Toronto tenants crushed by rent hike exemptions
Joseph Darius Jaafari
The Globe and Mail
27 January 2017
When residents at the Carnaby, a condo building on Toronto’s Queen
Street West, were given their rent notices last month, they expected an
increase of about 2 per cent, as per the guideline set by the
province’s Landlord and Tenant Board last year. Instead, they saw their
rents skyrocket – in one case by as much as 30 per cent.
Lisa Beam’s rent for her 500-square-foot unit jumped 17 per cent to
$1,750 a month. She contacted the complex’s property manager, Baytree
Real Capital, in disbelief before turning to tenant advocates for
advice.
“I finally realized that I didn’t have much of a choice in terms of
paying it. It was well within their rights to raise my rent that high,”
said Ms. Beam, a 44-year-old corporate trainer.
two classes of renters in Ontario
The tightening of Toronto’s rental market, which has reached record-low
vacancy rates, is being felt most acutely by the residents of newly
built condos, which are exempt from rent controls. There is no yearly
rent cap for properties built after 1991 because of a controversial
exemption in the province’s Residential Tenancies Act that was designed
to spur the development of rental properties. The law accomplished its
goal but has drawn the ire of housing advocates who say it has created
two classes of renters in Ontario: those who have rights and those who
have none.
“You got a tier of renters that are covered under the law who are able
to enforce their rights and get stable rent increases that they can try
to navigate. And then you have this other tier that have no
understanding of what their rents are going to be next year,” said
Geordie Dent, executive director of the Federation of Metro Tenants’
Associations. “That second group? It’s growing and it’s going to keep
growing.”
Recent data from Urbanation Inc., a consulting and market research firm
that focuses on the GTA’s condo market, shows that average rents for
condos rose 11.7 per cent in the fourth quarter of 2016 over the same
period a year earlier. In the city’s core, condos rented for an average
of $2,134 a month in the last three months of 2016.
At the same time, Toronto’s extremely hot housing market has made it
harder to find rental units. First-time buyers who can’t afford the
rapidly increasing price of single-family homes have been pushed to the
condo market, according to an analysis by Canada Mortgage and Housing
Corp. The resulting growth in condo prices has encouraged many condo
owners to sell rather than rent their units, according to Urbanation,
which found rental listings down 8 per cent in the final quarter of
last year.
The exemption for homes built after 1991 was originally part of a piece
of legislation with roots in the Residential Premises Rent Review Act
of 1975, which sanctified rental guidelines and restricted rental
increases and evictions. The 1975 law changed over the course of its
lifetime and eventually included a rotating five-year adjustment period
that gave newly built homes time to find their appropriate market
value; after five years, the home would be placed into rental
regulation. The rotating exemption was last updated in 1991. Five years
later, after Mike Harris and the Progressive Conservative Party came to
power, the law was reworked to say that homes built or occupied after
Nov. 1, 1991, were not included under rental regulation.
condos, a majority of which are being used as rental properties
Since then, almost a million housing units have been built in Toronto,
according to the city’s planning department. Of those, Canada Mortgage
and Housing Corp. lists almost a third as condominiums, a majority of
which are being used as rental properties.
“The 1991 exemption was to say to any investors big, medium or small
that this is what we’re going to do as an incentive. The market
responded by creating hundreds of thousands of small landlords,” said
Daryl Chong, president and chief executive officer of the Greater
Toronto Apartment Association.
But city councillors such as Josh Matlow (Ward 22, St. Paul’s), who
chairs the city’s Tenant Issues Committee, argued that the exemption
was to appease the development community.
“You would hope that this would be a matter of public discussion, but
this just isn’t seen as a priority. It hasn’t been that shiny ball that
has attracted the attention that it deserves,” he said.
Mr. Matlow has joined the growing voice of housing advocates pushing
for the exemption to be struck down, but he believes the provincial
government – the only power that can help tenants not covered by rent
controls – has turned a blind eye to renters.
“One of our big themes over the past two years has been Canada’s lack
of a housing policy,” said Kenneth Hale, the director of advocacy and
legal services for the Advocacy Centre for Tenants Ontario. “Well, we
actually do have a housing policy, and it’s to support home ownership
and to leave behind people who can’t make it into home ownership and
let them fend for themselves.”
But landlord groups and developers in Ontario have countered that the
exemption has given power back to the market. They oppose any
regulation to reel in possible abuses.
“If you were to say there are some landlords abusing the rent exemption
by increasing the rent significantly, I’d say it’s possible, but I just
don’t see it,” said Doug Levitt, a senior partner at the law firm
Horlick Levitt Di Lella and a member of the Canadian Condominium
Institute. “There is a lot of push-back, but [the exemption is] one of
the few things that have gotten to stimulate growth. I would never be
for regulating it.”
Minister of Housing Chris Ballard continues to support the exemption, saying it creates new demand for rental housing.
“The post-1991 rent exemption was originally introduced – and has been
maintained over time – as an incentive for private landlords to create
new rental accommodation in order to meet increasing demand for
housing,” he said in a statement. “This incentive helps to renew, build
and increase the supply of new rental accommodation.”
Removing the exemption would hurt the city’s housing market by causing
landlords to sell off their properties to avoid losing money on their
investments, said Mr. Chong of the Greater Toronto Apartment
Association.
“The annual increase in property tax and condo fees is way in excess of
the rental guideline increases. If the 1991 exemption were to end,
these owners would have no recourse but to sell because they’d be in a
losing proposition. This could trigger a large sell-off,” he said.
“Then a lot of people would sell off their units, and all of a sudden a
big part of the rental market is now sold off. All to the detriment of
the families in the owner-occupied units.”
But both Mr. Hale and Mr. Dent see that logic as flawed, saying tax
incentives – not rent regulation – are what spur development.
“Simply getting rid of rent control just means that you can have an escalation of rent,” Mr. Dent said.
For Ms. Beam and other renters at the Carnaby, there is little
recourse. After contacting the Federation of Metro Tenants’
Association’s Tenant Hotline, one renter was told there was nothing
they could do “except maybe lobby your local government.”
(Baytree Real Capital declined to comment on how it determines yearly rental increases.)
“This is in an unlegislated area that puts all the power in the hands
of the landlord,” said Alexis Fitzjohn, another resident at the
Carnaby, who is moving at the end of the month after being notified
that the owner of her unit is returning. “I know landlords complain
that the rental increase guideline isn’t high enough, but then revisit
it. Don’t just not legislate it and then allow the landlord to raise
the rent $600. I mean, how is that right either?”
top contents chapter previous next