Wednesday 15 January 1992

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


Chair / Président(e): Brown, Michael A. (Algoma-Manitoulin L)

Vice-Chair / Vice-Président(e): McClelland, Carman (Brampton North/-Nord L)

Abel, Donald (Wentworth North/-Nord ND)

Bisson, Gilles (Cochrane South/-Sud ND)

Harrington, Margaret H. (Niagara Falls ND)

Mammoliti, George (Yorkview ND)

Marchese, Rosario (Fort York ND)

Marland, Margaret (Mississauga South/-Sud PC)

O'Neill, Yvonne (Ottawa-Rideau L)

Poole, Dianne (Eglinton L)

Turnbull, David (York Mills PC)

Winninger, David (London South/-Sud NDP)

Substitution(s) / Membre(s) remplaçant(s):

Daigeler, Hans (Nepean L) for Mr McClelland

Lessard, Wayne (Windsor-Walkerville ND) for Mr Marchese

Morrow, Mark (Wentworth East/-Est ND) for Mr Winninger

Owens, Stephen (Scarborough Centre/-Centre ND) for Mr Bisson

Ward, Brad (Brantford ND) for Mr Marchese

Clerk / Greffier: Deller, Deborah

Staff / Personnel: Baldwin, Elizabeth, Legislative Counsel

The committee met at 1018 in room 151.


Resuming consideration of Bill 121, An Act to revise the Law related to Residential Rent Regulation / Projet de loi 121, Loi révisant les lois relatives à la réglementation des loyers d'habitation.

Section 14:

The Chair: The standing committee on general government will come to order. The business of the committee is to deal with clause-by-clause of Bill 121. When we adjourned yesterday afternoon we were considering the Liberal amendment to subsection 14(1). The only member I have on the list is presently not here. Does anyone else wish to speak to the Liberal amendment?

Mr Mammoliti: Mr Chair, you will have to forgive me for a couple of minutes, but I have to tell you this story because I think it is funny and I think it is a good way to start the day. I spoke on this yesterday, and as I was speaking I spoke on neglect, of course, as Ms Poole had mentioned neglect. I mentioned there was a building in my riding that I thought the landlord was neglecting. I mentioned in particular a window and that window being ready to fall out because of the neglect over the years.

As I was speaking at that time, I got a nudge from somebody in the building who said, "Come outside to the parking lot, because there's something wrong with your vehicle." I went out to the parking lot, and ironic as it is, one of the windows of this building had fallen on to my vehicle.

Mr Morrow: No.

Mr Daigeler: Talk about neglect.

Mr Mammoliti: Yes. Not that the Speaker is neglectful; I am not saying that the Speaker is neglecting this building, but I am saying that it is funny. I thought I would start the day off right perhaps. Thank you very much for the time.

The Chair: Thank you for that information, Mr Mammoliti.

Ms Poole: Excuse me for my voice, Mr Chair, but I cannot quite control it. If Mr Mammoliti is suggesting that in the first case he was giving this as an example of neglect, and that the same scenario happened yesterday with the Legislative Assembly, with the government of this province and that we are neglectful, I think it makes the point that you can have a very good landlord, a very responsible landlord, and sometimes things happen to these old buildings that are beyond your control. I think that very well illustrated the point we wanted to make about neglect and how one has to be very careful with criteria for neglect, because what Mr Mammoliti thought was neglect in one instance I am sure he would be loath to accuse the Legislative Assembly of in another.

The Chair: I remind members that we are speaking to section 14.

Mr Mammoliti: Very quickly, I take Ms Poole's suggestion with a grain of salt. I did some investigating and I think you are right, Ms Poole, in terms of the window. I was told that it was because of previous governments and the fact that nobody attended to this window that it fell. I went back and asked how many years and they said "a couple of years." I am just asking. I am not too sure which government it was at that time. I believe it was a Liberal government. Perhaps there was some neglect there, Ms Poole.

The Chair: Interesting.

Ms Poole: Just on the point of neglect and putting the case for the previous government, it was the previous government that actually had the standing committee on the Legislative Assembly look at restoration of this building for that very reason. In fact, it was some NDP actions on that committee that delayed the whole matter, so I am afraid --

Mr Mammoliti: What does this have to do with subsection 14(1)?

Ms Poole: I was just responding to Mr Mammoliti, Mr Chair. That is what it has to do with subsection 14(1).

The Chair: If anything is in order this morning, this is.

Ms Poole: That is it, Mr Chair.

The Chair: Thank you. Are there further questions or comments on Ms Poole's amendment to subsection 14(1)? If not, shall the Liberal amendment, Ms Poole's amendment to subsection 14(1), carry?

Mr Turnbull: Recorded vote, Mr Chairman.

The committee divided on Ms Poole's motion, which was negatived on the following vote:

Ayes -- 3

Daigeler, Poole, Turnbull.

Nays -- 5

Harrington, Lessard, Mammoliti, Morrow, Owens.

Ms Poole: On a point of order, Mr Chairman: Since the Liberal amendment to subsection 14(2) was in direct relation to the amendment to subsection 14(1), which has failed, we will withdraw the amendment to subsection 14(2).

The Chair: Mr Turnbull moves that subsection 14(1) of the bill be struck out and the following substituted:

"14(1) The landlord may base an application on an extraordinary increase in operating costs for hydro, heating, municipal taxes, garbage tippage fees, water and sewage fees, insurance, cablevision, superintendent's salary and rent, maintenance or any provincial and federal taxes the landlord must pay in order to maintain the residential complex."

Do you wish to comment on this amendment?

Mr Turnbull: Quite clearly it is in recognition of the fact that we want to make sure that buildings are maintained for tenants and that the landlord has sufficient funds to be able to do this, recognizing that the list of items I read into the record is outside of the control of the landlord, the majority of them being amounts of money mandated by various levels of government or such people as hydro that the landlord should pay.

We do not believe the present rolling three-year average is sufficient to reflect such costs as Ontario Hydro's going up by close to 12% this year. We know that tippage fees are going up by extraordinary amounts. When you use a rolling average, the reflection of those numbers is a very trailing indicator of those costs. So this amendment tries to recognize the fact that these are costs outside the landlord's control and tries to give him sufficient funds to make sure he can maintain the building for the tenants to have a clean and safe house.

The Chair: Further questions or comments?

Ms Poole: The one I would like to discuss is cablevision. This was previously included in extraordinary operating costs under the Residential Rent Review Act. Cable costs have gone up fairly significantly over the last years. One of the problems I have with it being excluded now is that I am afraid landlords will choose to deny cable to tenants. Some people may say this is not possible, but in fact it is true. I have one building in my riding, 500 Duplex Avenue, where I have been battling the landlord for years over the fact that he has refused to allow the cable company to come into the building. I have approximately 600 tenants in that building who have not had cable because of this situation.

If a landlord right now has cable in the building and wishes to have it removed, that would be within his or her right. He would have to make a corresponding decrease in the rent, but in many of these cases the rent was quite nominal. In fact, historically, tenants were paying about $3 a month, which I think you can recognize was a very low cost. The landlord could just deduct that amount from the rent and then refuse to allow Rogers Cable or any other cable company to put the cable in. That is one fear I have about this, that if landlords have a significant increase in costs and can get no recognition for it, they may well decide to just remove it from the building.

I think you will also find, with reference to things like hydro, that landlords may well be putting tenant units on individual meters. You will have all sorts of things happening like this, which I do not think was in the spirit of the legislation and certainly was not anticipated. It may well create problems with some things like cablevision not being included.

The Chair: Further questions or comments on the Conservative motion regarding section 14(1)?

Mr Owens: Just a quick question to the parliamentary assistant: If cablevision was included initially, why was it withdrawn?

Ms Harrington: That is exactly what I was thinking. As you may know, there are four categories that are left as extraordinary operating costs that we feel are beyond the landlord's control. Those are hydro, which we just mentioned, heating, municipal taxes and water. As Mr Owens mentioned, cablevision was in Bill 4. We have not included it here for a couple of reasons. We want to simplify this list as much as possible.

I wonder if you could comment briefly on cablevision.

Mr Harcourt: There has been a trend across the province for landlords to withdraw cablevision and put it on a tenant-pay basis, one of the reasons being because of the pay-TV type of cablevision, where tenants can opt for different options depending on what the individuals want. That has been happening right across the province. In fact, there are not a lot of buildings where there is a bulk cablevision agreement at the present time.


Ms Poole: I was interested in the parliamentary assistant's comment about leaving in the ones which were beyond the control of the landlord. I certainly agree that things like hydro and heating and municipal taxes are instances of that. However, I really do not see where cablevision is within the control of the landlord. Insurance is another instance where it is totally beyond the landlord's control. I agree with you that salary and rent are within the landlord's control, so that is probably an inappropriate one to retain on the list.

I really have difficulty with the premise that the reason all the others were removed was just to make the list simple. I would think that in addition to its being simple, you would want the list to be fair and to cover all the necessary extraordinary costs. In the instance of things such as insurance and cablevision, certainly that is true. One of the problems with things such as cablevision is that it relies on the consent of the landlord to have it in the building. I have never seen landlord-tenant relationships at such an all-time low and I know I have heard a number of landlords threatening that if they are going to be miserable, they are going to make sure everybody is miserable. It is not an attitude I approve of but, that being said, it is a reality and I think this kind of omission is going to put the cat among the pigeons. We may find that tenants are the ones who are going to end up suffering.

We also want to make sure landlords have adequate insurance on their buildings. As I mentioned, that is one area where it is totally beyond the landlord's control. They can obviously shop around for the best insurance rate, but that is the only way in which it is within their control. That has been removed and I think that is a legitimate cost. You would want to ensure that buildings are properly insured.

Ms Harrington: I would comment briefly. Ms Poole did mention that with regard to insurance rates the landlord can shop around. That is the difference with something like hydro or municipal taxes, which is something you cannot decide yes or no to. The other costs we are mentioning are reflected in the building operating cost index, which is part of the guideline. The guideline would go up and down reflecting what the costs to the landlord are.

Mr Owens: Just on Ms Poole's comments, if I understood the response to my question from the parliamentary assistant and the ministry staff person with respect to cablevision, it is that the billing is individualized now rather than in bulk.

Ms Poole: Not in all cases.

Mr Owens: In terms of looking at billings across the province, was there a determination made as to how many buildings are still involved in bulk billing before the decision was made to withdraw the section?

Mr Harcourt: We do not have an exact number. The trend across the province has been towards a tenant-pay basis and more and more bulk agreements are being discontinued.

The Chair: Further questions or comments on Mr Turnbull's motion on subsection 14(1)? If not, shall Mr Turnbull's motion carry?

Mr Turnbull: A recorded vote, please.

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

Ayes -- 3

Daigeler, Poole, Turnbull.

Nays -- 5

Abel, Harrington, Lessard, Morrow, Owens.

Clerk of the Committee: Are you going to pass subsection 14(1)?

The Chair: We passed subsection 14(1) before.

Clerk of the Committee: You just did Mr Turnbull's amendment.

The Chair: Right, then we are on subsection 14(1) itself. Questions, comments? If not, shall subsection 14(1) carry? Carried.

On subsection 14(2), we have a government and a Conservative amendment. Ms Poole has withdrawn the Liberal amendment. Ms Harrington, would you like to give us an explanation of the government's change?

Ms Harrington: Subsection 14(2) sets out a test for determining whether the increase in one of the specified cost categories is extraordinary. There must be an increase of 50% or more from the amount for that cost category in the rent control index. The amount is expressed as a percentage representing the three-year moving average of cost changes in that category. For example, if a heating cost increase of 6% is recognized in the rent control index, a landlord's heating costs must have increased by 9% or more to qualify for an extraordinary operating cost increase. This is a government amendment to clarify that the increase that was measured as a 50% change in the percentage not be a 50% change in the actual cost.

The Chair: Mr Turnbull, would you like to put your motion?

Mr Turnbull: We are going to withdraw ours because it was ancillary to the previous amendment.

The Chair: Then we are just dealing with the government amendment to subsection 14(2). Shall subsection 14(2) carry? Carried.

Subsection 14(3).

Ms Harrington: Subsection 14(3) provides, "The rent officer" -- in making findings about extraordinary operating costs -- "shall not consider any potion of an increase in municipal taxes that results from non-compliance with a work order." This is a government amendment to provide the same provision with respect to extraordinary operating cost increases in municipal taxes that result from non-compliance with a work order as was found in the Residential Rent Regulation Act -- I am sorry, the Residential Rent Regulation Amendment Act of 1991.

Ms Poole: As the parliamentary assistant just corrected herself, this was in Bill 4. The reason it was in Bill 4 is because there was a Liberal amendment to include it. This takes care of the scenario where a landlord does not do the necessary repairs in his or her building and correspondingly the municipality comes in, issues a work order, and the municipality ends up doing the work because the landlord refuses to obey the terms of the work order. Until this amendment was put into Bill 4, that would have resulted in the city putting the additional cost on the taxes. The landlord would then claim an extraordinary operating cost and be able to put through a rent increase to the tenants because he had not done his work and it had to go on the taxes. This was to take care of that situation.

It is certainly the Liberal Party's position that this amendment should be in the current legislation and we will be supporting it.

Mr Owens: Are you patting yourself on the back?

Ms Harrington: I would like to thank the Liberal Party for putting that forward last spring. I remember that was a very important part to amend and here we have it again.

The Chair: Further questions, comments or applause?

Mr Owens: Let the record show applause from the government side.

Ms Poole: I think Mr Owens felt the Liberal Party was congratulating itself on this. I will just tell you, if we do not, nobody else in this room will.

The Chair: Shall subsection 14(3) carry? Carried.


Members will note we are moving on to a Liberal amendment to add section 14.1. This is a little confusing because it is actually a new section in the numbering that we are discussing. It is section 14.1.

Ms Poole moves that the bill be amended by adding the following section:

"14.1(1) The landlord may base an application on an increase in financing costs for the residential complex of at least 2%.

"(2) The rent officer shall not consider an application under this section unless the financing on which the increase is based has been negotiated at arm's length."

Ms Poole: This amendment is being put forward with another one later in the legislation where if there is a decrease in mortgage rates, that decrease will be passed on to the tenants. Again, in a situation where there is an expense beyond a landlord's control, such as an arm's-length mortgage increase or decrease, that should either be allowed to the landlord or passed on to the tenant, depending on the particular situation. This was something that was in Bill 4. The government had already accepted in Bill 4 that interest rate changes, if at arm's length, were a reasonable thing to include. I am sure it was just an oversight by the government that it was not included in this legislation.

The second part of this particular amendment says that the matter has to be at arm's length. This of course is to prevent the scenario where a landlord would have his mother, father or a partner in another company make a loan or renew the mortgage for the landlord at a greatly enhanced rate. We certainly do not want that kind of scenario to occur. We feel this is a most reasonable amendment. Legislative counsel can correct me if I am wrong, but it is later on, around section 25 or something, where we deal with the decreases in interest rates and how that should be passed on to tenants. As the legislation now stands, if a landlord's mortgage costs are reduced, that is not passed on to tenants, and if a landlord's mortgage costs increase, that is not passed on to tenants in the way of a rent increase. I think this is a very balanced amendment. The government should consider accepting it.

The Chair: Further questions or comments? If there are no other comments, Ms Harrington will reply.

Ms Harrington: The minister had said very clearly yesterday that we will not be passing any financing costs or costs of buying the building through to the tenants. The other point I want to make about this suggestion is that if the government were to track the interest rates with regard to both increases and decreases, as Ms Poole has said, we would have to pass through, if this amendment went through, any increase over 2% or any decrease below 2%. This certainly would have to have a tracking mechanism and it would also add a lot of complexity if the government had to do this.

Ms Poole: There is absolutely no reason why any type of tracking would have to occur. It is a decrease or decrease in the landlord's mortgage rate by 2%. There need be no overall tracking of what the mortgage rates are at the time. It depends on what mortgage rate the landlord had on the building previously. I think this is extremely shortsighted. We are now in a scenario, with interest rates falling dramatically over the last couple of years, where it would be to the benefit of tenants. On the other hand, I think in situations where the landlord has had an increase in the mortgage rates it is fair that it be passed on.

I have a question for the parliamentary assistant. In Bill 4, interest rate increases or reductions were included in the legislation. At the time the government had made it clear that it did not want financing costs passed on to the tenants. That aspect was removed in Bill 4. It did not appear because the government had stated that principle. Yet at the same time, in Bill 4 the government had put in a provision about interest rates. They said it was fair that they do so. What has happened in the last year, that the government has reversed itself on this position? It does not make any sense whatsoever.

