The Ontario Landlord Association calls it “irresponsible”
After receiving a complaint from a constituent about a steep rent hike, Norm Sterling introduced a Bill late last month to address a little known part of the Residential Tenancies Act that prevents rent control on properties constructed after 1991.
“Overall, the tenant protection legislation introduced by the Harris government is working well because it strikes a balance between protecting most tenants from unexpected increases while allowing landlords to increase the rent when one tenant moves out and a new tenant moves in,” says Sterling, MPP for Carleton-Mississippi Mills. “There is currently an exception for new units occupied after 1991. My bill (Bill 204), if passed, would eliminate that exemption.”
The issue came to Sterling’s attention when a constituent living in Almonte, about 50 kilometres west of Ottawa, complained about a 25 per cent increase levied by her landlord. She was shocked to learn that because her building was completed and first occupied after Nov. 1, 1991, her landlord could demand any increase, regardless of the maximum increase set in the Rent Increase Guideline.
“A constituent came in to see me because she had received the rent increase and exhausted the various appeal mechanisms in place to deal with it. It means her rent was going up about $200 a month,” says Sterling.
The exemption was originally introduced in the early 1990s by the then Bob Rae NDP government as a way to encourage the construction of new rental housing.
The Rent Increase Guideline, as set out by the Ontario government has been low over the last few years; for 2011 it’s .7 per cent. The guideline is the maximum a landlord can increase rent for most residential units without having to get approval from the Landlord and Tenant Board. The guideline was designed to take into account increases in landlords’ building maintenance and operating costs, but over the years, many landlords and associations who represent them claim the increases have not even come close to meeting rising costs. In 2010, the guideline was 2.1 per cent and in 2009, 1.8 per cent.
Sterling says with the proliferation of condo developments in the province, especially the Toronto area, and with more interest rates allowing for greater numbers of homeowners in the province, the exemption provision should no longer be required.
“We have a huge number of new condos . . . and there are high vacancy rates in some areas. Due to higher vacancy rates . . . rent increases in these new rental units have generally been modest, therefore this has not risen as an issue until now.”
However, stats from the Canadian Mortgage and Housing Corp. (CMHC) indicate vacancy rates are going down, dropping from 3.4 per cent to 2.5 per cent over the past year in Ontario.
“Market forces have prevented landlords from raising rents in general,” says Stuart Henderson of the Ontario Landlord Association (OLA).
Some question how far Sterling’s bill will go, especially since Queen’s Park is not currently sitting. Also, Sterling, a 34-year veteran of Ontario politics and a long-time Tory MPP and former cabinet minister, lost a nomination battle in his riding and was bounced as an Ottawa-area candidate for his party in the fall election. He lost to Jack MacLaren, a former director of the Ontario Landowners Association. Sterling says he is retiring from politics and not running in October.
However, he wants to do what he can to give the issue “more profile.”
“This woman had lived there for 15 years. She used to volunteer to care of things around the property and now she fears the landlord is using the rent spike as a method of eviction,” he says.
He doesn’t believe the current Landlord Tenant Act needs to be overhauled, as the NDP have suggested. They tabled their own bills to try and gain greater rights for tenants.
“I think the existing Landlord Tenant Act is a perfect balance between tenants rights and landlord rights,” he says. “We can’t allow the free reign of landlords — it’s why I support some form of rent controls.”
The landlords and property management companies who are knowledgeable about the ability to increase rent above the rent guideline say they don’t use the loophole because it would chase away good tenants and price their units out of the market.
“While the exemption isn’t being used by a vast majority of landlords, having it leads to confidence in investors that if they need to, they can protect their investments by raising rents with proper notice,” says Henderson.
There is already a lack of confidence in becoming a landlord in Ontario due to what Henderson calls the current “restrictive legislation.”
“Getting rid of this exemption will multiply this lack of confidence, lead to less investment in new rental housing and hurt good tenants who deserve a wide variety of choices in finding high quality, affording rental housing,” he says.
Making changes like the one Sterling is proposing, he adds, requires consultations with stakeholders in the industry.
“Proposing a major change to make one tenant in your riding happy is irresponsible,” he says.