Saturday, July 30, 2011

Minister Bartollucci's Comments on Guideline are Intellectually Dishonest

On Friday Minister Bartolucci reacted in mock horror to the 3.1% provincial rent increase for 2012, saying he would re-vamp the system if the Liberals are elected.  But let’s look at the facts.

Prior to the Liberals enacting the Residential Tenancies Act in 2007, the annual guideline was based on a 3 year rolling average of eight building operating costs.  This blending of 3 years was used to smooth out the bumps of any one given year that may have been atypical.  It was Minister Bartolucci’s government that changed it to the current system which looks at only the most recent year of the Ontario Consumer Price Index. 

The rent guideline years of 2011 and 2012 were an aberration, and must be looked at together and in context.  This larger-than-normal increase for the 2012 calendar year exists because of the effect of the HST which came into force July 1st, 2010, affecting the “sample year” that was used to determine the 2012 guideline.  Landlords collect no HST on residential rents, and therefore there are no input tax credits available to them.  Nor can they pass on their cost of HST, as the rents they charge are strictly controlled.  Every cent of HST landlords paid was an added cost to them.  So adding the natural true inflationary forces with the new HST, you have a 3.1% increase for 2012, which I concede is more than 4 times greater than the .7% allowed for 2011.

But let’s go back and average the aberrations of 2011 and 2012, using a methodology closer to that used pre-Residential Tenancies Act.  Adding the 2011 and 2012 allowable percentages, we come up with 3.8% over two years, or 1.9% annualized.  If you look back all the way to 1990, there have only been 3 years that were less than the 1.9% (1.5% in 2005, 1.4% in 2008 and 1.8% in 2009). Interestingly the last two were under the current Liberal government.  So how is 1.9% averaged over two years unfair to tenants and a windfall to landlords?

The Liberals were happy to take credit when the increase was .7%, pandering to their core constituency.  But they are aghast when the low number from 2011 caught up with them in 2012.  They want to take credit when their formula produces numbers that look good on them, but disavow the formula when it produces a result fair to everyone.  Typical of the left, always picking winners and losers instead of allowing any sort of market forces to prevail.

2 comments:

Anonymous said...

It's amazing that they can spin and lie like that. Thanks for pointing out some of the history. Most people are not familiar with the changes.

Anonymous said...

It's also amazing that landlords can bank repairs so that a low CPI
will allow them to make repairs and base the towards maximizing profits. It's also amazing that that when doing these calculations the LTB does not take rent increases between the Base and Reference years as a prepaid cost which should be applied to these costs as they claim they are part of the rent.