Ms Harrington: We have examined the long term further. Bill 4 obviously was an interim piece of legislation and what we are looking at was how this legislation, Bill 121, will deal with the whole situation for the years ahead, something that is workable. We do not believe that the changes and fluctuations of interest rates over the life of the building is going to be a substantial factor that should be factored into the rent.

Ms Poole: Mrs Harrington, I cannot honestly believe that you feel this has no effect on the overall lifespan of the building. We all lived through the early 1980s where the interest rates went up to 21%, 22% and 24%. It was absolutely devastating. People lost their homes. People lost their buildings over it. It can have a very dramatic impact. On the other hand, I cannot see how you can argue that if an interest rate goes from 15% down to 9% over a three-year period, those tenants should not be entitled to have that reduction passed on to them. This is totally asinine if the government says it will not support this. It is most reasonable and in fact substantiates their own policy. It does not add one whit of complexity to the legislation. It is very simple. It worked well under the RRRA. It worked well under Bill 4. I think it is just shortsighted folly if you are not going to support this.

Mr Turnbull: We are going to bring our own amendment, so I will speak more in detail about that, but I have to point out that it is exceedingly easy to track interest rates. You need absolutely no expertise at all. We have recognized that many of the things the government is doing at the moment demonstrate it has no expertise, but it does not need any expertise to track interest rates. They are published every week on rate sheets.

Ms Harrington: We are talking about an individual building.

Mr Turnbull: Quite frankly, you want it to be an arm's-length number and there is a very small span between one financial institution and another as to what the interest rate is. To suggest it adds a level of complexity is completely misleading to the people who are watching this program. There are rate sheets published by all the financial organizations every single week. I have heard for years NDP members, both at the federal and provincial level, whining and snivelling about interest rates, and now to suggest it does not make any difference is absolutely sticking your head in the sand.

Mr Daigeler: Ms Poole asked a question that I was going to ask, but I was not very satisfied with the answer that was given by the parliamentary assistant. Why was it in Bill 4 and why is it withdrawn now? If it made sense to the government at the time of putting forward Bill 4, why does it no longer make sense to the government? I think that is the key question. Obviously, it was something your government supported then. What really has brought about the change? I did not hear any satisfactory answer to that, so perhaps the parliamentary assistant could give it another try.

Ms Harrington: What I stated first was that this is long-term. Mr Turnbull, I believe, or Ms Poole mentioned buying a home, relating it to that same situation. When you buy a home, you are taking that responsibility if the rates go up or if they go down in the future. As an owner, that is your financial responsibility. The owners of apartment buildings are in the same category. They are responsible for the financing of the building. This government believes, after re-examination, as Mr Daigeler has said, that the financial responsibility of the buying of the building and the financing of that building are the owner's responsibility and not the tenants'. If I am not explaining it clearly enough with regard to the complexity issue, I will ask my assistant if he might be of help on that particular issue.


Mr Daigeler: Perhaps I could just again point out that I think you are explaining why you are holding the position you are holding right now, but what I asked for is why you changed your mind. In Bill 4, why did you think it made sense and include it and now you think it no longer makes any sense and you have withdrawn it? My question really is, why did you think it was good for Bill 4?

Ms Harrington: Actually, it was a year ago we started with Bill 4. It seems such ages ago. The comment I would like to make on that is that there has been a lot of water under the bridge. In other words, we have had a lot of consultation and have talked to a lot of people. We have reviewed a lot of papers about what should be passed through to tenants and what should be landlords' responsibilities. After speaking with these people and looking at the submissions, we have re-evaluated the position we held with Bill 4. I would like to see if my assistant can explain with regard to the complexity of the over 2% with the financing costs.

Mr Harcourt: Just in terms of the complexity, if you want to track increased financing costs, there is also a necessity to track decreased financing costs. The problem is that it means tracking each financing instrument on a building-by-building basis. Often within an individual building you will have two, three or even more financing instruments. Obviously, we cannot expect a landlord to come to rent control when there is a decrease in financing costs; therefore, there is a need for the government to track all of those.

In terms of the previous legislation, there was also the complexity in terms of determining when arm's-length transactions were held and just tracking the financing generally. That was one of the least understood aspects of the Residential Rent Regulation Act.

Mr Owens: I want to make a comment on Mr Turnbull's statement with respect to interest rates and NDP federal and provincial members snivelling and whining about interest rates. I am just curious if his friends in the business community who have been forced out of business by interest rates are also called whiners and snivellers as well. I think that kind of conduct and that kind of language is totally inappropriate and certainly degrades the dignity of this committee. I would request that the member restrain himself, although I know it is quite difficult at times to act like a member of provincial Parliament, but I suggest he try and do that.

The Chair: Direct the comments directly to section 14.1. Thank you, Mr Owens.

Ms Poole: I would like to go back to Ms Harrington's comments about the difference between a person who owns a house and a person who owns a building and that this government has decided in its wisdom, or lack thereof, that if you own a building you should not be able to pass through interest rate changes. Perhaps it would help Ms Harrington if I talked a bit about the philosophy of rent review in this province over the last 16 years, why it was brought in and what the underpinning has been.

When rent review was brought in, it was to prevent rent gouging. It was a consumer protection piece of legislation. However, there was a recognition that as soon as you regulate the private market in quite a strong way there should be an allowance for cost pass-through, for legitimate costs to be passed through. There was also a recognition and an understanding that if a landlord had legitimate costs, whether they be spent in repairing the building, whether they be interest rate changes, whether they be in things such as hydro and water increases, those should be passed on and allowed because you are imposing a level of regulation on a market.

Now what has changed is that the NDP has said consistently that it did not believe there should be any cost pass-through. Well, the government has changed its mind in at least two areas. The government has said yes, there should now be cost pass-through for major repairs and renovations and in capital areas. This legislation is quite different from their campaign promise in that regard. They have also said that extraordinary operating costs such as hydro and heat, water and taxes should be passed through. But they have not given any logical reason why something like interest rates, which are totally beyond the control of a landlord, should not be reflected, whether there be an increase or a decrease.

When this government talks about complexity in this day of computers, I just have to laugh. That was the reason they said they were not going to put costs no longer borne into the legislation. It was too complex. They could not figure it out. When I brought up with them the fact that we have computers these days, so maybe it could be done, it seemed to quite surprise them. But lo and behold, in spite of its complexity, the government has now introduced an amendment to this legislation to have costs no longer borne.

Maybe they should take a second look at the complexity they have cited for this particular section and see whether there could be a change of heart in this regard, because quite frankly their arguments do not hold water. They put it in under Bill 4. They removed it under this legislation. I think they should re-examine their position.

Mr Turnbull: As Ms Poole has correctly pointed out, when the Conservatives brought in rent review to protect tenants because there was an unusually large increase in rents at that time, they recognized the principle of cost pass-through. In fact, cost pass-through is something that normally occurs in any free market enterprise. Where your costs go up you pass them through to the extent that you have the ability to. There may be certain years when you cannot fully reflect your increased costs, but that is offset by other years where you can. The market will regulate it. The Conservative legislation, and indeed the Liberal legislation which followed it, recognized that principle because clearly the people who went into these ventures went in with those awful words "profit motive." On this side of the table it still is not a dirty word. People can make a profit only if they can reflect their costs.

I am curious that last week the government went into an arrangement with Bombardier where the government is going to participate to the extent of 45% in the purchase of de Havilland, but the government's deal is that is going to pick up all the guarantees for losses for the next three or four years. The cost to the taxpayer could be something in the region of $300 million.

Mr Morrow: On a point of order, Mr Chair: It is really nice that the third party is advertising that we are doing a fantastic job for the province, but can we please stick to the section?


Mr Turnbull: With this example, Mr Chair, I am illustrating the effect of losses. It is directly related to this section. Here we have a government that says, "Okay, we're going to guarantee the losses," in other words, because it does not feel it can pass those losses through in the cost of the aircraft. It ends up with the taxpayers having to pay a bill which they really should not.

Nevertheless, here they want private landlords to pay if there is an increase. By the same token, reflecting on Ms Poole's amendment, if interest rates go down, as they are at the moment, this is a government which says, "No, we don't believe we should have those costs reduced." I am sure private landlords are pleased about that aspect of things, but there is complete inconsistency in what you are doing in this government.

You do not understand the way cost pass-throughs work and why they were put in place. Unless you have a full cost pass-through you cannot have any increase in the value of the building, and therefore you cannot have capital appreciation and there is no profit for the landlord. If you think people are going to invest in this province when you bring in regulations which disallow profit, I think the Premier is wasting his $50,000 television time and you should have a caucus retreat and rethink all of your policies, because you are not going to get the province working.


Mr Turnbull: We have, and we distributed them.

Ms Harrington: I would like to thank Mr Turnbull for expressing his opinions so clearly as to how he feels the system should work. Ms Poole mentioned the campaigning of this government with regard to protecting tenants in this province, and certainly we did that very strongly. What we are committed to is stability and security for tenants, and I think the tenants realize that. We have worked with tenants' groups. We have seen them here at our meetings the whole year long.

We believe the money paid out by tenants should go to the costs of the building: the capital costs and, as Ms Poole said, the operating costs. We have allowed extraordinary operating costs so that when things happen beyond the landlords' control, the tenants' dollars are involved in paying for that. But what we are not allowing -- and let me make this extremely clear, and the minister said it very clearly yesterday -- is tenants being responsible for the purchase price of that building. We believe that is the landlord's responsibility. He is the one who decides to buy that building, and the costs of financing that building are his.

In other words, we do not have a market system, as Mr Turnbull would like, where real estate prices go up because costs escalate. This has happened in Ontario over the last 15 years, and this is the cause of a lot of the problems we have today: the escalating cost of land and buildings. With regard to tenants' homes, we do not want to see that escalation in the marketplace.

Mr Turnbull: With respect, I would just point out, and we have had expert testimony to this effect, that in point of fact the average increase in apartment values and average returns have underperformed all other investment vehicles. It is not a question of that being a root cause of the problems. We have people who invested in these properties, and you are saying, "We're not going to allow them to recoup the cost of their investment." It undermines the whole reason why anybody would want to go into private ownership. If you want to be very honest about it and say, "Look, we philosophically disapprove as a party of private ownership of apartment buildings," that is something I will disagree with you on, but at least I will give you credit for the fact that you are being intellectually honest about it.

But do not expect private people to invest in properties unless they see the potential of profit. Part of the profit component in any business -- I do not care whether it is running Ontario Hydro or building airplanes at de Havilland or what it is -- is that you must recoup your investment. There is no other way. That is the way business works.

Ms Harrington: Mr Turnbull, I think we started discussing this, you and I and probably the rest of the committee, about a year ago, the different approaches we had. I do not want to go into this in detail because we could go on and on for ever, but I do want to point out to everyone that running a building on an ongoing basis is certainly a business. We believe there should be a fair profit in it for the landlord. But it is in a way different from owning and running a commercial building or any other investment in this province in that we are dealing with people's homes. They need that security of tenure, of not having huge rent increases.

That is why the government is of course involved and that is why it was under the Conservative government in 1975, to try and give some stability to the marketplace. That is why this issue is a little different than a wide-open marketplace which you would like to see. This is protecting people, and that is why we are in this. We believe it is a business for the landlord and that he should he make a fair profit, but it should not be a market system where it can escalate.

Mr Turnbull: I know we disagree and we have had some vigorous discussions both in the committee and privately, some delightful discussions about this, but I am just pointing out that you cannot say this is simply a different type of situation. For someone going into any business, even if it is providing rental accommodation for people as compared to any other type of business, there still has to be a profit motivation. Unless you can recoup your cost of investment, you cannot have a business. I mean, you automatically get out of the business. It is a simple fact of life. It is a hard fact that they are learning in eastern Europe today, but nevertheless there has to be a recouping of your investment; otherwise people will not invest. It leads to the whole problem that people will not invest and will not build.

Now the government is spending approximately 75% to 100% more than the for-profit sector can build apartment buildings for. That is taxpayers' money, including tenants' tax money, being blown out of the window, and it is totally counterproductive.

Ms Harrington: I have one final comment, Mr Turnbull. Under the past legislation where there was pass-through for interest rates and financing charges, this was a guaranteed investment for the landlord that whenever the cost went up, he could automatically pass through. What we are saying now is that the investor or the landlord has to take that risk. He is responsible for what he buys.

Mr Turnbull: You see, this occurs normally in any controlled market. Look at milk marketing boards. Yes, it is a guaranteed investment. It may not be the biggest rate of return, but it is guaranteed. If you are going to say you will pull out from under the landlords the guarantee element that at least their costs are going to be passed through, and at the same time you control the amount of upside they have, nobody on God's earth will invest. That applies to any business. This is Economics 101.

Ms Harrington: I think I stated very clearly that it is the investor's responsibility and that we are allowing a fair profit, and that is our position.

Mr Turnbull: But you are not. It is simply incorrect. If your costs go up, you do not have any control over it. If you think somebody is going to put $5 million into a building, cash -- because that is essentially what you are going to say, that the only way we should put it in is cash -- and then he is going to take the vagaries of the return, you are crazy. What they do is to invest and use leverage. Every business uses leverage to some extent, and it depends on the nature of the business how great that leverage is. It happens to be a fact of real estate that you tend to use more leverage than other businesses, and to the extent that the cost of interest is out of your control, your ability to make profits is dictated by those costs, if you are controlled at the other end.

You have to have a pass-through. It has always been recognized by government that you must have a pass-through mechanism. Even socialist governments have recognized that there has to be that element. You cannot just say, "These people are making a profit out of the people's homes." It is important that we provide clean, safe housing for people at the best possible price. The only way you can do it is by getting the private sector to invest. You are guaranteeing that not only the private sector in rental housing but all of the private sector will be absolutely spooked, as it is today, by the activities of this government, because on the one hand you are saying, "We want confidence from business," but at the same time you are saying, "We're ignoring the plain facts of economics."


Ms Harrington: Mr Turnbull, just one final comment here, I hope. The private sector is in the midst of a recession in Ontario and certainly we understand the problems we are facing.

Mr Turnbull: It is a worldwide problem.

Ms Harrington: This government has now allowed landlords to have 6% in this coming year, 1992, and a pass-through of up to 9%. How many tenants can afford that? How many tenants can have an increase in their income of 6% or 9% in this year?

Ms Poole: On a point of order, Mr Chair: Ms Harrington has just said that this government --

The Chair: A point of order?

Ms Poole: Yes, on a point of order, and it is a very important correction, Mr Chair -- that this government has allowed the landlords 6% and also up to 9% for cost pass-through. That should be up to 3%.

The Chair: It is not a point of order, it is a point of information.

Ms Poole: Which I am sure you are grateful to receive.

Ms Harrington: Yes, I am sorry, for a total of 9%.

Mr Turnbull: And built into that number is 2% for capital investment, so in point of fact it is 4%, yet we have hydro rates, which the government controls to great extent, going up by close to 12%, we have tax increases augured in Metro of 15%, so please do not tell me how generous you have been. You have not, because you have been absolutely reluctant to control the government-controlled numbers, yet at the same time --

Mr B. Ward: On a point of order, Mr Chair: On comments made perhaps the parliamentary assistant can clarify, but is there not a pass-through position for extraordinary increases in municipal taxes and hydro?

The Chair: Order, Mr Ward.

Mr B. Ward: That is a point of clarification, I guess.

The Chair: Yes, which does not exist.

Mr Turnbull: The fact is that the rolling formula for the reflection of those costs does not adequately, in the year it is incurred, reflect it. That is a great problem when you have significant increases, particularly from governmental agencies, and you have to wait for the rolling average -- you do not have the money when you need it. If you are going bankrupt it is not going to help you, the fact that you are going to get the money reflected in two years' time.

Ms Poole: The parliamentary assistant, I guess some time ago now, did say that this government believed that tenants should pay the costs related to the building, such as capital, increases in capital and extraordinary operating expenses, but that it did not believe that tenants should be financing the building.

This is quite different than what this NDP government promised in the election campaign. This government promised that there would be one rent increase per year geared to inflation and nothing else, no special bonuses for capital or financing. So this is very different from what you promised. Yet you have now reconsidered your position -- to be kind I shall phrase it that way -- and have decided that capital and extraordinary operating expenses should be allowed cost pass-through in this act.

The question I have for you, Ms Harrington, is quite direct. In the election campaign you were very clear that financing costs of any type would not be passed on. Why did your government put it in Bill 4 that interest rates could be passed on?

Ms Harrington: We are actually not discussing Bill 4. I do not really think the question is particularly appropriate. To tell you the truth, we were discussing this about 15 minutes ago, and I said, going back a whole year, so much has happened, we have talked to so many people, I cannot actually remember. That is the truth. But if we want to go back into history as to why something was in Bill 4, I just do not think it is appropriate, because we are trying to deal with Bill 121.

