounded at bank interest rate plus 2% since the practice is currently using the moneys paid by tenants as cheap available capital. It should be further required that the landlord provide the tenant with an annual statement of the amount of the last month's rent plus details of interest paid or credited.

Where a tenants' association represents its members as an agent for purposes of this act, that this be allowed providing the association is a non-profit registered body or incorporated as a non-profit body.

We would like to thank the committee for allowing us to appear on our behalf and the tenants of 1095 Jalna Boulevard and respectfully submit this for further consideration as amendments to Bill 4.

Mr Tilson: You have raised a lot of issues that I am sure the government will consider in its green paper, which it is introducing next month dealing specifically with Bill 4. Some of the comments you have raised are relevant.

One of the areas that I would like to specifically question you on for further clarification is the issue of flipping, because this is one of the areas the government has been saying is why Bill 4 has been implemented, because of the abuse of flipping. You have expressed something that I gather you are saying is going on in this area. You are submitting that there are buildings of poor construction which in turn goes on and as a result encourages flipping. Just to assist us, do you have specific facts on specific buildings?

Mr Rupple: Yes. We have 1095 Jalna. It is owned by a large contractor at arm's length. I will give you an example. Basement walls on my building are from 5.5 to 6.5, two-storey, brick bottom. It is a wooden upper floor --

The Chair: Sir. I think the question was about flipping, if I may interject to get to the point.

Mr Rupple: And how the property is flipped over. I understood that. The man has decided to try to make these into condominiums at twice the value or one and a half times the cost of what they are worth. That is not working because we pointed out how badly the building is constructed.

Mr Tilson: Just stop there for a minute. Would you not go to the building inspection department?

Mr Rupple: They are in there this week.

Mr Tilson: So that is in the process of being examined and perhaps even taken to the court.

Mr Rupple: We may have to.

Mr Tilson: I would suggest that if you are talking about poor workmanship, there is a building code. The provincial government has a building code. There are local standards. There are property standards. There are provincial standards. You have indicated that some of those maybe should be tightened up, and that may be sound advice, both provincially and municipally. But for the specific examples you are giving, I strongly recommend that you pursue the issue. The man must have had a building permit. If the building inspector is doing his or her job, that matter should be pursued. I would strongly recommend that you pursue that, because you may find some relief there.

Mr Rupple: It is kind of late to do that now. These buildings were built in 1980. It is pretty hard to tear down a building today.

Mr Tilson: That is why I was asking you for specific facts.

Mr Rupple: These are facts.

Mr Tilson: But specific facts that at the time of construction they violated the building code.

Mr Rupple: At one end of the building it is an eight-inch wall, where an inspector would not normally go. They know where the inspectors go.

The Chair: The time has expired. I just remind committee members that we are trying to keep all our questions on Bill 4. I understand building standards are very important. I do not know where Bill 4 addresses building standards. It does not matter to me how committee members use their time, but I am just reminded because --

Mr Tilson: On a point of order, Mr Chairman: I felt that line of questions was relevant. It was dealing with the point of flipping and that was one of the main issues why Bill 4 has been implemented.

The Chair: I do recall the matter of flipping, but I think all the questions dealt with the building standards. As I said, it does not really matter to me. It is up to the committee members how they wish to use their time, but this morning I was cautioned so I thought it would be important for the Chair to intervene at this point.

Mr Winninger: You have made an effective presentation. I would just like to focus in on an issue you address in the third paragraph of your submission, and that is the pass-through of excessive financing costs.

I guess you are aware that Bill 4 would limit the pass-through of financing costs to 75% of the equity. I would suspect from the tenor of your submission that your experience has been otherwise, that landlords, through numbered companies and companies that are technically at arm's length but bear some relationship to each other, are passing the equity along and each time increasing the financing and that gets passed through in higher rents to the tenants. Could you comment on that? Is that the case with your complex?

Mr Rupple: The mortgage certainly is not coming down from 1985 to the current. He is still drawing the 20% as interest on a third mortgage.

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Mr Winninger: Does it concern you that the high rents resulting from financing cost increases did not come down when the financing costs are reduced to the landlord?

Mr Rupple: In this case it has happened, but why should the man take the money out of a business that is bringing him in 20? He would be foolish not to. If I were him and could get away with it in my business, I would like to do it too.

Mr Winninger: Is it your experience that the landlords not only are refinancing their own buildings, they are refinancing them to create capital to acquire other buildings and meanwhile pass through the higher financing costs to their tenants?

Mr Rupple: That is true, yes, especially with the larger landlords and builders.

Mr Winninger: Thank you, Mr Rupple. Those are my questions.

Mr Mahoney: I do not think it is in here, but could you give me specifics of what your rent increases have been, say, over the last two or three or five years, or whatever you might have.

Mr Rupple: From November 1990 to November of this year my increase was $540 to $615.

Mr Mahoney: Sorry, you lost me there. November of 1990 or 1989?

Mr Rupple: Correction: November of 1988 to November 1989, $540 to $615.

Mr Mahoney: So, 1988-89, okay, it went up $75.

Mr Rupple: Yes, and from November 1989 to November of this year --

Mr Mahoney: Of which year, sir, 1989-90?

Mr Rupple: To 1990, yes. This past November the rent jumped from $615 to $690, another $75.

Mr Mahoney: Were these the result of orders through rent review that were applied for?

Mr Rupple: Right; these are the phase-ins.

Mr Mahoney: And you appealed against these?

Mr Rupple: We have appealed against the phase-ins.

Mr Mahoney: Have they actually been approved?

Mr Rupple: They were approved and we applied for an appeal.

Mr Mahoney: Okay. Under Bill 4 they have put a moratorium on that. There is a cap on it. That is understandable, for the two-year period.

Mr Rupple: We are not covered.

Mr Mahoney: But my question deals more with the issue that you seemed to dwell on in your presentation, which is the quality of the building, the maintenance, the upkeep, that type of thing. Is there anything you can point to in Bill 4 that would address that problem?

Mr Rupple: No. This is why we are asking that something be done to that area.

Mr Mahoney: Okay, and do I understand what you are saying here correctly when you say that landlords should be prohibited from forming associations?

Mr Rupple: Yes.

Mr Mahoney: Such as the one that was just before us?

Mr Rupple: As a guild or a body, yes. He is not representing the tenants. We had an instance of that in northwest London.

Mr Mahoney: So on Mr Shillington's association, the London Property Management Association, you are saying that --

Mr Rupple: He is a small association.

Mr Mahoney: -- they should not be allowed to form that kind of relationship with one another?

Mr Rupple: If he wants to form a tenants' -- what would you call it? -- not an association.

Mr Mahoney: But he is not a tenant; he is a landlord.

Mr Rupple: Yes. Not a tenants' association per se, and ordered to keep your tenants in line: "As long as you do not cause any waves we will not attempt to get rid of you." When a landlord attempted something like that, we formed an association and started our fight.

Mr Mahoney: Okay, thanks.

The Chair: Sir, thank you for your presentation.

BILL LATVANEN

The Chair: Our next presenter is Bill Latvanen. You have 10 minutes for your oral presentation and 10 minutes for questions. The floor is yours.

Mr Latvanen: My name is Bill Latvanen. I reside in the city here along with my wife and two children, nine and five. Please excuse my nervousness here.

The Chair: This is very informal, Bill. Just take your time and read from your notes.

Mr Latvanen: It hardly seems informal.

Interjection: It is not a fireside chat.

The Chair: Well, we need a special licence to serve wine.

Mr Latvanen: I am not politically active in any of the groups that have been represented here, or rather I guess I should say I have not been politically active because I guess I am now. This proposed legislation, Bill 4, has me frustrated and I suppose a little bit angry and I am here to try and represent the concerns of myself, my wife and my family. I realize there are other parties affected by this legislation, but I am certain they are better organized and able to represent their own concerns.

Briefly, I guess what I would like to do is just paint a personal picture of how this will affect me. As I indicated, I am married. I have two children, nine and five. I purchased my first rental property in 1980 -- it is four units -- and my second property in 1982, and that is eight units, so in total we have 12 units. We lived in the first building for two years until we purchased the second building. We lived in that building up until 1988 when we were able to afford a home. This is a modest home. It is a two-bedroom home. It is not expensive.

