SUPPORTING STRONGER RENTAL HOUSING IN...

FEDERATION OF RENTAL-HOUSING PROVIDERS OF ONTARIO 1

SUPPORTING STRONGER RENTAL HOUSING IN ONTARIO

NOVEMBER, 2014

FEDERATION OF RENTAL-HOUSING PROVIDERS OF ONTARIO 2 FEDERATION OF RENTAL-HOUSING PROVIDERS OF ONTARIO 2

The Federation of Rental-housing Providers of Ontario (FRPO) is the largest association in Ontario representing those who own, manage, build, and finance residential rental properties.

Our membership includes a diverse group of owners and managers, from those with one small building or single rental unit, up to the largest property management firms and institutional owners and managers. The association also includes our partners in industry, including service providers, suppliers, and industry consultants.

FRPO represents more than 2,200 professionals who own or manage over 350,000 rental homes in every area of Ontario.

Over 25 years in operation

Our members provide

over 350,000 homes in Ontario

Represent over��

2,200 industry professionals

REPRESENTING RENTAL HOUSING PROFESSIONALS


Our approach with government is one of partnership, focused on our common objectives and priorities

FRPO works to promote a balanced and healthy housing market with a vital rental-housing industry, choice for consumers, adequate government assistance for low-income households, and private sector solutions to rental-housing needs.

Our government relations professionals provide policy decision makers with vital research and industry trends, and work in partnership to identify opportunities to improve outcomes for tenants, and to continue to be an important contributor to Ontario’s tax base, job growth, and overall economic prosperity.

Through education, training, and quality certification programs, FRPO provides its members and the industry with vital tools and services to ensure a sustainable private sector rental-housing industry in Ontario.


A ROLE FOR THE PRIVATE SECTOR IN PROVIDING AFFORDABLE HOUSING

Ontario’s private sector rental housing providers supply homes to individuals and families with a range of incomes across the entire province. Our expertise lies in building, operating, and maintaining all types of rental housing units in an effective and efficient manner.

Our members utilize the best available technologies and management practices to ensure we meet and exceed the standards set by government, along with guidelines and practices supported by the industry. We have the expertise to build new purpose-built rental housing wherever the need exists and market conditions support new development.

Housing affordability has been a complex and difficult issue for governments over time. FRPO is committed to working with government and other organizations to support solutions that will match those in need of housing with the right type of housing in a timely manner.

FRPO members believe affordable housing is achieved through the right partnership between the public, private, and not-for-profit sectors. We all have a role to play. By putting on the table what we all do well, we can provide those in need with the right housing option.

We remain committed to finding better ways to bring the right housing solutions to all tenants in Ontario.

Affordable housing is achieved through the right partnership between the public, private, and not-for-profit sectors. We all have a role to play.


INDUSTRY INFRASTRUCTURE INVESTMENT

$4.5 billion in capital expenditures on new apartment construction and renovations to existing housing

Over 42,000 full-time jobs created in new construction and repair

More than double the annual capital investment by the Ontario

government in both GO Transit and provincial highways combined

Source: KPMG Rental Housing Industry Economic Impact Study, December 2013


0% 20% 40% 60% 80% 100%

15-24

25-34

35-44

45-54

55-64

65-74

75+

Percent Renting

Age

Gro

up

KEY DEMOGRAPHICS OF RENTERS ARE SHIFTINGHome ownership is becoming increasingly unaffordable for Ontarians, and people are now staying in rental housing longer than they did 20 years ago.

Millennials, those in the 15-35 age bracket, are a key part of the population seeking rental accommodation. Those entering the workforce are looking for their first rental home of their own so they can be close to where they work. They are looking for a modern look and feel to their home environment.

Seniors and newly retired couples are becoming growing consumers of rental housing as they seek housing solutions that are free from the obligations tied to home ownership. This segment of renters are looking for amenities that promote a sense of community.

AGE PROFILE OF ONTARIO RENTERS 55% of Ontario’s rental housing stock, or 750,000 units, was built prior to 1970


ONTARIO’S PRIVATE SECTOR HOUSING INDUSTRY��Provides homes to over ��

1.2 million households in Ontario��

$18.3 BILLION ��in GDP annually��

Over 147,000 jobs��

$7 billion in annual ��tax revenue to governments �� Source: KPMG Rental Housing Industry Economic Impact Study, December 2013 ��

Ontario’s private sector rental housing industry provides quality rental homes to over 1.2 million households across the province. One in three Canadians rent their own homes, yet purpose-built rental construction has accounted for just 10% of new residential construction over the last 15 years (source: CMHC).

