RESIDENTIAL RENT REGULATION AMENDMENT ACT, 1990
Tuesday 19 February 1991
Residential Rent Regulation Amendment Act, 1990, Bill 4
STANDING COMMITTEE ON GENERAL GOVERNMENT
Chair: Mancini, Remo (Essex South L)
Acting Chair: Miclash, Frank (Kenora L)
Vice-Chair: Brown, Michael A. (Algoma-Manitoulin L)
Abel, Donald (Wentworth North NDP)
Bisson, Gilles (Cochrane South NDP)
Drainville, Dennis (Victoria-Haliburton NDP)
Duignan, Noel (Halton North NDP)
Harrington, Margaret H. (Niagara Falls NDP)
Mahoney, Steven W. (Mississauga West L)
Mammoliti, George (Yorkview NDP)
Murdoch, Bill (Grey PC)
O'Neill, Yvonne (Ottawa Rideau L)
Scott, Ian G. (St George-St. David L)
Turnbull, David (York Mills PC)
Kwinter, Monte (Wilson Heights L) for Mrs O'Neill
Miclash, Frank (Kenora L) for Mrs O'Neill
Owens, Stephen (Scarborough Centre NDP) for Mr Abel
Poole, Dianne (Eglinton L) for Mr Scott
Tilson, David (Dufferin-Peel PC) for Mr B. Murdoch
Ward, Margery (Don Mills NDP) for Mr Bisson
Clerk: Deller, Deborah
Baldwin, Elizabeth, Legislative Counsel
Hunter, Leith, Legislative Counsel
Richmond, Jerry, Research Officer, Legislative Research Service
The committee met at 1041 in room 151.
RESIDENTIAL RENT REGULATION AMENDMENT ACT, 1990
Resuming consideration of Bill 4, An Act to amend the Residential Rent Regulation Act, 1986.
The Vice-Chair: Good morning. Welcome to the morning sitting of the standing committee on general government. I would first like to apologize for the late start. Two of our members are fogged in. We cannot find them and it has been a little bit of a problem for establishing a quorum this morning. Nevertheless, we are here now and things are about ready to start.
Our purpose today is to do a clause-by-clause on Bill 4. As this process will be new to many of us, we are relying on the assistance of the clerk and the legislative counsel, who are here beside me and who will help us with any technicalities that may arise.
Mr Tilson: Mr Chair, before we start the process, I had asked a question in Ottawa for the staff to produce a report on profits. I think it was the report that the last government had commissioned. I believe it was commissioned with the LePage firm. I am wondering whether that report has been made available. I think it would be useful to us before we start the clause-by-clause discussions.
The Vice-Chair: I think that is a good point. Colleen Parrish is with us. She undertook to provide that at the earliest possible date to the committee.
Ms Parrish: I have just spoken to my staff. We sent it down to be copied and it is still being copied. We will do our very best efforts to get it here this morning. It is hard for me judge as to whether it was useful in relation to Bill 4. Certainly in relation to rent control options it is of interest. The study essentially looks at the rate of return for landlords over a fairly prolonged period of time.
Mr Tilson: Bill 4 deals with rent control.
Ms Parrish: Yes, it deals with the moneys available to landlords, certainly. For example, the report does not deal specifically with some of the issues that are in contention in Bill 4, such as capital repairs and so on, but it does deal with other issues like economic and financial loss.
Mr Tilson: Yes. I do not really intend to get into a debate with you. I just think it would be useful for this committee to have.
Ms Parrish: I can only say we asked for it to be copied. There just seems to be some particular problem. I will ask my staff again to make sure -- the problem is it is a huge study and I guess there has just been a logistical problem.
Mr Tilson: It is a huge study?
Ms Parrish: It is very thick.
Mr Tilson: Oh, really?
Ms Parrish: Yes.
Mr Tilson: Did it have an executive summary or anything like that?
Ms Parrish: Honestly, I do not know. I will just speak to my staff and see if they cannot do their very best efforts. I am as disappointed as you are.
The Vice-Chair: Just while Colleen is checking: Mrs Poole.
Ms Poole: Yes. Actually, Mr Chair, I wanted to also ask the ministry for some documentation that was requested in Sudbury. Perhaps we should wait until Ms Parrish is back.
Interjection: Maybe we might even just need one copy per caucus.
Ms Parrish: Yes, that is what I was saying, that they should send over as much as they can as soon as they can.
Mr Tilson: Yes. I guess the question is that I was led to believe that there was substantial information in this report and the staff have commented that it may be more relevant to the green paper discussions. I do not want to put you through unnecessary photocopying. The difficulty is I do not know what is in it, I do not know what it says.
Ms Parrish: Yes, I can only apologize. It appears that it was just one of these slips, that the copy centre did not understand that it was supposed to do it yesterday. They did not do it. Now we are trying to get it done as soon as possible.
Mr Tilson: Sure. Thank you.
Ms Poole: My request stems from information asked for by the Chair when we were in Sudbury. We had discussed a number of issues such as flipping and economic eviction. I believe the Chair did ask for specific information by the Ministry of Housing at that time. That was about a week ago. I wonder if that information could be tabled at this time.
The Vice-Chair: Ms Parrish, I believe that also was requested again in the Ottawa meeting of last Friday morning. The issue, I think, was flipping -- a definition and some idea of the incidence of that.
Ms Poole: I believe there were actually two aspects to it in Sudbury. We had talked about economic eviction and some statistics in that regard, and we had also asked for some statistics about flipping, so I think we are actually asking for two separate items.
Clerk of the Committee: I have the request, actually, if you want me to read it out.
The Vice-Chair: If you would, please.
Clerk of the Committee: "The committee requested a definition of `flipping' and the number and extent of flips broken down into region, and the definition of `luxury' and `unnecessary renovations' with `necessary' being defined."
Ms Parrish: That request was made in Ottawa, is that correct?
Ms Poole: What about the request that was made in Sudbury by the Chair?
Clerk of the Committee: I do not have the Sudbury request.
Ms Parrish: We were asked about economic eviction and we did write a letter on the issue, and we also responded to it orally. The bottom line is we indicated that we did not have statistics on economic eviction per se because there has not been any collection of evidence in that manner.
On the issue of flipping and luxury renovation, the question that the clerk read out that was asked in Ottawa, my staff and I have prepared material and we have forwarded it to our senior people for approval today, and we hope to get that to you this afternoon.
Mr Owens: I am just wondering, in order to simplify things, if we could check Hansard from Sudbury just to determine what was asked for. I recall that we did make a request with respect to economic eviction, but there was a lot of discussion around how you would determine whether it was in fact an economic eviction or not. But we should just check the Hansard instead of debating back and forth here about what we asked for and what we did not.
The Vice-Chair: That is an excellent suggestion, Mr Owens.
Ms Poole: Just one last comment: I agree with Mr Owens, I think that is what we should do, but it seemed to me that there were two parts to Mr Mancini's request, and the one we decided was feasible and doable by the ministry and the other might be difficult to obtain. Could we get that clarification as soon as possible and get that documentation from the ministry prior to getting too far into clause-by-clause?
The Vice-Chair: I take it the ministry believes it can supply the information for this afternoon's session?
Ms Parrish: We are making our best efforts. We have prepared the material at staff level and we are just forwarding it to our senior people who have done the transmittal of the material to the committee today.
The Vice-Chair: Thank you. I guess we are about ready to begin the clause-by-clause.
The Vice-Chair: We will begin with section 1. Are there questions or comments or amendments to section 1 of the bill?.
Mr Tilson: Our party is concerned with subsection 1(2), which is the subsection dealing with mobile homes. We do have an amendment but perhaps someone could give us some comments specifically as to why this subsection is going to be in when specifically the minister has informed us -- I do not know whether he has informed us in committee, but I know he has made statements -- that this would be dealt with under interministerial review. I think he did say it yesterday, as a matter of fact. The green paper as well states that mobile house sites and land lease arrangements would be under interministerial review. Therefore, my question is why this section is here.
Ms Harrington: What the minister mentioned yesterday, or we discussed, was that the mobile home parks are under review but that is with the Rental Housing Protection Act. We feel that it is clearly still within the jurisdiction of this bill, the Residential Rent Regulation Amendment Act.
Mr Tilson: I can say that this type of discussion came up somewhat in the minister's home riding of Windsor when we attended in Windsor and we had two or three individuals appear, giving pro and con arguments, of course. Those discussions centred around a number of areas involving mobile home sites, the typical argument of which was that the Minister of the Environment or a ministry could require that the standards in mobile home parks be increased -- the water system, the sewage system, those types of things -- and normally with municipalities those could be substantially upgrading matters that normally would be the subject of municipalities bearing those costs. The point has been made to this committee that because of the substantial nature of those costs, it would be very difficult for a landlord to make those expenditures and indeed then pass them on to the tenants. It would be very difficult for the landlord and very difficult for the tenant in situations such as that.
The minister, as I recall, did make a comment that -- in fact, I think that is where he first made the comment that the whole subject of mobile homes would be dealt with under other legislation. This amendment, as I understand it, was made in response to a recent Divisional Court decision this year -- I cannot remember the name of it -- which said that the subject of mobile homes is outside this legislation. I assume that is why this legislation is being submitted by the NDP, to say, "Sorry, Divisional Court, this is within this legislation."
The reason why I am putting this forward is that I agree with the minister that the whole subject of mobile homes and land lease arrangements should be outside this legislation. It is something completely different from the apartment type of tenant, the apartment type of landlord. If there is a problem with a tenant in an apartment building, or it could be a multi-unit dwelling, and there are difficulties for whatever reason, the tenant has the option of moving on. The difficulty with mobile homes of course is that it is very difficult for a tenant to move on. First of all, there are not that many mobile home parks, sites, and the expense that it would entail for them moving from one site to another would be tremendous.
So at that time in Windsor I concurred with the minister that this subject of mobile homes, home sites and land lease arrangements should not be in this legislation. Could you comment on that?
Ms Harrington: I would like to comment on that and then I will turn it over to Colleen to comment as well.
This amendment is strictly a technical amendment that clarifies that the RRRA covers both mobile home parks and/or the single-family dwellings in land lease communities and mobile home parks where the site is rented and the unit or structure is owned by the tenant on the site.
The act also applies to situations where both site and structure or unit are rented. Because this subsection is a matter of clarification of the original policy intent, it is retroactive to 1 January 1987 -- subsection 2(2) -- with the exception of court decisions that have been made before 29 November 1990. Thus, the Divisional Court decision made on this issue in the case of Cartwright versus Jutasi will not be overturned.
Mr Tilson: Before you pass that on, I understand that. I understand that portion. What I do not understand is the comments that have been made by Minister Cooke -- and he made those yesterday; I am sure he made them to this committee -- that this whole subject is under interministerial review. If it is under interministerial review, then why is it in this legislation?
Ms Harrington: It is under the Residential Housing Protection Act that it is under review. Would you clarify it further, Colleen?
Mr Tilson: I understood his statements were that the entire subject of mobile home sites and land lease arrangements was under interministerial review, which is exactly what this subsection is.
Ms Harrington: I remember what was said, yes.
Mr Tilson: So is he making exceptions now, that some things are and some things are not? I just do not understand where he is coming from when he makes such a statement.
Ms Parrish: Perhaps I could give you some idea of the thinking behind this. Essentially, when the Residential Rent Regulation Act was passed it was very clear that the policy intent was that land lease and mobile home parks communities were covered, and if you go back and look at the RRRA material, it makes it very clear that that was the policy intent and that is what people thought they were doing at the time.
Mr Tilson: The courts did not agree with that, of course.
Ms Parrish: Then the drafting raised a sort of technical problem around a certain kind of situation, essentially the situation where the house, the modular home in this case, was owned and the land rented. All that this amendment is doing is clarifying what people thought the original policy intent was, and that is different from extending or changing a law. The RHPA was clearly never intended to cover mobile home parks, never tried to and there was never any drafting that tried to do that. So it would actually be a policy change. All this is doing, I guess, is sort of putting the status quo back to what people thought it was at the time the RRRA was passed and essentially holding the status quo in place on this issue until these wider issues about how mobile home parks and land lease communities should be addressed.
That is the distinction that is being drawn, between whether you simply are just fixing up what everybody thought was the law as opposed to extending or changing to a new policy.
Mr Tilson: As I indicated, I understand that. I understand why this section is being put forward. It is being put forward to do away with the decision that was made by the Divisional Court. The Divisional Court said that it was outside this legislation. This section says no, it is not and it is quite clear now.
My question is that having heard my comments, I hope you would agree that there is a distinction between the mobile home site and the lead lease arrangement and the apartment dweller, the apartment building dweller or the multi-unit dweller who lives in fixed structures. I agreed with the minister that it is most inappropriate that this subsection be in this specific legislation which is designed for the fixed multi-unit dweller; in other words, the apartment owner or the basement apartment, the rent of condos, those types of fixed units. I happen to agree with them on that, that the mobile home site and the land lease arrangements are quite different matters. Could you comment on that, Mrs Harrington?
Ms Harrington: As far as my dealing with this section of the act is concerned, I felt that what we are doing is just restating that it is under the RRRA.
Mr Tilson: That is not what my question was, Mrs Harrington. My question was, is it appropriate that this subject be in this specific legislation, because that is what the minister commented to us in the past, that it should not be, that it should be under separate legislation, which is why of course it is under interministerial review.
Ms Harrington: Yes, it should be in.
Mr Tilson: If we acknowledge that, then would you concur that this section should be taken out and dealt with when the interministerial review has been completed?
Ms Harrington: Under the long-term legislation I believe this will be revisited, as it was mentioned in the green paper.
Mr Tilson: But if it is inappropriate that it be in this type of legislation, why are we putting it in now?
Ms Harrington: To clarify the position that it was in the original RRRA.
Mr Tilson: You are saying one thing at one moment and another thing some time else. Either it should be in or it should not be in. You said a minute ago that it should not be in and now you are saying it should be in. Which is it? Your minister has already said that it should not be in. The subject of mobile homes is not a --
Ms Harrington: What he said was that it should be in Bill 4 and that it will be revisited in the green paper.
Mr Tilson: Notwithstanding the fact that the minister says that it is not subject to this type of legislation.
Ms Harrington: If you would care to hear the minister on that, I would be willing to defer this section until he is with us tomorrow morning, if you would like to discuss that with him.
Mr Tilson: Sure, I am agreeable to that.
The Vice-Chair: Is there unanimous consent to stand down section 1 until the minister can be present? Yes? We have unanimous consent to stand down section 1 of the bill.
Section 1 stood down.
Ms Poole: Mr Chair, I was on the speaking list for that.
The Vice-Chair: Yes, you were.
Ms Poole: Would you prefer I retain my comments until tomorrow?
The Vice-Chair: Mr Owens was also on the list. I think it would be most appropriate to wait until tomorrow to deal with it. We have gone as far as we can this morning, I think.
The Vice-Chair: Are there comments, questions or amendments to section 2 of the bill?
Ms Poole: Might I make a suggestion that at the beginning of each section either the parliamentary assistant or a representative of the ministry describe the purpose of the section and what it is to change from the original Bill 51?
The Vice-Chair: I think that is a very good suggestion.
Ms Harrington: Yes. I thought the clerk would read the section first and then I was to comment. Is that your understanding?
Clerk of the Committee: No. I can do it if you like, though.
The Vice-Chair: I think all members have copies of the bill. I do not think it is necessary to read the bill.
Ms Harrington: Okay.
Ms Poole: I do not know whether it would make it easier for Hansard, Mr Chair, if the section was indeed read out before Mrs Harrington commented on it, just for anybody who actually does read the proceedings. As highly unlikely as it may appear, there are people who do read Hansard. It would clarify for them what we are talking about.
The Vice-Chair: The normal procedure is that the clerk does not read the section. She would read any amendments that were put, but the section is not necessary. But if the committee wishes, the clerk would be most happy to read the section in. I see no problem with that, if that is the wish of the committee.
Ms Harrington: Okay.
The Vice-Chair: It looks like it is agreed, to me.
Mr Duignan: No.
The Vice-Chair: Seriously?
Mr Owens: Why would we want to have to read through the whole section as opposed to past process, which is just the amendment? It does not make any sense at all. Why do we want to veer from past practice?
The Vice-Chair: I am at the will of the committee. I am just trying to ascertain what your wishes are here. That is my job, to do what you wish. So if there are objections, I would gather we would not deviate from standard practice.
Mr Owens: That would be my suggestion.
Ms Harrington: Okay.
The Vice-Chair: All right. Would you like to explain the section, Mrs Harrington?
Ms Harrington: Hopefully you have looked at this section. This amendment permits the simplification of the information which must be sent out in the notice of rent increase form. Previously, before a landlord could increase the rent for a rental unit, a notice of rent increase had to state the amount of the increase, expressed both in dollars and as a percentage of the current rent charged and of maximum rent. The 90-day notice period to tenants has not changed.
Are there any comments?
The Vice-Chair: Mr Tilson?