For the first several years, for all of the work that goes into looking after a small property, there is no big return on this. I hear these words "flip" and what not. I never flipped a property. I own these properties. I intend to keep them for a long time. I do not have an indexed pension plan. I have an inconsequential amount of money in an RRSP. I have a large mortgage on the property that I currently own. I work full-time hours. My wife works.

I find this kind of proposed legislation extremely frightening. To the best of my knowledge it has already devalued the properties that I own. Getting to the point, I guess if that is my fault that I bought into this, then this is my fault.

I come from very modest circumstances. My father was a steelworker. My mother did not work. She passed away when I was eight years old. My wife came from a poor family. We are talking outdoor plumbing here. We get to the point where we buy that first building -- this is not a substantial building by any means -- and we move into that, and we do the best we can to fix that building up, to bring it on line. We buy the other building, and that second building has experienced substantial renovation. It is to the point now where we can probably afford to have people come in and do the necessary work. For a long time you cannot. You cannot have a plumber come in to fix a backed-up toilet. It is $100 or $150 to roll a truck; you cannot do it.

You reach a point where, all of a sudden, you think things are going to get better. That is what I am talking about, buying into that. If you work hard and you exercise industry and effort, you can aspire to something better. You do that for a long period of time and then you find out that the taxman comes, you have got the GST, we had a 10% increase in property taxes. Now, all of a sudden the properties are being devalued anywhere from 20% to 25%.

I might tell you too that these buildings are older. They are coming up on the century mark. One of them was built in 1897 and one of them in the first decade of this century. The building built in 1897 has had substantial renovations to it, but this year it is going to require a new roof on the back section of the building. It is probably going to require some foundation work because it is a brick foundation and it is just going to require some shoring up in certain places.

The heating system in that building is a hot-water heating system. That is an original boiler. The firing mechanism was probably installed -- I do not know this for sure -- some time in the 1940s or 1950s. For instance, if this, through some type of catastrophe were to freeze up and blow up or whatever, to replace that heating system is roughly $40,000 to $50,000. What I understand is that I am going to have to come up with that out-of-pocket cost and not be able to pass this cost on.

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The building has new electrical, new plumbing -- all done by myself -- new cabinet work, all kinds of things like that, but when we look at the cost of replacing the heating system, it is just beyond me. My equity has been devalued already. What do you want from me? I just cannot understand this type of legislation.

I really am not well organized here, and I am trying to just speak extemporaneously.

The Chair: You are doing very well.

Mr Latvanen: I guess, in summary, what I would like to say is that I thought the previous government was arrogant and a little unresponsive to the needs of the little guy. I guess what I am trying to say is that my wife and myself are little guys. I appreciate the opportunity to speak here because we are going to be hurt by this, there is no question. I do not have a retirement plan. Those buildings are my retirement plan. I would just like to speak to you about what this gentleman said previously. I am not here to represent the corporate landlords. The media picks this stuff on fat cats and what not, but I would just like to say briefly too that the Bierbaums and the Zaifmans, the Siftons in this city and the Katzes are pretty decent landlords: they are pretty fair players and they actually are exemplary corporate citizens here. They have a genuine concern for this community.

Some talk about the retroactive stuff. I would just like to briefly speak to that too. If I were in that position, that would have just wiped me out. If I had one of those buildings where I had to make substantial renovations and had applied under the law to do so and then this happens, that is pernicious; I cannot understand that, where you would apply in something completely legal and then not be able to get it. Again, I am not capable of speaking to those issues, but I just want to pass an opinion for what it is worth here. I guess my frustration comes from the fact that the bill has the ability to depreciate the value of all the equity and industry that we have put into the properties. It does not allow for any circumstances beyond my control that might arise which would necessitate my passing through the costs to my tenants.

I have very good relations with all my tenants, by the way. I do not experience any vacancies in my property. I would like to suggest to you that that is not just through good luck. It is through hard work and long and irregular hours. If anybody has even owned a property, they know that is true.

When you get to the point where you think that you are going to see some light at the end of the tunnel in 10 or 15 years from now, all of a sudden this light is being shut out. I really do not know what my options are. I do not think I have a great many options. I am not an ideologue in terms of being a political activist. I just look for a workable middle and try to adapt it to that workable middle ground. Whether we get this from the left or from the right, it is not going to work. If we do not find the middle around here then maybe it is time to pack my bags and go somewhere else. That is all I have to say

[Applause]

The Chair: Order. There are no public demonstrations allowed.

Mr Mahoney: But we are informal.

Ms Harrington: First of all I would like to laud you for your decision to invest way back in 1980. I think that was an excellent decision. It is certainly something that myself and my husband would like to do. I think there is nothing wrong with that. I would like to say to you, hang in there. You are doing all the right things. To clarify that, the government is not against you, okay?

Mr Mahoney: Well, that makes it all better.

Ms Harrington: Good, good.

Mr Latvanen: I want to say that I have been hanging in for eight years and just recently did I get my head above water. You aspire to better yourself -- I guess maybe I better not comment on it. That is what makes me angry. I mean, "Hang in there." I have been hanging in. I have been hanging in very tough: 1982 was hanging in by your fingernails. If I did not get another three months, I was toast at those interest rates coming due, toast.

Ms Harrington: I would like to say that we have all lost money in this real estate market in the last year. That is the way things are, but I believe that real estate is still a good investment, it is going to be for the next 10 years, for ever. We need landlords like you. I want to tell you this is interim legislation. Yesterday the minister announced, for landlords of older buildings, such as yourself, smaller landlords, that he is looking at, what, $35 million for upgrading?

Mrs Y. O'Neill: It is $15 million for upgrading.

Ms Harrington: So we would like to let you know about that. I believe Mr Winninger had something to say.

Mr Latvanen: I would like to speak to that, because I wanted to run a residential rehabilitation assistance program at one time and to get the banks to finance that cost me another $20,000 out of pocket because they would not do the gap financing and this was contrary to the advice that I got from the RRAP people at that point in time. I have a mortgage document currently registered with RRAP that says face value --

Ms Harrington: This is a different program.

Mr Latvanen: I understand, but consider the time and effort. I cannot hire a lawyer to do this, as some people can afford to do. I have to take the time to go down there -- and just the time to go through the process is amazing -- and then they turn it around on you when you are halfway through it. So this is good, maybe, for some bigger people who can afford to hire people to do this.

Ms Harrington: You should go to Mr Winninger's office; he will help you.

Mr Latvanen: It is a difficult process to go through.

Mr Tilson: That is a relief.

Mr Mammoliti: Is there much time, Mr Chair?

The Chair: Not very much, but I am going to give you time for one question.

Mr Mammoliti: You said earlier that you invested in older apartments. Was it 1892 or something?

Mr Latvanen: It was 1897. The first building I bought was probably built some time in the first decade of this century.

Mr Mammoliti: I just have a hard time understanding why an investor would want to invest in something that may pose a problem to him later.

Mr Latvanen: George, let me put it this way. I was a tenant up until that time. I lived in that building and I bought it because it was the cheapest building in one of the most run-down areas of the city and I went and I lived there. The next building I moved to I bought in 1982, which was not a time to buy, but it was the only time that I was going to be able to buy that type of building.

Mr Mammoliti: But it was an old building.

Mr Latvanen: That is correct and it was in a rundown area of the city.

Mr Mammoliti: In the back of your mind, you must have assumed that something might go wrong in the future.

Mr Latvanen: I could not afford a house. I lived in that place with my wife.

Mr Mammoliti: But you could afford a building, not a house.

The Chair: Order.

Mr Latvanen: A building was cheaper because it has apartments in it --

The Chair: Is there a reason why no one wants to listen to the Chair?

Ms M. Ward: Nothing personal, I am sure.

Mr Latvanen: My apologies.

The Chair: No, I was speaking to everyone. Mrs O'Neill, then Mr Mahoney.

Mrs Y. O'Neill: Mr Latvanen, I am very glad you came before us. You are a young man with a young family and it looks like you have pulled yourself up from what were very humble beginnings to something that you can certainly be proud of.