At a time when younger Ontarians are wishing to live downtown in urban cores, and senior citizens are looking to downsize to smaller rental units, the pressure to create additional purpose-built rental housing continues to grow.

Purpose-built rental housing is built and operated by professionals in the rental housing business. This means that the homes and services are provided by qualified staff who are committed to quality and standards that are expected by today’s residential tenants. Our commitment to quality is reflected in our own Certified Rental Building Program, an industry certification program comprised of over 50 environmental and service standards demonstrating our commitment to superior customer service and quality. Private sector housing providers want to continue to build new purpose-built rental homes across Ontario to respond to growing demand for rental housing. However, the Ontario government continues to maintain several policies that are inhibiting new multi-residential construction to help provide more rental-housing choice for Ontarians. It is our hope that by working in partnership with the Ontario government and other related industries, we can cultivate a more supportive policy environment that will encourage new development of rental housing and a continued commitment to high quality and standards in the industry.


KEY ISSUES IN THE ONTARIO RENTAL HOUSING INDUSTRY

§  Rent Control

§  Rent Dispute Process

§  Property Tax & Assessment

§  Municipal Licensing


POLICY CHANGE IMPACTS ON SUPPLY

Rent controls in Ontario have had a major negative impact on the supply of purpose-built rental housing units. Rent controls were first introduced by provincial legislation in July 1975, and the various rent control policies of successive governments since that time have continued to treat housing providers and tenants unfairly.

VACANCY DE-CONTROL Vacancy de-control was introduced in 1998 to let rents reflect current market conditions when an existing tenant moves out. This policy decision by government has played a significant role in encouraging housing providers to make important investments in the quality of rental housing.

Nobel laureate economists including F.A. Hayek, Milton Friedman, and Gunnar Myrdal have all argued rent control is a counter-productive policy. Rent control policies are shown to artificially induce housing shortages, create under-maintenance of existing housing stock, and result in more expensive taxpayer-financed social housing programs.

Unfortunately, despite the available evidence, some jurisdictions, such as Ontario, chose to implement and continue to maintain rent control policies that negatively affect the rental housing market and tenant choice.

Not all jurisdictions in Canada see rent control as mandatory; Alberta, for example, ended rent controls in 1980 and has enjoyed a stable rental housing market since then. In fact six provinces in Canada currently have no rent controls.

FRPO is ready and able to work with the provincial government and other partners to explore alternative solutions to rent control policies to provide tenants more choice and better rental housing.

RENT CONTROLA POLICY WORKING AGAINST TENANT CHOICE


0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

12-m

onth

CPI

Cha

nge

INFLATION IS PUTTING PRESSURE ON 2.5% RENT CAP

GUIDELINEHISTORY

Ontario’s annual rent increase guideline is set each year through a Consumer Price Index (CPI) formula prescribed in legislation. This formula reflects annual relative change to the purchasing power of a consumer dollar within a defined basket of goods in Ontario as determined by Statistics Canada.

In 2012, the government introduced a hard cap on annual rent increases of 2.5%.

Over the past year alone, the monthly inflation rate has started to put upward pressure on the 2.5% cap, and started to edge above it.

This hard cap of 2.5% will soon become unsustainable, and begin to seriously affect choice and quality in the rental housing market. This is not good for tenants, or for housing providers.

RENT INCREASE GUIDELINE & THE 2.5% HARD CAP

RESIDENTIAL TENANCIES ACT, 2006�� 120. (2) The Minister shall determine the guideline in effect for each calendar year as follows:

1. Subject to the limitation set out in paragraph 2, the guideline for a calendar year is the percentage change from year to year in the Consumer Price Index for Ontario for prices of goods and services as reported monthly by Statistics Canada, averaged over the 12-month period that ends in the end of May of the previous calendar year, rounded to the first decimal point.

2015 1.6%

2014 0.8%

2013 2.5%

2012 3.1%

2011 0.7%

2010 2.1%

2009 1.8%

2008 1.4%

2007 2.6%

2006 2.1%

2005 1.5%

2004 2.9%

2003 2.9%

2002 3.9%

2001 2.9%

2000 2.6%

Source: MMAH


WHAT THE EVIDENCE SAYS

NEW CONSTRUCTION AFTER 1991

§  62 new buildings built per year§  Average of 115 units per building

NEW CONSTRUCTION BEFORE 1991

§  45 new buildings built per year§  Average of 82 units per building

“The post-1991 rent exemption was originally introduced—and has been maintained over time—as an incentive for private landlords to build new rental accommodation. This incentive not only helps to renew the rental housing stock, but also creates jobs in the construction sector. As such, any changes to this incentive could have an adverse effect on the rental housing sector, the economy, and job creation.”��

Hon. Linda JeffreyMinister of Municipal Affairs and Housing

April 2013

THE POST-1991 RENT EXEMPTION POLICY – RESTORING TENANT CHOICE

The current new development policy set out in the Residential Tenancies Act is the primary reason why new rental housing is being built

As a partial recognition that rent control policies of the past have hampered the development of new purpose-built rental housing units, the provincial government now allows rental units built after November 1991 to be exempt from the annual guideline increase.

This policy has not only seen an increase in the number of new rental buildings being constructed, but there has been no spike in rental rates being charged. Allowing free market conditions to guide rental rates allows housing providers to provide quality rental housing units and respond to growing demand for rental housing in growing economies.

This policy must be maintained to protect tenant choice, and ensure the rental housing stock continues to meet tenant demand.

Source: Stats Can


RENT DISPUTE PROCESSONTARIO HAS THE LONGEST DISPUTE RESOLUTION PROCESS

Currently the typical rent dispute case takes on average 90 days before Ontario’s Landlord Tenant Board. This is the average 'me it takes—some disputes take many months to resolve, and at great cost to all parOes involved. And, a tenant has the ability to delay this process even further, someOmes more than a year, if an appeal is made to the Divisional Court. In Alberta, the enOre process takes 17 days. In Saskatchewan, it’s 25 days; Manitoba, 32 days; B.C., 35 days. Tenants make up roughly the same percentage of the populaOon in all provinces – yet Ontario’s process results in more costly and unnecessary delays.

AVERAGE DAYS TO RESOLVE LANDLORD-TENANT DISPUTES��British Columbia 35��Alberta 17��Saskatchewan 25��Manitoba 32��

Ontario 90��


SAIDA SABRIE v. STARLIGHT APARTMENTS(Court Decision: June 10, 2014)

Failure to pay rent. Amount of rent owed to landlord $2,127

First tribunal hearing scheduled ��April 8,2013 ADJOURNED

Rescheduled tribunal hearing set for June 7, 2013 ADJOURNED

Rescheduled again and heard on ��August 14, 2013. No further adjournments granted by tribunal

ORDER ISSUED

Tribunal issued order for tenant to pay rent arrears or move out by: AUGUST 26, 2013

Tenant ignored order, appealed to Divisional Court (Judicial Review)

LTB ORDER STAYED

Divisional Court hearing scheduled and heard JUNE 10, 2014

Court found no error of law, applicant’s case had no merit

LTB ORDERCONFIRMED

Total landlord costs incurred: $25,000. Total amount awarded: $2,500

129days

292days

TOTAL OF 421 DAYS

A RECENT CASE EXAMPLEFRPO recognizes that the vast majority of tenants are good tenants, and respect the agreements they sign with their rental housing provider. However, there are those individuals who take advantage of the dispute process to avoid making good on their obligaOons to pay the rent they owe, or in some cases, interfering with the right of enjoyment of other tenants living in the building. Changes to the rules in 2008 require landlords to retain a lawyer or licensed paralegal to represent them at the Tribunal or in Court, while the tenant is able to represent themselves. This simply adds to the costs of dealing with a tenant problem. The chart highlights an example of a case that was appealed by the tenant to the Ontario Divisional Court aêr the Landlord Tenant Board issued an Order for the tenant to pay what was owed or move out of the unit. The landlord obtained an Order of the Landlord Tenant Board to require the tenant to pay what was owed, or move out of the unit aêr a 129 day process. A further delay of 292 days resulted from the tenant appealing the decision, with no basis being found by the court for the appeal. Aêr 421 days, and a cost of $25,000, the owner of the apartment unit sOll had to collect the $2,127 that was owed in rent arrears.


