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ChangestotheRentControlThePoliticalContextJohnMathesonJune2,2017

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• Backgroundonthekey“hotbutton”issuesintheRentControlpolicy…

• Recentpoliticalandhousingtrends…• HowtheycombinedtocreatethenewchangestoRentControl…

• Somethoughtsonwhatmaycomenext…• Howtheindustrycanbestadvanceitsinterestsinthemonthsahead…

ThisPresentation

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• 1975:Rentcontrolscreatedasa“temporarymeasure”-- evolvedover80s.

• 1992:Duetocrisisofsupply,NDPcreatedafive-yearexemptiontorentalscomingontothemarketafter1991

• 1997:HarrisPCsmakepost-1991exemptionpermanent,andcreatevacancyde-control

• 2013:Guidelineiscappedat2.5%

RentControl:APoliticalFootball

VacancyDecontrol

ExemptionfornewunitsPost91

HardCaponGuideline

AboveGuidelineIncreases

• Thesefeaturesarekeypolitical“footballs”thatcomeupwhenunfavourable marketandpoliticalconditionsarise

• FRPOsucceededinfightingoffsignificantchangein2003and2007.Issuewasquietin2011and2014elections.

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RecentSituation

GTARealEstatePricesandthe

“crisisofaffordability”

DeclineinPopularity

oftheWynneLiberals

Badanecdotes

createdpoliticalopportunity…

ThesethreefactorscombinedcreatedtheconditionsthatledtotherecentRentControlchanges…

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Liberalslagginginpolls…

May2015

May2017 PC 42

LIB 28

NDP 23

Green 6

ForumResearch:VotingPreferenceQuestion…

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Liberalshavedrivenaveryaggressiveagendato“reset”• “FairHydroPlan;”reduceratesby25%• PilotonCreateGuaranteedIncome• Increaseminimumwage/newprotectionforlowwageemployees/easierunionization

• HealthandEducationSpending:Pharmacarefor“under25’s”• OMBchanges…• “FairHousingPlan:”MarketCoolinginGTAandRentControl

• PressureonLeader,morale,andfundraising• Needto“dosomething”• LeanLeft:“Aggressiveandprogressive”

ImpactoftheBadNumbers…

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• 2017:RealestatepricespostheftyyearoveryearincreasesinGTA- 33%yearoveryear

• Thepublicwasconcerned..

GTACrisisofHousingAffordability

GTARealEstatePricesandthe

“crisisofaffordability”

Badanecdotescreatedpoliticalopportunity…

• Severalisolatedincidentsofegregiousrentincreasesintheprivatelandlordmarketgarnersignificantmediaattentioncreatingpoliticalpressure

• Createdsomethingto“fix”and“blame”• NDPProposesPrivateMembersBillto

endthePost‘91Exemption…• Liberalsfollowsuit

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• IntroducedApril20,2017:Billedas16measuresaimedat“improvinghousingaffordability”

• Keyelements:• Anon-residentspeculationtax– foreigntax• Somemovestofacilitatedevelopment(property

taxchanges/rebatesondevelopmentcharges)• ExpandrentcontroltoallrentalunitsinOntario,by

includingthosethatwerepreviouslyunderthe1991exemption- Allrentalunitsnowsubjecttotheannualprovincialrentincreaseguideline,whichislinkedtoinflationandcappedat2.5%

• Nochangewithrespecttovacancyde-control.• Minorchangestoabove-guidelineincreases

FairHousingPlan

Taxon“nonresident”speculation

Measuresto“stimulatesupply”

ExpandRentControlby

repealingthe91Exemption

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• PCswontheSaultSte.Marieby-election- PCs:40- NDP:33- Libs:23

• InthepreviouselectiontheLibswonwithalmost60%

• NotyetcertainhowthiswillimpacttheLiberalsintermsoftheirstrategy…

• Willtheyslowdown?Or“pedaltothemetal”

HowistheLiberal“reset”going?

Newly elected Sault Ste. Marie MPP Ross Romano and Progressive Conservative Leader Patrick Brown celebrate their byelection win. (Erik White/CBC)

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• PotentialforachangetoVacancyDecontrol?OrAGGIs?- NDPareonrecordandwouldrepealit…- TheLiberalsareworriedaboutleftflank…- Rentcontrolpopularwithpublic

RentControl:CoulditGetWorse?

VacancyDecontrol

Nowtoelection During election(June2018)

Afterelection

LiberalsorNDPcouldintroduceBilltoendvacancy

decontrol

PossibleCampaignIssue

Willanewgovernment

act?Whatifit’saminority?