I tried to explain to Mr Mammoliti that some people do find that if they invest, they can pay their debt and that is what you were doing. It is unfortunate that sometimes the other side of this table does not seem to understand that property can be an investment. You have indicated you have no pension plan that is indexed, which many people who have collective agreements do have, and you are being responsible in planning for your old age or indeed a case when you may be disabled; none of us knows that.

In your kinder moments you talked about being frustrated and when you gave your real feelings I think you talked about being angry. I do not know whether you heard about the announcement yesterday. It is an announcement that could perhaps help you, but you have explained why that would be difficult. I guess what I find very difficult about the announcement yesterday is that the criteria are very vague and that makes it even more difficult for you. I would like you just to tell me what you think particularly about the retroactivity of this as a principle of government.

Mr Latvanen: On principle, I just cannot condone that. It is not logical and it is not fair. That is what seems really obtuse to me here, the fact that the party that proposes this seems to have got in on the fact that it was not going to be arrogant, it was going to be reasonable and responsive and most of all it was going to be fair. For somebody to undertake something under the guidelines of the current law, to go through the process -- and believe me, I know how arduous it is, I have done it on a small scale -- it is a very arduous process to go through.

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Mrs Y. O'Neill: I know that.

Mr Latvanen: It takes a lot of time, it is extremely time-consuming and there are opportunity costs involved in that, whether it is with your family or whether it is with your current job or whatever it is, and for them not to get that, especially people like -- there is all this bandied about, like, "These fat cats," but who are they? Name some names for me.

Mrs Y. O'Neill: Thank you very much. You have brought a very, very real experience to this committee and I think it is very valuable.

Mr Mahoney: Just very briefly, I do not think I have much time left, but you can see, by some of the questions, some of the difficulties we are having with this situation. Have you had any professional advice on how much your property may have been devalued as a result of just the announcement of Bill 4?

Mr Latvanen: Just what I have read and through talking to people. They are talking residential, they are saying 20% to 25%, but I do not know if that is true. We will have to see what happens if there are any transactions that occur that will support that. I have seen some properties come up for sale -- not in this area, but I think it was the Hamilton area -- and a lot of them went by power of sale. I am assuming those are the conditions that are mitigated by that.

Mr Mahoney: You are dealing with century-old buildings, in essence, and I would have to think that when you purchase something like that, ongoing maintenance would be of a concern and you would plan for that kind of thing on a regular basis. It would be important not to let them deteriorate, because they would fall apart more quickly, perhaps, than some of the newer buildings, although we have heard evidence of some shabbily constructed newer buildings and I am sure that is true, but I would think it would be important to do that. What is your feeling, if this bill goes through as is, about how you are going to treat these buildings as far as ongoing maintenance, and how are you going to afford to take care of them?

Mr Latvanen: I do not know. I have to really look at whether I want to continue to hold these properties. I mean, you live your life for 10 years for other people in the hopes of getting ahead a little bit and then, all of a sudden, you are going to say, "Well, you're going to have to hang in there for another 10 years or whatever." I am living my life for these other people who are enjoying the fruits of my labour and I do not get anything. It is my time, it is my money and there is an opportunity cost. There is an opportunity cost with your family. When they call at 12 o'clock at night you go over and you fix it. There is an opportunity cost to this for me.

Mrs Y. O'Neill: Real experiences.

Mr Turnbull: When you speak about possibly leaving Canada or leaving this province, I say to you it will be a great loss if we lose people like you because it is precisely people like you who make this province work. If we give in to the socialist pap which destroyed Britain for many years, we will find ourselves in the same mess.

Quite frankly, when I came to live in Canada, the first thing I did was to scrape enough money together for a very small deposit on a duplex, which I fixed and worked at myself exactly as you did. I think it is totally unreasonable for the NDP to suggest that you are a bad buy because you bought an old building, the suggestion that for anybody who owns an old building there should be no market for that building. You said it was the one you could afford and you worked away at fixing it up.

If we do not encourage people like you, we should not be encouraging anybody. We might as well close down the province and say we are out of business. Frankly, it makes me angry when I hear the kind of rubbish spoken by Mr Mammoliti. I apologize to you that in coming to this committee you would have that kind of --

Mr Mammoliti: A point of order: I do not consider anything I say here rubbish and I take offence to that word.

Mr Mahoney: I would like to second it.

Mr Abel: We should not get into name-calling.

Mr Mammoliti: Name-calling is not necessary here. We were called paps.

Mr Abel: Socialist pap.

The Chair: I will ask all members to try to address their concerns to Bill 4.

Mr Turnbull: Mr Latvanen, are you aware that when Bob Rae was interviewed last year before he was in power, he said: "You can't talk about rent review until you talk about the structure of ownership. You make it less profitable for people to own it. I would bring in a very rigid, tough system of rent review. Simply eliminate the exceptions and loopholes. There will be a huge squawk from the speculative community" -- I do not think you are part of the speculative community, but you are squawking and I agree with you -- "and you say to them, `If you're unhappy, we'll buy you out'"?

To date, we see no suggestion from the NDP that it is going to buy you out. They have admitted that there needs to be some way of addressing capital costs and they say they are going to do it in the permanent legislation. Yet people who have gone out and borrowed money are being told retroactively that they cannot recover that money and they are going to be wiped out. This is what socialism does to this country.

The Chair: Our time has expired. Mr Latvanen, thank you for coming before the committee today. The Chair appreciated your comments and I am sure that all committee members did.

E. A. HOLDINGS

The Chair: The next presenter is E. A. Holdings, Joan Stevens. I think you have seen the procedure and you feel comfortable. We have allotted, it appears, 40 minutes for you.

Mrs Stevens: Forty? I was advised 20.

The Chair: It means we may have a coffee break, but if you have prepared for 20, then please let us work around your schedule. So you have 10 minutes for your presentation.

Mrs Stevens: I am here to urge you not to pass this legislation. The measures that you are proposing in this legislation are extreme. The retroactive nature of it assures the providers of rental accommodation no continuity and no reasonable protection. What is worse, we have been lumped with a few unsavoury persons in this industry who have done ridiculous or unnecessary things. Landlords are being portrayed as sleazy citizens and I resent this. I am not sleazy.

I am a small landlord with three buildings and a total of 69 rental units. These buildings were purchased to provide my husband and myself with a retirement income because we have no pension. The buildings are 25 to 30 years old. We have owned two of them for 17 years and one for seven years. They are not luxury accommodation. The buildings are older walk-ups and a small high-rise. There is no carpet in the halls, there are no pools and no tennis courts.

My tenants are ordinary working people, retired women or single professionals. The rent is affordable: $340 to $385 monthly for a single-bedroom; $400 to $426 monthly for a two-bedroom. There is nothing fancy in the service we provide: basic accommodation. laundry facilities and parking. Our goal is to provide decent accommodation in a clean and quiet building.

We have lived with rent review since it started in 1975. In the beginning we believed it was temporary. We looked at capital cost expenditures and postponed them with the thought that it would not be too long before the legislation was revoked and we could do the work. The repairs can be postponed, but eventually the time comes when the work must be done.

In 1989 I looked at all my buildings and decided I would have to go to rent review to obtain the funding to do the repairs. We were simply losing ground. I took one building to rent review in 1989. I have been very pleased with the results. The turnover rate of tenants decreased from 35% yearly to 10% yearly. We were able to plan our repairs, rather than run around the building spreading out our resources patching and fixing. My tenants are happy. The cost to the tenants was an increase of 13%.

The second building I took to rent review in 1990. I was awarded a rent increase of 10.6% to be effective 1 October 1990. This is in limbo at the moment. Again, the repairs have solved a lot of problems and concerns and have made it easier for my superintendents, my tenants and myself. The third building requires approximately $75,000 worth of work. If I cannot finance the repairs, I will simply have to postpone them further.

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The proposed legislation will affect the tenants in the building I took to rent review in 1989 by cancelling the equalization schedule for the 1991 rent adjustments. This is resulting in unfair rental rates for my tenants. It does not affect my gross revenue. Some tenants will be paying as much as $108 yearly for the same unit as their neighbour. I believe that tenants have a right to expect their government to aim for equity, rather than support inequity and unjust subsidization.

The building that I took in 1990 has had the rent increase put in limbo. Should this legislation be enacted, it will have profound implications for myself and the tenants in the building. May I point out that this application was done under the tightened regulations of the Rental Housing Protection Act of May 1990.