Eliminate the automatic stay of a Tribunal order in the event of a tenant appeal being filed��

Reduce statutory delays, such as reducing the N4 notice period from the current 14 days down to 5��

Introduce a Dispute Form and end default hearings��

Allow private bailiffs to enforce Orders as an alternative to the Sheriff ’s Office

FRPO is presenting several options to government to bring about an appropriate balance to the current dispute process

HOW TO BRING FAIRNESS TO THE DISPUTE SYSTEM FOR EVERYONE


PROPERTY TAX AND ASSESSMENTFAIR TAXES EQUALS FAIR RENT

Many tenants do not realize property taxes are included in the monthly rent they pay.

If the rental property is incorrectly assessed, or treated differently than other residential properties by the municipality, tenants may be paying more than their fair share of property taxes included in their rent.

Two potential causes for unfair rents due to property tax policy

HOW PROPERTIES ARE ASSESSED§  Ontario is the only jurisdiction that uses

Gross Income Multiplier (GIM) assessment method

§  If a property’s assessment does not reflect its real value, it could be paying too much in property tax

HOW PROPERTIES ARE TAXED

§  On average, municipalities tax apartment buildings at TWICE the rate of houses and condominiums

§  Tenants in apartment buildings may be paying more for local services through their monthly rent than those who own their own home


MAKING THE ASSESSMENT SYSTEM FAIR FOR TENANTS

FRPO WORKING IN PARTNERSHIP WITH GOVERNMENT

When assessment values are incorrect, everyone bears the cost of filing appeals. In an effort to improve the system, FRPO commissioned a research report in 2014 to examine how other jurisdictions in the world determine the value of apartment buildings for the purposes of taxation. The report, completed by the International Property Tax Institute (IPTI), revealed that the method used in Ontario has been abandoned by almost all other Commonwealth countries, the United States, and the other Canadian provinces.

FRPO is pleased to have entered into a partnership arrangement with the Municipal Property Assessment Corporation (MPAC) and the Ontario Ministry of Finance to explore moving to a more transparent and appropriate assessment method for apartment buildings.

FRPO and government have the same objectives when it comes to property assessment: to reduce the cost of appeals through improving the quality of the values returned in the assessment roll, and reduce the administrative costs to filing the necessary data to complete the assessment roll. This is one way we can bring fairness to tenant rents.

§  In 2014, FRPO & MPAC came together to explore ways to reduce the administrative burden of filing information needed to determine assessed value of apartment buildings

§  New Tenant Information Package (TIP) forms released September 29th

§  Rental data now collected at the suite level only (suite time, market rent)—individual tenant data no longer required

§  One-time collection of what utilities and amenities are included in rent—going forward MPAC is notified of changes only

§  New form captures number of vacant units on ��June 1—no longer necessary to list individual unit vacancy details

��When Industry & Government Collaborate

Previous forms collected 10.7 million data points. This new process will drop

this number to 733,000, a volume

reduction of 93%Source: MPAC


BRINGING FAIRNESS TO HOW APARTMENT BUILDINGS ARE TAXED

FRPO CALLS ON THE PROVINCIAL GOVERNMENT TO BRING AN END TO UNFAIR TAXATION ON TENANTS

The municipal level of government determines the relative taxation burden between the different property classes including residential, commercial, industrial and multi-residential.

In 1998, additional transparency was introduced to the property tax system in Ontario by publishing the relative burdens between the property tax classes in each municipality. These tax ratios for each property class show how much more each class pays in taxes compared to the residential class.

Across Ontario, tenants pay on average TWICE the property tax rate through their rent compared to the rate paid by owners of houses and condominiums. While some progress has been made since 1998 by municipalities to eliminate this unfairness, this inequity on tenants remains unacceptable.

The current property taxation system in Ontario suggests those who rent their homes can afford to pay more taxes than those who own their homes. FRPO believes a home is a home, and all residential properties in a municipality should be taxed at the same rate. This is the case in most other provinces in Canada, and in the interest of fairness, Ontario should follow suit.

Under provincial legislation, when property taxes go down, housing providers must immediately pass these savings through to tenants in the form of lower rent. Bringing fairness to the property tax system for tenants in apartment buildings would immediately help to reduce the cost of renting a home.