Mr Tilson: A question to anyone -- even to you, Mr Chair. The question I have is, I understand that form has already been prepared and distributed to various organizations around the province. Is that correct?
Ms Harrington: It has been tested with various groups to see if it in fact was a simplification and if people approved of it and agreed that it was an improvement over the past.
Mr Tilson: My understanding is that that has been said by the various rent review people to be the form that should be used.
Ms Harrington: What was that?
Ms Poole: Mr Chair, would it be possible to table that form with the committee so we could have a look at it?
Ms Harrington: It has already been in use this year is your comment?
Mr Tilson: It has been suggested that that is the form that should be used.
The Vice-Chair: We have a request that the particular form be tabled with the committee.
Ms Harrington: Okay. Tomorrow?
Mr Tilson: I am sorry?
Ms Parrish: Tomorrow, sir?
The Vice-Chair: That the precise document, Mr Tilson, will be tabled with this committee. Just continue. That is just a clarification of where we are, I think.
Mr Tilson: So we are going to put this section down until tomorrow too?
The Vice-Chair: No, there is no suggestion that it be stood down, at least not to this point. The only thing that was asked by Ms Poole was that the particular form be tabled with the committee.
Mr Tilson: I guess if that is being consented to, the difficulty is, if we do not have the form, can we properly pass this section?
The Vice-Chair: If the committee wishes, we can certainly stand it down, if that is the suggestion you are making, Mr Tilson.
Mr Tilson: That is the suggestion I am making.
The Vice-Chair: Mr Tilson is suggesting that we stand down section 2. Is there unanimous consent for that request?
Mr Drainville: No.
The Vice-Chair: There is not unanimous consent for the request.
Mr Owens: Just on a point of clarification as well from the clerk, is it not appropriate that once the parliamentary assistant finishes her description of the clause that the clause should be moved for acceptance before debate and discussion takes place?
Clerk of the Committee: The Chair has asked for questions, comments or amendments to section 2, which opens up the discussion.
Mr Owens: But in terms of proper procedure, should the clause not be moved before we start making amendments?
Clerk of the Committee: No, it does not have to be.
The Vice-Chair: Actually, it has been moved because it has had second reading in the Legislature. It is before this committee, so it is taken to have been moved.
Are there further comments on section 2 of the bill? Amendments? Questions?
Ms Poole: I would just like a clarification for that. There did not seem to be unanimous consent by the government members that this be stood down until tomorrow, so I understand that we are going to be asked to vote on this without seeing the form in relation to it. Is that correct?
The Vice-Chair: That is correct.
Ms Poole: Then I withdraw my request. It seems to me redundant to see the form that this section applies to after we have voted to approve or to reject this particular motion.
The Vice-Chair: Mr Tilson.
Mr Tilson: I guess my question is to the staff or to Mrs Harrington, whether we can properly vote on this section if we have not got the prescribed form before us. Mrs Poole has stated we have been asked to vote on something that we cannot even see.
Ms Harrington: I had asked for the form to be here as well, and I was told there would be some paper coming tomorrow which included the form.
Mr Tilson: It could say, "Go to the moon and back." I mean, I do not know what it says. To be fair, we really should see it before we vote on it. It could say anything. I do not think this government is delegating all its authority to the bureaucrats yet, hopefully.
Ms M. Ward: The current section in there, section 5, uses the words "prescribed form." We are using the same wording here, "prescribed form." I do not think that this sets out what that form is and I do not think we have to see it in order to understand the meaning of this subsection.
Mr Kwinter: We had no idea when the original bill was introduced whether or not the committee had a chance to see the form, but certainly the representatives of the ministry and the parliamentary assistant have stated that there is a form and it has been tested. It has been given out to certain people to look at to determine whether or not that form is better than the old form. It seems to me absurd that a section of this bill which calls for this prescribed form that no one on the committee has seen is passed without seeing that form. I do not see it as a major problem, I just think that, almost as a courtesy to the committee, they should see the form so they can determine whether or not there are problems they can see with the form.
Ms Harrington: I have no problem in deferring this until we have the form.
Ms M. Ward: May I ask a question?
The Vice-Chair: Mrs Ward?
Ms M. Ward: My question is for the ministry staff. Would a form ever change while legislation is in effect?
Ms Parrish: Yes.
Ms M. Ward: That is precisely the point I was trying to make, that a change in the form is not --
The Vice-Chair: Mr Drainville.
Interjection: She just said yes.
Mr Tilson: It has been tried and tested.
The Vice-Chair: Order. Mr Drainville has the floor.
Mr Drainville: I took the view that Mrs Ward has taken before, but I certainly do not want to stand in the way of the committee. I mean, I took the view of Mrs Ward that there was no need to see it, but if it is important to the committee, I am quite willing to forget that and indicate that we can stand down the section.
Mr Mammoliti: I too do not have a problem with deferring. However, I just heard now that this form does get amended during the course of a particular legislation. I really do not think it matters, and to be honest with you, I think that, hearing that, perhaps we should pursue and go on to voting on this particular section without deferring, because if that is the case, then I guess the opposition is going to be asking for all kinds of forms in the next however many sections we are going to be talking about, and I particularly do not want to do that. If this form was a standard form that would not get changed, then I could say that they have a particular concern that this should be dealt with. However, if it gets changed and it has been practice to be changed, then I really do not see it interfering with our vote at this point.
Ms Poole: I believe that the intent of this motion is to make it easier for tenants to understand the form and to make the form much simpler, and I certainly 100% support that aim. However, I have dealt with the Ministry of Housing for many years now, and while I have the greatest respect for the people in the Ministry of Housing, their definition of simple and mine are two entirely different things and their interpretation of simple is not necessarily what you and I might think. So I would be very reluctant to pass this amendment whose purported intent is to make the form simpler if in fact we see this form and in no way, shape or form is it simpler.
I think it is a fairly simple request. I can tell you that if we see the form, whenever it is, whether it is this afternoon or tomorrow, I fully intend to support this motion. I just would like to see with my own eyes that this form is going to serve its purpose.
Ms Harrington: May I ask staff to comment on the form?
Ms Parrish: I apologize that the form is not available today, and I have asked my staff to go and get a copy of the form that was tested. The process is that we have given the form to development to an independent group that specializes in sort of simpler form creation. It is called the Canadian Legal Education Corp or something like that. They go through a process of testing the form, which occurred last week. As a result of testing the form, a number of people said: "Well, this is better but it's not so good." As a result of the input we got, we are now revising the form again, and that is why it is not available today but will be available tomorrow.
I have asked my staff to try to obtain for you I guess what I would call the form that we are trying to fix and improve after testing with landlords and tenants, and my staff have informed me that they can get copies of the form this afternoon. We will do our very best efforts. I do not want to bore you with all these details, but I just want to assure you that we are making every effort and there is no attempt to try and keep any information from the members of the committee.
Mr Tilson: First of all, I would concur with Ms Poole that obviously we need to simplify matters such as this and I wholeheartedly support the intent of it. I think, though, we have just heard an example of the fact that a form has been sent out, it has been reviewed and it is determined that the form is not perhaps the form that was recommended by the ministry, that the ministry staff are making corrections as a result of that.
I think that the people in this room, this committee, may have some intelligent remarks to make with respect to the form. They may not; they may concur with it. But we have been going around this, this committee. I do not think any of us qualify ourselves as experts yet, but we certainly have heard a lot of testimony about the needs of tenants and the wishes of tenants, and I just find it strange that we are voting on something that the ministry has already admitted was not prepared correctly in their revising. It may well be that this committee may review it and make further revisions.
I am only echoing what Ms Poole says. Our two members of the Progressive Conservatives intend to support this amendment in principle, but we would like to see the form first. That is all we are saying.
Ms Poole: After that eloquent speech by Mr Tilson, I am not sure I remember what I was going to say.
The thing is that the members of the government have repeated time and time again that this is interim legislation and that it will not be in place for a very long time, which means that this form will be fairly unlikely to change once it is prescribed, I would estimate, if we are talking a short period of time.
On the other hand, I would hope that not only has it been tested with the body that Ms Parrish has mentioned, which may be comprised of lawyers, but that also real people, such as tenants and landlords, have had an opportunity to test it as well. I think if it passes that test I certainly would not have any problem with it.
I do not think that we are going to be asking for any extended debate by standing this over until we see the form. My feeling is that, unless members have something specific to say about it, we should immediately call the motion, once we have seen the form and had a chance to comment. I certainly do not propose any delay.
Interjection: Do we have a motion for that?
The Vice-Chair: No, there is not.
Mr Mammoliti: On that particular note then, I am not too sure whether I would agree to defer till tomorrow.
Ms Harrington: This afternoon.
Mr Mammoliti: I would like to ask whether the staff could have that form for us this afternoon and perhaps just defer it till this afternoon, at which time we will proceed to take the vote.
The Vice-Chair: If you could be helpful to the Chair, I am a little confused. We started out with a member asking for unanimous consent to stand down this section. It was not given by the committee. After a little bit more discussion, the parliamentary assistant agreed that it should be stood down. Then we had some members from the parliamentary assistant's party indicating that they were not agreeable to standing it down. I really do not have a motion on the floor right now, so if we could have a motion -- a request rather, a request for unanimous consent to stand it down till this afternoon, I would know where I am in this.
Ms Poole: I would like to give you a formal request, Mr Chair, that this section be stood down until this afternoon after we have had an opportunity to see the prescribed form set out by the ministry.
The Vice-Chair: Is that agreeable?
Section 2 stood down.
The Vice-Chair: Hearing no objections, we are on to section 3. Are there questions, comments or amendments to section 3?
Ms Harrington: This is a technical amendment that references the amount which may be charged by a landlord if a whole-building review order is pending. The landlord can only charge the lesser of the amount specified in the notice of rent increase or the amount of the previous maximum rent plus the guideline amount pending issuance of a whole-building review order.
This amendment refers to section 100c, a new section created by this bill. It integrates the guideline and the whole-building review provisions, part VI-A, with the guideline and the whole-building provisions of the rest of the act.
Ms Poole: I have a question of Mrs Harrington and then a question of legislative counsel. The question I have of Mrs Harrington is, is the intent of this provision that a landlord cannot receive more at rent review than the application has requested? If so, I heartily endorse that.
Ms Harrington: Could I ask staff just to clarify to make sure?
Ms Parrish: No. There is a later provision that does that, but this section does not do that. This one is really just a reference. It is just a cleaning up. It just references a new section which is created later on. There is a later part of the act that does exactly what you have indicated.
Ms Poole: The question I have of legislative counsel is, the Liberal caucus has tabled an amendment which would allow a rent increase over and above the statutory guideline for capital expenditures, and there are all sorts of provisions attached to that for tenant protection. In supporting this section, do we predetermine that there will be no rent increase granted over and above the guideline amount for any purpose? That is actually my question of legislative counsel.
Ms Baldwin: I am trying to figure out where to start. I am sure we will get to the end together. Just advising the committee from legislative counsel's point of view at a more basic level than that for a minute, section 3, and the ministry people can correct me if I am wrong, seems to be a section that is placed in the bill as a secondary sort of amendment because of what happens in section 8, where the new part VI-A of the act is added. It presupposes that l00c, which is part of the new part VI-A proposed, would pass. I say this with some reluctance, but it may be therefore that it would be appropriate for the committee to stand down section 3 until they know what they have done with part VI-A.
As to your particular question, 100c of the bill, I would have to look at that. Just give me a moment.
Ms Poole: Mr Chair, while legislative counsel is perusing section 100c, I will explain the source of my concern. The preamble for 100c, subsection (1), says, "No landlord shall increase the rent charged for a rental unit by more than the percentage permitted under subsection 71(1) unless," and then it goes into certain provisos. Because we have placed forward a motion that would allow in certain circumstances a rent increase above the guideline for necessary capital repairs, I am concerned that this would affect our section.
Ms Baldwin: I do not think that is a concern. I believe that your motion dealing with necessary capital repairs comes in the context of 100e, and that would come under clause (a) of 100c(1), which says, "an order has been made in accordance with this part." As your scheme proposes it, an order would be made under 100e. So the problem that you are raising I do not think is a problem.
Ms Poole: It may well not be, given the government response to my amendments anyway, but okay, thank you. But you would suggest maybe we should stand down this section until after we deal with part VI-A? Is that a suggestion?
Ms Baldwin: This section is in here as something that is necessary if part VI-A passes, and in that sense the committee may wish to deal with part VI-A before they do this, which is basically ancillary to it, even though in the context of the act it appears first.
Mr Drainville: I am not sure whether it would be appropriate right at this moment or in another moment, but I would like to call a five-minute recess, if we could.
The Chair: Do we have agreement? Agreed. The committee will be in recess for five minutes.
The committee recessed at 1126.
The Vice-Chair: The recess is concluded. The committee is dealing with section 3 and we are presently having an explanation by legislative counsel of where we are. I think that would be useful. Then we can continue our discussions.
Ms Baldwin: The comments I was making before the break with regard to section 3 also apply to sections 4, 5 and 6. They do not apply to section 7, and let me just review this once very briefly.
Sections 3, 4, 5 and 6 are ancillary to section 8. They are fix-up stuff that has to be done to the earlier part of the act, assuming that the new part VI-A passes in essentially this form, but that does not rule out there being amendments to it.
There are two ways to proceed now, given that that is so. One of them is to defer sections 3 through 6 until after you have considered section 8. Then you know what you have and you go back and you deal with those earlier sections. The other is to go ahead and vote on and perhaps pass sections 3 through 6, assuming, I guess, is the best way to put it, that section 8 is going to be essentially passed. At that point, if something in section 8 is passed that conflicts with what you have done earlier, you are going to have to come back and revisit it in order to have a bill or a statute that makes some sense in the end. Those are the options open to you.
The Vice-Chair: Thank you very much. We are then dealing with section 3. What is the wish of the committee?
Ms Harrington: We should proceed with sections 3 through 6.
Mr Tilson: I do not understand why Mrs Harrington would say that, because if I understand the legislative counsel, if we pass these sections there will be a conflict. If we subsequently make further amendments to later sections, there will be a conflict with respect to these sections. The legislative counsel, as I understand her, appears to be recommending that these matters be deferred until we have dealt with the later sections.
Mr Drainville: No. What the legislative counsel said, I believe, is if there was any question as to whether section 8 would be passed or not, then we should defer it. I think under that proviso we should continue with 3 through 6.
Ms Harrington: If there was any change later in section 8, we would certainly be willing, with unanimous consent, to look at going back to do the housekeeping amendments.
Mr Tilson: Notwithstanding whether or not section 8 is amended or not amended, is there still a conflict? My question is to the legislative counsel.
Let's say everything goes as is. I guess I am getting back to Ms Poole's first question. Is there a conflict? There appears to me that there may be.
Ms Baldwin: I do not understand your question, a conflict between what and what?
Mr Tilson: With the subsequent section 8.
Ms Baldwin: The bill as it is drafted now, if sections 3 through 6 passed and section 8 passed, there would not be a conflict, that would be fine. I do not think I quite understand your question.
Mr Tilson: I guess what I am just looking for some reassurance on is that there will be no conflict.
Ms Baldwin: The possibility of conflict would arise, or the possibility of problems would arise, if parts of section 8 were substantially changed. Short of that there will not be a problem.
My belief is that with most of the motions that I have seen, even if section 8 is passed with those motions there still will not be a problem with sections 3 to 6.
The reason I am making my comment about sections 3 to 6 being ancillary and the possibility of considering deferral of them is because I am trying not to prejudge whether, for example, the committee passes section 8 or whether there is a major, substantial change to it.
Does that answer your question?
Mr Tilson: Yes.
Ms Poole: I guess my only concern would be that our caucus does have substantive amendments to section 8 of the act, and we are being asked to vote on certain things which apply to provisions in section 8 which may actually run contrary to the amendments which we are proposing, and since at this stage we do not know which of our amendments will be passed and which will not be passed, it is hard for us to judge whether we should actually be voting in support of these other clauses.
I personally would have no problem in proceeding. My first choice would be definitely to stand down until after we have dealt with section 8, but I would have no problem in the alternative with proceeding with those sections 3 to 6, provided that we do have a guarantee by committee members that there will be unanimous consent to go back to them if we find later in the act that it is problematic, because you do need unanimous consent. Any time that a section is passed, we do need unanimous consent to reopen it. That would be my only concern. If members of this committee are willing to re-open it if there is a conflict that is discovered later on, then I have no problem with proceeding with these sections right now.
Mr Mammoliti: I think I would be safe in saying that you will not have that problem. I think we could agree to something like that, and on that note, I think that we should go directly to 3 and start talking, because it seems to me that we are stalling and I do not want to do that. So let's go to 3 and let's start doing something. How is that, Mr Chair?
The Vice-Chair: Thank you, Mr Mammoliti. Mr Owens.
Mr Owens: My comments would be similar to Mr Mammoliti's, other than that with respect to revisiting sections I think legislative counsel is here to advise us as to whether the legislation would be technically correct or not. Then if we did agree to amendments passed by either opposition party, we would clearly be willing to revisit the clauses in order to make sure that they are technically correct and not subject to legal challenge at a later date.
