Monday, June 18, 2018

Rent control changes don't have to be all or nothing

Back in 2017 when CBC reporter Shannon Martin first started her crusade against the rent guideline exemption for post-1991 buildings, it was clear to me that the good times were over for developers.  But it worried me, as incentives are needed if purpose-built rentals are to be built, rather than condominiums.  Condos are too attractive when held up against rentals, as developers get their money out quickly without the risks of government intervention in the rental market over a long period.

As a stakeholder, I was worried that the rental housing industry was fighting a lost cause with the Liberal government, and I urged them to consider compromise.  But there was only one position for the industry...."Don't touch the post-1991 rent control exemption".

At the time, I thought it was extreme naivety by the industry.  The Premier, bottoming out in the polls, had nothing to lose.  The industry had to allow Premier Wynne something of a win with a face-saving compromise.  By March of 2017, the government was becoming embarrassed by the CBC revealing rent control's dirty little secret and the growing tide of negative public opinion.  I suggested at the time that one alternative would be to scrap the 27 year old exemption that was supposed to be for "new construction", and replace it with a system using a sliding scale that would see new purpose-built rentals be exempt initially, and then on a sliding scale, revert back to become fully rent controlled.

Unfortunately, there was no such compromise proposed by the industry, and when the axe fell in April of 2017, they lost the exemption completely retroactive to April 20th.

During the recent provincial campaign, Doug Ford made it clear that rent control is here to stay, and that's fine.  But there is lots of wiggle-room within the broad umbrella known as rent control to allow for changes.

My preferred method that would allow developers and owners to reduce risk without allowing rent gouging to occur, would be to implement a rent increase system using a sliding scale exemption with a cap.  For instance, the Ford administration could implement a system for newly constructed properties such as year 1 post-construction, rental guideline + 10%, year 2, guideline + 8%, year 3, guideline + 6%, year 4, guideline + 4%, and finally in year 5, guideline + 2%, becoming the provincial guideline thereafter.

Another no-brainer would be to bring back the above guideline rent increase application for extraordinary increases in utility costs, removed by Premier Wynne in the 2017 Rental Fairness Act.  Where landlords charge all-in with utilities, they shouldn't be punished by rising hydro costs that are beyond their control.  That was completely unfair.

And finally, recognizing that for the time being, condos are the new rentals, the government should allow above guideline rent increase applications by landlords who have had extraordinary increases in condo maintenance fees or special assessments.  Currently there is no way for condo owners who are landlords to adjust their rents when forces beyond their control make them cash-flow negative.

There are lots of changes needed to modernize and bring balance to the Residential Tenancies Act, and with a majority government, the Ford government should get moving with these types of rent control changes.

No comments: