Friday, November 16, 2018

Not the Change Landlords Were Looking For, Premier Ford

While it was exciting to read the news about the introduction of Bill 57 by the PC government, the euphoria wore off after reading the bill and digesting the information.

The Bill, an omnibus bill effecting a number of statutes will, once passed, make changes to the Residential Tenancies Act (the 'RTA') to once again eliminate the rent guideline percentage increase for new construction.

This does NOT reinstate the post-1991 guideline exemption that was eliminated by Kathleen Wynne in April of 2017.  That train has left the station. But it does re-instate a similar scheme going forward for rental units in new rental complexes in which no unit was previously occupied for residential purposes on or before November 15th, 2018.

So for new construction, including new additions to existing structures, the Bill exempts from the provincial guideline, the guideline percentage portion of the rent control scheme, allowing landlords to raise the rent annually by ANY amount provided landlords give proper notice of the increase.

Critics say that the previous government's scheme didn't result in many new purpose-built buildings, and that's likely true, although there were other factors in play that might not apply today.

Critics also charge that having no cap on increases will lead to economic evictions, where landlords will be able to get rid of any tenant they don't like by simply doubling the rent.  Also true, and there is no way to sugar-coat that.

My take on the Bill is that it was a bone thrown to the large corporate landlords, pension funds, developers etc. to incentivize them to take a chance at developing purpose-built rental buildings and ensure themselves a superior rate of return.

Frankly, I don't think that's going to work.  With successive governments playing ping-pong each election with rent increase exemptions related to new construction, developers won't take the risk and will instead continue to build condos.

This iteration of the exemption is slightly different from the previous post-1991 deal.  It allows small landlords in their houses to build NEW second suites, subject to conditions, and those would not be subject to rent control.  The thinking is that incentive will mesh with current provincial government policy which forces municipalities to draft acceptable rules and permit second suites.  After a quick read of the Bill, I'm wondering how small landlords will satisfy their onus of proving that there is a new rental space in their home that was not first rented prior to November 15th, 2018.  How would a new purchaser know what the previous owner did with the space?

The exemption only applies to post-November 15th, 2018 units, but the exemption is not available for units that would otherwise be eligible based on the first-occupied date, but where a tenancy agreement was executed prior to that date.  Bad timing for those landlords who signed leases last week. However, subsequent rentals in those units would be eligible for the exemption.

So if this is the best the PC Government can do, it's a terrible disappointment.  No changes to the rent control guideline for 90% of units, no change to the Landlord and Tenant Board process, no reinstatement of the ability to get above guideline increase orders for extraordinary utility costs, no clarification of the jurisdictional issues between Small Claims Court and the LTB, no help for landlords with respect to cannabis growing, damage deposits, evictions, etc.

Also there is no roll-back of the draconian landlord's own use rule changes that the Wynne government instituted in October of 2017.

Minister Steve Clark should get back to work making changes that will help the non-institutional landlords who make up 1/2 the rental stock, to make their lives more palatable.  Only then will more units from that sector come onto the market.

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