Ms Poole: I would just like to give you an example. If we are looking at subsection 3(2), it names the date of 1 January 1993. If this legislation is amended to make it more acceptable to our caucus and, I am sure, to the Conservative caucus, then we may well not have a problem with that date. On the other hand, if none of our amendments are accepted and we feel that the impact of Bill 4 is going to be extremely dramatic and want to limit the time, we might like to revisit that after we have had a look at part VI-A of the act.
That is the type of concern I am talking about, and if we do have the consent of the committee to revisit them, to reopen in the event we find that the amendments are not quite as popular as we had hoped they would be, then I would endorse George's fine, excellent suggestion that we proceed right now and get on with it. George did say that he would support some of my amendments if I was nice to him, so I am going to be very nice to George.
Mr Mammoliti: No, no, I did not say that. Do not put words in my mouth.
Ms Poole: He just did not say which ones.
Mr Mammoliti: I just wanted you to be nice to me, that is all.
The Vice-Chair: I think just where we are now is dealing with section 3. In the absence of unanimous consent, I will deal with all sections in the order in which they appear in the bill. If the committee wants to change that, I need unanimous consent. Are there questions, comments or amendments to section 3? Mrs Poole?
Ms Poole: Not at this time.
The Vice-Chair: Seeing no further comments or questions, is it the wish of the committee that section -- oh, Mr Tilson?
Mr Tilson: I guess my question is the general intent of this 1 January 1993. My question is to Mrs Harrington or whoever feels she can answer it. If we follow the theory of that date throughout, is that suggesting that this moratorium period that is being suggested goes beyond the two year period, that in fact it is two years plus three months?
Ms Harrington: That is right, but at this time I believe we are only dealing with subsection 3(1). We have not got on to subsection 3(2) yet.
The Vice-Chair: No. Actually, it is the whole section 3.
Ms Harrington: You want to deal with how much at once?
Mr Tilson: We are dealing with section 3, are we not, Mr Chair?
The Vice-Chair: We are dealing with the entire section 3 of the bill.
Mr Tilson: Yes.
Ms Harrington: Oh, I thought we would like to go to each one so I could comment on each one.
The Vice-Chair: We can do that. I was just looking for comments, to see if there was any interest in particular clauses.
Mr Tilson: I have a question, that overall question with respect to section 3. So in fact the initial announcement by the NDP that this was a two-year moratorium, in fact it is a two-year moratorium plus three months.
Ms Harrington: That is correct.
Mr Tilson: Is there any reason for that?
Mr Drainville: All the questions.
Ms Harrington: No particular reason, but we certainly are trying --
Mr Tilson: Just for the heck of it? Okay, that is a good answer.
The Vice-Chair: So there are no further questions or comments on section 3?
Ms Harrington: I had comments on a different subsection.
The Vice-Chair: Okay, fine.
Ms Harrington: To comment on subsection 3(2), this is a technical amendment that states that references to 100c as part of VI-A in this bill have a sunset date of 1 January 1993. Just as part VI-A sunsets, so do all references to its sections.
The Vice-Chair: Seeing no further questions or comments, is it the wish of the committee that section 3 carry?
Section 3 agreed to.
The Vice-Chair: Moving on to section 4, are there questions, comments or amendments to section 4 of the bill? Mrs Harrington, do you want to do all sections?
Ms Harrington: Subsection 4(1): This is a technical amendment that adds to the reference to whole building review, subsection 71(4), the new Bill 4 reference 100c, the whole building review provision in part VI-A. Where a landlord fails to inform a new tenant what the maximum rent for that unit is, even if he is not charging the maximum, then the landlord cannot increase the rent to the maximum amount for at least a 24-month period.
I will go on to comment on subsection 4(2). This is a technical amendment that states that this section, as part of the new part VI-A, has a sunset date of 1 January 1993. Just as part VI-A sunsets, so do all references to its sections.
The Vice-Chair: Are there questions and comments regarding section 4?
Ms Poole: I just have a general question which I suppose could be applied to the use of a sunset provision in all of these clauses. The government has made it very clear that it does intend to bring in new long-term legislation which in effect will revoke Bill 4, so I am wondering why there needs to be a sunset clause in there at all.
Ms Harrington: Why is the sunset date in there at all?
Ms Poole: Yes. If the long-term legislation is going to revoke Bill 4 at the time it comes into play, then why bother having a sunset clause in at all?
Ms Harrington: Just to make sure that this is not a continuing permanent legislation, as an outside deadline, to work within that.
Ms Poole: So it is really for optics, because you have already declared you are having long-term legislation that will be in place long before 1 January 1993.
Ms Harrington: That is right.
Ms Poole: So this is not an optical illusion but for the optics that this is supposed to be temporary.
Ms Harrington: To make sure that it is temporary, yes.
Ms Poole: So it has no substantive reason for being there?
Ms Harrington: It is an outside date. As you may know with your history in the Legislature, sometimes bills do take a long time and that getting long-term legislation within a year is quite a feat, so this is just to ensure that it will be done by this outside date.
Ms Poole: What happens if the long-term legislation is not in by this sunset date? I cannot see that it serves any purpose and at the same time I can see that it can be a detriment if for some reason you do not have your long-term legislation in. What you are saying is that we will be there without anything for that period.
Ms Harrington: You would go back to the RRRA then, if new legislation was not in place, because this bill then would end at that date, 1993.
Ms Poole: Which would seem to create a lot of confusion. I mean, you can put it in. I am just not sure it serves any real purpose.
Mr Tilson: It is better than nothing.
The Vice-Chair: Are there further questions, comments, or amendments to section 4? If not, is it the will of the committee that section 4 carry?
Section 4 agreed to.
The Vice-Chair: It now being 12 of the clock, I would --
Mr Owens: You are not standing down lunch, Mr Chair?
The Vice-Chair: No, I am not standing down lunch, Mr Owens. It now being 12 of the clock, the committee will adjourn until 2 o'clock this afternoon.
The committee recessed at 1200.
The committee resumed at 1410.
The Vice-Chair: Good afternoon. I see a quorum. Before we continue with clause-by-clause, our researcher, Mr Richmond, has some news for us.
Mr Richmond: Thank you, Mr Chairman. I know it has been in a big rush, but we have distributed a number of handouts on the two tax questions. For this I am very grateful to my colleague Ray McLellan, who assembled this information.
What the two handouts speak to, there is a brief memo on professional witnesses whom we have contacted to date, and there are some CVs also distributed that the committee can deal with. The clerk indicated to me, and I was aware, there is some overlap in some of the names. I know Larry Smith appeared on the lists that were distributed yesterday from the caucuses and there may be some other overlap. So, in accordance with the committee's wishes, we may be able to, so to speak, kill two birds with one stone if in fact we have these people. They may be able to also speak on the broader tax questions.
Ray has also assembled a memo on the Revenue Canada tax treatment of ongoing losses regarding residential rental units. Ray is here, and if members should have any questions, I would suggest you direct them to Ray McLellan. I do not know whether anyone does.
The Vice-Chair: Dana?
Ms Richardson: I do not actually have one, it is just a point of clarification on page 3 of Mr McLellan's letter. I think that we just spoke to you, Mr McLellan, about the reference to capital expenditures?
Mr McLellan: Yes. The second bullet point should say, "may not be deducted." That is for the capital expenditures. That was a typo, so you might note that.
Mr Tilson: Sorry, I did not hear that.
Ms Richardson: On page 3 of Mr McLellan's memo there is reference to a conversation with Janice Dulk and there are two points under that. In the second point it talks about capital expenditures, and the correction is that the full amount of capital expenditures may not be deducted in the year incurred.
Mr McLellan: Going to our background information in the rental income tax guide that has been handed out, on page 12 of that guide there is a discussion in chapter 2 of capital cost allowance and that reference is on the top left hand under the heading "Calculating capital cost allowance." The second sentence says that, "You may not deduct the full amount of capital expenditures in the year you incur them." We could just clarify that.
The other document --
Ms Poole: Are you finished with that document?
Mr McLellan: I think so, yes.
Ms Poole: I just had one question about that document. I have just been perusing it and on page 3, in the first paragraph, it says, "If the rent is consistently not enough to cover the normal expenses, then you may not be renting to earn income and you cannot deduct the resulting loss." So that would be for any landlord whose rents are not enough to cover expenses, they cannot then deduct the loss on their income tax. Is that correct?
Mr McLellan: It may be worth while to go to page 9 in the background document that we have, under the section "Rental losses." If the committee has a moment, it may be worth while just to briefly look at this section under "Rental losses." It says:
"If you incur the expenses to earn income, you may deduct your rental loss against your other sources of income. For income tax purposes, `earning income' means that you can reasonably expect your rental operation to make a profit."
It goes on in the next paragraph to say, "If the rent is consistently not enough to cover the normal expenses, then you may not be renting to earn income and you cannot deduct the resulting loss." It goes on later on at the end of that page, "If you lose money because you are renting a property to a relative or for a lower rate than you would rent it to other tenants, you may not claim a rental loss," and on the top of the next page, page 10 says, "In other situations where your rental expenses are consistently more than your rental income, you may not be allowed to claim a rental loss because you cannot reasonably expect to make a profit." I think in discussions with Revenue Canada they made reference to the hobby farm situation, where you are constantly, or you could be constantly, running in a loss situation.
If I can just go back for a moment, in this tax guide as well you will notice on the second page that there is a discussion of what is new for 1990, and throughout this guide there are underlined sections where there are proposed amendments. Those proposed amendments are at the stage that they have not had first reading yet, and apparently there will be a press release tomorrow with the federal government with respect to these amendments to the act, so that is something that the committee may want to consider when that is clarified. But, as I say, throughout this document, where there are changes, they are underlined. In mine they are highlighted, but in yours they are underlined, so those are proposed changes to the act.
I think another point leads into the second memo that I have distributed. I have gone ahead, on Mr Richmond's instruction, to do two things; first of all to contact the Canadian Tax Foundation with respect to possible witnesses, and I have spoken with four people to date: Professor Larry Smith, Professor George Fallis, Professor Marion Steele at Guelph and also Professor Andrew Muller down at McMaster. When the committee has a chance they can read through my notes here as to when these people would be available and you may decide to follow up and contact some of those people.
With respect to receiving expert witnesses in the area of chartered accountancy, I have contacted the Ontario Institute of Chartered Accountants and I am waiting for a list to come back from Peter Wilkinson with respect to possible witnesses to come before the committee.
I think that probably addresses those two memos for the committee.
The Vice-Chair: Thank you. Mr Tilson?
Mr Tilson: I do appreciate this information, particularly while we are going through the clause-by-clause, because it is a matter that has never been dealt with, at least that I can recall, up until the last day of the public hearings, and the New Democratic Party has consistently taken the position that capital expenditures, maintenance, those sorts of things, can be made, even at a break-even point. At the very least their argument is, even at a break-even point, in the hopes that ultimately their investment would increase. In other words, that is the business.
Page 10 of this document, which is the 1990 rental income tax guide, is really quite damaging to that philosophy.
"In other situations where your rental expenses are consistently more than your rental income, you may not be allowed to claim a rental loss because you cannot reasonably expect to make a profit."
From the testimony that we have been hearing around this province, landlord after landlord after landlord is saying exactly that. They will not be able to claim a loss. So they are getting a double whammy. They are getting hit with the fact that they cannot pass on capital expenditures to the tenants and they cannot write them off as losses, because it is quite clear from looking at their records that they cannot reasonably expect to make a profit.
I really think, as I indicated in Ottawa, that this type of expert testimony should come to this committee before we go through the clause-by-clause discussions to enable us to formulate whether there should be some major changes recommended by the government to prevent this. Otherwise, landlords are going to be shattered. They are just going to be shattered financially.
Obviously that has been voted on and the government has decided -- the New Democratic Party at least has decided; the opposition parties certainly did not -- that we should wait until next week before we should hear someone, after the clause-by-clause discussions, and that is regrettable, because recommendations could come forward from some tax authority indicating flaws in Bill 4 which should be dealt with before we make our report to the Legislature; and that, unless the NDP changes their mind, will not be done. We will hear further information from these people, and unless they refute what is being said, it refutes entirely the whole premise of the New Democratic Party as to how rental housing should be operated.
So I would ask that the New Democratic members of this committee reconsider this position, assuming that one of these people can appear this week, before we conclude our clause-by-clause discussions, and hopefully they can appear this week.
Ms Poole: I think Mr Tilson has raised some very valid concerns. We have as one of the expert witnesses listed, Professor Larry Smith. It is my recollection that we have already had Professor Smith on our list as an expert witness next week for the long-term consultation. I see from Mr McLellan's document that Professor Smith would be available 20 and 21 February, which is tomorrow and Thursday, I believe, and I would suggest that it would be well worth the committee's time to have him appear, even if it is for a very brief period, to answer questions they have about this area.
Ms Harrington: All of these concerns from the tax guide certainly have been around for many years under the Residential Rent Regulation Act, and we know that situation, and landlords have been dealing and living with that situation for many years. We are in the process of trying to change that in the long-term legislation, and what Bill 4 does is just basically stop things in their tracks at this point.
We certainly --
Mr Tilson: On a point of order, Mr Chair: With all due respect to Ms Harrington, she is not stating the correct facts. The facts are that capital expenditures are ignored by Bill 4, and in fact they are taken right out of the --
The Vice-Chair: That is not a point of order.
Ms Harrington: The point I was making is that the situation was very similar under the RRRA and that is what we are operating under at the moment, and if there are changes to be made, they would be made in the long--term legislation. So we have to proceed.
Ms Poole: I would just like a point of clarification. If Ms Harrington says we are going to proceed, does that mean we are not going to call this witness forward and we are not going to explore this at all?
Ms Harrington: I believe the committee has agreed that we would call the witness for next week, as was agreed.
The Vice-Chair: Mr Tilson?
Mr Tilson: My question is to Ms Harrington, as the parliamentary assistant to the minister. We are standing certain things down; for example, the item with respect to mobile homes. We are putting that down until the minister can come and provide more information to us, so obviously there is time to discuss certain things.
I quite agree with Ms Poole. I do not think that we will be spending a great deal of time on this subject. It is a very narrow focal point and I think the matter could be disposed of very quickly, and Professor Smith is prepared to appear as early as tomorrow. I think that would be most useful.
Accordingly, because he has stated that, I would so move, that this committee invite him to appear tomorrow at an agreed-upon time.
Ms Poole: I would support that motion, because, for instance, a couple of questions I would like to ask Professor Smith involve the following.
One of the statements here says, "If the rent is consistently not enough to cover the normal expenses, then you may not be renting to earn income and you cannot deduct the resulting loss." I want to find out if that "may not" is discretionary and whether a landlord could in fact submit evidence to prove that he was attempting to earn income, and just because of the particular rental market, because of certain restrictions by legislation, he has a result that he cannot control.
Other things that we might want to ask him: if, for instance, financial loss is taken into consideration as a mechanism when we are looking at this particular section.
We are, for instance, meeting for two hours at lunch hour tomorrow with the ministry --
The Vice-Chair: Thursday.
Ms Poole: Thursday, sorry; my days are all mixed up here. I would be agreeable to even using a half-hour of that time for this purpose. But I would be very surprised if the government is unwilling to have any exploration of this matter at all. Surely you must have questions about this, and it does raise concerns about Bill 4, financial loss, losses from capital expenditures and all sorts of issues.
Mr Duignan: The purpose of Bill 4 is a moratorium. Some of these questions are appropriately addressed to the permanent legislation, which we will be getting into discussing next week.
I am totally opposed, and this committee has already agreed to ask these witnesses to come here next week.
Mr Drainville: I would just like to speak to two issues. One is, again, this is a moratorium bill. I mean, we can dress it up in whatever clothing we like, but the reality is this is just one more attempt to have us stall the clause-by-clause. And we can sit here as long as the opposition wants us to on this particular issue.
I would like to also say, we have just received the list here that has been suggested in terms of possibilities of whom we might invite. We have not had time to look at that or to discuss that at this point. The suggestion has been that Mr Smith come. There are other people here, and we just need to look into that before we decide which one.
Ms Poole: On a point of order, Mr Chair: Mr Smith was the only one on this list who indicated availability this week and that is why I picked his name. I have no problems with the others, other than it seems to indicate that they are not available this week.
Mr Mammoliti: I do not know, is that a point of order?
The Vice-Chair: Mr Tilson?
Mr Tilson: Certainly the intent of this motion was not to delay the proceedings. I mean, whether this matter started on Friday, we now have new, very important information, which really confirms the information that was presented to us by the delegation in Ottawa.
I am certainly not trying to delay the proceedings. All I want to do is to investigate the repercussions of Bill 4, which is the whole purpose of what this committee is trying to do. I have no problem if Mr Drainville and Mr Duignan believe that I am trying to delay the proceedings, because I am not.