The Chair: Ms Poole, I would try to bring the members back to speaking directly to section 14.1 as much as possible. I realize that all these factors have some relevance, but coming back to section 14.1 more directly would be helpful to the committee.

Ms Poole: Yes, Mr Chair. Section 14.1 talks about allowing for interest rate changes up to 2% if there is that change in financing costs, and it is very, very relevant to what happened in Bill 4, because in Bill 4 that is exactly what was allowed, an increase in financing costs related to interest rates. The government accepted it as a legitimate expense. So I think it is not only quite in order but quite relevant and we need to know why the government decided it was appropriate to put interest rate relief into Bill 4 and now it has revoked it for Bill 121. Was it because they did not understand that interest rates had something to do with financing? I certainly think from their lack of understanding on economic issues this is quite a distinct possibility.

Ms Harrington: I think that is a quite unfair comment. But I just would like to say that various things were changed between Bill 4 and Bill 121 because of the consultations during the past half-year.

Ms Poole: With reference to the consultations, could I please ask the parliamentary assistant, in her consultations and in the minister's consultations, what groups or individuals came forward and said that interest rate increases or reductions should not be considered? I would specifically like you to address those points.

Ms Harrington: I believe we had several hundred submissions, and I cannot tell you exactly which ones at this time unless we research it. But I think it is fair to say that this whole process of committee work is a process of listening to people and evaluating things and that is what the government is here for: with the help of our advisers, our staff people, to look at what is the best way of doing things, following our basic principles. I have no problem in saying this was a good decision and this is the way we have decided it should be, and it is our role to do that.

Ms Poole: As far as this government's following its basic principles is concerned, after I have seen it change its mind, waffle and betray people on the promises it made in the election, I do not think this government has principles. So I think that is a very moot point.

Ms Harrington: We would rather cooperate on this committee. We have had a history, I think, of good cooperation over the last year among the people who have been on the committee for a long time, and I believe the reason the opposition is here is to try to improve this legislation. I would hope that would be your attitude.

The Acting Chair (Mr Daigeler): Do you still want to continue, Ms Poole?


Ms Poole: Yes. I certainly agree with the parliamentary assistant's attitude about cooperation, and on a number of occasions I think I have displayed that. But I get very antagonistic, to say the least, when we are dealing with a piece of legislation which makes a lot of sense.

If the parliamentary assistant wants to go back to the tenants and explain to them why in this time of very low interest rates they are not going to be able to ask for reductions because the government has decided it is not going to consider interest rate changes, and if she is going to say to business, to which the government has promised greater cooperation and to listen, "We are not going to allow you to pass on interest rate changes," legitimate ones, arm's-length ones, then I think the government has a lot of explaining to do.

It is extremely frustrating when we cannot get a legitimate answer as to why this government campaigned saying it would not allow it, did allow it on an interim piece of legislation and now with the final legislation has disallowed it and will not give us an explanation of why. It is very frustrating.

Mrs Marland: I too share the concerns being expressed here about not getting answers to questions. The committee process with new legislation usually involves two parts. The first part is when the public is invited to come to committee and comment on proposed new legislation. It is at the point of where the legislation has in fact received first and second reading. It is legislation. It is still being proposed and possibly amended.

Where the process is breaking down on this bill we are discussing this morning is that this committee did hold public hearings. I was not a member of the committee at the time, but the committee did hold public hearings. I do not know how many of the members sitting on the committee this morning were part of the public hearing process, but I think the process becomes a tremendous sham by any government when there are public hearings held and the public comes to those hearings and expresses areas of concern with a piece of legislation.

The Acting Chair (Mr Daigeler): Are you sure you are addressing section 14.1?

Mrs Marland: I certainly am. There are many sections of this bill, including section 14.1, with which the public had a great deal of concern. The fact that this socialist government decides to ignore the input of the public through those public hearings means that we might as well forget about the committee process and especially that part of the committee process where we invite the public to come and tell us what its concerns are, because with a committee made up of a majority of government members, we the opposition, the Liberal Party and ourselves as Conservatives, have no possible chance of making any changes because the balance of votes naturally rests with the government.

In this case with section 14.1 we have a government which broadcasts that it wants to hear from the public. "Come and tell us your concerns." Now when we are trying to get passed an amendment which addresses one of the concerns from the public, not only are we not getting any support from the government for that amendment, we are not even getting answers to some of the questions. Yet this socialist government continues to ask the public for input.

I do not have it with me at the moment, but I will bring to the committee this afternoon an almost full-page ad where the government is asking the public for opinions. The ad also refers to what they have done to help the public. One of the referral categories in this ad happens to be rent control legislation. Under section 14.1, which we are dealing with now, we have an example of a very serious matter for both property owners and tenants. Where it becomes a serious matter for the tenants, for example, is when we ultimately lose the existing housing stock we have in rental accommodation.

Where we have a government ideology which promotes government ownership of housing stock, which obviously is what this bill will result in, because the private sector will not be able to afford to own rental accommodation, if this government chooses not to support section 14.1 as at least some area of help that can be given to property owners, the property owners will not exist in the private sector.

I happen to know from a conversation I had yesterday with a journalist on a prominent Toronto newspaper that a staff person at the Ministry of Housing was asked by this journalist: When the government takes over all of these buildings as they go on the market and there is nobody else who is able to afford to own them or maintain them, what will happen in the long term?

Of course there was no direct answer to that question, but there was a direct answer to the next question which was: In the non-profit sector where we have the government subsidizing non-profit units to the tune of $27,000 a unit in this city when you could rent a luxury apartment for at least $12,000, if you want to talk about luxury accommodation, why is the government building these non-profit units at such a heavy subsidy of $27,000 a unit rather than just going out and renting accommodation at maybe $10,000 or $12,000 a year per unit? The answer was, "In 35 years we will own those units." That is somebody speaking for this Ministry of Housing.

This same Ministry of Housing will not support this Liberal amendment. I am quite sure no matter how well we argue it, they will also not support our Conservative amendment, which is the one that follows this, because they are bound and determined to put the private sector out of the housing business. That is what it is all about.

When a spokesperson for the Ministry of Housing says we are subsidizing non-profit units at $27,000 a unit, even though it is not fair to the taxpayers of this province, nor I might add to the people who pay their own rents at $600, $700, $800, $1,200 a month, this government is saying to the people of Ontario, "We should be in the housing business." If that is not what they are saying, then we have got to get some answers to the questions being asked here this morning.

Why is the Minister of Housing doing everything to put the private sector out of business if he is not prepared to pick up that accommodation when it becomes available through bankruptcies? This is not something we are talking about five years, ten years from now; we are talking about the number of property owners who have gone bankrupt in the last two years. Maybe I should ask the Minister of Housing, since you would think he would care, do you have any idea how many property owners have gone bankrupt in rental accommodation in the last two years?


Ms Harrington: Have you finished your comments? May I reply to many of your comments?

Mrs Marland: I am asking that one question at this point, Ms Harrington.

Mr Abel: On a point of order, Mr Chairman: I understand you are trying to exercise a certain element of latitude here, but Mrs Marland has been talking for the last 10 minutes and we are all patiently waiting for her to make some reference to the article we are discussing, and she has yet to do so. I would ask that you get her back on track and speak on the section before us.

Mr Turnbull: On that same point of order, Mr Chairman: I think it is quite clear she is talking to the impact of not accepting this amendment. What Mrs Marland is suggesting is very germane to this amendment.

Mr Abel: I beg to differ. Her comments certainly are not germane.

The Chair: I have been listening intently to Mrs Marland and offering a great deal of latitude, I believe, but her comments in my view have been germane to the subject, although she is stretching it at some points. I would ask Mrs Marland when she is discussing it to more directly discuss 14.1, but I understand that this is a far-reaching issue.

Ms Harrington: Mrs Marland asked exactly how many either buildings or units or land owners have gone bankrupt, and certainly I do not have that figure right with me. I think everyone in Ontario will know that many businesses are in very difficult situations. I am sure that is reflected in the landlord business as well as every other business across this province during the recession. To interpret any further than that the reasons for such, one cannot do. One cannot say exactly why.

I would like to comment on some of the other points Mrs Marland has brought forward.

First of all, this government does recognize and has stated all along during the past year that the private rental market in Ontario is a very important part of the affordable housing supply, and as such we value it and we believe it should be making a fair profit, as I have said.

She also commented that this bill, or rent review or rent control, is being consulted on at this time with regard to an advertisement. This copy of the advertisement lists several, up to 10 or 12, different bills and items that are being consulted on with the public at this time, and rent control is not one of them because we have dealt with that during the past year, at extreme length, opening up the process to all tenants, landlords and any interested group. The time has come when we have to make those decisions.

The most important thing I believe Mrs Marland referred to was that she said, "The public consultation process is a sham" -- or has been a sham -- "in this committee work." I would like to say, very much to the contrary, that what this exact amendment we are dealing with, this section of the bill the government is proposing at this time, is a direct result of consultations with the public, and I would like to explain that to Mrs Marland.

In the green paper we put out late last spring, we omitted the interest rates being part of extraordinary operating costs, which had been in Bill 4, and we waited. We waited to hear what the private sector would comment on whether or not there should be a tracking and an adjustment for interest rates. Because of the results of that discussion after Bill 4 was put forward to the public across this province, I put forward to you, Mrs Marland, that why, after public consultation, it is not in the government's offer, why interest rate changes are not part of the pass-through. I would like to explain that very clearly to you.

Mrs Marland: When Ms Harrington says that, it is really interesting to hear her contradict herself. She says the reason interest rates are not here is because that is what the public asked for, through consultations.

Ms Harrington: No, not exactly.

Mrs Marland: Would you like to say it again?

Ms Harrington: I wanted to point out to you that the green paper was put out late last spring and the public consultation process after that was to find out what the public thought with regard to the many issues raised in the green paper, and also with regard to changes in Bill 4 to make it into long-term legislation. What I am telling you is that we waited to see if there was going to be private sector demand for interest rates to be included here. We wanted to discuss it. We wanted to hear what people thought. During that process we found it was not something the people with whom we consulted felt strongly enough that it should be in, or remain in, as it was in Bill 4.

Mrs Marland: Okay, so you are saying that the people with whom you consulted did not think interest rates should be included in the next piece of legislation?

Ms Harrington: I cannot tell you the exact names or dates or places with regard to the consultation. What I am telling you is a general overall picture of putting out the consultation paper and waiting and getting response to it.

Mrs Marland: I think it is great that you and I are so much on the same wavelength that you anticipated my next question. I had not yet asked you who the groups were you consulted with, but you answered, which I appreciated, Margaret.

Ms Harrington: Thank you.

Mrs Marland: The thing is that I do not think anybody can come into this committee and say "the groups we have consulted with" and then not be able to tell us who they are. I am sorry.

Ms Harrington: We have a list of hundreds of people.

Mr Abel: There are 150 presentations.

Mrs Marland: I do not expect you to have those names with you at this point, but if the ministry's reason for not including interest rates in this section 14.1 we are dealing with, if you are using the argument that you put out this green paper and asked the public and you did not hear back from the private sector that it was indeed something it wanted, that statement on its own is fair enough.

But then you went on to say "those groups we consulted with." I think that in fairness to the people of this province, we are entitled to know which groups the Ministry of Housing consulted with. I do not expect you to have a list today, but I am asking the Ministry of Housing to provide us with a list of the people with whom it consulted on this particular matter. If you are talking about your controlled, closed-door public hearings on the green paper, then that will make it even more interesting because I know the member for Eglinton attempted to attend those public hearings on the green paper in her riding. I certainly attempted to attend the public hearings on the green paper in my --

Mr Abel: You were there for the whole time.

The Chair: Order, Mr Abel.

Mrs Marland: Mr Abel, perhaps you would let me finish my sentence.

Mr Abel: You said, "attempted." You were there.

The Chair: Mrs Marland has the floor.

Mrs Marland: You really are being a little intolerable. If you would let me complete my sentence instead of going off and foaming at the mouth in a fit, I will tell the rest of the committee what I did. Perhaps before I talk about those public meetings on the green paper, I should make sure that I am on the same subject the parliamentary assistant was referring to. When you said that you consulted with the public and that there were a number of groups you heard from, are they the groups that came to the public meetings that were advertised on the green paper or did the ministry consult with other groups apart from those meetings?


Ms Harrington: I would like to make that as clear as possible. There were just so many consultations I was involved in, but what I am speaking about here is that we sent out bulletins to all the tenants and to many others across the province last spring called Rent Control Options. People were asked to send back their opinion.

I would also like to let Mrs Marland know that when there were published advertisements in all the newspapers across Ontario, and I believe this was last June but I stand to be corrected, there was a huge volume of response and phone calls from everyone. I would not categorize whether they were tenants or landlords, but any interested person. It was the difficult job of the clerk of this committee to try to get as many of these people as possible to come to meetings, either here, televised, open, public, in this building or in other situations similarly open to the press and public across this province when we travelled. Those are the meetings I am referring to. I am not talking about any meetings particularly held here in Toronto. Some were open and some were by invitation, but I am talking about the process of this committee. That is certainly open and public.

The Chair: Perhaps to be helpful, we are speaking about section 14.1 directly. To be fair, I think I should restrict the discussion to what consultation occurred regarding this particular section rather than the entire consultation process. For the purposes of dealing with section 14.1, I think it is in order to discuss it, but we should discuss the consultation revolving around this particular issue.

Ms Poole: Mr Chairman, on a particular point.

The Chair: Yes?

Ms Poole: If I could just add a further request to what Mrs Marland has asked Ms Harrington, not only do we want a list of those parties you consulted on the interest rate changes, but we would like a list of those who supported including it in the legislation and those who did not. We would like very specifically this section 14.1 elucidated, in a list of those who did support interest rate changes being in, the names of the groups and whether they supported it or not.

Ms Harrington: In response to asking for a list of who and on which side they came down, I am not entirely sure that is appropriate because every member of the committee has everything we heard and all the submissions given in writing. Every caucus, I am sure, has all the submissions on file. To ask our research staff to go back through every one of them -- I know there was a summary put out by our research staff on various issues at the end of the consultation, so it might be appropriate if we got hold of that. But this is something every member on this committee would have access to already.

The point I want to make is that we have gone through all this. We have the summary, and for the people of Ontario it is time that we, with all this in mind, make some decisions.

Ms Poole: The reason we are pursuing this is that Ms Harrington stated that one of the reasons they had changed their mind and not included it in this legislation, when they had included it in Bill 4, was the consultation process. We do not have a copy of the briefs submitted during that public hearing consultation process. I went to the meeting in my riding of Eglinton. I was not allowed to speak, but I was allowed to sit there. Many people did not have written copies, but the Ministry of Housing had a written summary for every witness -- the member from the Ministry of Housing was sitting beside me -- and what points they made. They surely have tabulated this information on every issue as to how many and who is supporting the various proposals.

What we would like is a list of the people in that consultation process who, with reference to section 14.1, wanted interest rate changes included or who did not. That is all we are asking. We do not have access to this information, and I do not think it the least bit unreasonable for us to ask to have it at this time. It is very important.

Ms Harrington: What I would like to point out and I believe I have already pointed out very clearly is that the process of this committee, the standing committee on general government, which is dealing with both Bill 4 and Bill 121 and all the public submissions to this committee, is that every member of this committee has a copy of all those submissions. I am sure you have a copy of the summary of that, with the recommendations on each of the issues. That you already have.

Ms Poole: I just point out we are talking about two different things. I am talking about the public hearings which Mrs Harrington referred to and Mrs Harrington is talking about the committee hearings. The committee hearings we do have access to, and a large number of those actually asked for this to be back in the legislation. I am talking about the part we do not have access to, which were the public hearings the ministry and the government have written documentation on. We do not have a copy and that is what we are requesting, not the committee information but the hearing information.

Ms Harrington: I think when I began and we talked about the consulting process, what I was referring to was the work of this committee.

Mrs Marland: That is not what I was asking about. The point is the importance of section 14.1. If there is a committee member this morning who does not understand the importance of 14.1, we are in worse trouble than I thought we were. I am quite confident the opposition members understand the significance of this amendment that is before us. If nobody else understands it, then there is nothing we can say that can change that understanding.

When I said, "Who is it who has said this is not necessary?" the answer the parliamentary assistant gave me was, "We put out a green paper, we had public consultations, da-da, da-da, da-da." That is perfectly true, but if she is saying that on a basis of those public consultations -- and I am not talking about the committee presentations at this point. It is perfectly true that we have copies of all the committee briefs. It is also perfectly true that in those committee briefs a large number of people said they were concerned that this was now being eliminated, that the opportunity to deal with interest cost fluctuations that was included in Bill 4 is now no longer available under this legislation.