The tenants had full disclosure before and during the renovations. There was a meeting arranged with them. They signed for in-suite repairs. They had an opportunity to protest to the Rent Review Hearings Board and to appeal the rent review order. In fact I found the tenants to be supportive of the repairs. None of them appealed or contested the repairs. Some of them told me that they hoped I would get the increase because their rent was too low.

The repairs were not unreasonable. Most of them were safety oriented: permanent lighting in dark common areas, drainage to keep the laundry area floor dry, new treads on exterior steps, a backflow preventer, in-suite smoke detectors, employee safety and relevelling a floor that had settled. Some of the repairs were to solve ongoing maintenance problems: hall flooring that continued to lift; common area and exterior painting; driveway repairs and lighting.

Should this legislation be proclaimed, the tenants will find that the level of maintenance will have to decline and I will have to cancel the planned replacement of kitchen counters and bathroom sinks that I had hoped to be able to do over the next five years at no cost to the tenants. The tenants are going to be the ultimate losers. Their homes will be less attractive and less modern. They will have to apologize to their friends for the sorry state of their homes.

I will have real difficulties with regard to the cash flow of this building. I have borrowed $40,000 to do the repairs. The bank will not cancel the debt because the government changes. If I do not have the funds, expenses will have to be cut. I cannot forget the loan. All the maintenance for the building will have to be reviewed and cost-slashed. After 15 years of rent review, there is not a lot of room left to eliminate costs.

One of my bigger concerns is that if a true emergency happens -- the boiler breaks in midwinter, the roof starts leaking, the heat pipes require major repairs -- I will no longer have the confidence of the bank. I will no longer be considered a good risk. I will not be able to raise the required funds. Where will my tenants be then?

As I mentioned earlier, my third building is in need of some repairs: the roof, heating system, replacing Thermopane windows, living room flooring. I planned to incorporate adding insulation into the roof with the renovations here to help Ontario reduce hydro consumption. It is a sad fact that socially irresponsible hydro consumption will increase rents. Conservation measures cannot be funded. From the exterior, the building looks okay, but if some of these problems are not addressed it will slowly proceed downhill until the cost of repairing it is too great and it will become a slum.

One of the great needs of the poor in Ontario is affordable housing. There are many small landlords like us who are providing this housing. I believe we are doing a good job. If it is the choice of the government to have rent review, then landlords have a real need to be able to maintain the buildings and to be dealt with fairly. If the minister wants to protect tenants from 60% to 80% increases, speculations and flips, may I suggest that he is using a bomb to kill a fly. The measures are out of perspective with the reality.

I cannot agree with the basic nature of this legislation. I have followed the law from the beginning. I have done, step by step, what was required. The law, by awarding me the increase, has said, "Yes, that is what should have been done." There is something basically very wrong with a system that supports and encourages people to invest in a business and then arbitrarily retroactively changes that law and leaves the business with unserviced debt. I urge you to revoke this legislation.

Mr Mahoney: Thank you very much, Mrs Stevens, for that presentation. Certainly some of us on this committee agree wholeheartedly with your sense of frustration and outrage, particularly at the retroactivity aspect of it. I have asked this question of other folks and have yet to hear an answer that would explain how this has happened, but tenant groups have come before us and suggested that Bill 4 is just a panacea to all their problems and is going to solve all their problems. Yet we have heard from people like yourself who indicate that it is your feeling that tenants will suffer.

Is there anything in this bill that you can see that addresses anything other than a moratorium on rent increases? I refer primarily to methods that tenant groups might be able to use to force a landlord to do certain work or make certain repairs. Is there anything there that you see?

Mrs Stevens: I do not think the legislation addresses this. The changes to the rent review act in May 1990 certainly gave the tenants a great deal of power to refuse any changes within their suites, and if that is the way they want it, fine. My position is that my rents are very low. They are bargain basement rents, really. Seventeen years ago I would have four or five cars in my parking lot; now we have arguments because we have 20. They do not like my flooring so they all lay wall-to-wall carpets and my big problem is getting them not to have the carpets nailed down. They are quite willing to nail down carpets because it is just $1,000 or a couple of thousand dollars for carpets for your apartment. When you are paying $400 a month, that is peanuts, you know. You can afford these things.

This bill might address the problems for some of the tenants who have landlords who have been flipping and doing all kinds of things, but it is not addressing the problems for a building such as mine where there is stable ownership, stable rents, just a very stable situation. I understand that is the majority of units in this province.

Mr Mahoney: Do you budget a certain percentage of your total revenue for ongoing annual maintenance?

Mrs Stevens: Yes.

Mr Mahoney: Could you tell me what that would be?

Mrs Stevens: Do you mean in terms of capital cost or just general maintenance?

Mr Mahoney: General maintenance is an area that I think I am particularly interested in; how you take care of the building on an ongoing basis.

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Mrs Stevens: I am paying out about 14% or 15% of revenues. Just for maintenance.

Mr Mahoney: Do you see that changing if this bill comes into effect?

Mrs Stevens: I have $40,000 worth of debt to reduce.

Mr Mahoney: That is the only place you can see getting it?

Mrs Stevens: I cannot cut municipal taxes. I cannot cut heat. I cannot cut the mortgage payments. I cannot cut the superintendent's salary; he is not going to be happy. Where else do I have room to cut other than maintenance?

Mr Mahoney: So the reality is that as a result of your being forced into a corner and having to cut back on maintenance, the result of this bill is that it does exactly the opposite of what the government has led the tenants' associations to believe: that is, it creates a situation where the maintenance will reduce and the tenants' lifestyles will be reduced as well. Would you agree with that?

Mrs Stevens: How can you reduce somebody's lifestyle if he is making $40,000 a year and paying $5,000 for rent?

Mr Mahoney: The quality of life in your buildings is what I am saying. It will be reduced?

Mrs Stevens: Oh, certainly. The people with counters, where the counters are all cut and burned, are going to be left with them unless they care to replace them themselves.

Mr Mahoney: Sure. Thanks very much.

Mr Tilson: Of course, the government will say that you are getting lots of money.

Mrs Stevens: Just ask me.

Mr Tilson: I am on your side, remember, as far as this issue is concerned, because there are obviously examples that we have heard, in Toronto specifically, where there have been great abuses by landlords. There have been some terrible, terrible situations where tenants are being put in unbelievable positions.

Mrs Stevens: My heart goes out to them, because I think that is unfair.

Mr Tilson: Mine too. I am going to ask you the same type of question as far as the city of London is concerned.

Mrs Stevens: Some of these buildings are in the city of Woodstock too.

Mr Tilson: I do not know how much knowledge you have of this area. If you do not know, then I am sure you will tell me. But I look at the problems we have heard of tenants in the city of Toronto and those problems are real. I am not familiar with the London press, but certainly I follow the Toronto press and these problems are real. I am not so sure they are as widespread as the government is alleging, with the flipping and the marble foyers and all that sort of thing; I think that is a massive exaggeration.

I would like you to give me your thoughts specifically as to whether you think the same type of landlord-tenant problems, abuses by landlords, exist in the city of London and surroundings area that may exist in some areas of Toronto.

Mrs Stevens: Not to my knowledge. There may be an isolated case, but by and large I think the relationship is very satisfactory between landlords and tenants and I think there are a lot of responsible landlords who are doing reasonable things.

I wish to point out that the repairs I did were not unreasonable. They were things that had to be done. It was a list that started out as a small list and as time went on it grew larger and larger because it is an old building. If anyone has a house that is 20 years old, you know that things break. The list gets longer after a while and eventually they have to be addressed. I do not think that London landlords are unreasonable and I certainly do not see a lot of press about it.

Mr Tilson: Mr Rae has stated publicly -- and it has not been denied in the House, because I asked him in the House -- the policy of the government is to buy out private enterprise. That statement has been made by the Premier and it has not been denied. I think that is exactly what his plan is, although I do not know how much he is going to try and devalue the value of your property to make that move.

I would like to ask another question.

Mrs Stevens: I will see it rot first.

Mr Tilson: I am sure you will. That is the concern that the members of our party have and that I think the members of the opposition have. We do not want to see slums around this province.

Mrs Stevens: And I do not wish to do this to my tenants, because my tenants are decent people.

