NDP calls for more provincial power to police landlords

In the aftermath of the Toronto bed bug crisis, New Democratic MPP Cheri DiNovo introduced a private member's bill, the Residential Tenancies Amendment Act, to provide for what she says is much needed oversight of landlords - some of whom "willingly rented apartments that they knew to be infested.

"What I think landlord licensing does is really weed out the bad landlords and leaves the good ones. And that's all we're asking for here," she says. "The problem is that unless you have licensing of any business - and quite frankly I know of very few businesses that are not licensed - there's no way of holding people to account ... Unless you have some means of the government forcing people to do something, they won't do it."

On Jan. 1, 2007, the province passed Bill 130, amending the Ontario Municipal Act to give municipalities the power to govern, regulate and license residential rental units, similar to the way towns and cities license businesses.

As most politically inclined people know, once government is given the ability to expand its powers, it's really only a matter of time before it actually does.

Now, municipalities, such as London and Oshawa, have already taken the province up on the offer, creating their own licensing programs, while it looks like Waterloo may have its own city-wide rental licensing system set up sometime this spring.

But DiNovo's bill would go much further. If passed, Bill 112 would require all owners of dwellings with six or more units to obtain licences for each property "in order to enter into a tenancy agreement or renew an existing tenancy agreement."

Quentin D'Souza, a property investor in Durham Region, sees this measure as nothing more than a "money grab" that lacks any enforcement mechanisms and further bogs investors down with more red tape. "This is more of a money grab than anything else," he says.

"How do they enforce it? Do they (the province) have an army of people that are going to go out and look at properties?"

Rent control

Secondly, DiNovo says her bill aims to increase affordability for renters struggling to pay for the necessities of life.

Currently under the Residential Tenancies Act, landlords can apply to the Landlord and Tenant Board to charge rents higher than the annual guideline set by the province and they can increase their rents to match the current market value once a tenant has moved out.

Bill 112 would abolish that. An unintended consequence of the former measure, says Real Estate Investment Network President Don Campbell, is that it would cause large distortions among rents charged in the same cities and even in the same neighbourhoods or buildings.

Landlords who've had the same tenants for a long time and have been raising their rents only to what the guidelines allow will be left behind those who have high tenant turnover and are able to raise their rents to the current market value every time a tenant leaves, Campbell says.

For example, a landlord who has had the same tenants for five years would only be able to raise his or her rent in accordance with the guidelines, which usually matches the rate of inflation. If the landlord is charging $500 rent in 2005 and the average increase permitted by the guidelines over five years is 1.76%, the landlord would only be able to charge roughly $545 by 2010.

The problem is the current market value of rent could have gone up to $800 during that time, says Campbell. So a landlord who had his or her tenants move out would be able to bring the rent up to $800, while the other landlord would be stuck charging $255 less a month.

Consequences of government intervention

If passed, Campbell says, this bill will produce the same results that rent controls under Bill Davis's Red Tory government in the 1970s caused: a lack of investment in rental housing.

"It's going to negatively affect renters because people will stop providing rental properties in Ontario. They're just going to finally say, 'You know what? It isn't worth it in this province anymore because it's become draconian since every single year they'll lose more and more money."

As the number of properties that can actually cash flow dry up and fewer investors come to the province, landlords who choose to stay in Ontario will eventually stop investing in their properties, too, Campbell says, especially since landlords will not be able to apply to the Landlord and Tenant Board to charge above-guideline rents to deal with rising energy costs in the province.

"If you have zero cash flow because of some of these draconian rules, you won't have that money to spend on maintenance. So the property will get worse, dirtier and uglier and five years down the road the majority of rental properties in the province will be under-maintained."

In the end what this bill could do is "chase away" a lot of honest landlords from the Ontario rental market altogether, Campbell says.

DiNovo says this fear is overstated and the belief that rent controls cause diminished investment in rental housing is simply a myth. "Nothing could be farther from the truth and this is based on fact, not fiction," she says. "The bill would only get rid of the bad landlords, not the good ones."

DiNovo asserts that rental property investment would not dry up because landlords will still be able to apply to the board to charge above-guideline rents as long as they're making improvements to their properties.

"Ultimately, you can't raise the rent 46% because the cost of hydro has gone up," she says. "But if somebody is putting money into building and [they find] their costs were over and above what they suspected ... then that option always has to exist: to be able to go and raise the rent above the market guidelines. So that wouldn't change."

The "critical issue" regarding the creation of incentives for investors, she says, is not about rent controls, it's about creating tax breaks and capital investment write-offs.

But DiNovo stresses that her proposal is a private member's bill and that she is open to making revisions to it.

More regulations

The bill also requires landlords who terminate a tenancy for "personal use" to compensate the tenant and "expands the circumstances" in which landlords must provide compensation when demolishing a building or converting it to a non-residential use.

In addition, the bill extends the time period in which tenants can file a complaint with the Landlord and Tenant Board from one to two years.

That means landlords will have to spend more money and time on filing two years worth of documentation, so that they can deal with any "unexpected surprises," says real estate investor D'Souza.

"If you don't have a good documentation system and a tenant brings up an issue that's 18 months old, for example, that could end up costing you because you'll have to prove that at the Landlord and Tenant Board," he says.

The bill was introduced in the fall of 2010 and will most likely die on the order paper by the time the provincial election is held on Oct. 6.

But there still is the possibility that the bill will resurface in the next session, according to D'Souza. "If there's any use to the bill, most likely the governing party, like McGuinty's group right now, would take the bill and kind of massage it so that they could claim that it's their bill."

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