The government has changed its mind between its own Bill 4 and Bill 121. All we are asking this morning is, on what basis have they changed their mind? Is it their own ideology solely? If they say that, fair enough. If they want to say, "We don't believe that interest change fluctuations should be in this bill," then they should tell us that. But the parliamentary assistant is not saying, "It is what we believe." The parliamentary assistant is saying, "This is what the public has told us through our public consultation process."

We are simply saying, "All right, then can you tell us with whom you consulted?" The parliamentary assistant's answer to that question was, "We had hundreds of groups" -- or whatever her words were -- "a large number of groups, and I can't tell you who they were." First of all, we know the ministry can tell us who those groups were because, as the member for Eglinton said when she attended a meeting, as did I -- and when I said I attempted, I would like to finish that explanation since it was a point of order, Mr Chairman.


When I attempted to attend the meeting in my riding in this so-called public consultation process, I was told by the ministry staff that I was not invited, therefore I could not attend. I said, "Are you telling me as the member for that riding I am not entitled to attend a public meeting in my riding?" They said: "That is so. We have a list of members of the public who have applied to attend and they are now as a result of their application invited to attend."

Then I said, "What about if I just show up?" They said: "We would advise that you don't just show up because you're not invited and it's not a meeting for members of Parliament to participate in. It is something for the public." So I said, "But I would like to hear what my public in my riding are saying about this socialist government legislation, or how can I represent their interests when we deal with the legislation?" which is what is happening today.

When I was given those answers from the minister's staff, I waited for a week. By the way, of course, as members we were not informed of the dates or the places of those hearings. All of this is on record in Hansard in the House because there were a number of questions from both parties on our concern about the elimination of the right of members to attend those meetings. When I found I was not going to be allowed to attend the meeting, I decided I was not going to let that lie. In fact, I recall in the House Elinor Caplan actually went to the meeting in her riding and was refused entry. Can you imagine, as an elected representative, she was refused entry into the meeting in her own riding?

As Mr Abel correctly says, I did attend the meeting he chaired only in the end, because I chose to make my appearance and let them throw me out. Wisely, they chose not to have the Third World War with me at that meeting, and I was permitted to sit in on that meeting and monitor the proceedings. Because I did that, I know minutes were taken of every presenter at that meeting by ministry staff. There were two people actually recording what was being said.

The ministry has a list of the people who participated in the discussion of this legislation based on the green paper public meetings. You have a list of who attended. You have a list of what was said, I assume, through the minutes that were taken, and you are saying there was no support for section 14.1.

Ms Harrington: May I respond?

Mrs Marland: No, just wait till I finish, because you may like to answer the final question. You said there was no support for section 14.1 as a result of those public hearings. What I am asking you --

Ms Harrington: I would say not strong enough support.

Mrs Marland: You are changing your answer.

Ms Harrington: Would you like to --

Mrs Marland: You cannot give us different answers. I am sorry, Ms Harrington, but you cannot say, "There was no support for recognizing the concern about interest rates as in section 14.1," and then say, "Well, there wasn't strong support."

Ms Harrington: I will check my exact wording.

Mrs Marland: All right. If you want to be more specific, I will be more specific. Was there even one expert who spoke to the ministry during this public deliberation -- and when I say an "expert," I am talking about somebody from a financial institution, a banker. I am not talking about the poor property owner. I am talking about an independent third party here who would, out of public-service-mindedness, want to tell the ministry what a calamity this legislation would create if there was not an amendment like section 14.1 that would recognize interest rate fluctuations -- would you tell me if there was even a single person who would be in that category of financial expert who had spoken to the ministry about his concern about what would happen if it was not included?

Ms Harrington: Certainly the record of who spoke to our committee and what their qualifications were is a public record. I could certainly ask anyone to find that out.

Mrs Marland: Could we have that list then as requested?

Ms Harrington: I would like to --

Mrs Marland: Excuse me.

Ms Harrington: -- respond to you.

Mrs Marland: Then may we have the list to which the member for Eglinton is referring?

Ms Harrington: Yes. May I?

Mrs Marland: Yes.

Ms Harrington: Thank you. A couple of different areas I wanted to touch on. First of all, I remember distinctly with the minister -- this is so long ago now it seems, possibly last March or so -- meeting with the people in the field. We did have bankers there. I remember expressly talking with some of them. They were directly advising the minister with regard to the legislation proposed at that time, the green paper. Both Mrs Marland and Ms Poole have asked for a summary of the ministry's consultation last spring. Is that correct?

Mrs Marland: Yes.

Ms Harrington: That has been printed and we can provide it this afternoon, if that would be helpful to you.

Mrs Marland: It would be very helpful. Does that include the list of the participants, the presenters at those public hearings?

Ms Harrington: I think that would be attached on the back, but I would have to check to see. It does not have a complete list.

Mrs Marland: We do not need it by this afternoon obviously, but can we have by next week the list of the participants at those public hearings on the green paper?

Ms Harrington: I hate to give huge amounts of work. I want to tell you that there are many factors, of course, to the government's decision, as with any decision. I was only trying to be as helpful as possible by explaining as many of the reasons as I could think of. The consultation process is one of them but certainly not the only reason. At the beginning of this discussion I also said it is a matter of our basic principles. I explained over and over that the landlord is responsible for the financing of the building.

I think it is perfectly relevant, and I am sure everyone in Ontario would agree, that this government has to make decisions and is perfectly able to change its mind and to make these decisions. I am not quite sure of the relevance of going into all the, say, psychological factors of why the government did this. I think it is more appropriate that this committee deal with the merits of what is written here in section 14.1, whether you feel it is appropriate at this time.

As to the behind-the-scene sort of psychological reasons why a government would make this decision, I do not think it is entirely appropriate. It is more appropriate that we deal with what is actually written here, the pros and cons of whether it will work in Ontario.

The Chair: Thank you. On that note, it being 12 of the clock, we can pick up this discussion on the Liberal motion on section 14.1 at 2 o'clock this afternoon. Committee adjourned.

The committee recessed at 1200.


The committee resumed at 1411.

The Chair: The committee will recall that when we adjourned at noon we were discussing Ms Poole's motion, section 14.1. Mrs Marland had the floor.

Mrs Marland: There is some difficulty when we switch horses in midstream, because I was asking questions of the parliamentary assistant, who is back sitting as a member of the committee, and now the minister is back in the position of answering the questions. In fairness to the minister, it may be that these questions will still have to go around to Ms Harrington, because it was her argument I was dealing with.

Under section 14.1, I was discussing the issue of why it is so important for any government to recognize that fluctuating interest costs are not within anyone's control. Therefore, someone who has a building financed -- I do not know, because I do not own rental residential property, but I am sure that for the most part they are not short-term mortgages. When a mortgage has to be changed or renewed, the property owner has to deal with whatever the current rate of interest is depending on the rate fluctuation, which is beyond the control of anyone.

When asked about this this morning, when asked why the Bob Rae socialist government had included interest rates in Bill 4, its own rent control legislation, and had chosen to exclude it in its latest rent control legislation, Bill 121, the parliamentary assistant said it was quite relevant for government to change its mind. She said, "It's a matter of our basic principles."

I think she is perfectly right in her opinion that it is quite relevant for the government to change its mind. I will not discuss what the socialist government's basic principles are, because of course its basic principles are very different from mine or those of my party. She said something about there being no psychological reasons. I did not understand what she meant by that. But as to her answer about it being quite relevant for government to change its mind, if we accept that premise for the government's position on section 14.1, that raises a question in my mind.

They have been the government only 17 months. They campaigned to be the government with one position. Then they brought in Bill 4, which was the opposite position to that which they campaigned on. Now they have brought in Bill 121, which is opposite to the position they had in Bill 4. So we have an example here that yes, this government does change its mind. It changed its mind from its campaign promises and then it changed its mind in two concurrent pieces of legislation.

I have to ask, is there any likelihood at all that this government will change its mind again before Bill 121 is proclaimed? Is it possible that we hang on by our fingernails to that slight, thin hair of hope, that there might be some sections of this bill they might change their minds about before it proceeds to third and final reading?

Ms Harrington: I want to make a little clearer what I said. I was saying that it is perfectly legitimate that this government makes decisions. Those decisions are based on principles and on the consultation process this committee went through and that the government has initiated through the ministry. I think it is clear to everyone how that process works. That is democracy. The government is elected to make decisions based on its philosophy. That is why they are elected in that number. Then certainly they have to carry through the process of this standing committee. I think it is clear to everyone what has happened over the last year in the decision-making. It is a very valid process.

The Chair: Just to be clear, from now on I will allow questions to the minister, but unless it is agreeable we generally place questions to the minister, not to other members of the committee.

Mrs Marland: I was actually trying to be courteous, because I could hardly expect the minister to answer a question we were in the midst of with the parliamentary assistant this morning.

This morning we were discussing our concern that section 14.1, dealing with interest rates, is the very section that will be tremendously pertinent to whether the people in the business of property ownership for rental housing are going to stay in business. I think my colleague the member for York Mills expressed it in a most articulate, capable way this morning for those people who might not otherwise clearly understand this matter.

I note that Mr Mammoliti is laughing. I suppose he laughs out of embarrassment because he may not understand the matter and was not able to be here this morning, unfortunately, at the point when Mr Turnbull was explaining how pertinent is this section before us at this moment.

We talk about businesses in this province going out of business, but then we talk about pushing businesses out of business, which this section of the bill will do, without question. If there is not some leeway for property owners to move when their financing is impacted by interest rates they have no control over, if we do not in this legislation make some recognition of that, then without question we will be pushing these property owners who need new financing out of business.

I know, from the comments that have been made in this committee, that the socialist government does not care about pushing people out of business. We know that because of the statements that have been made by the members of this committee about their disdain for property owners, even, in some instances, their disdain for tenants. We have had the socialist members of this committee refer to tenants as peasants, a very derogatory, disgusting reference --


The Chair: Please speak directly to section 14.1.

Mrs Marland: We are concerned when the ideology of the socialist government puts land owners, property owners, out of business, and they do not care; that is fine with them. It is not fine for us. It is not acceptable to the Progressive Conservative Party of this province that property owners are put out of business, because the people who live on their properties are equally affected. I am speaking about the people who live in rental accommodation around this province when I express my concern that if the government chooses to ignore section 14.1, a Liberal amendment, which is very similar to the PC amendment which follows, if it chooses to ignore these amendments and not support us, what happens is that we pass another housing bill, to use a colloquial term, that in fact works to the detriment of providing housing in this province. It is totally destructive, because the amount of rental accommodation will eventually be drastically reduced because there will be nobody in the business of providing rental accommodation.

We care about tenants in this province. We care about those people who cannot afford to own their own property. In spite of the fact that the current minister says that 40% of the population lives in rental accommodation and she does not see anything wrong with that --

Mr B. Ward: On a point of order, Mr Chair: Is the member eventually going to get to her question? I am sure the minister is anxious to clarify and answer any questions. I hope the member will quickly derive some type of question out of her rambling

The Chair: I am certain Mrs Marland will take your thoughts into consideration. If you wish to be on the list, I could add your name.

Mrs Marland: It is interesting that the government member for Brantford does not yet understand the committee process. I might say for his benefit, in response to his point of order -- which of course was not a point of order; he does not understand what a point of order is or he would not raise one that was not -- that I am not compelled to ask questions, but I do have the privilege of speaking on behalf of the people whose best interests are not represented in this piece of legislation that is before us today.

In any case, the fact is that questions have been asked of this minister and this ministry for some time now to which we have yet to receive answers. People are going to be out of business because section 14.1 will not be supported, property owners who go for new financing by necessity, and there is no consideration or recognition in this bill of the fluctuation of interest rates. When they go out of business, everybody suffers. Whether or not the socialist government cares about tenants, we do. When the buildings become run-down and obsolete and finally people have to walk away from them because they cannot afford to own them any longer, it will be the tenants who will be out on the street with nowhere to live.

This morning we had an answer from the parliamentary assistant, and I made a note of it. She said, "Many businesses are going out of business in Ontario today," a perfectly apt statement. Yes, many businesses are going out of business. Is it not rather interesting that a government, which chooses to ignore section 14.1, not support it, is quite happy to sit there and put more people out of business. That is what we are talking about.

We think it is a disgusting sham for a government in office to be marching around this province asking the public for input, getting that input and then ignoring it. Then we have the Premier wanting to spend $50,000 to speak about the state of the economy in this province when at the same time his Housing minister probably has not even told him she is not supporting section 14.1.

In fairness to Premier Bob Rae, he should be told that in this very committee on this very day his government members are going to vote against an amendment, which will have a devastating effect not too far down the road, possibly within the next 12 months, on a number of business people, property owners in this province.

If the answer is, "Many businesses are going out of business, and that's why we're not going to support this bill," I think the public will certainly understand that callous indifference to its welfare, that callous indifference to the future of this province, because every time any business goes out of business, the buying power, therefore the manufacturing power and the whole thrust that drives the economy of this province is affected. If the government fails to recognize that interest rates are something beyond the control of an innocent property owner, then its comprehension of what drives business in the economy is obviously worse than we think it is.

I want to differentiate here, because I want to be very clear. I know for a fact that there are excellent, competent and brilliant staff in both the treasury and the Ministry of Housing, who I am sure have given advice to the Treasurer, the Premier and to this Minister of Housing. But if they are directing their members to vote against section 14.1 -- and we have not heard their members speak on section 14.1 except through the parliamentary assistant -- then I guess we have to assume that although the advice, the counsel and the wisdom of treasury staff are there for them to draw upon -- I do not know whether the Ministry of Housing has economists included in its numbers, but certainly it would not take very much common sense.

I am not an economist. I can figure out 14.1. If interest and financing costs fluctuate and there is no recognition of it in this bill, I can understand very easily what that means: Tenants are going to be out on the street and we are going to be throwing property owners out of business. But if the minister chooses not to understand that, we come back to a question which I think she might like to answer. I guess Ms Gigantes was not the minister when Bill 4 was passed. Was it Mr Cooke?


The Chair: Mr Cooke.

Mrs Marland: Ms Gigantes, were you the minister when Bill 4 was passed?

Hon Ms Gigantes: Mr Chair, I was not. You were right.

The Chair: Thank you. It happens occasionally.

Mrs Marland: Would you have any explanation, Ms Gigantes, why the concern we are addressing in 14.1 is not included in this bill and was included in Mr Cooke's bill?

Hon Ms Gigantes: Bill 4, as you know, is not a stand-alone bill; it is an amendment to the existing legislation. It also, among other things, provides what will happen to certain properties at certain stages of the operation of Bill 51 when Bill 121 takes effect. Therefore, because we were looking at some properties which retrospectively will have consideration made at a point when they were in certain processes under Bill 51 as Bill 121 swings into operation, we adopted some of the measures that were in Bill 51. Bill 4 was an amendment to Bill 51.

When we come to Bill 121, the bill which is now before us, we had gone through a long, careful public consultation. We had also entered into discussions with various interest groups, and we came to the determination that we would not allow the cost pass-through of interest changes to landlords on an application. One of the chief problems tenants had named during the discussions that were held across the province in preparation for Bill 121 was that they were being asked to shoulder the financing cost of the buildings where they rented, and it is one of the elements we have decided will not continue under Bill 121. That is why there is a difference.

Mrs Marland: I think I have made the point about why 14.1 is so important and why we are supporting the Liberal amendment and why my amendment, which follows, has the same intent. Now that the minister is back, though, I would like to reconfirm that there will be staff in attendance at a future meeting of this committee while we are still in deliberation of this bill to tell us about the job description for rent officers and the applicants' qualifications for the position of rent officer.

Hon Ms Gigantes: I did suggest yesterday that we might usefully look at that information when we got to part IV of the bill. The way it goes now, it looks like we will get to part IV of the bill, along with 1,500 other clauses -- I should not exaggerate, should I? -- many other clauses, on the last day of the discussions which are scheduled for this committee to handle this bill, but the offer stands and ministry staff are aware and quite prepared to come and enter into that discussion.

Mrs Marland: I wonder whether, to facilitate this, and as it involves drawing ministry staff out of their offices to attend this meeting, we could have agreement on the committee that we would deal with the section part IV comes under. Is it section 87? You told us yesterday what it was.

Hon Ms Gigantes: I believe it is section 116 on page 68.