Mr Tilson: I will ask a question with respect to general maintenance. My understanding is that with respect to normal maintenance, of the accepted guideline increase over the present current rent review provision, 1% of that 1.6% has been allowed for normal maintenance.

Mrs Stevens: Yes.

Mr Tilson: Can you tell me with respect to your building or buildings -- I do not know whether you have several or not -- how much money that means based on your rental income?

Mrs Stevens: One per cent.

Mr Tilson: To properly maintain your buildings.

Mrs Stevens: One per cent of my rental income on a yearly basis is $1,100.

Mr Tilson: There is the answer.

Ms Harrington: Mr Tilson has just mentioned that we would agree there are real problems in this province. There are some landlords, Mrs Stevens, who are not like you. I think you will understand.

Mrs Stevens: A minority, a very small minority.

Ms Harrington: This is the situation we are attempting to deal with. I put it to you that apartment units are not just investments but are homes, and I think you will realize that.

Mrs Stevens: I stated it.

Ms Harrington: This is the whole problem. We want an attitude that homes are very important to people, and in many cases apartment units are looked at as strictly investments.

Mrs Stevens: Could I point out to you that you did not declare a moratorium on increases over 20% or over 50%; you declared a moratorium on all increases over the guideline.

Ms Harrington: That is right.

Mrs Stevens: So you are lumping everyone in the same sleazebag as a few people who have put marble in their foyer, and I do not like that.

Ms Harrington: The problem you have brought forward is one of the capital costs that are passed through. The answer I am trying to give to you and to everyone, and to explain very clearly, is that capital costs, we understand from talking to a lot of different landlords, are something we will have to deal with. We are a new government and what we are attempting to do is bring together the landlords and tenants to stop some of the abuses and problems that have been evident in the past. We want to take your concerns back with us. That is why we are here. We want to deal with that problem, if you will accept that.

Mrs Stevens: I would certainly hope so, because these people want homes they can be proud of.

Ms Harrington: I entirely agree.

Mrs Stevens: If you take hall flooring that is lifting -- every week it is a different tile -- and you replace it with new flooring that will take a good finish, and their friends walk in and they say, "Gee, this is lovely," they are proud. Their friends say they are living in a nice place, and that matters to people. If you eliminate capital costs and if you deny landlords the ability to raise funds for capital cost funding things, then you have done the people who rent accommodation in this province a great disservice, and this is what this moratorium is doing.

Ms Harrington: I just wanted to clarify to you that this particular moratorium we are discussing, which is Bill 4, is interim legislation, and we are trying to establish with you today and in the following months, as quickly as we can, something that will address the problems.

Mrs Stevens: I understood that this hearing was to address Bill 4 and that you were having other hearings to address the others.

Ms Harrington: That is right, as soon as we possibly can.

Mrs Stevens: So you are addressing Bill 4 today, are you not?

Ms Harrington: That is right. I just wanted to assure you that we want to work with you.

Mrs Stevens: I hope so, because what you are doing is absolutely dreadful.

The Chair: Mr Winninger, if you can make it very brief, I will allow one last question.

Mr Winninger: I gather that if capital costs were factored into the increases that landlords would seek under a revised Bill 4, you would not be averse if there were some kind of cap on that.

Mrs Stevens: What kind of cap? What do you mean by cap?

Mr Winninger: You said we are not directing this legislation at increases over 20%, that it is at all increases. What do you think is the notional kind of rental increase that an average tenant can bear in one year in your buildings?

Mrs Stevens: In my buildings? Some of my people are on very fixed incomes. I would say upwards of anywhere from 10% to 20%, looking at the reality of what you have to do. You are looking at 15 years of neglect.

Mr Winninger: These people on fixed incomes, would they include pensioners?

The Chair: Order. I allowed an extra question. I allowed more time for it. Mrs Stevens, I want to thank you very much for coming to speak to the committee today. We appreciated your representation.

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SANDRA MATTHEW

The Chair: We are going to move right along. Sandra Matthew is here. You have 10 minutes for your oral presentation and we will reserve 10 minutes for questions.

Ms Matthew: My name is Sandra Matthew and I am a tenant. For the past six years I have been a resident tenant of a 56-unit apartment building at 1000 Huron Street, London. Also, for the past five years I have been employed as building superintendent at 1000 Huron Street, a position which at times is extremely hard work, but none the less a position which I do not wish to lose.

There are various reasons why I enjoy living in my apartment building. For example, it is my choice of home; my rent is affordable and, incidentally, inclusive of all utilities, and my fellow tenants, all of whom I know personally, and my landlord, who is also my employer, are all decent, caring, concerned, approachable people.

As both a tenant and a superintendent, I am made increasingly aware of the fact that the situation in my building is not one of us, the tenants, against them, the management. Neither is it a game of cops and robbers or cowboys and Indians. The situation is such that we consider ourselves to be one large family. We all get along extremely well together, we eagerly help each other and none of us are kept in the dark with regard to any situation involving our building, which I should add is approximately 23 years old.

Speaking before this panel is one of the most difficult things I have ever undertaken in my life, but you see, there are many, many satisfied tenants who would not dream of taking a day off work to come here today. However, after listening to the battery of detrimental remarks and slurs, if you like, hurled at many of Ontario's landlords by the Rae government, I am incensed. In fact, the Rae government provided me with the determination to come here today to set the record straight.

I was a proud and willing participant in a rally which was held at Queen's Park on 11 December 1990. I teamed up with a multitude of other tenants, landlords, tradespeople, superintendents and construction workers to protest the Rae government's disregard of Ontarians and the introduction of the so-called fair policies with regard to rental accommodation. Our rally was tremendously successful and absolutely peaceful. However, while travelling home on the bus, myself and the other passengers, also participants in the rally, heard a brief newscast. Some lady who announced that she was involved with a Toronto tenants' association could be heard saying that our rally had been a put-up job by the landlords. Now, I have never met this woman; I do not even know her name or what she looks like, but what I do know is that she lied. I am tired of lies and I could suggest that maybe someone was pulling her strings, but I will not.

Over the past few weeks, I have intermittently listened to the panel's ongoing discussions on rental housing policies on television and I feel the necessity to inform the panel that I for one have absolutely no intention of sitting back and allowing my home to be turned into a garbage dump because of what I believe to be the Rae government's criminal treatment of many landlords in Ontario, landlords who have acted according to the letter of the law and because of this now find themselves plummeted into financial limbo, my landlord included.

Early last year, after many lengthy landlord and tenant discussions concerning ongoing building repairs, all tenants in my building, including myself, were informed by the landlord that major capital expenditures would be undertaken beginning in late March 1990 and continuing during the course of the summer of 1990, and upon completion of the work, an application to recover the massive costs of such a project by raising rents over and above the suggested guideline would be submitted to rent review services.

Those capital expenditures consisted of a necessary new roof -- the old one had been patched on many occasions -- necessary insulation and vast amounts of drywall installed in the majority of apartments; necessary carpeting, kitchen counters and faucets, bathroom wash basins and faucets and tub faucets in all apartments; necessary carpets installed in three hallways; necessary flooring in the main lobby and the stairways; and necessary replacement sidewalks. Also necessary was an awesome amount of organization to ensure that this work could be carried out as quickly, quietly and cleanly as possible, with the minimum amount of inconvenience to the tenants of each of our 56 occupied units.

The landlord, the tenants, including myself, and the tradespeople all worked as a team and by the end of the summer of 1990 all work had been completed to the satisfaction of the landlord and tenants alike. Our hectic, organized chaos had paid off. Peace, quiet, cleanliness and firm structure was restored to 1000 Huron Street. Our landlord then submitted all of the documents which were required by law to rent review services. We, the tenants, believed that all we had to do was wait for the decision stating that the actual amount of rent chargeable for each individual apartment was whatever it was.

Having been a home owner myself, I know only too well the costs incurred in maintaining even a single-family dwelling, as do many of my neighbours. On 1 October 1990, every tenant in my building was notified in writing of a pending application to establish maximum rents. Every tenant was given the opportunity to view a detailed list of proposed rents, which was available to them in my apartment between the hours of 9 am and 5 pm on a daily basis. Every tenant was given 45 days in which to dispute the submissions by visiting the local rent review office and filing grievance, so to speak. Not one tenant in our building disputed anything. How do I know this? I approached rent review services and I asked.