10 The number of Ontario municipalities who tax apartment buildings the same as houses and condominiums

Apartment buildings are taxed on average at

TWICE the rate of houses and condominiums

Average over-taxation on typical 2 bedroom apartment is $80 per mth

or $1,020 per year

www.fairtaxfairrent.ca


MUNICIPAL LICENSINGA NEW TAX ON TENANTSRental housing providers are required to comply with a number of regulatory requirements in how they build and maintain rental units. These requirements are defined in provincial or federal statutes and provide municipalities with a number of tools to ensure appropriate safety and security for tenants. This tight network of statutory authorities allows municipal governments to regulate local rental housing markets in an effective and standardized manner.

Prior to 2007, the Municipal Act exempted rental units from municipal licensing regimes, since sufficient tools and authorities already existed (Building Code, Fire Code, Property Standards bylaws, etc).

In response to municipal fiscal concerns, municipalities were granted the authority starting in 2007 to impose a number of new levies and taxes on businesses and residents, including the ability to charge a licensing fee to owners of residential units in the municipality, by repealing section 2 of ��O.Reg 243/02 under the Municipal Act.

The evidence shows that licensing regimes imposed on residential apartments often do not generate net new revenues, but instead result in increased costs that must be recovered through general property taxation. The evidence also reveals that these types of licensing schemes do not help to increase the quality of rental housing.

Governments trying to help low-income families find affordable housing are in fact making rental housing more expensive by adding licensing fees to the cost of providing rental housing to tenants, with no increase in quality.

FRPO can therefore only conclude this is an unintended consequence of the government policy change.

FRPO maintains municipalities

already have the necessary tools to effectively manage how rental housing is developed and operated


This new fee, from $50 - $400 each year is passed along to the tenant in their rent

WATERLOO 2 bdrm apartment $800/mth

EXAMPLE Licensing fee $400

Additional cost $33/mth (+4.2%) ��

Examples of Municipal Licensing Fees

MUNICIPAL LICENSING FEES INCREASE COSTS TO TENANTS

When municipal officials fully consider

the evidence, they ultimately decide against implementing municipal licensing

GuelphHamilton

OttawaRegina


In 2013, FRPO commissioned a research study to examine the evidence on apartment licensing schemes in multiple jurisdictions

CONCLUSION

“Apartment licensing is not an efficient source of new ‘net’ municipal revenues. It creates unintended negative effects on the local economy…”

“…More importantly, apartment licensing does not necessarily offer added protection to tenantsand prospective tenants. In fact, it tends to add to the eligible costs that can be charged by landlords and to reduce the options for tenants in the rental housing market.”

FRPO’S SOLUTION

Restore the regulatory provision that existed prior to 2007 to exempt apartments from municipal licensing


CERTIFICATION & STANDARDSAN INDUSTRY COMMITTED TO QUALITY AND THE ENVIRONMENT

FRPO promotes only the highest levels of accountability and integrity amongst its members. And as an industry, we believe the highest commitment to quality and ongoing improvement is through self-‐regulaOon and accreditaOon. That is why FRPO invested in the creaOon of North America’s first-‐ever cerOficaOon program for the rental-‐housing industry. The CERTIFIED RENTAL BUILDING (CRB) PROGRAM provides consumers with a quality assurance alternaOve they can count on when selecOng their rental apartment home. It assures tenants they are choosing a well-‐run, well-‐managed building each and every Ome. The program ensures that each successfully cerOfied building pracOces over 50 established building management and environmental standards, and the staff and owners are commifed to high standards of care, maintenance, and overall quality measures. The CERTIFIED RENTAL BUILDING brand sets that building apart from other buildings that do not carry the cerOficaOon. Audited by JD Power & Associates, tenants can be assured they are renOng from a housing provider commifed to quality and the environment.

PROGRAMAUDITED BY


§  The only multi-residential certification program in North America

§  Includes 50 building management, customer service & environmental standards

10 new environmental standards recently added to the existing certification program

Endorsed and supported by the Ontario government

www.crbprogram.org

FRPO’S self-regulating industry quality assurance program for tenants

GOOD FOR TENANTSGOOD FOR THE ENVIRONMENT


CONTACT

Scott AndisonPresident & CEOFederation of Rental-housing Providers of Ontario20 Upjohn RdToronto, ON M3B 2V9

tel: 416-385-1100 email: [email protected]

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