I will be pleased to withdraw the motion, on the understanding that if information is brought forward by whatever expert, whether it is Mr Smith or whether it is Mr Fallis or anyone else that the NDP wish, there would be unanimous consent to raise the issue for potential amendments as a result of those facts that could be presented to the committee. If we have that undertaking of unanimous consent by the New Democratic Party, then I would withdraw the motion.
Ms Harrington: The decision was made clearly last week that we would invite this person, or a person, and it would be the following week from this week, and we would like to go with that decision.
With regard to amendments, amendments can always be made in the House, so I do not think it is absolutely necessary that we look at that stipulation.
Mr Mammoliti: I have never been one for the supernatural, and for a minute there I thought that I had an instinct, a gut reaction that Mr Tilson was stalling. But I am glad that Mr Tilson verified that he was not stalling the proceedings, because I was a little afraid there. You know, I am not one for the supernatural.
Getting more to the point, Mr Chairman, I feel that we are stalling, personally. I feel that discussing this at this point will not help.
Mr Tilson: Stop referring to ghosts and let's get on with it.
Mr Mammoliti: I would suggest that we continue where we left off this morning and that we deal with this perhaps next week when it was scheduled to be dealt with. That is basically it, Mr Chairman.
Ms Poole: I would just point out to committee members, to refresh your memory, that the reason this matter came up to begin with was because a presenter to the Bill 4 hearings said this was the case, that they could not claim the financial loss, and this was going to impact on Bill 4. That was why it was originally suggested. At the same time, there was a suggestion that all three parties bring forward a list of presenters for the long-term consultation and a tax expert was one of those who was on the list. I believe that is where Professor Smith's name actually came up. There were two separate things occurring at the same time: One was for the long-term consultation and the other was for Bill 4.
I mean, we are going to spend half an hour, we are going to waste half an hour right here discussing this when right off the bat we could have said, "Let's have him come for half an hour." I have suggested during our lunch hour. Now how is that going to delay Bill 4? Instead, we are sitting arguing on this silly stuff about whether --
Mr Mammoliti: We are not arguing, you are.
The Vice-Chair: Order.
Ms Poole: Oh, there is no argument, Mr Chair. I suggest then we must have unanimous consent.
Mr Tilson: Does the Chair see unanimous consent?
The Vice-Chair: We have a motion before the committee. The motion, in case members need their memory refreshed, is:
Mr Tilson moved that Professor Larry Smith from the department of economics at the University of Toronto be invited to appear before the committee on Wednesday 20 February 1991.
Those in favour of Mr Tilson's motion?
Mr Tilson: A recorded vote, Mr Chair.
The committee divided on Mr Tilson's motion, which was negatived on the following vote:
Miclash, Poole, Tilson.
Abel, Drainville, Duignan, Harrington, Mammoliti, Ward, M.
The Vice-Chair: We do have a problem, at least a minor problem, though. The researchers have presented us with a list. Someone from that list will have to be chosen, according to the committee's motion. Therefore, we will have to make some kind of a decision on that fairly shortly.
Mr Drainville: Might I suggest, if it is possible, Mr Chair, that tonight just before we begin the hearings with Mr Thom we can just indicate at that point who should be invited? Perhaps we should talk ahead of time, because obviously, if there is going to be a disagreement between the various parties, we should not eat into Mr Thom's time, naturally. But if there is ready agreement, then it would be fair this evening just to quickly pass a motion to that effect. That would be my suggestion.
The Vice-Chair: If the Chair might, perhaps the easiest suggestion is the subcommittee could have a look at the names and give the clerk a suggestion.
Interjection: That is fine.
Ms M. Ward: I just wanted to point out that this memo says that they have requested the Ontario Institute of Chartered Accountants to prepare a list also. We do not have that yet. You might want to wait until you have those names.
The Vice-Chair: Mr Richmond, do you have a comment?
Mr Richmond: My understanding is we may well have some additional people to add to the list. Today is, what, Tuesday? One suggestion may be for the committee to wait until possibly, I do not know, tomorrow or Thursday, and through contacts with Mr McLellan I can give the committee an indication if we get further names.
The Vice-Chair: I think we should deal with this at least by tomorrow some time, just to be fair to the clerk and to the staff in order to arrange it. If we cannot have those names, we will have to go with the ones we have.
Mr Richmond: All right. I will do my best to bring whatever other names we get.
The Vice-Chair: Thank you, Mr Richmond. Once we have those names, is it the wish of the committee that the subcommittee deal with the selection of the witness? Do I have unanimous consent?
Mr Drainville: Mr Chair, just on that note --
Ms Poole: I hope this is not another stalling tactic, Mr Drainville.
Mr Drainville: Well, we will find out; any moment we will find out.
I have no difficulty at all with the steering committee looking at the issue, but as far as I understand, it is going to come back to the committee for agreement after the steering committee has looked at the issue.
The Vice-Chair: The practice has been in matters of this sort that, if the steering committee comes to a decision that is unanimous, which it would be if it came from the steering committee, that the clerk could go ahead without the consent of the committee.
Mr Drainville: Okay. If it is unanimous for the steering committee, absolutely, yes, that is fine. Sure.
The Vice-Chair: Good. Mr Richmond.
Mr Richmond: Just one other housekeeping matter. When Mr Mancini was in the chair last week, he and I discussed -- and I have obtained this from the ministry -- that the ministry would assemble in binders all the handouts that it has distributed to the committee to date. I have these here, one for each caucus, and I will give one to the clerk and the Chair. I will just hand those out so you know what you are getting. We just found that we were getting so much paper that it was getting confusing, with respect, Dana.
Mr Tilson: It depends how many binders you give us.
Ms Poole: Mr Chair, this is obviously another stalling tactic by the research.
The Vice-Chair: Thank you, Mrs Poole.
Mr Mammoliti: Have you got that gut instinct, gut feeling?
The Vice-Chair: That being completed, we will move on to the clause-by-clause examination of this bill.
The Vice-Chair: We are looking now at section 5. Are there questions, comments or amendments to section 5 of the bill? Mrs Harrington.
Ms Harrington: Subsection 5(1) is a technical amendment that references the time limit required for submissions on rent review applications under the new part Vl-A. Whole-building review applications, now section 100d in part Vl-A, have special time limits, as do applications for tenure review under section 63. These time limits are set out specifically in other parts of the bill and have not changed from the current RRRA, 1986.
All other applications have the following time limit requirement: The party making the application must file with the minister within 15 days the necessary documents and material supporting the whole-building review application under Part Vl-A. Representations may then be submitted by a party other than the applicant no later than 30 days from the filing of the application. These time limit requirements are the same as in the current act. So we do not see any significant issue.
Subsection 5(2) is a technical amendment that states that this section, as part of the new part Vl-A, has a sunset date of 1 January 1993.
Ms Poole: I would just like to be perfectly clear. Is there a time change involved, or is 15 days what it was before?
Ms Harrington: It is what it was before.
Ms Poole: That is what I had understood from your comments. So this is a technical amendment that does not change the time period at all.
Ms Harrington: That is right.
The Vice-Chair: Seeing no other questions or comments, is it the pleasure of the committee that section 5 carry?
Section 5 agreed to.
The Vice-Chair: Moving on then to section 6.
Ms Harrington: Subsection 6(1) is again a technical amendment that adds to the provision on whole-building review, with the new reference 100d as well as section 74 under Part VI, for applications with first effective dates of 1 October 1990 or after, time frames for parties to submit representations in response to directions from the minister. This is needed because a new Part VI-A has been created for Bill 4. This ensures that all parties to a whole-building review have an adequate opportunity to respond to each other's submissions.
The Vice-Chair: Are there questions or comments on subsection 6(1)? There being none, subsection 6(2).
Ms Harrington: Subsection 6(2) is another technical amendment that states that this section, as part of the new part VI-A, has a sunset date of 1 January 1993. Just as part VI-A sunsets, so do all references to its sections.
The Vice-Chair: Are there any questions and comments about subsection 6(2)? Is it the pleasure of the committee then that section 6 of the act be carried?
Section 6 agreed to.
Ms Harrington: Section 7 specifically provides that the ministry may include an option for instalment payments in an order issued under part VI of the act. If the order is issued three months or more after the first effective date of increase and the tenant owes money to the landlord, the tenant has the option to pay immediately or in equal monthly instalments over a 12-month period. If the 12-month instalment option is chosen, the instalment payments will continue even if the tenancy is terminated. This applies to orders issued on 29 November 1990 or after.
The Vice-Chair: Thank you. Are there further questions or comments on section 7?
Ms Poole: I would like some clarification as to this section. You said that the tenant would be allowed to pay by 12 monthly instalments if the rent increase was what, three months, if the order was made more than three months after the date of the rent increase?
Ms Harrington: If the order is issued three months or more after the first effective date of increase.
Ms Poole: Okay. So then that gives the tenant the option of paying in 12 equal instalments or by a lump sum.
Ms Harrington: That is right.
Ms Poole: Is there any provision for what happens, for instance, if a tenant moves in the meantime? Or what if, on the other hand, which has occurred sometimes, a tenant has moved and has been owed money by the landlord? Are there any provisions that would protect that tenant in that instance?
Ms Harrington: The first case you mentioned, when the tenant actually moves, the payments are still due. If you look at the section itself, it says, "Where the order permits the tenant to pay the amount owing by instalments, the tenant may do so even if the tenancy is terminated." So it is still due.
What was the other case, where the landlord --
Ms Poole: There are only two instances from a rent order. One would be where the landlord owes a rebate to the tenant, the other is if a tenant owes money to the landlord, and I am trying to find out if there is any provision for, if the tenancy is terminated, what happens in either case?
Ms Harrington: The first one I have just clarified. If the landlord owes money to the tenant, it is due, is that not correct; due to the tenant immediately?
Ms Richardson: The tenant has the usual rights under civil remedies to collect. There are provisions in the bill about certain orders that are being voided and phase-ins that are being voided which have a positive requirement on the landlord to make a payment within 60 days after royal assent. So it depends on the circumstance.
Ms Poole: So I gather what you are saying is that if a tenant owes the money, there are two possibilities, he can either pay by lump sum or in 12 monthly instalments, but for a landlord, he pays within 60 days. And does the tenant have the right to deduct that money from his rent if the landlord has not paid within 60 days?
Ms Richardson: Excuse me. For the two provisions where there has been a voided order or a voided phase-in, if the landlord does not repay within 60 days, then the tenant may deduct from his future rent increases or make a rebate application. So once again it depends on the circumstance.
Ms Poole: So I gather rent review would be sending out a notice to tenants or to the landlord concerned, hopefully to both parties, explaining the situation and their rights; and also, in the instance of a tenant who might be entitled to a rebate because an order is voided, would that tenant be notified by rent review as to the amount that the tenant is entitled to have and how this is to be effected? Would that automatically be happening from rent review?
Ms Richardson: Once again, it depends. We probably would not send out an order, but notification would be sent to the parties about the circumstances. We would not know how much the tenant had or had not paid in the interim, so it would be unlikely for us to actually specify the amount that is owing to the tenant, but assistance would be provided to the parties if they need some help in figuring that out.
Ms Poole: So the notice that would go out would say what the tenant or the landlord was entitled to and then it would be up to them to figure out how much they had paid or not paid.
Ms Richardson: We would make that information available to them.
Ms Poole: Okay.
The Vice-Chair: Are there further questions or comments? Seeing none, is it the pleasure of the committee that section 7 be carried?
Section 7 agreed to.
Ms Harrington: Section 8: This just is a completely separate part for the moratorium on rent increases with the first effective date on or after 1 October 1990.
How far do you want me to go?
The Vice-Chair: I think we will go through this section one clause at a time. So we will do 100a?
Ms Harrington: Okay. Section 100a is the definition of "gross potential rent." It is the same as is currently used under the RRRA, 1986, as provided in Ontario regulation 440/87, section 1. Gross potential rent is used in calculating the justified rent increase based on operating cost allowance, extraordinary operating costs, etc.
Mr Duignan: On a point of order, Mr Chairman: I am just wondering -- The Vice-Chair: Fine. Are there questions or comments regarding section 100a? I see none. Is it the pleasure of the committee that section 100a be carried? Carried.
Section 100b. Oh wait, section 2 -- long memory. We will go back.
Ms Harrington: I do not have one of the forms yet.
The Vice-Chair: I have a copy of the bill here for the parliamentary assistant.
Ms Harrington: No, we are talking about the forms.
The Vice-Chair: The forms. Oh.
Ms Harrington: That is okay. I do not need them now.
The Vice-Chair: All members of the committee will now be, I hope, in possession of the forms that were requested this morning. Are there comments?
Mr Tilson: Does it matter? We have already voted on it.
The Vice-Chair: No, we have not. This section we stood down this morning. We are coming back to it. The information is now before the committee. Are there questions or comments on this clause?
Ms Poole: The ministry has been good enough to provide us with form 1 and form 2, and we have not had a lot of opportunity to peruse it, but I had some initial questions about it.
As far as the format of the calculation of rent is concerned, the first item is, "Your rent is now," which is I think quite straightforward. The next item is, "Your rent increase is," and I assume, for instance, if your rent was $500 and the statutory guideline was a 5% increase, then your rent increase would be $25. Am I right so far?
Ms Parrish: Yes.
Ms Poole: You have got a second option under number 2. You have got, "Or I am increasing your rent by" such-and-such a per cent. "This is higher than the guideline amount because: I have made an application for the new rental period. I am asking for an increase of" X. The amount that goes into the bar at the far right, "Your rent increase is" X amount of dollars, does that amount include what the landlord has gone to rent review for as a new rent increase?
Ms Parrish: This box that has a little box around it, is that what you are referring to?
Ms Poole: No. You have two spaces at the sides for dollar amounts and then you have a boxed amount at the bottom, on the right-hand side. I am talking about the second space on the right-hand side where a dollar amount is to go. What I am having trouble figuring out is if that calculation at the bottom of item 2 for an application for the new rental period, "I am asking for an increase of" X amount of dollars, if that is the amount that goes there.
Ms Parrish: This money down here? This $30, for example, the amount that you would say the rent increase is? Your example was $25, you would write in $25 there, and then the sort of box at the bottom would be $525.
Ms Poole: What I am trying to get at, for instance, if a landlord were going to go for extraordinary operating, which right now under Bill 4 is all he would be allowed to go for above the guideline, the first amount would be the rent. The second amount is your rent increase. Now if it was just statutory it would only be $25.
Ms Parrish: That is right.
Ms Poole: But if the landlord has applied for extraordinary operating --
Ms Parrish: Then they have to use form 2. Form 1 is only if your rent increase does not need Ministry of Housing approval or if you have already had your approval.
Ms Poole: Ah.
Ms Parrish: Or you are moving to maximum rent.
Ms Poole: Okay. I am actually looking at form 2.
Ms Parrish: You would have to go to form 2 to give the information that you have applied for additional rent increases.
Ms Poole: Okay.
Ms Parrish: And there is a little box there that says, "I have made an application for the new rental period" and I want X, which would be more than the guideline increase. Form 1 is only if you are moving to maximum rent or if you are putting in something you have already gotten, for example phase-in, or guideline.
Ms Poole: I apologize for the confusion, because I did not tell you I was looking at form 2.
Ms Parrish: Okay.
Ms Poole: So my question then on the form 2 is, that second space there, which is the new rent increase, would that include the guideline plus, say, the extraordinary operating?
Ms Parrish: That is my understanding. Yes.
Ms Poole: So should this not say, "Your rent increase, if approved, will be"? I am just concerned that they think they have to pay that right now.
Ms Parrish: I see what you mean. Although there are some sort of notes here, it does not make it completely clear, in your view, that --
Ms Poole: That they might not have to pay this.
Ms Parrish: That this is precative; that is, that is what the landlord wants.
Ms Poole: Yes, exactly. In item 2 it says, "Your rent increase is," as though, like, this is the gospel, "Ladies and gentlemen, this is what you will have to pay." But if the landlord has not been to rent review and does not know they are going to get the extraordinary operating, then we might have a problem in that tenants will automatically pay that amount, not realizing that the landlord might not be entitled to it. Do you see what I mean? I am just saying , "Your rent increase, if approved, will be," so that they will know that it still has to be approved.
Ms Parrish: Right. Yes. And that would sort of tie in to these notes at the bottom that say you cannot review before there is a decision, and if you do not know, phone us and soon.
Ms Poole: That is right, because a lot of calls to my office, come from tenants who do not know what they have to pay, and we always say: "You have to pay the guideline. This is the amount you have to pay. But if the landlord wins his application, you'll have to pay this much extra, so try to put it away in a bank account so you'll have it ready if the landlord wins." So I can see tenants looking at that and saying, "Oh, I have to pay this," when the landlord has not actually received approval for that increase. And it might not also be a bad idea -- and I am looking to see if this is on here -- to tell the tenant what he is required to pay as of the date of his rent increase if it has not received Ministry of Housing approval.
Ms Parrish: So you are saying in essence that you should say to the individual, "You must pay this 5%" -- we will make it easy for the mathematics -- "You must pay the $25." However, if I want another 5%, you do not have to pay that until it is approved.