Mrs Marland: Do you think we could consider scheduling the appearance of ministry staff to deal with the job description and the eligibility of applicants for the position of rent officer that comes under the powers and the responsibilities assigned to rent officers under section 116?

The Chair: The Chair is obligated to deal with sections in the order in which they appear unless I have unanimous consent of the committee. In that case, the committee can do as it wishes. If the committee wishes to follow your suggestion, that would be fine, but as section 14.1 does not specifically address that issue, would you mind if we took that particular issue up after we have completed subsections 14.1(1) and (2)?

Mr Mammoliti: I sat here and kept quiet for the most part in listening to Mrs Marland, but I am compelled to respond to some of the things she has said, only because I am devoted to rent control. I am glad I have been a part of the process and I am proud to be a part of this government, more specifically when we deal with rent control. I am glad I have been here from day one.

I would like to talk about what Mrs Marland said in relation to our campaign and our campaigning. She mentioned that we changed our mind with Bill 4 and with Bill 121. Let me tell Mrs Marland that we promised to consult. We promised to utilize the system a little better, to utilize these committees a little better and have an open mind, and to admit when we make mistakes and when we do not. What I understand from Mrs Marland is that she would prefer to go back to the way it was, where government would go around and waste taxpayers' money with this sort of committee and not make any changes and say, "Sorry, our mind is made up and that's the way we want to deal with things."

I can say to Mrs Marland that this government will not do that. In relation to Bill 4 and to Bill 121, where we have changed our mind we have done so for a reason. We have consulted. We have listened to business. We have made amendments where we feel perhaps we may have made mistakes in the past. We are not afraid to change things, as opposed to your government and the previous government.

Mrs Marland neglected to mention that one of our promises in the election was that we would consult and that we would change our stance, if necessary, after we consulted with people. It is not a waste of time. If she is telling this committee that she would rather a government go around the province and not change its mind if it has been convinced otherwise, then I am appalled and I am disgusted. Frankly, she should think of perhaps even resigning her post if that is how she feels government should be run, because that is wrong and I do not think the public wants that. I think the public wants government to change.

In terms of section 14.1, we are consulting, we are asking, we are looking to change, if necessary. We are voting -- the democratic way of doing things -- and we are debating, something I think we are all very good at. That is the way the process should work in regard to section 14.1.


As are some of the reporters who hang around the hallways in this building, Mrs Marland is wonderful at putting things way out of context. She said this government has called tenants peasants. I say to you, Mr Chair, that is far from the truth. If you recall, when the topic of peasants came up we said it was her government and the government previous that have put tenants in the position of being peasants. It is those two governments that have done the damage, and for her to say that this government has called them peasants is utterly ridiculous. She should be ashamed of herself for putting things out of context.

She mentioned interest rates --

The Chair: Which is useful. That is what section 14.1 relates to.

Mrs Marland: On a point of order, Mr Chairman: In the Hansard of Thursday, December 5, under the name of Mr Mammoliti, it reads: "You still want to kick and punch those peasants, and I am not going to put up with it." It was Mr Mammoliti's own --

The Chair: That is not a point of order. Thank you, Mrs Marland.

Mr Mammoliti: This is wonderful. She has all the minutes. She neglects to read, perhaps, the paragraph before that where I tell her that she loves to punch tenants and to kick tenants and to keep them under the foot. Remember that wonderful Robin Hood story I told you about as well. That is what I was talking about before I was rudely interrupted, something she loves to do on a regular basis in this committee to waste time. I was talking about interest rates, and I can relate it to December 5 as well, in that interest rates are a way of kicking and punching tenants.

For Mrs Marland, and the Liberals as well, to say it is the right thing to do to put high interest rates on the backs of tenants and have them pay, I would say that is wrong. You are only keeping tenants further away and putting them under your foot, per se, because obviously they are the ones who have to pay for the mistakes landlords make when they invest.

They give an indication in their speeches of how wonderful landlords and their business decisions are. I wonder how good a landlord is if he has chosen to invest in a building when the interest rates are so high. Is that the right thing to do, and is the intent right? If landlords can put it on the backs of tenants and know they can put it on the backs of tenants, is it morally right?

What is an investor? Is an investor someone who cares about tenants or someone who is a business person, or both? I say both: someone who cares about business and who cares about the tenants. I do not think it is right for landlords to put tenants in the position of paying for their bad investments. Often, when we talk about interest rates we are talking about bad investments.

That has gone on long enough, in my opinion, and I am proud to be a member of a government that will say: "Enough is enough. We are representing you." Relating it to the bill and specifically section 14.1, this is just another way of saying: "We're representing you and we believe rent control is a necessity. In future, landlords will not be able to increase your rent because of high interest rates." That is not morally right. The moral aspect of it is a big issue with me.

When landlords come to this committee and say they care about their tenants, when it comes to interest rates we have to think twice about what they are saying. Do they care? If they care, they would agree with the government and say they should not charge the tenants for high interest rates.

On those three points Mrs Marland should think twice before she rambles on, as my colleague said earlier. Before the opposition members talk about rent control, they should look at every aspect and every decision we have made and the reasoning behind the decisions, before they ramble on. The fact that Mrs Marland continues to put things out of context and exaggerate is something I can deal with, because I have the right to speak in this committee and the right to interject if I feel she is saying something wrong. I can handle my own when it comes to this sort of thing, and I continually do it, as you know.

Mrs Marland: Like you did at the Conroy Hotel.

Mr Mammoliti: Like I did at the Conroy Hotel -- absolutely right. I used the fact that I worked at a particular place for a few years and I referred that to the way her government dealt with tenants back then. I still say it is a good example. Yes, in terms of section 14.1 specifically, I would say her government, and the previous government for that matter, dealt with tenants as a bad doorman in a bar would deal with a drunk. That is why I referred to the Conroy Hotel back then, as she mentioned.

I do not particularly want to get into the story again, but we talked a little bit about kicking and punching and how her government loved to do that to tenants and treat them like they were something out of this world.

Mr Morrow: They did not do that.

Mr Mammoliti: Oh, yes, they did do that. They did that on a regular basis through their legislation and through the way they dealt with their tenants. I say there is no difference between them and how a bad doorman would deal with somebody who has had too much to drink. There are some doormen who take the time to talk with somebody who has had a little too much to drink and perhaps buy them a taxi and get them home and do the right thing, and then there are doormen who really do not care and put them through windows and doors and boot them out as quickly as they come in.

I refer to the Conservative and the Liberal governments as the bad doormen. Nowadays they would be called doorpeople or doorpersons, because there are women doorpeople as well, and they do a wonderful job.

Ms Poole: On a point of order, Mr Chair: This is very interesting, I am sure, but could we go back --

Mr Morrow: I am enjoying this.

Ms Poole: This is very sad; Mr Morrow is enjoying this. Could we please go back to section 14.1 and not talk about doorpeople?

Mr Mammoliti: Mr Chair, before you make a ruling, I agree I strayed somewhat.


Mrs Marland: On the same point of order, Mr Chairman: I am quite happy to allow Mr Mammoliti to continue because I think it is great that the people see the kind of people they have elected.

The Chair: Mr Mammoliti knows he should continue speaking to section 14.1.

Mr Mammoliti: Yes, people have seen you long enough.

The Chair: Through the Chair, Mr Mammoliti.

Mr Mammoliti: Through the Chair, of course. The people of Ontario have seen people such as Mrs Marland long enough. They have seen her continually through these debates, because she tries to take up all the time on camera and all the time with committee. I have got phone calls --

The Chair: Section 14.1.

Mr Mammoliti: On section 14.1, Mr Chair, because people such as Mrs Marland take up all the time, we cannot properly debate things like section 14.1. Talking about interest rates, I gave you the bouncer scenario, Mr Chair. I think it is a good one. I think people can look at it and say, "You know, he's not off the wall. He's telling the truth." When landlords want to charge the tenants because of bad investments, I call that the bad doorperson effect. They just want to do their thing.

She also mentioned "peasants" at one point. I have to bring that up again because I think this scenario is a good one as well. The Robin Hood story is certainly one people can relate to.

Ms Poole: On a point of order, Mr Chair: We have already endured the story of Robin Hood as told by Mr Mammoliti. Do we have to do this again?

The Chair: I am sure Mr Mammoliti is going to relate this directly to 14.1 and maybe compete for the Academy Award.

Mrs Marland: Mr Chairman, on the same point of order raised by the member for Eglinton, I think it is worthwhile for Mr Mammoliti to raise Robin Hood again, because this time he may get the story right.

The Chair: Mr Mammoliti has the floor and will continue his discussion of section 14.1.

Mr Mammoliti: We were talking about peasants and how in the olden days the governments treated peasants badly. They were only concerned about the taxes. They would put them under their feet and would not care. I talked about Robin Hood and how he did the right thing, in my opinion. He got back at them. He did things that individuals would only dream of.

Mrs Marland: Like what? Tell us what he did.

Mr Mammoliti: He would take on those individuals who only cared for themselves and about getting rich and did not give a damn about anybody else. That is what Robin Hood did. I am proud of Robin Hood, I am proud of this government and I am proud of how we are dealing with rent control. We are, in essence, being a Robin Hood per se, and I am glad we are.

Ms Poole: On a point of order, Mr Chair.

Mr Mammoliti: On 14.1 --

Ms Poole: Mr Chair, Mr Mammoliti thinks that by saying the magic words "on 14.1" every 10 minutes this keeps him on the topic. I guess I should be grateful; at least he did not go into Friar Tuck this time; we were spared that. Could we please get back to 14.1, which deals with interest rates, and not the Sheriff of Nottingham?

The Chair: Mr Mammoliti, I think you understand you should be speaking directly to 14.1.

Mr Mammoliti: I would love to relate to investments and 14.1 as well an example I brought up yesterday, the building I most recently visited in my riding, a building that has been totally neglected by the landlord, in my opinion, a building that perhaps one day somebody may take over. The interest rates may very well skyrocket and somebody may want to charge the tenants in that particular building the amount he or she would be charged with the interest rates. That is just a prime example of the abuse that could happen with a building that has been neglected. There are a lot of buildings like that; a lot of landlords have neglected buildings. It is really tough not to blame the previous governments. I do not like doing that, but it is really tough: The previous governments have allowed this to happen.

It is time it stops and it is time that, through legislation, we force it to stop. I see my colleague from Don Mills is laughing. It is time it stops. We hear from business, who say to us that we are doing this to get at them so they cannot make a profit and that by doing this we are going to stop everything from happening in Ontario; their Ontario is going to be the worst place to live because of our government. I cannot accept that, especially when the Conservatives and individuals I know of who are Conservatives are going around this country and this province saying to business, "It's time to get out."

On the one hand we are saying it is time to unite and be Canadian and stick together and on the other hand we have individuals saying to business, "Get out because of the government." Where are your priorities, I ask those people. If your priorities are with Ontario, as you preach, then you would not be telling people to leave the province, you would not be telling landlords to leave the province, as you are doing, and you would not be leaving the room as well.

Ms Poole: On a point of order, Mr Chair: Could the record please show that the minister would also desperately like to leave the room but is refraining.

Hon Ms Gigantes: That is not true.

Ms Poole: You just like laughing at him -- no, with him.

The Chair: Mr Mammoliti, you will direct your comments as closely as possible to 14.1.

Mr Mammoliti: When we talk about interest rates and investment, this is a serious problem. We cannot ignore this; this is a serious problem. We have individuals who are claiming they care about Canada and Ontario telling business to leave. I do not think that is funny. It is something we should take note of and I think the public has a right to know. When they hear the people who are speaking, they should take note of what they are saying and who they care for.

Mr Chair, I will leave it at that and perhaps let some others comment and maybe tell us how much they would love landlords to stay in Ontario as opposed to telling them to leave.

Mrs Marland: What is the alternative from you?

Mr Mammoliti: It was great. For a while I was able to speak without interruptions, but now that Mrs Marland is back --

Mrs Marland: I am helping you. What is the alternative?

Mr Mammoliti: -- she is doing the natural thing, and that is to be rude.

Mrs Marland: I did not leave, by the way. I would not have missed this for a minute.


Ms Harrington: I briefly want to set the record straight. Some time ago Mrs Marland quoted me as saying many businesses are going out of business. To go from that statement to implying -- I believe this is quite clear on the record -- that this government wants to put people out of business is, I feel, utterly inappropriate and not helpful to our working together and not helpful to this committee. I ask her to refrain from this type of non sequitur.

Mrs Marland: On a point of privilege, Mr Chair: May I respond?

The Chair: On a point of privilege, Mrs Marland, but it better be.

Mrs Marland: The parliamentary assistant said, in response to our point that property owners were going out of business --

The Chair: No, Mrs Marland, that is not a point of privilege. It may be a point of clarification, but it is not a point of privilege. Ms Harrington has the floor. If you wish to be on the list, I can put you on the list.

Mrs Marland: Yes, please. I would appreciate that.

Ms Harrington: I felt it was very clear, just to make sure that maybe Mrs Marland does not need to respond, that what I said in no way led to what she interpreted from that. She implied that this government had motives with regard to business. I think what I have said is clear.

Ms Poole: I had not planned to speak too much this afternoon, because I am sure my voice is not particularly pleasant to listen to, but there were a couple of points Mr Mammoliti made which I have to respond to.

First of all, he made the statement that when you are talking about interest rates you are really talking about bad investments. Perhaps I should point out to Mr Mammoliti --

Mr Mammoliti: On a point of privilege, Mr Chair: I did not say, "We are really talking about bad investments."

The Chair: That is not a point of privilege. That may be a point of clarification but it is not a point of privilege.

Ms Poole: Perhaps I could clarify for Mr Mammoliti that it is the Bank of Canada that sets the prime rate from which interest rates flow; in fact, it is government policy that sets the interest rate. It is certainly not within the landlord's purview. When you make outstanding statements such as interest rates being bad investments, that is totally erroneous and gives people an impression which is not at all accurate.

The second thing Mr Mammoliti talked about -- all I have been able to gather after half an hour of his speaking is two points where he actually did refer to section 14.1 -- was that his government went and consulted around the province, which is why it has made changes to the legislation, and that people want the legislation. Of course the ministry has not had time yet to provide us with the results of the public hearings it conducted.


Ms Poole: Oh, we have them. Thank you, Mr Chair. When we look at that we will find out how the public responded.

I did have the opportunity over the lunch-hour to go through the legislative research summary of the bill and those who did refer to interest rate changes. The vast majority of those who made presentations on this issue were very much in favour of having it reinstated in the act. It included groups such as the Ontario Chamber of Commerce, the board of trade and the Ontario Home Builders' Association, to name a few. I specifically took out the Canadian Bankers Association brief because this morning, when we were asking Ms Harrington about it, she did not refer to it when she was talking about people who had recommended changes. I would like to quote the CBA for you from the August 27 Hansard. This specifically relates to section 14.1.

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

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

It was extremely clear from the consultations this committee held that the expert testimony is that it would certainly be in the interest of the housing market to have interest rates restored. On the other side of the coin, there is no doubt that it would be in the interest of tenants to be able to apply for a rent reduction, should those interest rates change downward. The Liberals' two amendments on this, that both interest rate increases and interest rate decreases be considered under this legislation, I think should be reconsidered by the minister. The minister is getting a cup of coffee at the moment, so I will wait a moment until she returns to her seat, because I had a question in this regard.

The Chair: I am certain the minister can hear the question.

Ms Poole: I will ask the question, and when the minister comes back --

The Chair: She will not answer until she comes back.

Ms Poole: That is right. We will not expect her to answer on the fly. Minister, is your government adamant that it will not consider relief in this legislation both for interest rate increases on the part of landlords and interest rate decreases for the benefit of tenants?

Hon Ms Gigantes: That is correct.

Ms Poole: So neither of those two provisions will be considered by your government?

Hon Ms Gigantes: That is correct; exactly.

Ms Poole: For a government that purports to defend tenants, I think many tenants will be very upset by that statement.

Hon Ms Gigantes: I think you are wrong.

Ms Poole: You mean tenants would like the fact that they cannot apply for a decrease in their rent?

Hon Ms Gigantes: No, they would like the security of knowing that they are not going to pay increases as a result of increased financing costs.

Ms Poole: Mr Chair, through you to the minister, I would suggest to the minister that what tenants want and expect is fairness. They think of many issues in life, including tenant-landlord relations, but they think of many things. The test they apply to those things is usually a measure of fairness. If they receive the benefit if there are decreases, and if they have to pay a greater share if there are increases, I think that is how most tenants would want to see this legislation. It is a matter of justice and fairness.

Hon Ms Gigantes: I think you are absolutely right that what tenants are looking for is fairness. There is no question that it is a lot easier for a landlord to make an application for an increase because of increased interest costs than it is for a tenant to find out what mortgage arrangements the landlord is making.