The Rae government made a decision to change the existing laws and then, to add insult to injury, it decided to change those laws retroactive to 1 October 1990. What a bloody bombshell. Such actions must warrant a lawsuit. However, that would be another matter. Suddenly, I found myself witnessing sensationalism concerning greedy landlords and gouging. I had to listen to tales of woe concerning poor tenants whose rent had been increased by 100% and 150%. Nobody ever did tell me 100% of what initial amount and 150% of what initial amount -- maybe $40, maybe $100. Sensationalism was the correct choice of word.

I found myself listening to standard questions from some members of the panel, questions such as, "Do you care?" and, "How many people have suffered economic eviction from your building?" Well, I care. That is one of the reasons for my being here and no one in our building has been priced out. I should not overlook the old faithful statement, "We disagree on many points." I know for a fact that we disagree on almost every issue. That is another reason why I have chosen to speak to you today. Hopefully, someone will listen to me -- I mean, really, really listen -- and set aside any further notions of trying to shaft us.

Our building, as I informed you earlier, is my home. It is warm and friendly, clean and comfortable. It is beautifully maintained and free of vermin. As a matter of fact, I have never seen a cockroach and I really do not feel deprived. My fellow tenants and myself are proud to have our friends and relatives visit us at 1000 Huron Street, although right now we have a huge cloud hanging over our heads.

Will the institution which financed the necessary replacements in our homes go power of sale, courtesy of the Rae government? Will our landlord who has worked so diligently, a person we all admire and respect, be forced to sell, courtesy of the Rae government? Will we ever again receive the kind of care and consideration we have become accustomed to, should our homes be placed in the hands of some stranger, courtesy of the Rae government?

We are very concerned and anxious people. We could move to another apartment building which is in fairly close proximity to 1000 Huron Street. We could all go together tonight. We would definitely be given the bare essentials, we would definitely pay a lesser rent and we would definitely know that our new living quarters lowered the tone of the area. Is there any Rae of hope for us?

You know, it would not hurt the Rae government to remember, as representatives of the public, just how lucky they are to have a fairly significant standing in the community at the moment. However, faith is fast failing and I would urge the party not to underestimate either the intelligence or the organizational skills of tenants. Some of you are probably saying to yourselves, "This is just her opinion." Well, please be advised that it is also the opinion of 86% of the tenants of 1000 Huron Street.

On that note I would like to read to you a petition, a copy of which was forwarded to Bob Rae and copies of which are available to the panel at this time. This petition contains signatures of 86% of the tenants of 1000 Huron Street. It is dated 10 December 1990 and it is headed: "For the attention of Bob Rae."

"We, the undersigned, are tenants of a 56-unit apartment building at 1000 Huron Street, London, Ontario. Our landlord has continually strived to give us good rented accommodation at a fair price. Two years ago, when our parking lot became congested, our landlord decided to enlarge it for our benefit, at his own expense. We are entitled to one parking space per unit according to our lease. However, he provided the extra space, which we now use for our second vehicles and our visitors' vehicles, without hesitation.

"We recently had the leaky roof replaced, new carpets installed in all apartments, new countertops and taps, new hall carpets and a beautiful new lobby. All of this work was carried out in a proper and legal fashion.

"All tenants in our building were agreeable to a 17% increase in rent, which our landlord legitimately applied for. We were all given written notification from the Ministry of Housing informing us that we had 45 days in which to dispute the suggested increase, but we all knew that we had nothing to dispute because every replacement in our building had been a necessary replacement. Not one of us balked.

"We are now led to understand that you, sir, are not going to grant our landlord his increase in rent and we would suggest that you rethink this decision. As tenants we are concerned that (a) our landlord may be forced into selling our building to someone who will not look after us as well as he does, and (b) the level of care and consideration which we have received in the past will greatly deteriorate because our landlord cannot get a decent return on his investment. Your flagrant disregard of our wants and needs leaves us no alternative but to demand that you turn your attention away from landlords and tenants, because you obviously know nothing about this situation. In short, don't call us, we'll call you."

Thank you.

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Mr Turnbull: Ms Matthew, thank you very much for an excellent presentation. In any respect, has the landlord coerced you to come along here and speak today?

Ms Matthew: Up until the morning, the landlord did not even know that I was going to ask him for the day off work.

Mr Turnbull: I saw on television last night that there was somebody at the demonstration you spoke about at Queen's Park who said the landlord had in some way coerced him and had bused him down. Would you say that was typical of the people there? I know you have already answered it, but I want to underline this fact.

Ms Matthew: That is a bunch of garbage.

Mr Turnbull: What do you think of the idea of becoming a civil servant, Ms Matthew?

Ms Matthew: If the money is good I might consider it, but it would have to be damned good to take me out of my own building where my own tenants and where my own landlord are.

Mr Turnbull: I think Mr Rae intends to make you into a civil servant.

Ms Matthew: He has no hope.

Mr Turnbull: He wants to change the structure of ownership. He said we need a government program of purchase and he has already said he wants to drive down the price. That would, de facto, make you a civil servant, if they buy out the building. What do you think about that idea?

Ms Matthew: I wish we could go back quite a few months when none of us had ever heard of Bob Rae and just put matters right again.

Mr Mahoney: Heck of an idea.

Mr Turnbull: In terms of the renovations that were undertaken in your building, were any of them of a luxury nature?

Ms Matthew: Nothing whatsoever. We have 56 units and, as I said, the building is approximately 23 years old. It could be a year older or a year younger. It is a beautifully maintained building. There are constant ongoing repairs. There was absolutely nothing of any luxurious nature undertaken during the capital expenditures through the summer of 1990. All work that was carried out was absolutely essential work.

Mr Turnbull: Let me get your opinion on this last point. First of all, the retroactive nature with respect to the pass-through of capital costs is something we have heard a lot of testimony about, how it is going to hurt people. The reaction of the NDP, you have heard it today, is, "Oh, well, the permanent legislation will address that." But in the meantime, we have the carnage of small landlords who are going to be driven into bankruptcy and they will be gone. How would you react to that?

Ms Matthew: I think what is happening with Bill 4, this retroactivity, is sick. It is sad, it really is. Whoever thinks he or she put a lot of thought into this retroactivity was not thinking at all. They obviously have absolutely no idea just how many small businessmen and small landlords it is going to cripple and how many tenants it is going to cripple at the same time, because we have standards too. We have minds. We know what we want and I want my home in 1000 Huron Street. But with my boss having his hands tied behind his back because he cannot get his money due to this retroactivity, I might lose my home, unless of course Bob Rae wants to pay the loans or the mortgage or whatever.

Mr Winninger: I have no quarrel personally with agreements between landlords and tenants to effect necessary capital repairs. I do have two areas of concern, however. First of all, are any of your tenants here today?

Ms Matthew: They would have been tuned in to channel 31, the legislative channel on TV, but apparently there is no TV here today. Somebody did ask me to ask if maybe our words were being screened.

Mr Winninger: Did you draft that petition for them to sign?

Ms Matthew: No, I did not. It was a joint effort.

Mr Winninger: How long has your owner owned your building?

Ms Matthew: He owned the building long before I became a tenant or superintendent there.

Mr Winninger: Do you know how long?

Ms Matthew: I think approximately 10 years.

Mr Winninger: Does it strike you as a bit strange that an owner of a 56-unit building, who has owned it for 10 years, cannot put on a new roof staying within the statutory increase level?

Ms Matthew: No, it does not. Do you realize how large the roof is on a 56-unit apartment building? Do you realize how much it costs? Do you realize that it is very difficult for a person to go into his pocket and pull out $75,000 and say, "Hey, go on, put me a new roof on"?

Mr Winninger: Can that not be amortized over many years?

Ms Matthew: Yes, it can with the help of capital expenditures. A new roof has a life expectancy of approximately 15 to 20 years.

Mr Winninger: You enjoy a subsidized rent, do you not?

Ms Matthew: Subsidized in which way?

Mr Winninger: Do you pay a reduced rent because you are the superintendent?

Ms Matthew: I do not, I pay rent at the same level as every other tenant pays rent.