Ms Poole: That is right. I do not know if that is helpful to you
Ms Parrish: It is a good point.
Ms Poole: I think it is important for tenants to know that that is not set in stone and it should be, "Your rent increase, if approved, will be," and to also tell them in dollar amounts what they should pay automatically and what they have to wait for the approval to pay.
Ms Parrish: There is some room on this form. We could, for example, put in some additional material here, like, "I am proposing to increase your rent," and then next to the guideline we could put in something about, "This is the part you must pay now, the other part is the part under application" sort of thing.
Ms Poole: That would be very helpful. Otherwise you will find tenants confused as to what they do and do not have to pay.
That is my only comment. Otherwise, I think these forms are definitely an improvement over what is being used right now. They are much simpler and I do like the format. It may not be a bad idea, before you do finalize it, to have some real tenants out there sit down, fill one out for them and say, "What does this mean to you," and see if they can explain it. If they can, you will know you have really gotten all the glitches out of it. That is my only comment.
The Vice-Chair: Are there further questions, comments or amendments to section 2? Seeing none, is it the pleasure of the committee that section 2 carry?
Section 2 agreed to.
The Vice-Chair: The next section, then, 100b, parliamentary assistant?
Ms Harrington: This section provides that part VI-A applies to all rent increases on or after 1 October 1990 and that part VI, which governs rent increases prior to that date, does not apply except in specific cases. Part VI-A does not apply to rent increases proposed in an application or set out in a notice of phase-in or in an order that has been issued by the minister, the hearings board or the court with a first effective date prior to 1 October 1990.
The Acting Chair (Mr Miclash): Questions or comments?
Ms Poole: The Liberal caucus has offered an amendment to subsections 100b(1) and (2). While members are looking at this motion, I wondered if I could have the indulgence of the committee for five minutes. I have just been asked to call my office urgently, and hopefully I can deal with it very quickly, but since we do have an amendment to this section I did not want to leave, so I am just requesting a five-minute adjournment.
The Acting Chair: Do we have permission to take a recess? Okay? The committee is recessed for five minutes.
The committee recessed at 1501.
The Acting Chair: Ladies and gentlemen, if I can reconvene.
Ms Poole: Mr Chair, I think when we left off you were calling for comments, questions or amendments. The Liberal caucus does have an amendment to this section and I do not know if you feel this is the appropriate time to make it or if you would like general discussion prior to my making the amendment.
The Acting Chair: I guess maybe we will go on to general discussion, please.
Mr Tilson: I would like to ask Ms Harrington, as the parliamentary assistant: We have had an amazing amount of dialogue from people around this province as to the detrimental effect of the retroactive portion of this bill. We have had both landlords and tenants indicate to us the terrible effect it is going to have on the economy of this province. We have had landlords sit before us in this very room and weep, literally weep as to the terrible effect it is going to have on their lives and their families, people who have worked hard all their lives, who have played by the rules, who have played by the rules set up by the government of the province of Ontario and who have expressed their lack of confidence in the government of the province of Ontario.
It does not matter whether you are Conservative or New Democrat or Liberal, rules are set by governments to be followed and they are not set to be changed in midstream. And governments that come to power, for whatever reason, must realize that, because to have sound government you must play by the rules. Otherwise there would be anarchy, and that is what these people are saying, and they are people from all walks of life. They are small landlords, they are large land owners.
It is mainly the small landlords who are going to be seriously affected by this. It would be very easy for me to review the statements that have been made by different people who have come to us right across the province. I will not do that, because certainly you have been one of the members of the government, of the New Democratic Party, who has been present almost at all of these hearings. In fact I think you have been present at every one of them, the public hearings, and you have heard all these people. I have watched you. I have watched you particularly as to how you react to these people who literally come and break down as to how it is affecting their lives, and in turn saying how it is going to affect the tenants of the province, how it is going to affect their way of life, and in fact producing facts.
Having heard all of that testimony, have you changed your mind as to whether or not the government, the New Democratic Party government, should choose the effective date of 1 October 1990?
Ms Harrington: What an extremely perceptive and difficult question. But let's look at it clearly. This government was elected and has a mandate and that is exactly what we are doing, following what we believe have to be changes in the RRRA. And of course we have to live or die by what we do. That is a reality of politics and we have to accept that, and we all do. We cannot please everybody; I am sure you know that.
We have heard some very heart-rending stories, there is no denying that, and it has been difficult, but this legislation I believe is good legislation, and this is why we are going ahead with it. It is a moratorium, and I do not think we have to go back through everything that we had said or heard over the last month.
But the other comment I would like to make is that, if you would like a direct response from the minister, since he was not actually present, as you and I were, to hear all of the testimony, I would not mind if you did want to defer this till tomorrow if you wanted to speak to him more directly about how you feel.
Mr Tilson: I am asking you as a member of this government, Mrs Harrington. I am asking you as the -- and I do not mean to offend the New Democratic members of the government who sit in this committee, but you are perceived, at least, in that you happen to be the parliamentary assistant to the minister, to be a leader from the government side, the New Democratic Party side, in this committee. Whether you are that in fact, you are perceived as that, and I respect you for that and I have respected some of your comments and I certainly understand.
You are saying that there are tenants who are suffering in this province, and all parties have said that. We have all made those comments, we have all seen testimony given to this hearing where tenants are suffering, and I say that because as that leader in this committee, at least from the New Democratic Party, I think it is incumbent upon you to show that leadership and to relate the effect that testimony has had on you -- hopefully it has had effect; you seem to be a person it would have an effect on -- and you will not simply look at it as tenant legislation.
I can say that our party looks at this legislation as a problem that affects all sectors of our society. Housing, as we have repeatedly said over and over, is like food, shelter, housing; it is in that category. It is something that we all look at. It is something that gives us great concern.
When we have landlords telling us the testimony that they have and listing off how it is spread out beyond just the landlord to the worker who is going to lose his job, to the tenant whose quality of life is going to be affected, these are facts. These statements that have been made by these landlords are not philosophical dogmas of the Liberal Party, the New Democratic Party, the Conservative Party; these are facts that have been presented to this committee.
Looking at that, I asked whether you had considered -- and there is no question the New Democratic Party has expressed their interest to help tenants. In fact, the Minister of Housing has said that he does not represent the landlords, he represents the tenants of this province. I find it astounding for a minister of the crown to take that position. I do not think you would take that position. I am looking for you to contradict me. You know, I would like you to contradict me.
Ms Harrington: I did not say it was tenant legislation. My view is that this is legislation for the benefit of all of Ontario. It is a moratorium so that we can put in place a new system in this province. As I said, that was the minister's statement, and if you want to get his response, I cannot answer what his response would be.
Mr Tilson: I understand your rationale in developing the moratorium. I disagree with it, I disagree with the approach, but that is irrelevant at this point because we do not have the votes. However, we do have the right to speak and we do have the right to emphasize to you facts that have been presented to this committee.
Having said that your government is representing all aspects throughout the province of Ontario, all people throughout the province of Ontario, and I hope that you do, and having listened to the fact -- and it is just not isolated facts of landlords that are being forced into bankruptcy -- would you therefore consider changing this retroactive aspect of the legislation in light of the facts that have come to you and other members of this committee in these hearings?
Ms Harrington: From the facts that have come to us -- there is no sense in going back over all of them -- we understand clearly that there are facts with regard to, as you say, landlords and workers and a lot of different people affected in Ontario. That is why we had the hearings. We wanted to know what the effects were and how people felt. We do know that and we have to, as you say, take the consequences of doing the best, making some decisions, and what we want to do is put this in place and then, as the minister clearly said yesterday, look to the rest of the people in Ontario, like the landlords and other people, to try to improve a system. We are clearly open to a lot of options and decisions have not been made on that. A decision has been made on the part of our party and our government that this legislation is appropriate at this time.
Mr Tilson: If I could continue, it is regrettable that you will not reconsider your position, having heard the terrible facts that have been presented to this committee. I would therefore like you to elaborate, on behalf of the government, your rationale for choosing this retroactive date of 1 October 1990, specifically when it involves orders when notices must be given 90 days prior to orders being given, so that effectively the retroactive aspect of this legislation, in most cases, is not 1 October 1990 but 1 July 1990. I would like you to give your government's rationale.
Ms Harrington: I would like to point out, for instance, if we chose, say, the date of 28 November 1990 for the filing of applications as the cutoff date, the earliest rent increase that would be affected by Bill 4 would then be 1 March 1991, so rent increases under the old system would continue right through until 1 March, and we did not feel that that would be acceptable.
Mr Tilson: Is it possible, Mrs Harrington, that if the Bill 4 change is passed without amendment, this government could change the rules again in midstream and say, "Well, we found that was a mistake, we're going to change the rules again"? I am just trying to determine your rationale.
Ms Harrington: I think it has been very clear. There has never been a New Democratic government in Ontario. One was elected with a mandate to look at the rent control situation, which has been the RRRA for the last five years, which was a very poor system that needed immediate action, we felt, and people of Ontario, I think, understood that. What we have said very clearly to you and to everyone is that, as soon as possible, with as wide a consultation as possible, with this green paper that we have just released yesterday, we want to make a good system that will work.
In the whole rental system in Ontario there are many pieces, and a very important part of it is the private ownership rental market. We recognize that that has to be a system where there is a fair profit and that those people will be part of the system and will make a fair profit.
So that is the message we are sending out and I think that message is fairly clear.
Mr Tilson: Well, I hope that the government will keep an open mind on this subject. It sounded when I first asked the question about changing your mind that I was trying to ask a trick question, and I was not. I was asking the question because if all these landlords who have come before us, if facts, further facts, are produced to this government that indeed show these landlords and others, other families and children and the people who work for these landlords, are going to be put into bankruptcy or affected financially, I hope that the government would change the rules again.
I say that because obviously I do not think these landlords who have come to us are kidding. I do not think they are lying to us. I do not think they are making it up. There are too many of them to be making it up. And I would hope that before we all vote on this, no matter what the decision of this committee is, you will all take a long, hard look at that before we vote on this bill in the House, because it is quite clear to everyone, no matter what party you are in, that there are a number of people who, as a result of this legislation, are going to be bankrupt, who are going to be literally destroyed because of a government that is determined to enforce a dogma that is not going to work.
Mr Turnbull: Mrs Harrington, unfortunately what I have to say will be very repetitive of what Mr Tilson said. I do not believe that there is anybody around this table who has any thought other than the fact that we want to ensure that people are properly housed, that there is an availability of housing, that it is affordable and that it is safe and clean. I do not believe any party has any other view, and I will defend to the hilt and believe it or not, I have in fact defended your government with people who have spoken to me about your right to pass laws, because you have been elected. You were elected with approximately 23% of the eligible voters and 37% of the popular vote that was cast, but I will defend to the hilt your ability and your right to govern with a majority.
However, there is the problem here that you are passing retroactive legislation, and we have heard a lot of testimony -- and I am sorry that this is so repetitive of what Mr Tilson has said, but it goes to the heart of what our party objects to in this legislation, and it is the fact that your members refuse to ask for expert testimony from a representative of the Trust Companies Association of Canada as to the likely effect it would have on landlords, and specifically small landlords.
I recall having a discussion with you, Mrs Harrington, and I subsequently said I would not discuss this in public because it was a private discussion, and you said, "No, no; that's fine," and I admire you for the fact that within minutes of us having that second discussion you put it on the record that you had considered buying an apartment building with your husband, out of your life savings, as I understand it. I admire the upfront way that you do things.
But there is no doubt about it that small landlords who have bought their buildings within the framework of the law, a framework which, while it may be flawed -- and in fact I have told you on several occasions I believe that the existing legislation was flawed -- nevertheless it was the law, and ultimately, if we cannot rely on the law, what can we rely on?
It would be utterly repugnant to me if, when your government is eventually defeated -- and I would hope there is no government in Canada that is smug enough, of any party, to think that it cannot and will not be defeated -- a subsequent government were to retroactively change rental legislation and say, "Oh, it was wrong," and the tenants had to pay thousands and thousands of dollars back because this legislation was retroactively cancelled. I want you to think about it in that light. It is not the way we govern.
It is of so much importance to landlords, particularly small landlords, that they have been on the phone to me saying: "Please, what should I do? The bank is contacting me. They are wanting the finances to be rearranged. What do I do?" And I have had to say to them: "Hold on. Let us look at what the permanent legislation is."
But within the discussion paper, it impressed me, the fact that this discussion paper clearly recognizes the fact that we have up to $7 billion worth of repairs that are going to be needed by the year 2000 to our rental stock. We have seen that on average about 17% of household income is required to pay for rental accommodation in this province. That is a statistic from CMHC. We have seen that 0.006% of all of the rental stock has had these excessively high increases, and we have also seen some expert testimony that in fact it was based typically on very, very low base rents.
When you consider all of that, that the discussion talks about the need for a vehicle -- let's call it a vehicle -- to pass through the cost of these repairs, does it not seem reasonable that we should address this question of retroactivity, a question which we know there are suggestions of being unconstitutional? We will not know that until it is tested at court. The landlords' association asked you to refer it to the courts before passage of this legislation, which I would urge you to do, but more than that, if you do not do that, they are going to challenge it in the courts. Surely when we rely on the democratic process and the rule of courts, we should absolutely consider the message that we send if you do not get rid of the retroactive aspect of this legislation.
Ms Harrington: I am sorry. I did not hear your last sentence because I was asking --
Mr Turnbull: I was just saying, unless you get rid of the retroactive aspect of this legislation, we are just going to face so many bankruptcies of small landlords and it is their life savings. Do you not think it is appropriate for you to remove that aspect? You will find, I suspect, from this side of the table unanimity, that you will get success in passing the rest of your bill if you will remove the retroactive aspect of your legislation. Will you do that?
Ms Harrington: There has been a lot of discussion with regard to the retroactivity and the legality of it. There are staff who have looked at it in some detail. I would like to ask one of them to just comment on the technicalities of it for me.
Ms Parrish: I would point out that it is not the practice to refer all legislation through the courts to have it constitutionally tested because it is a very long period of time that it would take to have it referred. I should say that the issue of the constitutionality of this bill has been considered by staff, has been referred to the Attorney General; the bill has been through all of the normal mechanisms of government.
I would point out that the constitutionality of the previous statute, the RRRA, was in fact also challenged by a landlord in a case called R. v Haddock and the issue of the constitutionality of the previous statute, which had some retrospective elements, was also dealt with. The courts ruled quite conclusively in that case that it was not unconstitutional.
So it is not as if this is an untried area of the law. Normally cases only get a constitutional reference where you really are dealing with a situation where there is not a body of previous case law.
I can understand other kinds of objections. I am really only speaking to the issue of the constitutional review of the bill itself.
I should also point out that -- and I have to say that I am a lawyer, so I can say this -- lawyers have all these sort of technical distinctions which are sort of tedious, but there is a distinction in law between a bill which is retroactive and retrospective, and Bill 4 is a retrospective bill, not a retroactive bill.
Mr Turnbull: I would ask that we have that legal opinion tabled with this committee, Mr Chair.
The Acting Chair: Yes, if you so wish it to be tabled.
Ms Parrish: May I speak to that issue?
The Acting Chair: Yes.
Ms Parrish: You can appreciate that we are in an awkward position as staff, because there has been an indication that there will be litigation in this area, so you can appreciate we are in a difficult position in terms of our client. This is not a situation where there is no threatened litigation, there is litigation involved here. So the question is, should we be essentially disclosing our case to the public in this situation? I guess it is difficult, because we do not know what kind of case will come forward, we only know essentially what we read in the papers or we hear from the committee deputants.
Mr Turnbull: It seems to me that since it is public funds that were expended on this, it should be available to the public and certainly to this committee. Perhaps in light of what you are saying, if you will not table it, I would suggest that this -- first of all, I would ask you that you table it, and if you do not table it, I would ask that this committee get its own legal advice.
The Acting Chair: Mr Turnbull, just a clarification; you are asking for the document to be tabled?
Mr Turnbull: Yes.
The Acting Chair: Okay.
Ms Harrington: Which document does he want tabled?
The Acting Chair: Which document is that, Mr Turnbull?
Mr Turnbull: The legal opinion that the ministry is in receipt of as to the constitutionality of the retroactive aspect.
Mr Drainville: I just want to respond to that. It is always a little bit of a difficulty, I think, when we put ministry staff in the position that I think we are just about to put this staff person in. You asked a particular question, Mr Turnbull. I think the ministry staff did their best to respond to you and respond to the question that you were raising.
I think that the caution the ministry staff person has put to the committee is one that needs to be very seriously considered. There is an indication of litigation coming. I do not think it is appropriate that we get into a situation in which the staff has both to provide us with information and to do the work that they have to do as ministry staff.
I think that both of your requests go far beyond what is necessary at this time and I think that the member of the ministry staff has made their determination clear. You asked how the ministry dealt with it. She has indicated how they have dealt with it. You have seen the legislation as it is drafted. You have heard from the parliamentary assistant why the government is taking the position that it is taking. I think that this is all within the bounds of reasonable discourse and response and I think that the two requests you have just made are beyond reasonableness.