Ms Poole: This is something the Ministry of Housing could assist with.

Hon Ms Gigantes: No. There is no way that can happen in fairness. There is a total imbalance in information and therefore in power in what you are proposing. We will not incorporate financing costs into the landlord's eligible costs for above-guideline increases.

Ms Poole: Right now we have a rent registry system which registers the rent of all units in the province. It is a fully computerized system with great capabilities and possibilities for providing information to tenants. I do not see any reason why the ministry cannot ask landlords to file with it mortgage rate changes when they renew their mortgages, and if there is a change, why tenants cannot be advised through the rent registry system so they would have access to the information and be able to do an application. It is not a terribly onerous thing, and it would provide tenants with the information they need and provide them with the ability to apply for a rent reduction. I do not buy the argument that complexity is one reason we cannot do this.


Hon Ms Gigantes: I think you should buy that argument after the experience we have had with Bill 51. We have added some we have concerns about, whether they are going to work easily. It is our belief that the more elements of this nature we add in, following your proposal, the less workable this legislation is going to be, the longer it will take for individual cases of rent determination to be made, the more unsatisfactory to both parties in a landlord-tenant arrangement will find this process. We are certainly not going to repeat the kinds of mistakes in terms of the complexities and therefore the unworkabilities and the potential for creating frustration, delay, large retroactive payments and so on which we have seen under Bill 51. It does not make sense.

In this instance it would be of very little help to tenants to suggest this proposal. It would be a great deal of help to landlords. We have seen that in the past. There are landlords who have been able to take advantage of financing costs pass-throughs to the great disadvantage of tenants time after time -- not most landlords, but there are landlords who do it and it has to stop. That is our decision.

Ms Poole: It would seem to me the minister has made it clear they will not reconsider this matter, and I do not see any point in pursuing it further. I would call the question.

The Chair: Ms Poole moves that the question be now put.

Those in favour of Ms Poole's motion will say "aye."

Those opposed will say "nay."

Motion agreed to.

Ms Poole: Mr Chair, on a point of order: I think I was out of order, because there was another speaker on the list.

The Chair: No, you were not out of order.

Ms Poole: I think you cannot call the question if you have been the previous speaker.

The Chair: I am told by the clerk that you had a perfect right to make the motion you made at the time you made it. I put the question and it was decided in the affirmative. We should now vote.

Ms Poole: Could I have a recorded vote, please?

The committee divided on Ms Poole's motion to add section 14.1, which was negatived on the following vote:

Ayes -- 4

Daigeler, Marland, Poole, Turnbull.

Nays -- 5

Harrington, Mammoliti, Morrow, Owens, Ward, B.

The Chair: We have a Conservative amendment.

Mrs Marland moves that the bill be amended by adding the following section:

"14.1(1) The landlord may base an application on an increase in financing costs for the residential complex.

"(2) A hearing officer shall not consider an application under this section unless the rate of interest for the financing is not greater than the market rate that would be expected for such financing."

Mrs Marland: This amendment extends the scope of a landlord's application to include financing costs, obviously. We have also included a subsection which limits the type of application to legitimate increases in financing arrangements. That is what is significant about our motion and different from the Liberal motion we just dealt with. What we are saying in this motion is that we do not agree that if property owners went out arbitrarily to refinance their projects and asked for extraordinary increases -- maybe they have not negotiated a realistic rate, and it might be suggested they do not care about how much the percentage is because their attitude might be that they are not the ones who are going to have to pay it.

Our feeling is that if it is a legitimate market rate of interest, why would it be so difficult to accept that as a cost of doing business for a property owner? We are not suggesting where the rate of interest is inappropriate or extraordinary; we are saying where it is within a fair market rate at that time.

We have already talked this afternoon about the fact that the person applying for the financing does not control the market. I would like to ask the minister if she would consider it fair if we limit it to applications that are within the current market rate.

Hon Ms Gigantes: It is our view that financing costs shall not be part of the very small number of items for which we feel it is appropriate that landlords be allowed to ask for above-guideline increases. The answer is no.

Mrs Marland: Why do you feel that way about financing costs?

Hon Ms Gigantes: Because this amendment is a mild change from the previous Liberal amendment which we discussed. I think we have had a fair discussion and I do not wish to repeat all that I have said before and unnecessarily tie up the time of committee.

Mrs Marland: I do not wish you to repeat anything you have already said. I am asking you something I have not asked you before.

Hon Ms Gigantes: The question was asked before and I answered it within the last 20 minutes and then probably within the last 40 minutes. I know Mrs Marland was listening.

Mrs Marland: I am asking you if it is not a fair request that where financing is required and that new financing is obtained at the current market value, recognizing that the applicant has no control over what the market costs are at the time, would you consider allowing that financing cost if it was within the current market rate?

Hon Ms Gigantes: I believe that question was addressed to me through you?

The Acting Chair (Mr Morrow): Yes, it was.

Hon Ms Gigantes: The answer is no.

Mrs Marland: I will try another question and see if I can get an answer out of this minister who is responsible for housing in this province, and who through that office will still be responsible for housing people when they have no rental accommodation to live in because the property owners will be out of business, which leads me to clarify the point that was allowed by the Chair to be raised by Mrs Harrington.

When we asked her this morning about putting property owners out of business, her response was -- and I made note of it -- "Many businesses are going out of business in Ontario today." She suggested that I misinterpreted her response. I think it is very clear that the socialist Bob Rae government is saying, "Well, there are many businesses going out of business today and we can't do anything to help." If as a result of this legislation more businesses go out of business, namely, the property owners, I think the implication of those comments will be very clear. We actually have the transcript from this morning now. The clerk has distributed it. When I have a moment to read it, maybe we will be clear about what her response really was.


I would ask the minister, in relation to this amendment, about a property owner who requires new financing and who goes to the various sources, whether it be banks or a mortgage company or other types of moneylenders, when the legitimate current market rate of interest is substantially higher than the mortgage that is presently on that property, for example, at the end of a 15- or 20-year mortgage which happens to have been at 5% or 6%, which is possible. That property owner goes for new financing and the current fair market rate of interest is obviously not 5% or 6% any more, but maybe 10% or 11%. How does the minister anticipate that the property owner going for that new financing at twice the rate of interest can afford that interest without some allowance through the rents?

Hon Ms Gigantes: The landlord will obviously have to manage his or her financial affairs. I cannot suggest hypothetically how that might happen in any given case. I would suggest, though, that in the kind of case Mrs Marland has referred to, obviously it would be the case that during a period when interest rates had been rising, the landlord benefited, relatively speaking, from the fact that the long term of the mortgage had provided an interest rate to the landlord on his or her borrowings which was lower than would have been the case had the landlord had a mortgage opening up in the meantime. It is part of a landlord's business, and it is not my business to suggest to landlords how they will handle the particular arrangements they make.

What is our concern is to make sure tenants do not end up with the burdens that can be imposed when landlords go through remortgaging. The number of times landlords choose to go through remortgaging, the length of terms of their remortgaging contracts -- all these things are matters which essentially are the landlord's business. I use that term in both senses: in the colloquial, it is the landlord's business, and it is also the business of the landlord. So we feel, it being the business of the landlord, that it should not become the obligation of the tenants.

We feel also that the guideline will provide for the costs of carrying on business for the landlord. The evidence we have over some period of time is that in any given year only about 25% of landlords make application for above-guideline increases. We can deduce from this that in any given year most landlords, about 75% of them, feel the guideline increase is an adequate rate of return on the investment they have made.

That being the case, we think we should not put another obligation, as has been the case under the existing legislation, Bill 51, where for some period of years tenants have had to carry the obligations of the landlord when it came to increased financing costs. We have made the decision that this is a situation which will not continue. We do not want tenants in this province to be subject to those costs and we have determined that it will not be an element of this legislation.

Mrs Marland: The more this minister answers questions, the more clear it becomes that she has no idea about what she is talking about. If it were not so serious I guess it could almost be humorous, because it is really deplorable to sit here and hear the Minister of Housing say she does not care, that it is the landlords' business. It does not take a very bright person to extend a little beyond that. Maybe we all decide we do not care about the landlords, that it is their business. Say we all agree with that. The next point is, what are the landlords expected to do? The minister does not care.

It is a given that the socialist government does not care about the landlords. But I care about the tenants who live in their properties. If we say we do not care about the landlords and the landlords go out of business because they cannot get new financing because they cannot get 1% or 2% rent increases from their tenants, then what happens is the tenants will not have anywhere to live. It is so straightforward, it is black and white.

Mr Owens: On a point of order, Mr Chair: The member for Mississauga South is suggesting that if we do not pass this amendment, tenants are not going to have anyplace to live. I would like to ask her where she comes up with that fantasy.

The Chair: That is not a point of order, Mr Owens.

Mrs Marland: To say it is the landlords' business and has no relationship to tenants is really ludicrous. The very fact that the minister admits only 25% of the landlords have applied for an above-guideline increase -- I did not know until she mentioned that, but it is very important -- probably tells you that in any given year maybe only 25% of the landlords require new financing.

I ask the minister, if a landlord has a 25-year-old building with a 5% or 6% mortgage, and that building has been under rent control for 17 years since 1975, and now the property owner needs a new mortgage and the current rate is 11%, how does the minister think that property owner is going to finance that project?

Hon Ms Gigantes: I do not believe it is terribly useful to get into hypothetical situations, but I do suspect that, given the low interest rate suggested by Mrs Marland and the length of time of this mortgage, had I been the landlord -- I know I am foolish to get drawn into this -- I would have been tempted to use the income from the building to pay off the mortgage and sit, as I know many landlords from my own community do, with buildings with no mortgage. That is the choice I personally would have made.

Mr Mammoliti: How much profit would have been made?

Hon Ms Gigantes: Oh, George, you cannot speculate how much profit would have been made.

Mr Mammoliti: After 25 years of a low mortgage, and how much would that land be worth?

Mr Turnbull: On a point of order, Mr Chair: If we have this kind of conduct being allowed, George Marmalade jumping in with his idiotic comments, you will find me jumping in a lot more. I have been a lot quieter lately, but I am not going to have this imbecile --


The Chair: I think, Mr Turnbull, you should withdraw those comments.

Mr Mammoliti: He should leave is what he should do.

Mr Turnbull: I will withdraw. You are not an imbecile. We will leave the viewers to judge for themselves.

Hon Ms Gigantes: That is not a withdrawal, Mr Chair. That is a repetition.

The Chair: Perhaps you could be helpful. The committee has functioned relatively well and --

Mr Turnbull: Mr Chair, I will reiterate, he is not an imbecile. But I am finding it intolerable to have him constantly interfering in this way and I will look to the Chair to make sure it does not happen any more.

The Chair: I think members should reflect on what we are here to do, and that is the public's business. It is not helpful for any member to interject at any point. The best way to do the public's business is if we in an orderly fashion respect each other, whether we agree or disagree with the point of view expressed, and operate in a civilized fashion. I would ask that the committee consider that carefully and that in the future we refrain from interjections and the type of comments I have heard in the last couple of minutes. Mrs Marland has the floor.

Mr Mammoliti: You don't have a window above my car, do you?

Mrs Marland: You see?

Mr Turnbull: On a point of order, Mr Chair: I have made my point that we expect you to gag these silly comments.

The Chair: Interjections, as you know, are always out of order, Mr Turnbull. It might be wise for the committee to take a five-minute recess. We will continue at quarter to 4.

The committee recessed at 1532.


The Chair: Mrs Marland had the floor discussing her motion to add section 14.1.

Mrs Marland: When the minister talks about everything being the responsibility of the property owner and indicates that it is not her business but theirs, to a certain degree that is true. It would apply to any business in the province. What we are trying to do is say that government should be getting out of the private sector business more and more, and we have enough evidence, on any example you want to give, that anything government does costs twice as much as the private sector doing it. I would agree if we are saying the government should stay out of private sector business.

The irony is that if we pass Bill 121 without my amendment, section 14.1, we will have the government getting more into business through having to provide more rental accommodation in this province than ever before. As a result of the government defeating this motion, the private sector is going to be backed more and more into a corner and will not be able to afford to stay in the business of providing rental accommodation, because when they go to refinance, remortgage their buildings, two things are going to happen. One is that without this amendment, if the market rate of interest is, for example, double what they had been paying, then obviously it would not be within their financial capability to pay double the rate of interest on the mortgage on their whole building without being able to cover that off with some other income.

The minister said in response to my example of an older building with a 15- or 20-year mortgage that if they had an older building she would hope that in the meantime they had been paying down their mortgage. At that point the member for Yorkview jumped in and said something about profit. I did not hear his total interjection and I do not know whether his interjection is going to be in Hansard; I am going to have to wait until tomorrow to see that in order to quote him accurately. But his tone, the way he said, "They've been making a profit, you know, de-da-de-da," his intonation is that profit is a dirty word. We are back to this fact, that these socialists believe no one should make a profit.

If we are going to say to a landlord, "When you come to refinance your building, we're not going to allow you anything above the guideline" -- and bear in mind that the guideline percentage increase in most given years is probably going to be below the inflation rate, then what we are going to say to that landlord is: "Tough luck, you're out of luck and we think you've had enough years that you could have paid down your mortgage. You've made a nice profit. That's our assessment. It'll fall where it'll fall now." The tragedy is that where it will fall is that tenants will be in buildings that ultimately will have to be abandoned. That does not sound very serious if you are not involved. It does not sound very serious until you start getting some very concrete -- pardon the pun -- examples of what is going to happen.

The parliamentary assistant said earlier that she cannot understand why this committee cannot work together. I suggest that it is very difficult for us to work together on this committee when this government and its members opposite will not even consider one of our amendments. How can we work together if they will not consider one of our amendments? There have been amendments to this bill that we voted in favour of: your amendments that are already printed in the bill. But you have not yet voted in favour -- no, you have not even considered any of our amendments.

When we ask you for your sources of input as to how you can argue that this is not a legitimate, important amendment to the people of this province, you cannot even name your sources. You cannot even name a single, solitary expert who may have given you the opinion that we are trying to give you with these amendments.

What is going to happen to this landlord the socialists do not care about? That is fine, that is up to them, but we care about the landlords and we care about the people who live in their buildings. But if it is none of your business, Madam Minister, can you just tell me what is going to happen as a result of your legislation? When there is a fair market rate of increase, what happens to that landlord when he has no recourse to recover the differential in the cost of his building financing, because you will not support this amendment? What happens to him, and do you care?

Hon Ms Gigantes: The position of the government is that the legislation represents the best effort, which I think will prove to be a very good effort, to balance the interests of landlords and of tenants in Ontario. It is the position of the Conservative Party that financing costs should be costs for which a landlord can apply for an above-guideline increase. It is our position that that should not be the case, and it has been a position at which we have arrived after having heard discussion of this particular item in the consultation period by many, many groups and individuals around the province. We feel quite strongly that it is inappropriate to propose that the item of interest rate changes, given all the variances that can occur around how a landlord deals with mortgaging of a property, should be an item which can be passed through to tenants directly. We are not satisfied to see that happen.

I should also add that I was corrected by the ministry when I suggested that 25% of landlords on an annual basis made application for above-guideline increases under the existing legislation, which, as you know, has wide-open provisions for financing and refinancing pass-through of costs. It is in fact 17%.

What that indicates to me, as a person who is responsible at the moment for the application of the legislation and for the changes in the legislation which we are proposing, is that most landlords have found they do not have to make an application above guideline. Mrs Marland has suggested that it is a regular occurrence for the guideline increases to be lower than inflation. She will know that was not true in the past year. It will not be true in 1992. The guideline reflects the real costs of building operation by apartment owners over a three-year period as a rolling average, and it does in fact represent an amount which for most landlords in any given year has been quite adequate.

We are making provision for landlords to apply for above-guideline increases capped at 3% annually for items which, when justified, we feel are items that tenants can be asked to contribute to. We have also provided that where a capital expense is a very large one and a 3% cap will not mean that tenants will fully pay for the increase in a one-year increase, then we will --

Mr Turnbull: On a point of order, Mr Chair: She is talking about capital, which has nothing to do with financing.

The Chair: That is not a point of order, Mr Turnbull.

Hon Ms Gigantes: Thank you, Mr Chair. I am trying to put the question of interest rates and whether they should be passed on in the context of the other matters which this legislation would allow landlords to pass on if they justify through an application. That is the question of capital renovations. We have allowed not only for a 3% above-guideline annual increase in rents, when justified, for capital undertakings, but we have also provided that there can be an additional two years of roll-through on a given capital application. In other words, the landlord can continue charging in year 2 and year 3 after an application in order to make up the cost of a major capital work.