Mrs Y. O'Neill: Ms Matthew, thank you very much for coming. You understand Bill 4. I am not sure that all the tenants in this province do understand Bill 4. You know its limitations. You know things that you can expect as a result of Bill 4. For that I commend you. You have been very clear. You are committed and I thank you for that.

Ms Matthew: My heart is in my mouth, I hated doing this today, I have never spoken in public before.

Mrs Y. O'Neill: You are doing a very good job. I would like to tell you that the petition you presented to this committee could be presented in the Legislature in a formal way. If you present it to your MPP -- I do not know who your MPP is -- he then has to present it in the Legislature, whether he agrees with it or does not agree with it.

You are talking now about being a superintendent in a building. We have not heard from a superintendent in a building. This is a group of employees that I think will be greatly affected. Sometimes, as in your case, there are one or two people in a building. I think you have brought a new insight for another group of people, another group of employees, people who do not have a lot of protection but who certainly are serving their communities. You are bringing to our attention that these people too will be affected by Bill 4.

I would like you to say one more thing, about how you feel about one part of this philosophy, that we build reserve funds for capital improvements. I think Mr Winninger's question was somewhat along these lines, that people should be able to plan, that if your landlord had been responsible, he would not have to worry about the $75,000 for the roof. Do you have something to say about that?

Ms Matthew: My landlord is a very responsible man. So are the majority of landlords, not just in London but in the entirety of Ontario. To have ongoing repairs taken care of promptly and properly in a building costs a lot of money. The 1% is no good. It just does not touch anything. Rents in general are taken up, all but a very small amount, in the general running of the building and in the general maintenance of the building and a few little added extras. After people have taken the wage out of that and paid the insurance, there is next to nothing left. A lot of landlords claim rent in the red.

Mrs Y. O'Neill: Municipal taxes.

Ms Matthew: Yes, for a lot of times. But they hang in there because they think one day they are going to be in the black. To expect the landlord, no matter what size, to be able to pull money out to cover things such as we did this summer -- a roof, 56 carpets of 300 square feet each, 56 countertops, 56 sets of deck sets, 56 vanity wash basins, 56 sets of vanity taps, 56 sets of tub taps, three huge hall carpets 200 feet by five feet, new flooring throughout a huge lobby, new flooring throughout two landing areas, stairways -- no man is going to be able to pull that kind of money out of his pocket at a moment's notice and say: "Yes, I can cover that. Don't you worry about it."

Mrs Y. O'Neill: Yet in many cases it is much more cost-effective to do that all at once than piece by piece.

Ms Matthews: Yes, it is. That is why capital expenditures come into play. He is not asking for the hundreds of thousands of dollars it costs all at once. He is asking for all of these just to be taken into consideration and amortized over a period of years.

We were absolutely thrilled that all we were going to have to pay was 17% increase in rent. We could have been asked for a lot more, but we were not.

The Chair: I am sorry. Time has expired. Thank you for coming before us.

1600

CARLTON GROUP

The Chair: The last presenter today is John Gleason, the Carlton Group. Mr Gleason would please come forward. My understanding is that you have been allotted 20 minutes, Mr Gleason, 10 minutes for your presentation. I think you know the procedure.

Mr Gleason: That is right. I am here today representing the interests of the Carlton Group. We are a medium-sized fee management company, with a current portfolio comprising commercial, retail, office, industrial, condominium and residential apartments and town houses.

At Carlton we have one common goal, which is foremost in our management of real estate: to increase the value of each client's investment. We achieve this by ensuring that the property is properly maintained, providing progressive marketing and ensuring tenant needs are properly addressed. We have no problem achieving our goals at the condominium and commercial properties, but we are finding it increasingly difficult to achieve these goals at the residential properties.

At present we are still continuing to complete minor maintenance repairs for our tenants. However, with the pending legislation on the horizon, it will mean we will have to take a serious look at redefining what minor maintenance is. With revenues shrinking each year, the only way to maintain a respectable bottom line is to cut expenses. As taxes have increased 11%, hydro 15% and water 14% for 1991, the only expense area that we have reasonable control over is maintenance.

Our company has spent the last six months assessing and costing the capital requirements for all the residential properties we are involved with. The work required ranged from roof replacement to parking deck repairs, and included plumbing and electrical upgrading, window repairs and replacement and balcony repairs. This work, we felt, would ensure the longevity of the building's physical structure, reduce energy consumption and ensure the tenants continue to live in a safe and comfortable surrounding. The majority of this work was going to be performed on buildings that were constructed before 1975. The total cost of the work was $4,973,853.

I say "was," because this work is now on hold. We cannot recommend to our investors to spend this money with the uncertainty that currently exists regarding Bill 4. If legislation does pass in the form indicated, which is a single, fixed annual guideline for rent increases based on inflation and the elimination of both cost pass-through and financial loss, it will make owners feel even less anxious to spend.

For us to recommend starting the capital work, the very least we need is a clear and immediate commitment from the government that there will be no changes to the current capital expenditure recovery rules. Until we get these assurances, our only alternative will be to continue patching where we were going to replace and update.

I would like to bring to the attention of the committee a poll conducted by Elliot Research of some 2,000 tenants, which found that 74% indicated they were concerned that the building in which they lived would deteriorate if there were no incentives for landlords to maintain or improve their property. Is the government aware of these tenants' concerns? Can it give these people any assurances that property will not deteriorate as a result of the pending legislation?

Our company has always abided by the rules and regulations of the legislation as it has existed over the years in its various forms. We have dotted the i's, crossed the t's and filled out the countless forms requested by the ministry to satisfy its requirements and meet its deadlines, and then we have sat and waited for it to review the information and hand out decisions, with no commitment of a deadline.

Now, to mix things up even further, the government is going to implement new legislation retroactively, when there are still outstanding issues relating to the current set; for example, the rent registry. What ever happened to it? We filed our rents for the registry system by 1 May 1987, as the government asked. It in turn was to advise landlords and tenants whether or not the registered rents were lawful. To date, our company has only received notice to justify rents for 129 out of 2,200 apartments. What is the current government going to do with the information already filed?

If the government wants to see what effect rent controls have had, it need look no farther than New York, London and Paris. Here, whole areas of the city are full of abandoned, rotting houses that would have lasted for centuries except for the implementation of rent controls.

Economics, the fifth edition, by Lipsey, Purvis and Steiner is a text used at the University of Western Ontario. In it the authors dedicated several pages to the issue of rent controls and how ineffective they are. The authors stated the following about the effect of rent controls:

"(1) There will be a housing shortage in the sense that quantity demand will exceed quantity supplied. (2) The actual quantity of accommodation will be less than if free market rents had been charged. (3) The shortage will lead to alternative allocation schemes...or the government may intervene."

I would like to know, as I am sure others would too, if it has been proven elsewhere and is part of a case study in economics, why the government persists in telling the taxpayers of this province rent controls are working? As the committee is no doubt aware, our Premier, Mr Rae, studied at the London School of Economics. How can he think continued controls are the answer to the current housing crisis? If rent control is working, show us where.

I am sure you are also aware of the decrease in vacancies in Ontario from 4% in 1973 to 0.08% last year. When rent controls were introduced in 1975, investors indicated that there would be a slowdown in rental apartment construction. For the province, their predictions have come true. Unfortunately, for the truly needy of the province, the availability of units go to those who can afford higher-priced units or single-family homes.

Numerous articles indicate that upwards of 43,000 families are waiting for assisted housing. Why not let those who know how to build and operate rental housing alleviate this backlog for the government and ensure that those who need housing receive it, by getting rid of rent controls and replacing them with shelter allowances for the truly needy? At least let the private sector help in resolving this problem.

Further, can the government give assurances to the banks and lending institutions that the pending legislation will not affect further loans for residential apartment owners? A recent internal memo from a major mortgage lender stated: "The traditional 1.20 debt coverage loan using a 5% vacancy, etc., should only apply where the location, physical product, leasing, ownership and management are of the highest quality and order. Everything gets marked down or beat up from there. Five per cent vacancy will be the minimum for the highest credits. Mas and pas will be assessed 10% to 15% and maybe higher dependent on the project. Small-town projects and rent rolls will be assessed even harder and so may the overall debt cover requirements."