Mr Brown: Just on this point, I agree with Mr Turnbull that the legal opinion should be tabled. I also agree with Mr Drainville that we should not have the ministry staff in this position. The question here is not to ministry staff whether they want the legal opinion placed before this committee and placed in public. The question is whether the government wants that to happen. The question therefore is more properly addressed to Mrs Harrington, who is here as the parliamentary assistant to the minister and who is here representing the Ministry of Housing. It is the government that has to make this decision, not staff, and I fully concur with that.
I think, with a government that was elected talking about being open, being accessible, that it is passing strange that it would not allow a legal opinion that we have, apparently, within the ministry somewhere, to be tabled at this committee.
Much discussion has gone on through these hearings about the legality of this particular section of the bill. We have had landlord groups clearly indicate that there will be litigation. We have the government assure us that: "No, no, not a problem; this is legal. This is fine." But the committee has had no opportunity itself to examine those legal issues.
It would seem to me that the parliamentary assistant has the ability to make that commitment to this committee. Otherwise we are in the unfortunate position of retaining legal counsel ourselves to determine that, or should be, if we are doing our jobs as members of this Legislature.
I see no reason for not having the opinion in the open. Clearly we are not trying to hide anything from the people of Ontario. And I would go back and caution the Ministry of Housing that the same lawyers are in the Ministry of Housing now as were before; the government has the same legal staff as it had six or seven months ago, and I can tell you, I was once over there sitting smugly listening to how the --
Ms Poole: You smug? No.
Mr Brown: Yes. Say it's not so.
Ms Poole: It is not so.
Mr Brown: -- listening to how the government's lawyers had determined various statutes to be totally legal, and we were shocked on more than one occasion when we found out the legal advice that we had retained did not hold up before the courts. So I just ask the parliamentary assistant, this is a political decision and not a staff decision and I support Mr Turnbull in asking that this be tabled.
Ms Harrington: As you know, and I think it was already stated, the normal caution -- it has gone through the Attorney General's office and that is, as you were mentioning, what we normally rely on. Whether or not all the evidence that we have at the ministry should be tabled in this House, I think you would agree I would like to check with my minister first. If you would like me to report back on that tomorrow, I think that would be the earliest I could.
Ms Poole: My understanding is that the minister will be joining us tomorrow. So since Mrs Harrington has asked for time to consider this, perhaps we can put the question to the minister tomorrow.
The Acting Chair: Okay. Back to the regular discussion. Mr Brown, you were next on the list.
Mr Brown: Is Mr Turnbull finished?
The Acting Chair: Are you finished on that point, Mr Turnbull?
Mr Turnbull: I would just like to put you on notice at this time that if the minister is not prepared to table it, I would like to put forward a motion tomorrow requesting this.
The Acting Chair: That will be tomorrow then?
Mr Turnbull: Thank you.
The Acting Chair: Mr Tilson?
Mr Tilson: Mrs Harrington, when you are discussing this with the minister, and I assume you will be before he arrives, the mandate of this committee is to obtain as much information as is within its bounds. We are looking at tax information, we are looking at all kinds of facts and professional opinions to assist us. We are having Mr Thom come tonight, who will provide us with some thoughts, professional thoughts. A legal opinion is no different from any other advice.
I appreciate that one can say that litigation is pending, and maybe it is, maybe it is not. We have had a landlords' group that says it is going to institute legal proceedings. Maybe they will, maybe they will not.
Our job, the job of this committee, is to advise the Legislature. If we have not got information, if we have not got legal information, we go out and find it. In other words, if this bill is legally unconstitutional or if there is something wrong with it, I think the mandate of this committee is to determine whether or not it is unconstitutional, whether in our opinion it is unconstitutional, not what some landlords' group thinks or some tenants' group thinks, or indeed whatever even the Minister of Housing thinks. This is an independent committee, and this committee is to advise the Legislature, and I think it is a reasonable position for this committee to report on the legality of this bill. It has been raised, a legitimate argument has been raised, and I would ask that you and the minister review that very carefully before you come in and refuse, which has been hinted, at least, by other members, that this information would not be forthcoming. So I do hope that you consider that, as you do all other information, such as the tax information.
Mr Mammoliti: On a point of order, Mr Chair: I am just curious as to what all of this has to do with subsection 100b(1). I think we have strayed off that particular item and we are talking about the whole bill here. I think that we should concentrate on 100b(1) and deal with that.
The Acting Chair: Mr Mammoliti, they are dealing with the retroactivity of the bill, and I believe that section does cover it. This is what we are discussing at the present time.
Mr Mammoliti: Well, again on my point of order, it was mentioned that the whole bill at points was being discussed and not specific to 100b(1). So I would suggest that we target our discussion around 100b(1) as opposed to the whole bill, and that is what has been happening.
The Acting Chair: Okay. I just might remind the members that we are discussing that particular section, subsection 100b(1), and I believe, Mr Turnbull, last comment on this portion, and then we will go on to Mr Brown.
Mr Turnbull: I will defer my comments at this moment.
Mr Brown: I have sat here for three weeks of public hearings, and nothing that I have heard has moved me so much as the testimony on this particular section of the bill. I think we all agree that tenants need protection, that tenants have had some problems with the previous legislation, and improvements need to be made. That is not a question. What is a question is this retroactivity. I think our party has offered a number of amendments which we think will improve the bill, but at least in my view, this part of the bill, this retroactivity that we know in some cases reaches back as far as three years, is, if nothing else, repugnant.
I have sat here and watched witnesses over there break down and cry. The Chairman had to ask for two recesses while men cry because they are losing their life savings, witnesses who have come to Canada 20, 25 years ago from other countries, have contributed to this nation, contributed to this province, and indeed contributed to this city. They have come here to do that. They have not had pension plans as most Ontarians do. They did not have high-paying jobs. But they worked hard and they raised their families, and they maybe guessed wrong. They put their money into real estate. They put their money into providing rental accommodation for the people of Ontario, providing a place to live for people in this province. And for them to have abided by and gone out and got legal orders -- and, if I recall, in that particular instance, even with the approval of their tenants to have this work done and have the cost passed through -- it just seems to me to beyond natural justice.
Whether it is legal or whether it is not, I would question the morality of a government that would reach into a person's savings, and whether it is in a bank account or in a building, that is what it is. And those people, according to them -- and I have no reason to disbelieve them; perhaps the government does, but I do not know why anyone would disbelieve these people -- are saying to us, "We will be ruined." The gentleman said: "What am I going to tell my son? What will I leave my son?"
Certainly no member of this committee could sit here over the three-week period and not realize that these are real people. They are not rich people. They do not drive in limousines. They do not live in fancy condo units. They do not have big houses in expensive parts of the city. They are the real people of Ontario, the people who built Ontario. And to have a government say, "We cannot allow you to have the same rights as other Ontarians," is beyond me.
Just for something to do -- and I did not really want to be particularly partisan about it, although I probably will be later on -- I thought I would get out the Agenda for People. I thought I would look at the Agenda for People. I see the smiles over there. You are wishing they were all shredded, I am sure. What does the Agenda for People say about rent control? Well, it said:
"New Democrats would bring in rent control. That means one increase a year based on inflation. There would be no extra bonuses to landlords for capital or financing costs. It's simple, it's fair, and it avoids the bureaucracy which has frustrated both tenants and landlords."
That is what it said. It said nothing about reaching back three years. It said nothing about reaching back two years. That was your platform. That is what you told the people of Ontario and that is what tenants and landlords were led to believe you would do. It said nothing about expropriating property retroactively, and that is really what you are doing, and I find that to be repugnant.
I, like everyone else, realize the realities of 6 September. You are the government. You can do what you want, and should do what your policies were. You should take the Agenda for People and implement it, because that is what the people of Ontario did. They elected a government that made specific promises and the people of Ontario have a right to believe that those specific promises will be kept. That is what they did and that is what they should expect.
But they should not expect this. They should not expect that people will lose their life savings. They should not expect that people will be bankrupt. They should not expect that, and I do not understand that. I really do not.
The rest of the bill we can think about and try to improve, but this part comes right to the crux of what we are all about in Ontario, what we are all about as Canadians. It is about fairness. It is about justice.
I just ask Ms Harrington and the members on the other side -- you were here, too. You heard those people. I have no reason to believe that you question their credibility. Would you not say -- be honest. Do not be the trained seals. Go back to the minister and say to the minister: "Minister, we can't do this. We've been out there. We didn't realize the ramifications when this bill was put forward. We didn't know that." Nobody could know that until we went through the public hearings. That is why we had public hearings. Go back and say to the minister, "Yes, let's go on with this bill if we must" -- and you must think it is a good idea, so I presume you will go ahead with the bill -- "but we can't live with this clause." It is just not right on a very basic level, and I do not think any Ontarian would believe that this is the right thing to do. It just is not.
The Acting Chair Mrs Poole? I am sorry, go ahead.
Mr Drainville: Just on a point of order, I put my hand up a long time ago, Mr Chair.
The Acting Chair: I am going on a basis of when people are recognized. Did you put your hand up after Ms Poole was recognized?
Mr Drainville: Fine; it was after that. That is fine.
The Acting Chair: Go ahead, Ms Poole.
Ms Poole: The Chair actually just sent me four Glossette raisins because I was first on the list and somehow got lost in the shuffle, so perhaps, Mr Drainville, you would like to apply for the same remedy.
Interjection: Give him five.
Mr Mammoliti: You get the whole box.
The Acting Chair: Go ahead, Ms Poole.
Ms Poole: I am not going to talk about the constitutionality, which to a certain extent is going to be beyond our control, but I am going to talk to you about two issues which concern me relating to the retroactivity. Those are fairness and trust in government.
The retroactivity, as all members have heard, goes back far further than the date of 1 October 1990, which many people believe is the retroactive date. Mr Tilson mentioned 1 July 1990 being the date of applications, but in fact, as we have heard, a landlord actually has to substantively complete renovations and repairs prior to even applying, so we are talking legislation relating to capital improvements that actually go back to the spring of 1990 and indeed the fall of 1989.
I know that members of the government have said to people, "Well, this is the risk you took, it was a bad investment." But I would say to you that these people followed the laws of Ontario, and surely there has to be a recognition on this committee and a recognition by us as legislators that we of all people must believe that the government of Ontario is the government of Ontario, be it Conservative, Liberal, NDP; that people have to trust in us as government. I am afraid that there are going to be many people who no longer trust government because of the effects of this retroactivity.
Some of you may remember the small landlords who came to our committee, a number of whom broke down and cried, and, as Mr Brown was, I was also very deeply moved by what happened and I know members of the government were. I watched Mrs Harrington's face and several times I thought she was going to cry. I think we are all trying to grapple with that, people who were saying that they would be forced into bankruptcy, lose their life savings, their retirement money, and it was moving.
But I would also say to you that if you believe in tenant protection, you will think twice about this retroactivity.
I do not know if any of you have ever had a building in your riding where the landlord has gone bankrupt. I do. That building has been in receivership for several years, and it is nothing but headache after headache. We have had to intervene with the city of Toronto to get the heat turned back on, to get the hydro reinstated, we have had to intervene -- in fact right now we are intervening with the Ministry of Consumer and Commercial Relations to try to get elevator service restored. We have seniors in that building walking up and down flights of stairs, which they are ill equipped to do, because there is nobody to take control of the situation.
So yes, the bankruptcy is particularly going to affect the small landlords, but it is ultimately also going to affect the tenants, and that is something we also do not want to see.
I know the point has been made a number of times by the parliamentary assistant that all pieces of legislation, and rent review legislation in particular, have had elements of retroactivity, and that is obviously true. But there is a great deal of difference between retroactive legislation which has notice, retroactive legislation which grandfathers -- and for any who are unfamiliar with that phrase, it is one we use legislatively to talk about buffering people who were caught in the system prior to the legislative change to ensure that there is as little instability as possible and as few people as possible suffer from the legislation. That is what I see missing in this. I see both notice and grandfathering as missing elements.
We have had a number of tenant groups that have come before us and said that they think that the retroactivity is unfair. I received just the other day a copy of a petition by 56 tenants in Hamilton where they have signed the petition saying that this is unfair. Their landlord came to them, their landlord consulted, did the necessary repairs with their goodwill and their blessings, and they think it is unfair that their landlord is now facing bankruptcy.
We heard from the Bretton Place Tenants' Association, which actually held a press conference about some of the inequities they saw in Bill 4, including the retroactivity. Right before us we had the president of the Graydon Hall Tenants' Association, together with a group of tenant associations from North York, and when we asked the question, "Do you feel the retroactivity is unfair," they said, "Yes, this is unfair and we disagree with it totally." We had Martin Connell, who made a presentation on behalf of a tenant association which I believe was in the west end of Toronto. Again the question was put, "What about the retroactivity?" "Unfair."
So do not think that every tenant out there is going to believe your words when you say it was necessary. Many people, tenants or otherwise, feel that it goes beyond the bounds of decency and fairness and balance.
I would like to draw your attention to one other point. In the long-term consultation paper, one of the options for dealing with the transition period is to apply any new approach to capital work done before the new rent control act was in place, provided no other rent increase had been obtained for the work. When I talked to the minister he said this as a justification. This was a conversation we had several months ago in the House. I said, "What about these people who are going bankrupt?" And he said, "Well, we're seriously considering putting a new provision in the long-term solution where they could reapply as long as they had not received a rent increase for it, but they would have to reapply under the new rules."
But, I mean, bankrupt is bankrupt. These people are going to be put in a position, many of them, where they will go to their bank for refinancing and they are not going to get it. They have put up their homes as collateral. So what are you going to do, say to them afterwards, "Well, you've given up your home, you've lost your savings, you're bankrupt, you've put yourself in a position where the financial institution has come in and taken over the building; but it's okay, now we're going to allow you to apply"?
And what are the tenants going to feel? They are going to say, "You mean retroactively you're now going to say two years after the fact that you're going to allow them to apply for capital improvements they made in 1989 and 1990?"
I just have a lot of problem with this retroactivity, and I have been a tenant advocate for many years and I will continue to be so. I think you will find that many of the amendments I have fostered and put before the committee are in the tenant vein. But this one I do not see as good for the small landlords in particular. Many of the large ones will be able to weather it. They will not like it, they will lose money, but they will be able to survive. Many of the small landlords, I put to you, will not.
When we were in Ottawa, I had statistics from the housing authorities in Ottawa which showed that out of 41,000 landlords in their area, 39,500 of them were small landlords, so we are talking about a significant number of people who are going to be disastrously affected.
From the comments that the parliamentary assistant made earlier in this discussion today, I am led to believe that they are not reconsidering their position on this retroactivity. I am disturbed by it, because it puts me in the awkward position that at the end of the day we as a Liberal caucus will have to consider our support for this bill. And unlike the Conservatives, I do not have a problem with the principle, I do not even have a problem with the moratorium, but I think there have to be provisions such that the moratorium does not disastrously affect our housing stock, does not affect the stability of the market and does not affect tenants and landlords in an adverse way. So you are putting myself, I guess, in particular as a tenant advocate, but certainly the whole Liberal caucus, in the position of reconsidering our support for this bill on third reading.
We supported it because we believed that the bill could be made fair, it could be made reasonable and there could be adjustments and amendments made that we could all live with. The retroactivity is one of the three major parts of our amendments, and I hope that you as government members are not going to put us in that position that we have to make that decision, to deny support for this bill because of it.
I think everybody has a copy of the amendment which I have had tabled with the committee. I would suggest, since this is quite a substantial section of the bill and goes to the heart of the bill, that we would stand this down until tomorrow morning when the minister is here. I would like his comments on it, particularly relating to the rationale for choosing 1 October, particularly relating to suggestions in the long-term consultation paper as to how he eventually plans to remedy the situation, and perhaps to give him a chance to rethink this issue. I would hope that we could reach consensus on it. There will be no ideal solution and no ideal way --
The minister has just appeared.
Mr Tilson: Speak of the devil.
Ms Poole: In the spirit of conciliation, I will not echo Mr Tilson's comment. I certainly would never call the minister the devil -- maybe Minister of Slums and other equally nasty names, but not the devil.
Perhaps instead of standing down this matter, now that we have the minister here we can continue the discussion.
Mr Chair, would it be appropriate for perhaps just a two-minute recess to give the parliamentary assistant an opportunity to brief the minister so he can get settled?
The Acting Chair: Concurrence? I am sorry, Mr Mammoliti?
Mr Mammoliti: We are still going to get an opportunity to speak, are we not?
The Acting Chair: Yes, we are. Two-minute recess.
The committee recessed at 1606.
The Acting Chair: Seeing a quorum, I would like to call the committee back to order.
Members of the committee, at this time I would just like to welcome the minister, Mr Cooke, and move on. Mr Drainville, please.