Given the fact that most landlords do not make application on an annual basis, given the fact that we are providing within the legislation what we think is a generous scope for landlords to apply for capital renovations, we do not think that tenants should also be called upon to provide the payment for changes in whatever arrangements a landlord takes on in terms of financing. It is not simply a question of what level the interest rate is at; it is also a question of how often the landlord remortgages and when the landlord chooses to remortgage. Because as long as we are saying in this amendment that it is at a market level of interest, then it would be okay, but what if the landlord chooses to do it every year or, in those years when doing that, we will allow the landlord to make an application for above-guideline increase? The matter becomes complex.

Certainly we have understood in the past, from experience under previous legislation, that this is an element of cost to tenants which is very difficult to determine in a fair manner. We certainly know from experience that tenants of some landlords have paid a high price in terms of rent increases based on financing costs, and we have decided, having thought about all of the elements involved in this decision, that we are not going to propose this in this legislation.

Mrs Marland: The minister chooses to ignore my questions, so I will continue to place them until I get an answer. First of all, I think the minister knows very well that the answer she just gave involving roll-through carryovers over three years, two years, for capital renovations has nothing whatsoever to do with the percentage I am talking about dealing with financing. Financing costs do not come under capital improvements in this legislation, and I would have thought by now that the minister would know that about her own bill.

Obviously, in pleading for this amendment I am not interested in supporting landlords and property owners who have frequent refinancing at high rates and flip apartments because it is to their financial advantage to do so. I am not interested in any of that stuff. I am concerned about tenants who in the past have in some examples had to pay rent increases to accommodate the frequent flipping and refinancing of properties.

But what we have with this legislation is the old example of the elephant gun to kill the fly. There are other ways of dealing with those examples which the minister chooses to give in response to my question, which was not the question I asked. The thing is that if the government chooses to ignore what happens down the road -- just take that small landlord who bought a two-storey or a three-storey walk-up with maybe six or eight units and has owned it for 15 or 20 years, and he needs to refinance his mortgage, to apply for a new mortgage. Under this legislation, as I keep saying, there is no way he can get that mortgage without being able to recover some of the increased costs -- maybe double the rate of interest from the old mortgage -- without having some latitude in the rents.

It is interesting. The minister says it would be wrong for the taxpayers to help the landlords finance their buildings because it is a business. What is the difference between using taxpayers' money to buy out de Havilland, I wonder. There are some examples where it is okay to use taxpayers' money to buy out a private business, but there are other situations where there is no way on God's green earth that this socialist government thinks it has any responsibility to anybody in terms of this subject of rental housing in this province. While they choose to ignore the people who own the rental accommodation, what they do not seem to get into their understanding is that they are also choosing to ignore those tenants.

What is going to happen when all these examples come to light when the property owners can no longer refinance their buildings? They certainly cannot sell them. Nobody is going to buy a building where rents are not stable, because nobody is going to be able to get new financing on a building where there is no guarantee of income. It is like buying any kind of business. If there is not a profit and loss statement that can be generated to show what the incomes are and what the expenses are within some secure parameters, nobody is going to finance it and nobody is going to buy it. You are going to have property owners put out of business because they cannot afford to refinance their buildings. I ask you, Minister, what is going to happen to those tenants? Do you care about those tenants? I know you do not care about the landlords who own the buildings, but what are you going to do for those tenants when those buildings can no longer be refinanced?

Hon Ms Gigantes: I think Mrs Marland makes assumptions when she says she knows what I care about. That is not the case. She does not know what I care about.

Mrs Marland: No, I am asking you.

Hon Ms Gigantes: Also, there is no way that I accept her outline of some kind of disaster flowing from our decision in proposing this legislation, in the form it is in, to decide that there will be no above-guideline increases for landlords on the basis of changes in financing costs. I do not accept that scenario.

From time to time, as in any other business, there will of course be landlords who, for a combination of reasons, will have difficulty assuring themselves of a profit. There is absolutely no sector of business in which this does not happen. However, having considered the issues involved and having considered them with the benefit of advice from inside and outside the ministry, from places around this province, having looked at evidence from now close to 16 years of experience with various combinations of rent regulation legislation in this province, there is just no way the assumptions she is making and the picture she is painting are ones I agree are accurate.

I do not expect, I do not want and I do not foresee a situation in which vast numbers of landlords will not be able quite effectively and profitably to run their businesses, who will therefore leave derelict buildings standing in some kind of moonscape in urban centres of this province. I believe this is not only an exaggeration; it is just so far off the situation that will exist that it does not relate to reality.


Mrs Marland has one view, which she has expounded. Before you is a bill which represents another view, and it is not simply another view based on a lack of understanding of how landlords operate. It is not based on many of the motives Mrs Marland has described; it is based on our best judgement of what is a reasonable balance in terms of the interests of landlords and tenants.

I have attempted to put this particular item of financial pass-through of interest rate changes in a context for Mrs Marland. She rejects that context. Every item we deal with is the item which is going to create the total disaster she foretells. I do not accept her reading of the situation. I do not think it is close to reality, in all frankness, and we have made a decision based on the best evidence and the best judgement we can make.

Mrs Marland: I asked the minister if she cares about those tenants and she chose not to answer the question. I did not say whether she cared about them or not; it was up to her. I gave her an opportunity and I asked her, do you care about those tenants whose buildings are going to go "out of business" because of the policies of her government as drafted in this piece of legislation?

I think this minister's office must be inside some kind of cocoon, because it is so apparent that she does not know what is going on in the real world. I am not the Minister of Housing, I am simply the spokesperson for our party on housing and I do not have all the Ministry of Housing staff at my fingertips as a resource to tell me what is going on out in the real world in Ontario today. But I do have some common sense and I read the newspapers, including the financial newspapers. If I can understand what is going on in the real world about the financing and refinancing of rental property in this province, I would expect the minister might understand that. She said there are not a lot of examples where there is a problem. She said there are not vast numbers of buildings.

If you do not believe that what I am trying to say is going to happen as a result of this legislation, why would you not agree to sit down even with some of the financial institutions who hold mortgages on these buildings, who have already told the building owners they will not under any circumstances refinance their buildings? When their current financial arrangements expire they will not refinance their buildings if this legislation goes through, because banks cannot afford to be in that kind of business either. Banks cannot lend money where the person who needs the money has no guarantee of a certain amount of income on their investment.

Here, on top of that, without section 14.1, we are saying: "We don't care if your costs go up. You're not going to get more than the amount of money we are allowing you, which is a 3% increase. We don't care. We don't care how much it costs you to finance your building." Even if it is a market rate of interest they obtained to refinance their building, even if they have not refinanced their building in the last five or 10 or 15 years, "We don't care," the minister says.

Do you have that statement made by the Premier? Just to show you where we are and probably what is behind some of the direction in this legislation and why I am quite sure the government is going to continue to oppose my amendment, I want to read a short quotation which endorses what the minister is saying this afternoon and explains why I am scared to death for the future of tenants in this province, let alone the direction of the economy in this province. Speaking of rental property, he said:

"You make it less profitable for people to own it. I would bring in a very rigid, tough system of rent review. Simple. Eliminate the exceptions and loopholes. There will be a huge squawk...and you say to them, "If you're unhappy, we'll buy you out.'"

That was then opposition leader Bob Rae, as quoted in a pre-election newsletter of the Federation of Metro Tenants' Associations.

Maybe we are just wasting our time sitting here. As opposition leader, he said, "If you're unhappy, we'll buy you out." I guess that is the philosophy, the policy, the ideology we are dealing with here. Of course, this socialist government is not going to buy out the property owners at a fair market value. Oh, no, that is not going to happen. We are going to pass Bill 121, without any of the amendments presented by the opposition members. Then, when all these properties cannot get refinancing with a fair allowance for the increased financing costs due to the current market rate of interest, when they cannot in the majority of cases even get new financing at any rate, I guess the dream of the former opposition leader, now the Premier, Bob Rae, will come true. They will use tax money to get into the housing business by buying these buildings at their depressed value, not a market value based on a fair market but a depressed market value which they will have induced by Bill 121, this bill before us today.

This is such a tragedy that is going on here. The biggest tragedy is that the impact and the understanding of what is happening with this legislation will not hit the public before it is passed. That is the bad news. I guess the good news is that it will hit the public before the next election, and after the next election we will not have to sit in a committee like this listening to the kind of philosophy and policies being espoused at these committee hearings. I ask the Minister of Housing questions she does not answer. She chooses to reply in areas that have no relevance to the questions I have placed. They choose to say that they do not care what happens to the landlords, it is their business: "It's not my business, I'm only the Minister of Housing. It's the landlords' business."


Mr Abel: You said that; we never said that.

Mrs Marland: The Minister of Housing said it is the landlords' business. It is the Minister of Housing's business to ensure that there is accommodation for tenants in this province in well-maintained, well-kept-up buildings. There will be nobody there to provide those buildings in the private sector because this government will have put the private sector totally out of business with millions and millions of dollars in bankruptcy to those personal owners of those properties. It is a travesty, and I think the humour of the debate that is reflected in the comments of the government members shows they do not care either. It is not only the Minister of Housing, I assume, who does not care about these tenants and landlords.

I want to assure that the Progressive Conservative caucus does care about tenants and landlords in this province and that is why we have placed this amendment to the bill. We are trying to open the door just a little. If something is beyond the control of a property owner when he goes to refinance the residential complex, we are trying to say, "Will you accept a fair market rate of interest?" and allow for him to apply for a little more than the 3% when that is the case.

When the minister says, "That's the landlord's business," she is saying, "Fine, that's their business." I am sure the tenants can hear very clearly what that message is. The tenants are not going to be blackmailed into believing that this bill protects them. The tenants of this province understand very clearly what this bill does. Unlike some members who refer to tenants as peasants, I do not. The tenants I know and the tenants I represent are very intelligent people and understand very clearly what is going on during these committee hearings. They understand very clearly the implications of this bill. They know that if they are blessed, or cursed -- whatever word you want to use -- with a Minister of Housing of this Bob Rae socialist government, which does not care about the person who owns their building who will soon be out of business, those tenants know quite well that they are the people who are going to have to face the repercussions of that kind of philosophy.

Hon Ms Gigantes: On a point of order, Mr Chair: I believe it is out of order for any member to ascribe motives to another member. When I answered the last series of questions or comments Mrs Marland raised I did attempt to point out to her that it was inappropriate for her to make assumptions about my motives, whether I cared or did not care and whether she understood that I cared. She does not understand, Mr Chair, and I would like to call upon you to ask her to stop trying to ascribe motives.

The Chair: Thank you, minister. As members all know, it is not parliamentary to impute or ascribe motivation to other members. Mrs Marland.

Mrs Marland: Mr Chairman, I am describing what it is that the people who live in rental accommodation of this province understand.

The Chair: Neither can you do indirectly what cannot be done directly.

Mrs Marland: I beg your pardon. I can certainly speak on behalf of my tenants.

The Chair: Certainly you may.

Hon Ms Gigantes: Not in ways that are out of order.

The Chair: Minister.

Mrs Marland: I can speak on behalf of my tenants, minister. You may speak on behalf of whomever you wish. I am here elected to speak on behalf of my tenants and that is all I am doing. Even you, in your almighty power, cannot stop me from doing that.

The Chair: Mrs Marland, this line is not particularly helpful to the decorum of the committee. I would ask that perhaps you choose your words more carefully.

Mrs Marland: You are absolutely right, and if the minister would stop interrupting I could complete my comments. It was the minister who interrupted me, as I recall. I did not interrupt her.

Mr Abel: It was a point of order; it was not an interruption.

Mrs Marland: There is a classic comment from a government member. "It was a point of order; it was not an interruption." It was not even a point of order, as you know.

The Chair: Mrs Marland, it was a correct point of order. Now you may continue.

Mrs Marland: I am concerned about the fallout for the tenants of this province of the government's lack of support for my motion. I say again on the record that if this government should think in its wildest imagination that the tenants in this province do not understand what is going on, then the government is going to have a rude awakening when it finds out that the tenants understand fully. You cannot beat the landlords over the head and drive them out of business without its having an impact on the tenants.

The tenants will tell you themselves that they understand financing. They understand market rates of interest charged by financial institutions. In fact, for the most part, most of them understand it so well that this is why they have had to postpone getting out of their rental accommodation and purchasing their own investment, because they know what the market rates are, they know whether it is an affordable step for them.

In spite of the fact that the Minister of Housing thinks people chose to have rental accommodation, the fact is that for the most part, with the exception of tenants who have given up their homes because they are older or have been taxed out of them and have had to move back into rental accommodation, most tenants you talk to in this province -- not all of them, by any means, but the majority -- would prefer to be paying their monthly sums of money into their own investment rather than somebody else's, as they do through different forms of rent.

So the tenants know very well that financing of buildings and land is dependent on current market rates and that the current market rates are something individuals have no control over.

In closing, the fact that this government chooses not to accept my amendment which would allow for financing costs to be considered -- we are not asking for an outright ruling here. We are not asking that all refinancing costs, regardless of the rate, be an automatic rent increase for tenants. It is not an outlandish request; it is very specific. If the minister and the government members choose to vote against this amendment, the fallout from that decision is on their heads, not ours.

Mr Turnbull: I would like to go back to some of the minister's earlier comments which rather tweaked my interest, your explanation that landlords who are having an increase in interest rates have already benefited from having the lower rate than the market rate at the time it is renewed. Will you explain to me, within the context of the existing rent regulations that have existed in Ontario for the last many years, the pass-through method, how they benefited from that?


Hon Ms Gigantes: They have been, if they were fortunate enough to have a mortgage rate at the levels being proposed by Mrs Marland -- mind you, I do not know where they would have got such a mortgage rate unless we went back maybe 15 years, as she proposed. That might be the case; I cannot recollect. They have been the beneficiary of a long-term stable financing arrangement which would make them, in terms of the rental market, probably pretty fortunate as landlords compared to the landlords who had started out with mortgaging rates in the last 5 or 10 years.

Mr Turnbull: Interest rates have gone up within the last five years. They have fluctuated and they are going down at the moment. If you had a mortgage, let's say a three-year mortgage, and at the time you bought it that was the best available rate, if at the time it is renewed it is less, that is a benefit, but if it has gone up, it is a disadvantage.

Hon Ms Gigantes: Let us suppose that the ordinary level of rents at the point --

Mr Turnbull: Excuse me, I am not familiar with the term "ordinary level."

Hon Ms Gigantes: One can take an average rent -- CMHC does every quarter -- for a one-bedroom or two-bedroom apartment in various urban centres in Canada. If we took those figures back over several years and looked at a landlord who was able to handle whatever financing costs he or she might have had at a low level, relatively speaking, and at the same time have rents which were at the average level, there obviously would be a benefit to that landlord to have had low mortgage payments.

Mr Turnbull: I can see you do not understand how the rent control methods worked. I would be happy if you would refer to your ministry official beside you, because when they went to rent review periodically, if they were doing a capital repair, the total costs were reflected, both the financing and the capital costs, and depending on the interest rate they got a rent greater or lesser. You are saying "taking the average." I am sorry, when you are talking about rent controls, the average has absolutely nothing to do with a specific building. It is absolutely a red herring.

Hon Ms Gigantes: I think there is some complication in this discussion because I believe Mr Turnbull is talking about interest rates assumed on capital works, and I believe --

Mr Turnbull: No, I am not. You seem to be mixing it up. I am saying that at the time you go to rent review that would be one of the factors. There were several factors in the basket for consideration by a rent review officer, but with respect to interest rates on mortgages, one of the factors in terms of rent increases was the mortgage rate and the amount of money paid on the mortgage.

Hon Ms Gigantes: If you are talking about an above-guideline increase on a landlord application --

Mr Turnbull: No, excuse me. If you went to rent review -- yes, for an above-guideline increase there was always the element of pass-through. That is what we are talking about. If you went to rent review and your mortgage had been at the lower rate, then it had been the tenants who were the beneficiaries of that.

Hon Ms Gigantes: On an above-guideline application.

Mr Turnbull: On the lower rate.

Hon Ms Gigantes: You are talking about a case in which the landlord has made application either under the old --

Mr Turnbull: No. You said that if he had in the past a lower interest rate, he had been the beneficiary. On the contrary, the tenants were the beneficiaries because they had not had an increase with respect to that. And do not talk about the average rent; there was a specific rent on that building and the rent was driven by a basket of factors, and one of them was the interest rate they were paying. To suggest the landlord somehow had wickedly benefited is rather disingenuous.