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• Ifnewdevelopmentofsupply(purpose-builtandcondorentals)fallsbehindwhiledemandincreases,thatwillputupwardpressureonmarketrents(onturnover)

• Upwardmarketrentswilltriggerapopulardesirefortheeliminationofvacancyde-control

• Badanecdotesmakebadpolicy:Oneextremerentincreasebyonenon-professionallandlordcreatedthepoliticalclimatethatstartedtheattackonthe91Exemption…

RiskFactors

MarketPressure

ConductintheMarket:

InaneraofsocialMedia,theday-to-daychoicesofoperatorsmatter,andhavethepotentialtoinfluenceprovincialpolicy

ToAvoidtheRemovalofVacancyDe-control…

• Somethingsarebeyondourdirectcontrol:• Supply:Weneedgovernmenttofacilitaterentaldevelopment

anddevelopersneedtodevelop…ifthereisacrisisofaffordablesupply,itwillcreatepoliticalmorepressuretoendvacancydecontrol.

• Howtheindustrycanhelpitself…1. Strategy:Unityaroundacommonstrategicapproachto

dealingwiththegovernment2. BetterPublicRelations:Investinimprovedpublicrelationsfor

therentalhousingsectorasawhole...3. RiskManagement:Landlordsneedtobeawareofthe

dangerouspoliticalcontextastheymanagetheiroperations–especiallyrentincreasesandtenantcommunications.

Letsnotcreateourowncrises…

Bill 124 Webinar

Proudly Sponsored by:

Bill 124Rental Fairness Act,

2017PRESENTED BY: JOE HOFFER

COHEN HIGHLEY LLP519-672-9330

HOFFER@COHENHIGHLEY.COM

VACANCY DECONTROL REMAINS BUT….

u Repeal of Rent Control Exemptions

u Rules for Post November -1991 NORI’suNORI given before April 20, 2017?uNORI given after April 20? Reduce

the increase.u “Rent” = all money paid to landlord

in exchange for occupancy (parking, locker, separate charges)

NEW EXEMPTION FROM RTA

u Amended exemptions from RTA for Housing Programs which include “rehabilitative or therapeutic services or services intended to support employment or life skills development”

u Four years max., very detailed requirements to qualify

u Relevant if you deal with Social Service Agency contracts

“PRESCRIBED LEASES”

u For “prescribed classes” of tenancyu “Prescribed Form” (can be augmented)u Shall be signed on or before tenant

entitled to occupancyu Tenant may demand prescribed form for

signing once during tenancyu Consequences if use wrong form of lease

u Rent penalty (max. 1 month, recoverable)u Lease termination at tenant’s option

NEW RULES: “LANDLORD’S OWN USE”

u 1 month rent penaltyu 1 year minimum (what if you move?

Sell? Die?) “Rebuttable Presumption”

u Freeze period = day of giving Notice of termination plus 1 year “after tenant vacates”

NEW RULES: “LANDLORD’S OWN USE”

u If during “freeze” period you u A) advertise unit for rentu B) enter into lease with another personu C) advertise the unit or the building for

saleu D) demolish the buildingu E) “take any step” to convert the unit

or building to non-residential use

u = bad faith, “reverse onus”

N5 AMENDMENT

u If N5 is served and conduct occurs within 7 days- file

u If N5 is served and conduct occurs after 7 days but within 6 months- file

u No longer an issue of application being dismissed if Landlord failed to apply for termination based on first N5

TENANT “VOIDING” EVICTION ORDER BASED ON RENT ARREARS

u Previously could stay the eviction by “filing a motion”

u Under amended rules, the motion must be accepted by the Board and the Board must refuse acceptance unless the tenant has paid all amounts under the Order

ORDER BASED ON PRIOR CONSENT ORDER OR SETTLEMENT (“s. 78”)u Minor amendment where

application against Tenant is based on previous application resulting in a consent Order or Settlement with a “section 78” provision.

u In addition to moneys owed, Board can now order payment of compensation for repair or replacement of damaged property if that was in previous application

AGI CHANGES

u Repeals “extraordinary” increase based on cost of utilities

u AGI based on “Municipal taxes and charges” remains

u Change to eligibility of capital expenditures (to allow Board to dismiss claims for “curb appeal” items): likely a broad discretion…

u Retrospective in nature to capture work done in reliance on current rules (now subject to new rules)

ELEVATOR/WORK ORDER ISSUES

u Must file evidence of status of any pending elevator (s. 21) TSAA Order or Board Orders regardless of whether compliance period remains open and regardless of whether the work is being claimed on the application

u If compliance period for elevators or other Board work order is expired, no AGI will issue until work is done, again regardless of whether the cost of such work is claimed in the application

ILLEGAL CHARGES

u S.134: Landlord cannot attempt to collect “any amount of money ‘purporting’ to be rent” for any period of time after tenancy (or tenant’s interest in the tenancy per “28 day notice”) is terminated and unit is vacated

u Likely intended to eliminate remedy for damages due to breach of fixed term lease (but does it?)

QUESTIONS?