Mr Drainville: Thank you, Mr Chair. I had a long response to the many speakers on the other side, who have said many things, but because the minister is here I will try to keep my comments in response brief
I would say in response, certainly in terms of the small landlords and the issue around retroactivity, that we as members of the government side have not been unmoved when we have seen many of the things that have been said and done here at the committee. It must also be stated at the same time, and with equal firmness, that much of what has been said by the opposition members as regards retroactivity presents a one-sided picture, and that picture is indeed that landlords will suffer, particularly small landlords. I must say that perhaps some small landlords will.
But there is a larger picture here, and it is a picture that needs to be not only alluded to but delineated very clearly, and that is that there is a greater good involved, and the greater good is that tenants will benefit. It is important to make the statement very clearly that if we were to take another date for this bill to start up from -- it has been suggested by some that 28 November would be an appropriate date -- if we were to do that, it would cause its own problems and there would be more tenants who would be hit with very significant increases. It is always a difficult job to find how to be able to be fair to all people in that tension, and at times, particularly in the establishment of legislation, there are some people who are not going to receive the full benefit of what we are doing. We hope that the majority will.
It also must be stated very clearly that in terms of the response of the members of the opposition, there were terms used that I must say are inflammatory to the discussion and this debate here at the committee; the word, for instance, "expropriation." This is not expropriation. To use that word is inflammatory. That is not what the government is intending in terms of this moratorium, and to use that word is just clearly not only unfair but inflammatory. Also, I will not even deign to comment on the "trained seals" portion of the comments.
On the issue that was raised on the unconstitutionality, again, I make the point that what we have done and what the ministry has done up to this point in time is to follow the procedures that the ministry is supposed to follow; that is, that the legislation is drafted, that it goes to the Attorney General's office, which ensures that the lawyers and those who craft the legislation have done the job that they are to do. To indicate that somehow the ministry has not done its job, that it is potentially unconstitutional, is conjecture on the part of those members. And they can conjecture all they want. The ministry has indicated it has done what it normally does in these situations, and of course we can question that, but I have to say as a member of the government that I want to affirm my support to the ministry staff in terms of ensuring that they have followed the procedures that are appropriate in this case.
So my last comment has, again, to do with the fact that Mr Turnbull, I believe, indicated in his remarks that it was some sort of heinous crime that a government would come to power and then set a bill that would be a retrospective, or "retroactive" is the word that was used. In fact, what we did was we went to the date 1 October and we chose that date -- indeed we could have chosen any possible date, but we chose that date -- because we felt it was appropriate. We came into power on that date, the ministers were sworn in to be ministers of the government on that date and it was an appropriate date to use.
I just want to put those remarks on the record, Mr Chairman.
Mr Mammoliti: I take particular offence to being called a trained seal.
Mr Brown: Honk, honk.
Mr Mammoliti: I think that Mr Drainville was being nice and trying to get around that. I take particular offence.
Ms Poole: On a point of order, Mr Chair: This is part of my agenda for being nice to George so that he is going to support my amendments. Remember that, George? I want to explain to you that this --
Mr Mammoliti: No, I do not, Dianne.
Ms Poole: -- comment has a history, that in the last Parliament the members of the NDP quite often were prone to making Flipper-type noises.
Hon Mr Cooke: Not Flipper; Flipper is a dolphin.
The Acting Chair: Maybe we can get on with it, Mrs Poole.
Ms Poole: This conversation has degenerated, but it has been done before, so no insult was intended other than comparing you to my Liberal colleagues of years past. It is called revenge.
Mr Mammoliti: I take offence to being compared to your Liberal colleagues then.
We will get away from this for a minute and we will talk about the retroactivity for a minute and how I agree with you that it should not be 1 October, that it should be perhaps 1 July 1990. I will tell you why. I represent the riding of Yorkview, and to be honest with you 1 October is not good enough for the people in Yorkview. There are going to be a lot of tenants who are still going to be hurt with this particular piece of legislation, and right now they are asking me, "Why can't it be 1 July and not 1 October?" So I just want to get the point across to you that even though I sit across here and I say 1 October, I certainly would like to protect the residents of Yorkview as well. Half of them, I would say at least half of them, are going to be affected as well. They are going to have to appeal if they have not appealed already, and I am going to give them moral support anyway. It is important to relay that to you, I think.
It is unfortunate, but people are going to be affected in Yorkview, my riding. The ones who are not going to be affected -- and we will go to go back to your thoughts -- on 1 October, they are happy. They are happy that they will not be kicked out of their units because of the previous Liberal legislation -- that is the way I like to refer to that, the previous Liberal legislation -- that is forcing thousands of people out of their units.
Mr Brown: Oh, you have got no numbers George, not one.
Mr Mammoliti: Yes, we have heard from --
Mr Brown: Not one.
The Acting Chair: Mr Brown. Go ahead, Mammoliti.
Mr Drainville: Mr Chair, on a point of order: Just awhile ago we sat through four speakers and said nothing and listened to those speakers. If the members here cannot be accorded the same --
The Acting Chair: Excuse me, Mr Drainville. I was bringing Mr Brown to order at the time. Go ahead, Mr Mammoliti.
Mr Mammoliti: I guess that is the seal in him, I do not know.
So we go back to what we have heard here. Yes, we have heard from landlords and, yes, a couple of them did break down and cry, but what the opposition seems to be neglecting to bring up is all of the tenants who have come in front of us. Representatives of these tenants, who represent thousands by the way, have come in front of us and said that they agree with the retroactivity and that if it were not for the retroactivity thousands of tenants would be forced out of their units. It is nice to talk about how many landlords have come in front of us and the couple who did start to cry, but please be fair and talk about the thousands of tenants who would be forced out of their units if it were not for the retroactivity.
So when my colleague Mr Drainville talked about the greater good, I think that is what he was referring to. Again, we are talking about thousands and thousands of tenants. It is important just to stress that the tenants of my riding are both going to be affected by and are going to enjoy 1 October as a retroactivity. It is my job as the MPP, I feel, to make them feel comfortable, give them the support that they need if they are appealing or if they are going to appeal any applications. I would strongly urge the opposition to do the same as well. Perhaps they should be giving some moral support to their constituents. Perhaps they should be attending appeal hearings for them and giving them that moral support instead of bashing a good piece of legislation that is going to be saving a lot more people than hurting.
The opposition also neglects to mention how many people have come in front of us and have talked about how if it were not for the retroactivity and how, if it were not for this piece of legislation, they would be out on the street, they would be in shelter homes, they would have to go to food banks. They have told us that. I have asked landlords that question on a number of occasions, landlords who have come to us and have said: "This piece of legislation is going to make me go broke. I'm going to be out of business." And I have asked, "Are you going to be forced to go to a food bank or a shelter home?" Nobody said, "Yes." Yet thousands of tenants are going to be forced into that predicament if it were not for this piece of legislation. I have asked that particular question on purpose for that reason. No landlords, not who have come in front of us anyway, have admitted that because of this legislation they are going to be going to a shelter or a food bank. Let's compare and let's see, let's determine how important this piece of legislation is and how fair it should be.
On that note I think I will close by just saying that I think it is only fair that the minister have a chance to say something in regard to this.
The Acting Chair: Minister, did you wish to comment at this time or should we --
Hon Mr Cooke: I will at the appropriate time.
The Acting Chair: Good. Mr Brown, please?
Mr Brown: I am totally almost amazed. The member has continued to spout statistics and to say things that we on this side have asked for from the Ministry of Housing over and over again. We have asked: "What is economic eviction? How many people are affected? What are we talking about? If this bill goes through as it stands, how many people will not face economic eviction who would have otherwise?" We do not know the answer to that. We have numbers like, "Thousands." Quite conceivably there are, but there is no evidence whatever that there are thousands, and what we have asked for is the evidence.
Mr Mammoliti, in talking about this, forgets that the average rent increase in Ontario last year was 5.8~o; that under rent review, where well under 20% of buildings or units went, they received rent increases of about 11%; and that there was a minuscule amount that had rent increases above that. And he may be right, but as we have pointed out over here on various occasions, 25% to 30% of tenants cannot afford any increase in rent -- zero, none -- whether this bill goes through or not.
We tend to mix up two issues. One is affordability and one is rent control. Rent control does not necessarily protect those who need it the most in this society.
We on this side are just amazed that the government cannot produce the kind of numbers to justify what it talks about. They talk about flips and how much impact that has had, with virtually no solid information about that, and yet that is the reason for this bill. They have talked about unnecessary renovations and they will not define them. They talk about economic eviction. They will not tell us what that is about. What is the definition of economic eviction and how many people are affected by it and how many people will benefit by this bill and will not be economically evicted if this bill goes through?
What we are left with is a lot of rhetoric, high-sounding, but at the end of the day what do tenants want?
I think tenants want better maintenance. We have heard that over and over and over in this committee, and this committee has asked over and over again of the tenants' groups that have been before us, "How does this help maintenance?" They do not think it will help maintenance. They do not think their buildings will be better maintained. We have asked: "How does this increase choice? Is there going to be more units available? Is a tenant going to be able to move to a different unit?" Again, nobody seems to have any answers about that.
The benefit of this bill is clear. It restricts cost: cost of the commodity, cost of housing, cost of people's homes. That is what it does, and that is all that it does. Affordability is not necessarily the same thing.
Ms Poole: Just to follow up on a few of the comments my colleague made, I am concerned when Mr Mammoliti -- and George, I will be very nice to you because I really do want your support -- talks about the thousands of tenants who will be forced out, because a concern that I have about some of the tenants in my riding who are facing economic eviction is, we are not talking about not being able to afford the increases, they cannot afford where they are.
If I had been Minister of Housing, the very first thing I would have done, within weeks of taking office, was to increase the number of in situ placements. It is an opportunity we would have to say that tenants, in the building in which they live, can receive a subsidy right in that building, so they can continue to live in the place where they have lived for 20 years, to stay with their friends and live in the building, where many other people are not subsidized, but at the same time they would have that kind of protection. That is the first thing I would have done.
I have a real problem with this because I do not think that this is a solution. On the surface, yes, you have said to tenants, "We're going to restrict the rent increases," and many tenants are very pleased by that. But the tenants you are talking about who are going to be forced to food banks are not going to be forced to food banks if Bill 4 does not come in. Those are the ones who are going to have to go food banks anyway because they cannot afford the rents they are paying now. So it is a much larger problem and Bill 4 is not going to solve it.
What would solve it, as a starting point, like I say, is not only the provision of non-profit housing, which I am sure the minister and his staff are working on right now, but also the very easy solution of increasing the in situ placements.
You cannot look at any one piece of legislation in isolation and you cannot look at any one piece of legislation as the be-all and end-all. It is not perfect, and as I commented some months ago, there is no way we will end with a piece of perfect legislation. What we are trying to do is to get something that (a) is effective, (b) is fair and (c) makes sure there is stability in the housing market. If it cannot meet those three criteria, then I think we have got a serious problem.
So when we are looking at the retroactivity, I think we have to look beyond what some of us have been saying on both sides. You have to look at the whole picture and what is going to be the impact on the housing market.
I am really disappointed that the ministry had almost three months since this legislation has been announced and yet we have not had one statistic that has been supplied by them about the rent applications that are currently at rent review, that will be caught by the moratorium and will not go through. We do not have one statistic to show what the average of those rent increases was. Surely if you are going to take a position that this moratorium retroactivity date of 1 October for rent increases was necessary you should have the statistics to back it up, and we have not seen any of that. We have seen broad statements like, "Thousands of tenants will be forced out." Well, I would like something more substantial, not only done on the practical side of saying, "Let's do something really meaningful for those tenants", but I would also like to see how grave the problem is. To me that has not been shown.
Mr Mammoliti: You should have told the tenants when they were in front of us that.
Ms Poole: What?
Mr Mammoliti: That that is what you would like to see. They are the ones I was referring to, the ones who were in front of us.
The Acting Chair: Mr Mammoliti. Go ahead, Ms Poole.
Ms Poole: I do not know if you have any further speakers on this.
The Acting Chair: I do.
Ms Poole: Okay, when you have completed the roster of speakers, I would like to introduce the amendment. So I will sustain the rest of my comments until then.
The Acting Chair: Thank you, Ms Poole. Mr Tilson, please.
Mr Tilson: Yes, a few remarks in response to some of the comments that have been made specifically by the New Democratic Party members of the committee.
We have just heard a statement that has been made today by Mr Drainville which, if that is where this government is going, whether it is on rent control or anything else, we are in for a long, long time: the. statement that greater is good, in other words, if numbers prevail. In other words, if you have got a piece of legislation that is going to favour a larger number of people to the detriment of a smaller number of people, then that is what you do, that is what you vote on.
In other words, the next thing we are going to hear is the New Democratic Party passing legislation against left-handed people. Of course, if you count up the left-handed people of the province of Ontario and the right-handed people of the province of Ontario, guess who is going to win. The right-handed people are going to win.
I think that is the mentality of the New Democratic Party, they are looking at numbers, they are looking at numbers of what they perceive is votes. In other words, as Mr Mahoney said the other day, I know it is scary --
Mr Turnbull: Do not quote him.
Ms Poole: Is this going to embarrass us?
Mr Tilson: No, no, I would not do that.
-- it is not the Agenda for People, it is an agenda for power, in other words, whatever it takes to get into power. That is what their statement is.
I think the ironic part is, dealing specifically with the retroactive clause that is before us, if this is passed it is going to have an unbelievable detrimental affect on the tenants of this province, the very people that the New Democratic Party is claiming it is going to be saving, because we have had landlords coming before us who are saying they are going to go bankrupt, that they are going bankrupt; and those who are not, they are going to struggle through. There are two types of landlords, of course. There are the smaller landlords, many of whom have said they are going to go bankrupt. The larger ones have implied that they will survive but it will be difficult and it will affect the overall operation of the building, it will affect the overall maintenance of the building. Testimony after testimony has been given to that effect.
So, Mr Drainville, greater is not good. Hopefully, you will look at the small landlord, the small landlord that may have two, three, four, six units, 20 units. There is the small landlord that you should be looking at. You should be looking at all of the people of the province of Ontario, not just a select group.
I think that is why the Progressive Conservative Party is opposing this legislation, because we would hope that legislation would be put forward that affects the overall economic aspect of the province of Ontario and this does the exact opposite, it creates a detriment.
Looking specifically at Bill 4, this legislation will not improve the terrible, terrible living standards that have been referred to by the New Democratic Party and referred to by members of this party. There are terrible, terrible situations that people all across the province, mainly in the city of Toronto but certainly outside the city of Toronto, are living under. It will not solve that -- in fact, quite the contrary.
We have had people come to us in these hearings who have stated that the quality of life will deteriorate under Bill 4 because of the retroactive aspect, because they will not have the money to pay the conditional orders that had been made, to pay for the orders that have been granted, and if they do not go bankrupt it is going to affect their overall maintaining of the building.
Will people who say that they will enjoy 1 October, the 1 October retroactive aspect -- in other words, at first glance, tenants will say, "Well, this is great, we are guaranteed things." But they forget that those small landlords who are going to go bankrupt not only will affect all the people surrounding those landlords, the families of those people, the people who work for those landlords, the people who have jobs with those landlords, but it will affect those very tenants.
I am simply amazed that George would refer to an earlier date, 1 July. I mean, that is pure negligence on his part, specifically after he has heard all these people coming and saying to us how it is going to affect them. The comment has been made that tenants are going to food banks and that if Bill 4 is not passed, all of these individuals, a large number of individuals, will be going to food banks. George, would you give me facts on that? What facts do you have to substantiate those. I hope that you will put George on the list and allow him to give facts to substantiate that allegation as to the numbers of tenants who will be going to food banks. He has asked the question, "How many landlords will be going to food banks?" We do not have those facts either, but we certainly have a large number of facts.
Because of the retroactive aspect of this bill, we have a large number of landlords who have stated in these hearings that they will be going bankrupt, that they will not even be landlords any more. The tenants will continue, but the landlords will cease to exist. I think that is the answer to his question as to where the landlords are going to go if Bill 4 is implemented. Nowhere has anyone ever stated what is fair rent, what is affordable rent; those statements have never been clarified by this government.
Since the minister has returned to the hearings, I would like to direct a question specifically to him that I asked his parliamentary assistant in his absence, and that is, that if he has not been watching on television, I am sure members of his government have relayed to him, and I am sure he may have read Hansard or had it reviewed with him, the many, many landlords and individuals who have come to this hearing and have stated that because of the rules that they have followed, and that have been broken by this government, they are going to go bankrupt. They say that they have followed the rules, they have followed the procedures that have been set up by the province of Ontario.
These people have had faith in the province of Ontario. Many of them have stated that they have been here for 20 years or more. Many of them have come from other countries, and they have come to Canada, and the province of Ontario specifically, because this is a democratic province, they understand the process, they understand that a law is a law is a law and that it cannot be changed in midstream and that they would be given notice of any change. Yet this government has taken upon itself to change the rules in midstream. That question has been asked over and over by landlords and by people who are affected by this retroactive legislation. Would you comment as to what the answer of this committee should be to those people?