Hon Ms Gigantes: Oh, no, I ascribed no motives to landlords. I was talking about the relative --

Mr Turnbull: No, but please explain the economics of how he has benefited.

The Chair: Maybe you could allow the minister to reply.

Hon Ms Gigantes: I was trying to address the question -- which I understood to be the question -- related to the relative market position and therefore the profitability position of the landlord. I do not think it particularly helpful to try to mix into the discussion which was being raised by Mrs Marland a whole other discussion which would relate to the number of times a landlord in a 15-year period had made an application for an above-guideline increase and the elements that would play around that, because that was not the point Mrs Marland was trying to raise.

Mr Turnbull: I am not talking about what Mrs Marland was saying. I am talking about what you had said at the beginning about the benefit of lower interest rates. Typically, mortgages renew every five years. That has been the history of most residential landlords, that they have gone for five-year terms. There have been periods when they have managed to get longer ones. There have been periods where interest rates have been so high they have said, "I'll go for a shorter period because I am hoping the rate will come down," and they have locked into a very short-term higher interest rate.

How does the tenant not benefit from that? It has not been the basis of a rent increase if they have had a lower interest rate. There has always been the element, until your government came along, of a cost pass-through. That was the basis of the whole structure of rent review, so it was the tenant who was benefiting, much in the same way as in our discussion yesterday it was the tenant who was benefiting if he were in a land-lease building where the costs were lower as a result of the fact that the landlord did not own the land, was renting it at a lower rate. It is exactly the same kind of situation. The tenant has benefited.

Hon Ms Gigantes: Mr Chair, there will be cases where tenants have benefited. There will be cases where landlords have benefited. There will be cases where both have benefited.

Mr Turnbull: Could you explain how the landlord has benefited?

Hon Ms Gigantes: If the landlord had a long-term lease, which was the subject to which Mrs Marland had asked me to address my mind --

Mr Turnbull: No, she did not say anything about the long-term lease.

Mrs Marland: No, I did not.

The Chair: You meant "mortgage," did you not?

Hon Ms Gigantes: I did. Excuse me. I said "lease," when I meant "mortgage."

The subject to which Mrs Marland had asked me to address my mind, to which I attempted to respond, was the situation where the landlord had a long-term mortgage at a low level of interest. In responding to her, I made comments which do not fit with the new scenario which apparently Mr Turnbull is now raising, and he is trying to suggest that the comments I made that related to what Mrs Marland was discussing are comments which would also, he insists, be made to apply in the case or cases which he is trying to raise. I am not quite sure what point he is trying to make, so if he could stop saying that I said something about the case he is raising, whatever that is -- if he explains what that case is I might try to address it -- and recognize that the comments I made to Mrs Marland related to Mrs Marland's case, I think that would help us.

The Chair: I am certain Mr Turnbull will phrase the question correctly.

Mr Turnbull: How would you reconcile the fact that we had a cost pass-through system and the landlord's interest rate was one of the elements of the cost pass-through, and now you are saying that you are going to take this away and you have a refinancing coming up and the bank says, "I'm sorry, you don't have enough income and you don't have an ability to increase the income relative to the interest rate"?

That is a hypothetical, simply because at this moment in time we have lower interest rates than we have had for the last few years. However, this legislation, I assume, you are planning on having for the duration of your term as a government, so we are looking at until 1995, I presume. If we then have high interest rates and we have a bank saying, "We're not going to renew" -- in fact, banks today, even with lower interest rates, are saying they are not going to renew -- how would you reconcile that with the ability of getting private enterprise to remain in this industry?


Hon Ms Gigantes: The member is correct when he says there may be landlords who will be seeking to renew their mortgages at this point, and it would be hypothetical to suggest that in fact they would be asked to pay higher interest rates unless they had other problems, because the general level of interest rates is as low as it has been, I believe, for at least 10 years and probably more.

That being the case, if we were addressing the hypothetical situation where over the next, say, three years interest rates were to increase significantly again, we would also be looking at a situation where -- for example, right now, because the guideline is based on three past years of actual costs of operation for landlords in the province, the guideline is well above inflation; it certainly will be.

We will look back, at the end of 1992, during the period when the guideline will have been 6%, and we will be able to say there has been a big gap between the guideline which the landlords could charge if they could find tenants -- and that speaks to a whole other matter -- without ever bothering with an application to rent review. Even if interest rates should increase over the next few years, there will be a period in which the guideline, certainly during this year, is going to be well in advance of the building costs of operation for this year.

It is my feeling that these things have tended to work themselves out. Because there is a roll-through provision with the guideline, the guideline does not go up as fast as inflation and it does not come down as fast as a recession. It tends to even things out. That can be a benefit to tenants at one point and a benefit to landlords at another point and vice versa.

I do not see, for the reasons I cited when attempting to respond to Mrs Marland's question, that there is going to be a problem for landlords in general. I cannot tell you, nor can you tell me, how many landlords might be forced to sell buildings, get out of being landlords, over the next two years, the next four years, the next six years, the next 10 years. Not one of us here can know that, but I do feel quite honestly that this legislation provides a balance between the interests of landlords and the interests of tenants in this province and that we are not going to be faced with the kind of quite dramatic scenarios which Mr Turnbull and previously Mrs Marland have been suggesting.

Mr Turnbull: First of all, your suggestion that the 6% is purely available to the landlord is erroneous because, as we well know, 2% of that is in fact for capital programs, so we are talking about 4%. We know the projected inflation rate for this year is something in excess of 3%. The actual inflation rate with respect to the operation of apartment buildings is going to be significantly higher than this. Why? Because municipal taxes are scheduled to go up astronomically. We have seen this in the papers every day. We know that hydro is going up by 11.5%. We know all the factors that are driven by government agencies which are higher than the general inflation rate. To suggest that it is 6% is not correct. It is 4% that we are looking at with respect to any financing.

Hon Ms Gigantes: No.

Mr Turnbull: Yes, it is, minister. Please check your figures.

You suggest it is inconceivable, unless there were something wrong -- I am not quite sure what you mean by something wrong -- that people would be having difficulty refinancing at the moment. If somebody has bought a building with a first and second mortgage and the second mortgage was at a lower interest rate and it comes up, and that was from maybe a vendor, then the vendor at this point may say he wants his money out, so you have to go to the general market for it. The banks are saying, "No, we won't finance it."

Hon Ms Gigantes: Perhaps I could ask Mr Harcourt to make a comment on the experience we have had in the relationship between the cost-of-living index and the component of the guideline that reflects inflation.

Mr Harcourt: If you look at the consumer price index between 1976 and 1991, you will see that costs have gone up 109%. The guideline over those years, which has fluctuated anywhere from 8% and as low as 4%, reflects an increase of 92.5%. While the cost of 92.5% is less than 109%, one must take into account that operating costs in a building are less than the actual rents. We have said under this act that it is approximately 55% and under the previous legislation it was 67%, but it is somewhat less than the actual cost or actual rent of the building. Based on that, in fact the guideline increases in most buildings have probably accounted for more than the increase in operating cost for that building.

Mr Turnbull: Okay, but it is a fact that within the 6%, 2% of that is for capital.

Mr Harcourt: You are correct, 2% is for capital.

Mr Turnbull: That is a non-starter, so we are talking about 4%, right?

Mr Harcourt: We are talking 6% unless the landlord makes application for above-guideline increases based on capital expenditure.

Mr Turnbull: Yes, but the assumption built into that is that 2% of that --

Mr Harcourt: Two per cent of the guideline for capital is correct.

Mr Turnbull: So we are talking about 4%.

Would you comment on those items which eventually will work their way through into the rolling average, such items as the hydro increase of 11.5% and the proposals for tax increases. I see Metro is talking about a 15% tax increase. When will that reflect itself in the guidelines?

Mr Harcourt: The increases for 1992 will be reflected in the guideline for the following year. They will begin to fold in over the next year and will continue to over the next three years given that the guideline is a three-year moving average.

Mr Turnbull: Let's take the situation that somebody has a second mortgage coming up which was below market rates, and we also have tax increases and we also have hydro increases.

Hon Ms Gigantes: Below current market rates?

Mr Turnbull: It is possible, a second mortgage, absolutely. A second mortgage has a higher interest rate than a first mortgage rate, in case you do not know that.

Hon Ms Gigantes: He has it wrong but I do not like to be rude.

Mr Turnbull: I beg your pardon. A second mortgage is not the same as a first mortgage.

Hon Ms Gigantes: I think you said it backwards.

Mr Turnbull: A second mortgage is more expensive than a first mortgage.

Hon Ms Gigantes: If I could make one more comment before we continue this, if Mr Turnbull will permit me, it is not accurate to say, in my view, that if there is a 6% guideline then the landlord has to operate with 4%. Somehow you are deciding to cut by 30% the amount of the rent increase available under the guideline which the landlord would have at his or her disposal to use for whatever purposes. Nothing in the 6% guideline has to be justified in terms of what it is used for until the landlord makes an application for an above-guideline increase.

Mr Turnbull: If you have a new roof in a given year and the previous year you have not spent your 2% on capital items, am I not correct in thinking that it will be disallowed?


Hon Ms Gigantes: No. There would be no call upon you as a landlord to justify the use of guideline increases until the year in which you made an application for a capital improvement or an extraordinary operating cost increase.

Mr Turnbull: Okay, so in that given year you would have 4%?

Hon Ms Gigantes: No, you would not.

Mr Turnbull: The 3% and 2% would be available for capital --

Hon Ms Gigantes: You would have to use the 2%, that is right. Yes, you would.

Mr Turnbull: You would have 4%.

Hon Ms Gigantes: That is correct, yes. In that given year, that is correct.

Mr Turnbull: So going back to my discussion of a second mortgage coming up and your being so shocked at my saying that would be possibly a higher rate than the current interest rate -- plenty of second mortgages were done at lower interest rates --

Hon Ms Gigantes: Lower than 6%?

Mr Turnbull: You are not going to get a second mortgage at 6%.

Hon Ms Gigantes: Well, that was what --

Mr Turnbull: I never said there were any second mortgages at 6%.

Hon Ms Gigantes: Very good.

Mr Turnbull: Where do you get a first mortgage today on a five-year term for 6%?

Hon Ms Gigantes: I am very sorry, Mr Chair. I think there is confusion again, because the statements I made earlier reflected my response to a scenario which had been put forward by Mrs Marland, which suggested a long-term mortgage of 5% to 6%. When I made those statements, Mr Turnbull decided I made them about every situation. Perhaps I should not have entered into a discussion of scenarios, because this is what has occurred.

Mr Turnbull: What is a first mortgage available at today? What rate?

Hon Ms Gigantes: It would depend on what you were doing with it and where you sat.

Mr Turnbull: If you were going to put it on an apartment building, how much would a first mortgage be?

Hon Ms Gigantes: That would depend very much who the customer was and what the customer was getting the first mortgage for.

Mr Turnbull: What range of rates would it be?

Hon Ms Gigantes: That would depend on the person, the financial position of the person or the company, and what purpose the mortgage was for.

Mr Turnbull: But what range would it be?

Mr Abel: On a point of order, Mr Chair: What does this have to do with 14.1? I really do not think this line of questioning by Mr Tilson is --

Hon Ms Gigantes: It is not Mr Tilson.

Mr Abel: Sorry, I just got so upset. I really do not think it contributes --

Mr Turnbull: It has everything to do with what we are talking about.

Mr Abel: I thought I had the floor.

The Chair: Mr Abel.

Mr Abel: I really do not think Mr Turnbull's line of questioning benefits this committee or is the reason we are here.

The Chair: Thank you, Mr Abel. Mr Turnbull can continue, but I would tell him that although we are discussing the relevance of a section that deals with interest rates, it may be more useful to deal more directly with this section.

Mr Turnbull: Mr Chair, as you will appreciate, this has everything to do with the clause we are discussing. Any discussion of 6% interest rates for mortgages is disingenuous. There are no 6% mortgages around. What we are talking about is the replacement of existing mortgages. First mortgages are in the 10% range at the moment for an apartment building, if you can get them, and second mortgages are considerably more than that, if you can get them.

Hon Ms Gigantes: Mr Chair, I agree with him and I think that was why his earlier phrasing of what he was intending to say was backwards, which did tend to confuse.

Mr Turnbull: There was nothing backwards in what I said. I do understand what I am talking about with respect to real estate, and you demonstrate every day you speak that you do not understand what you are talking about.

Mr Morrow: On a point of order, Mr Chairman: Is that necessary?

The Chair: Why do we not just leave it where it is for now?

Mr Turnbull: If you have a mortgage which is being replaced at less than current interest rate and the banks will not accept it --

Hon Ms Gigantes: Do you mean that the mortgage you have is less than current interest rate?

Mr Turnbull: Yes.

Hon Ms Gigantes: Okay, I think I have it.

Mr Turnbull: What would you do when the banks are saying, "Sorry, you don't have enough money to cover it?

Hon Ms Gigantes: It would very much depend on the situation. That is why I think it is really not terribly helpful for us to discuss specific scenarios.

Mr Turnbull: Give me an idea as to what specific situations there would be, because I am sorry it is incorrect.

Hon Ms Gigantes: You have proposed one, and you have asked me what I would do about it. It would very much depend on the financial situation I was in personally, perhaps my family's personal financial situation, perhaps a partner's financial situation. It could depend on whether I thought I was going to live for the next 10 years. Certainly a lot of factors might come into play if I were going to make a decision personally of that nature. As you know, there are a million kinds of influences that might in any given situation be important to a person making that kind of decision.

Mr Turnbull: That is an absolutely unacceptable answer. We have people who are going bankrupt today and all you say is, "We're not going to talk about hypotheticals. There are a million situations. Let's not talk about it." You have not answered a question satisfactorily for the opposition today.

Hon Ms Gigantes: Mr Chair, I have attempted, certainly, to do my honest best to answer the questions. It is not accurate for Mr Turnbull to say that I have said, "It doesn't matter, blah, blah, blah." I have not said those things. I have not dismissed the questions. I have done my level best to try to answer them. I may not have given the best answers in the world, but I certainly have done my level best to answer them.

Mr Abel: You have done it very well.

Ms Poole: So there.

Mrs Marland: What do you want, brownie points?

Mr Turnbull: So the people who have interest rate increases are just out of luck.

Hon Ms Gigantes: No, I do not believe that to be the case. I believe that, as in the past, most landlords will be able to manage their affairs quite satisfactorily. I believe there is room in this legislation for landlords to be able to run their buildings, to pay their costs and to undertake capital works in a way that will provide them with what they need to make a profit, and that will also provide tenants with some sense of security about the rate at which their rents will increase.

Mr Turnbull: I can tell you from all the landlords' and tenants' groups I am speaking to that they are not satisfied. I have spoken to the presidents of three tenants' groups in my area in the last three days and they all are not satisfied with this legislation.

Hon Ms Gigantes: I think that is probably true in a great many cases. This legislation, as I said, is a set of decisions made by this government about a reasonable kind of balancing of interests of landlords in this province with interests of tenants in this province. It may not be perfect, but it does represent our well-considered and best judgement.

Mr Mammoliti: Ask them if it is better than your legislation.

Mr Turnbull: One of the trained seals across the road is saying it is better than our legislation. As a matter of fact, quite a few tenants' groups have commented that our rental legislation was better than this.


The Chair: Mr Turnbull has the floor.

Mr Turnbull: So you will not consider any reflection whatsoever of interest rate increases or decreases in your legislation?

Hon Ms Gigantes: Not above guideline, no.

Mr Turnbull: And if the landlord has bona fide financing which is arranged at arm's length and the interest rate, when it comes up, is going to push him into bankruptcy as a direct result of the fact that he cannot flow this through, it does not matter?

Hon Ms Gigantes: As a direct result of?

Mr Turnbull: Of this legislation. Because the financing institutions look at this legislation and reflect on the ability of the landlord to be able to recapture the amount of money he has to pay as mortgage rate. I mean, that is one of the most fundamental things appraisers do. When they check for a bank or a financing institution, they look at the cash flow and they look at the ability of increasing the cash flow. If interest rates go up and you do not have the ability to pass that through, the financial institution will say, "No, we won't offer a mortgage."

Hon Ms Gigantes: It is not a question that the interest rates cannot be passed through. They cannot be passed through above guideline. That has been our decision.

Mr Turnbull: That is not a pass-through.

The Chair: On that note and it being five o'clock, the committee will adjourn until 10 o'clock tomorrow morning. It would be very helpful if all members could be present at 10 o'clock. We have been losing a little time in these discussions by not having representatives of all parties here at 10 o'clock. This is a complicated and lengthy piece of legislation. It would be helpful to have everyone here. Thank you.

The committee adjourned at 1701.