Sunday, March 22, 2020

We Need an April 1st Solution that's Fair for Landlords & Tenants

There is a groundswell of support for a rent strike in Ontario starting with the April 1st rent.  It started in Parkdale (hats off to their advocacy work) but has spread everywhere.  Take a look at the home page of Parkdale Organize.

http://parkdaleorganize.ca/

The posters are all over Toronto.  Tenants in every group are talking about it.  I've seen landlords in Facebook groups say that despite the law, they are just going to change the locks or shut off utilities where they are paying the bill, when safety or illegal activities are the issue.  Can anarchy be far behind.

But make no mistake, this seductive movement is going to cost tenants in the long run, in a number of ways.

The "Don't Pay Your Rent" message is going to ruin tenants' lives.

Groups such as ACTO, Parkdale Organize, OCAP and the FMTA are not the villains here, even though in the long-run they will make renting harder for tenants and result in hundreds of evictions when this crisis is over.  Their constituency have lost their jobs, many have no savings, and their lives are in turmoil.  I admire the work they are doing.  I'm just wondering why YOU as a landlord or a landlord organization aren't doing the same.

Part of the problem is that tenants are being told that landlords are getting mortgage relief, so it's OK to not pay rent.  It's a guilt-free rent strike.

First off, most landlords won't get any mortgage relief.  The conditions from banks and especially private lenders are onerous.  Investment properties are usually not covered, nor are properties with uninsured mortgages.  And remember, it's not forgiveness, it's deferral.  Payments will become larger after the pandemic as interest will have accrued as principle payments are postponed.

Generally, banks and private lenders are not allowing deferral for investment properties.  Other banks are only allowing it if there has been substantial pre-payment in the past resulting in an acceleration of the pay-down of their mortgage obligation.

But there are a lot of other costs for landlords. Mortgage payments are just a part of a landlord's expense.  Let's imagine the landlord that has no mortgage...there aren't many.  They still have taxes, insurance, maintenance, in condominiums common element fees, and in some cases special assessments.  And when a tenancy is "all in", they also have utilities to pay.  So if no rent comes in, those expenses continue. 

And let's not forget the myth of the rich landlord.  It's fair to expect REITs, large apartment building owners, private equity firms and the like to have resources for a rainy day.  I don't have a concern about them.  But there are hundreds of thousands of working people - yes, the worker class, not the landlord class as tenant groups refer to them, who own one additional property purchased through hard work to scratch up a down-payment, or perhaps rent space in their own home.  And hundreds of thousands of them are now unemployed as well.

These people will lose their homes or properties if there is not some sort of government relief.  And the rent strike, for the moment, is about April's rent.  But I'm certain it will blossom into a full-fledged long-term strike because there is a class war going on, and tenants see landlords as being fat, greedy and undeserving of relief.

Fueling the fire, governments both provincial and federal are making crazy proclamations saying "Don't worry about your rent...you won't be evicted", and it's true they won't be evicted as governments have shut down courts and tribunals.  But you don't hear government saying "Run to the grocery store, grab food and don't pay!"

BOTH ARE ESSENTIALS.  WHY ARE LANDLORDS BEING TARGETED?

That's easy.  For the same reason they are always targeted.  First, nobody sympathizes with landlords, they are an easy target. Ford, Trudeau and Tory are targeting them because it's cheap, easy politics.  Second, people generally don't distinguish between large apartment complex owners, and the landlord renting out a second property.

In this country, hundreds of billions of government dollars will be spent at the end of the day dealing with the financial and social problems caused by this pandemic.  Every sector will get money.  Every industry will have some sort of government benefit in terms of either outright forgiveness or deferral.  And that's the way it should be, but landlords shouldn't be the big target.  Here's what should happen:
  • Landlords and landlord groups should make it clear that they support the eviction ban, but that they need government help as well.
  • Ontario should set up a rent bank to dole out rents starting with April's rent directly to landlords for those tenants who can prove they have been laid off or had their hours reduced.
  • We need to solve the immediate problem for small landlords.  Large institutional landlords should just have to wait 3 months for their rent and see how this plays out.  Small landlords need help today.
  • The messaging from government should advise people to pay their rent to their landlord if they can, but if not, then to access the provincial government rent bank.
  • The messaging should let tenants know that like landlords, who may only have expense deferral, that this is a loan for rent...a no interest loan but a loan nonetheless that will have to be paid back over time.
  • The messaging should be honest, making tenants aware that at some point the Landlord Tenant Board will be up and running, and people who have rent arrears without hope of re-payment will be at risk of eviction.
It would be fantastic if ACTO or FMTA or Parkdale Organize or OCAP could present a common face to government, demanding this type of relief.  Unfortunately, the groups are so far apart ideologically, and in some cases so virulently anti-landlord, that this is not going to happen.

So if you are a landlord reading this, what can you do?  If you sit on your butt like most landlords have done in terms of political and media advocacy for the 20 years that I've been involved, then you will be steamrollered by what's coming.

You need to contact your MPP, contact every provincial cabinet minister, and send them your thoughts.  Give them a link to my blog.  Cut and paste my blog and write your own letter.  Arrange a video meeting as a constituent.

If you don't become part of the solution, you have only yourself to blame.

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