The importance of proper maintenance and upkeep of a building is made very clear in this memo, as is the fact that the small landlords, the mas and the pas, who in many cases have purchased buildings for retirement, will find it difficult to finance their property.

An editorial in the Financial Post dated August 1990 stated: "The uncertainty caused by frequent changes in rent review regulations further reduces the investment appeal of rental housing. Landlords and potential landlords invest elsewhere. Rent controls do not work. They should be phased out."

Our company echoes these sentiments and our investors are looking for other places to put their money even as we speak. Not that there is not available product on the market to purchase, but rather they feel more comfortable in choosing other alternatives such as commercial properties and, for some, out-of-province or US real estate.

I ask that the committee listen to the people who have made presentations on behalf of building owners. If you cannot assure them that their current investments are safe and future apartment projects will be profitable, be prepared for potential investment dollars destined for multi-residential markets to go elsewhere and perhaps be lost for ever.

Ms M. Ward: Mr Gleason, tell me a little bit more about your organization. I did not catch it at first.

Mr Gleason: Property managers in the city of London. We manage 2,200 residential apartments.

Ms M. Ward: Are the owners local people?

Mr Gleason: Yes, they are all local people who have bought the property to use as an investment, the ma-and-pa operations so to speak.

Ms M. Ward: They would be people who were not necessarily very much involved in the operation. You take over the operation, the management, completely?

Mr Gleason: Yes, we do.

Ms M. Ward: So they are not in contact with their clients to any large degree.

Mr Gleason: That is correct.

Ms M. Ward: What would be the average rent increase that you have received in those buildings, say, over the last couple of years?

Mr Gleason: We have only taken the guideline amounts on all properties.

1610

Ms M. Ward: So what is your concern at the moment, then, if you have been able to manage successfully with the guideline increase? Why are you concerned at the moment that you are going to be limited to the guideline increase in the next little while?

Mr Gleason: Because we have been limiting our rent increase to the guideline amount, we have totalled $4.973 million worth of capital costs that are now waiting to be done at all the properties. We have gone to rent review on some properties and have been able to set a higher maximum rent, but the current conditions will only allow us to give the guideline amounts, thus reducing our cash flow.

Ms M. Ward: Because of the vacancy rate and the market conditions at the moment?

Mr Gleason: The market conditions that exist now in the city of London are certainly dictating that, yes.

Ms M. Ward: I am afraid I cannot see the immediacy of your problem, if you could not even pass those on anyway because of the market.

Mr Gleason: Our buildings are deteriorating. What we would like to know is that if we did spend the money, at least we would be able to recoup it somewhere else down the line.

Ms M. Ward: You would not necessarily attempt to recoup it, then. You just want reassurance that you could?

Mr Gleason: We want the assurance that we can, and we would love to be able to attempt it, but market conditions in the city of London are not allowing us to do that.

Mr Winninger: I am a bit confused. I thought that some of the complexes that Carlton Group manages were on Sandringham, where the rents went up over 14%.

Mr Gleason: No, they have not gone up over 14%. We got a 14% approval on our application but we have not increased anybody's rent over the guideline amount.

Mr Winninger: But you could increase it to the maximum level under the existing system if you wanted to.

Mr Gleason: Yes, we could.

Mr Winninger: So you have applied for increases beyond the statutory guideline.

Mr Gleason: Yes, we have, and I mentioned that to --

Mr Winninger: In fact, a number of tenants have had to move out because of increases on Sandringham and also in north London. There are building enrichments --

Mr Gleason: I do not think any tenants have moved out because of the increases because we have not given them an increase over the guideline amount. If they have decided to move out, it has been of their own volition, not because we have increased their rent beyond their means.

Mr Winninger: As part of the rent review process, a lot of the increase was due to a pass-through of not just operating costs and capital costs, but also financial and economic loss. Is that not correct?

Mr Gleason: That is correct.

Mr Winninger: If I understood your position, your minimum position would be that you be allowed your capital costs.

Mr Gleason: I think our position is that we are just getting used to the current legislation as it stands now. What is happening is that we are going to have to redefine our minor maintenance requirement, and what a definition of minor maintenance is. We are now going to have to go back and reassess what capital cost improvements we do want to do and only will address the ones that are an immediate danger or will cause immediate damage to the building structure itself.

As I said, we have taken the past six months to review our entire portfolio at a cost to us that cannot be passed on to the tenants. We were in a position, and had the approval of the majority of our investors, to go ahead and spend over $4 million to bring these buildings up to date.

Mr Mahoney: Thank you very much for your presentation. You have said you have not passed on increases beyond the guidelines, that you were planning on doing $4 million worth of renovations and improvements to the building. I suppose your feeling is that you would then be able to increase the rents based on the approvals you have already got from the board, to recover at least a major portion of that $4 million if you were operating under the existing system.

Mr Gleason: Correct.

Mr Mahoney: I do not know why that is hard to understand. It seems pretty basic and simple to me, but I guess I am a basic, simple guy. I find it interesting, too, and you might have experienced this, that once we got this committee out of Toronto and into the real world, we have just been inundated all day today with people against this bill. I am sure you have seen some of the activities that have gone on in Toronto. They are activities that no one on this committee, from any of the three parties, endorses when we see the living conditions that some of the folks in Parkdale and other areas came before us with. None of us endorses that.

Do you see anything in this bill that would allow any redress, any opportunity for tenants who are experiencing this terrible problem to solve that problem, to get the repairs done by the landlord, to force the landlord to do them? Is there anything here at all that you can see?

Mr Gleason: Definitely not. One of the major problems we are experiencing as a landlord in southwestern Ontario is that the legislation seems to be geared more towards the Toronto market, as you have indicated. We sat back and listened to the hearings when the previous government was in office and now this current government again ready to chance the current legislation based on the desires of tenants and owners in Toronto.

We are not experiencing the same vacancy problem down there as they are in Toronto. We want someone to listen to us, the smaller landlords in the outlying areas, where we are having economic hardship problems and are trying to bring our buildings up to standard. I think, as the previous speaker before me, the majority of the tenants in the outlying areas do get along with their landlords. I think there are very few landlords in southwestern Ontario, and maybe other areas of Ontario, who cannot sit down if there is a problem, face to face, and work it out.

I think the only place you are finding tenant associations is in the larger metropolitan areas, where there may be some landlords who have taken advantage of the legislation. But I think for the most part landlords know where their money is coming from. It is coming from the tenants. If you treat them well and look after them, along with the product, they will look after you.

Mr Mahoney: Is a free market system not wonderful? Do you experience any of the problems we have heard about: cockroaches, vermin, holes in the walls and all of that kind of stuff, in any of the buildings you represent? Do you know of that kind of problem in this community?

Mr Gleason: Not to my immediate knowledge, no.

Mr Tilson: You represent the last delegation we are hearing in the city of London. My observation, having heard the various delegations that have come to this committee, at least in the testimony that has been given today, is that if Bill 4 is passed it is quite clear that the quality of life of the tenants in the city of London and the surrounding area will decrease. That is unfortunate, and hopefully the government will listen to that and reconsider its position.

The ministry has prepared statistics for us, and one specifically provided by Canada Mortgage and Housing Corp, on the average market rent. With the exception of Sudbury and Hamilton, London has the lowest average market rent on average, as of October 1990, at least. Can rent levels become so low, as a result of government legislation perhaps, that there would be absolutely no incentive for landlords to make building improvements or make capital expenditures to improve the quality of life for the tenant?

Mr Gleason: I think we are experiencing that now, as I had stated. We are in a position where we do have to redefine what we are going to do on just the minor maintenance, with the GST, going along with the increases in our utility costs, and financing costs going to refinance buildings. We do definitely have to reassess. I think that survey has indicated that as we are among the lowest in the province with our base rents, we are getting desperately near that break-even point on a number of properties.

Mr Tilson: Do you think Bill 4 will have an effect on the general economy of the city of London?

Mr Gleason: I definitely think it will.

The Chair: We are at the end of this particular presentation and also at the end of our work for today. Members have their itineraries. We are proceeding to Windsor this evening. Hearings will commence in Windsor tomorrow morning at 9 am. We have a very full schedule tomorrow. Unless there is anything the members wish to let other members or myself know, we are going to adjourn.

The committee adjourned at 1620.