Hon Mr Cooke: I appreciate the opportunity to respond. I might indicate to the Conservative critic that the choosing of a date in the legislation was extremely difficult. I am sure that it was just as difficult back a number of years ago when your government at the time was trying to choose a date for wage and price controls. The arguments, of course, at that time were that your government had retroactively ripped up thousands and thousands of collective agreements for ordinary workers in this province because it had come to the conclusion that there was a greater good, that there was a need to do this; supported, I might say, by the Liberal Party at the time. There were discussions about retroactivity in that particular case as well.
Ms Poole: Mr Chair, on a point of order: I would just like to clarify that the minister is speaking of the federal Conservative government.
Hon Mr Cooke: There was legislation at the provincial level. The province of the day decided to opt in legislatively, which it had to do, and it was supported by your party. I am just making the point. I disagreed at that particular time, but a date had to be chosen and the province at the time had decided to make a decision based on the greater good. That is exactly what they did and that legislation was eventually put into place. The choosing of the date for this legislation was extremely difficult. Any particular date that we chose would have had difficulties with it. The date that you are suggesting in your amendment offers some particular difficulties. It does not meet the suggestions that have been made by small landlords and by Fair Rental -- they have gone much further than that -- and even with the choosing of the date that you are suggesting in your amendment, thousands more units would be passed through the system. There are already under Bill 4, as you know, 130,000 units that will go through the old system, so that a little more than 10% of the rental housing market will go through the old system, even under our bill.
George is quite correct, we have heard from a considerable number of tenants across the province. I went to a tenants' meeting out in Scarborough a few weeks ago that was sponsored by all the MPPs, including Mr Curling and Mr Phillips, and that was one of the issues that was raised by the tenants. All the MPPs sponsored the meeting, that is what I am saying; I am not suggesting that Mr Curling or Mr Phillips made any comments about the date. In fact, Gerry's staff was there; he was unable to be there, but there were many --
Ms Poole: I would just clarify that Mr Curling and Mr Phillips, in response to that meeting, in fact raised an objection because notices of that meeting went out on NDP letterhead. I would not want you to imply that they helped organize it or participated, that Mr Phillips participated.
Hon Mr Cooke: Mr Phillips was unable to attend, but I am sorry -- I mean, this is not a big deal. Mr Curling was there and the constituency assistants for all the MPPs were there. It was a meeting that was co-operatively -- it was not a political meeting; it was a meeting to ask questions about Bill 4. Alvin was there and he spoke at the meeting, and in any case there were many tenants at that particular meeting who raised with me objections to the 1 October date. They were upset that the date was not more to their liking and covered more of the units in the Scarborough area because they were not getting covered by the protection of Bill 4. But again, a date had to be chosen, and no matter what date we chose, there would have been some concerns and some objections that were expressed.
I understand the concerns that landlords have expressed during the hearings on this bill. I understand that the same types of arguments were made concerning Bill 51, and there were many emotional presentations by landlords under the hearings for Bill 51 as well. I can certainly recall that there were also concerns expressed about the bill in the 1970s by the Davis government. In fact, I was quite interested on the day of hearings in my own town to note that a couple of the landlord groups that were making presentations, much to the liking of the members of the Conservative Party, when you were congratulating them for their presentation, they were not shy at saying to you: "Hey, this has been going on for 15 years. It was your party that brought in the first piece of rent regulation. We didn't like it back then and we don't like it now."
That is the nature of this issue. Rent regulation is not going to be supported by landlords and it is going to be embraced by tenants. Our party supports rent control. We have supported it for many, many years. Back in the 1970s we led the fight to bring in the first piece of rent control legislation. I do not apologize for that. It is something that I believe in very strongly.
I did not believe that the bill that was brought in in the 1970s was adequate; I do not believe that Bill 51 is adequate; I believe that we are moving in the direction of adequate legislation. That is a judgement we have to make. It is a judgement that I have made, and people will eventually decide whether we are right or whether we are wrong. But the date is very difficult, and to choose your date would mean that thousands of more units would be passed through the old system, and I cannot support that. You know I cannot support that, and if we allowed that, the effect would be that the moratorium would basically never take place.
What I have said, which I think is very important, is that in the consultation document we have indicated very clearly that we are prepared to have capital recognized in the permanent legislation. Obviously I understood that when the consultation document came out there were going to be some people who would view this as not paralleling the program for people, the promise that was made in the election, but I have come to the conclusion, and the government has come to the conclusion, that capital must be recognized.
Mr Tilson: Mr Chair.
The Acting Chair: On a point of order.
Mr Tilson: I think the minister has gone beyond -- he is now digressing into a speech and I think he has gone beyond --
Hon Mr Cooke: How do you digress into a speech?
Mr Tilson: -- the question that was asked. I am sure he will have his chance to give a speech, but I would like to ask him another question.
Hon Mr Cooke: Sure, go ahead.
Mr Tilson: I appreciate that you are dying to talk about this.
Mr Drainville: Just on a point of information, Mr Chair, are we ending at 5 o'clock this afternoon? I am just curious about this.
The Acting Chair: Yes, we are.
Mr Drainville: Okay. That is fine.
The Acting Chair: I would like to indicate that we do have four people on the list at the present time, so if we could have one more short question from you, Mr Tilson, and move on to our next --
Mr Tilson: Yes, I think it can be answered in that amount of time. The question is specifically on your last comment dealing with the number of people who would have gone through the system. In other words, if the date chosen was, say, the proposed amendment by the Liberal Party, if that in fact were the legislation that was passed, you indicated that you found it totally unacceptable to the thousands of people who would still go through the system under the old rules; but that gets back to the very first question asked, and that is, but those people were playing by the rules, those people were playing by the law of the province of Ontario, and do you think you have the right to change the rules in midstream? That is the question.
Hon Mr Cooke: And I indicated to you at the beginning that just as your party had made decisions and had, over its 42-year period in government, to bring in legislation that had a retroactive aspect to it -- and I referred specifically to the wage and price control legislation -- there has to be a judgement that is made of what the greater good is. And that judgement was made. I believe that we have not only the right but the responsibility to do that.
The Acting Chair: Thank you, Minister. Ladies and gentlemen, I am in the hands of the committee. It will be up to you people. I have four speakers left on the list. Do you wish to continue or do you wish to wrap up?
Mr Brown: Mr Chairman, I would move adjournment.
The Acting Chair: Okay. This committee is now adjourned until 7:30 this evening.
The committee recessed at 1658.
The committee resumed at 1937.
The Vice-Chair: This evening's business is to listen and discuss with Stuart Thom issues relating to rent control and rent review in general, and I guess particularly Bill 4. Mr Thom, welcome to the committee. We know of your expertise in this area and we are quite happy to have you with us thiS evening.
Mr Thom: Thank you, Mr Chairman. Thank you for asking me to come before you, ladies and gentlemen. As I have said to one or two of you, this is the first occasion since the report was released to the government in 1987 or released to the public in 1988 that I have had any opportunity or been invited to speak to a government emanation, a committee such as yourself or otherwise. I have in the intervening time had meetings with some landlord organizations, some party groups who thought they would be interested, but the governments of the day have not shown any particular interest.
Let me say right away, before I am misunderstood, when I speak of government I mean the general government of Ontario, because this scheme of rent regulation was introduced by a Conservative government, tightened up by a Liberal government in 1985 and is now being fine-tuned by an NDP government. There is no differentiation in my mind, so far as the overt actions of governments are concerned, between the attitudes of one successive government or another. So "government" is a general term as I use it this evening.
I have not got a prepared paper. I was not quite sure what was expected, and I thought if I got a prepared paper I would simply sit here and read and might not touch on the matters of interest to you. I will try not to take too long in my opening remarks. I look forward to any questions or comments you might have to offer later, and I will stay as long as you like or you can throw me out as soon as you are ready.
I would like to also make it clear that I hope I have a minimum of biases. None of us can avoid being biased in some respect to social and economic matters. You know something about my background. I have been a downtown lawyer, I come from the middle class and am reasonably prosperous, I can retire on a few savings and so on; but I was never a tenant except for a couple of years in Ottawa after the war, I am not a landlord and never have been. I do not have that personal direct experience except what I have gained in this activity in connection with rent regulation to understand the problems of landlords or tenants first hand as an operator in those fields. That may be a benefit, that may be a credit to me, I do not know. At least I say I try to minimize my biases as far as possible.
It is interesting that when the first volume of the report came out, it was received rather coolly by the landlords. They felt that I had given too much leeway to tenant criticisms of the then prevailing rent regulation system. That is simply my understanding of their reaction, but when we settled down -- and I am going to say we instead of I. First of all, this report was not the brainchild only of myself It was the result of many discussions with our consultants and others, so I am going to say we without naming other persons. There were many and they are very competent people.
When we entered into the second phase, to consider the future of rent regulation, for reasons which escaped me then and still escape me, the tenants were of the opinion that they could not expect from me -- I will have to say "me" here, I guess -- an unbiased attitude to their problems. I was sorry about that. I regret it still. It has never been made quite clear to me.
I think it was felt that there was some indication that I was wedded to the market as though it was the be-all and end-all and answer to your problems and questions. As I perhaps will say and make clear in a moment, I am of the opinion that the market is the basic mode of operation in this business, but as you will have seen from the recommendations which you have before you, it was recommended in volume II that there would be a rent control system that was even more stringent than the present system because there would be no cost pass-through. I say here that although I think the market has to be given full play in the operation of this industry, it has its faults -- you know them, I am not going to develop them -- and it has to be controlled in some measure, particularly in this industry.
As the minister points out in his discussion paper, rental housing is a home. It is more than just a downtown business or a corner grocery store or something where you go to earn your living and go home at night. It is the home of the tenants, and they have to be given a fair measure of protection. Now, what is fair is the point that of course agitates everybody involved in these problems, but you cannot overlook the fact that tenants make a home, usually, in the rental accommodation that is available to them, so you have to give a special consideration to the problems that face them as a result of the operations of the market, and the market, I think, as I have just said, has to be in some measure restrained or else its impact is unfair and excessively burdensome on tenants.
I would like to make another general comment. Landlord and tenant relationships almost by their nature tend to be adversarial -- not always so. I am sure in many instances -- and percentages and so on are hard to guess and I am not going to try any -- many relationships between a landlord and a tenant are friendly. The tenants like what the landlord does, the landlord likes what the tenant does and how they treat his or her building. But there is a basic sort of adversarial feature to the rent landlord and tenant relationship.
It is unfortunate that this rent regulation system in Ontario was launched on an adversarial basis, and by that I mean it was specifically denied, and still is, that the landlord and the tenant could negotiate the rents that should be paid and collected. I think that was unfortunate. It was one of the reasons, one of the underlying thinkings behind the act of 1975. It is still there.
In Quebec, if you have the opportunity to give further attention to their operation, it is possible to negotiate a rent relationship, a rental amount, and I think it has many virtues, because it does not then exacerbate what tends to be a difficult relationship.
It was brought home during the course of the commission hearings, unfortunately all too often, that tenants regarded landlords as fat, bloated capitalists and landlords regarded tenants too often -- I say too often; I am not trying statistics, but too often to be comfortable -- as careless, thoughtless people who had no thought for the fact they were living in somebody else's property, which is a fact, and it resulted in bad feelings which made it very difficult to bring about a relationship that led to good results. However, that is another factor that has to be considered.
The rental housing industry is a very big one, probably one of the biggest industries in the province. As the deputy minister said in her comments here last month, the annual rentals are $8 billion, which is a lot of money. I think she meant the total rentals including government and other types of buildings. I would say that to private landlords alone it is certainly well in excess of $5 billion or $6 billion. That is quite a sum of money. There are, as you have been already told, over a million rental housing units and we estimate about 100,000 landlords.
That brings in another feature which makes it difficult to regulate this industry -- very difficult. One of the chief reasons for the difficulty you are having in trying to devise appropriate rules and regulations is that landlords come in all sizes and shapes. There is the mom-and-pop operation. There is the single home owner who puts a couple of rental units in his house. That is very important to him. There is the smaller corporation that has perhaps two or three dozen or so units. Then there is the big monster corporation.
They all have one common factor -- now this is basically where the market comes into play -- that they have put into it -- and "they" now is this range of landlords -- a very substantial personal investment and they borrowed a lot of money, which they have to pay back. The mortgage companies have no qualms about collecting their money on the dot and according to the contract, and interest rates have been high, as you know. The landlords all have to meet a very substantial cost and they hope to get in return some return on their equity.
To understand return on equity is a matter I am not going to go into this evening. The economic theory and principles of rental housing are complicated. To understand what you are trying to do and handle this difficult social problem, you might think it is worth having an economist come to you and describe and discuss with you the economics of rental housing as the market operates. Not very many people understand it fully. I certainly did not, and I am not even sure I fully comprehend it.
But certainly landlords as a class expect to get some return on their investment or on their equity, whichever way you put it. If they do not get that return, they are going to put their money somewhere else and go somewhere else to invest their funds.
Now, what the amount of that equity should be and return should be, how to determine their equity and how you arrive at the return they are expected to get, is itself a very complicated situation, as you will have seen in the report, volume II. There is a very serious effort made to discuss the determination of return on equity and how it can be arrived at. I am not going to bring it up tonight. It is there to be read if you want to pursue the matter further.
But it is one of the basic factors of rental housing that, if you want private money in rental housing, you have to some time or other give landlords, investors -- call them investors rather than landlords at the moment -- a feeling they are going to get a fair return.
It is evident that they do not think today that they are getting a fair return. I am not going to repeat some of the evidence that has been given to you by such persons as Julius Melnitzer and Jonathan Krehm, just to name two of the people who appeared before you last month. The landlord community does not think it is getting a fair return on its investment, which is very substantial. You have got to have a very large capital investment to get a $5-million gross income per annum; up in the billions. And if you do not have that attitude of mind, that feeling of comfort on the part of the landlords, they are not going to stay in the industry.
That raises one of your big problems. Who is going to finance the costs of building, renewing, maintaining the rental units which are necessary to house the rental population of Ontario? It is an extraordinarily large sum of money. Now I am going to perhaps step outside the range of my proper interests: This province, this country, has not got that money just to throw at rental housing without the support and input of private landlords.
If you want to make rental housing a public utility, go ahead. Make it a public utility like Hydro. It will cost billions and billions of dollars. I simply do not think it can be done. I express now a personal opinion, but I think it is a fair one, that it is vitally important to the financial welfare of this province, let alone the welfare of the housing industry, that there be a very substantial input of private funds.
I now make the point without appearing, I hope, to be biased in favour of landlords: The prevailing system of rent regulation since 1975 has been progressively to discourage continuing new investment of private funds and maintaining the current investment of private funds. That is a very serious question in my mind, and although you may feel great sympathy for tenants and the problems they have, which I will mention in a moment, it seems to me most important that if this province is to financially maintain its rating -- what is it, double A now; it was triple A, I believe -- and not have to borrow great sums of money to keep rental housing available, the private money is imperative.
You have heard landlords on the subject already, so I am not going to develop their points. I simply say, I hope without displaying a bias, that that is one of the basic features of the problem before you, that private money is essential. If private money is going to stay in and come in in the amounts required, it has to have some expectation of return.
Turning to the tenants, they are a very varied group also. They could be categorized according to their economic position. About a third of the tenant households in Ontario are poor. That is not the word that is very popular -- you can use "economically disadvantaged" -- but they are poor. They cannot afford from their own resources, incomes, whatever they have, jobs, the rents required to pay economic rents to private landlords. That is one of the facts of life. It has been a fact of life, is, and will continue to be until there is some other way of organizing the economic community in which we live.
I am not going to get into the efforts that have been made in some other parts of the world to reform the capitalist system, whatever you want to call it, but so long as you maintain our present system of business, of economic system, there are going to be, regrettably, unfortunately, quite a lot of tenant households that cannot pay economic rents. I estimate about a third. It is quite a few -- a lot of people.
At the other end of the scale -- oh, say, 10%. These figures are not established anywhere, but they are a fair estimate. You can have different thoughts. You can go up or down a few percentage points either way. About 10% of the tenant population are quite well-to-do. They want to rent because, well, they are older people who do not want to have the bother and hassle of a house. They are what they call empty-nesters, or were. They would rather be able to travel and go off to Florida in the winter. They just like renting. They do not want the bother of looking after a house. Rent is no problem to them. They can pay rents of $1,500, $2,000 a month; it is perhaps 10%, 12% of their income. Fine.
I do not know why they were ever brought under the rent regulation system. That point was one of the pressure points in the mid-1980s when the Peterson government expanded rent regulation to include all tenants. I tell you quite frankly, it has never been clear to me why tenants who can afford to pay economic rents with no problem should have the protection of rent control.
I can give you what I believe was the thinking on the part of some tenants' spokesmen. I think they were misguided. They did not come before us in the second session to explain their thinking, some feeling that unless the totality of the rent regulation system was applied to all tenants, rich and poor, in some way the landlords would have some kind of an unfair advantage. I do not quite know what it is. I cannot explain it to you. I think it was a mistake to exclude the rich, the well-to-do -- to exempt them, I should say, from rent control. However, that is something you might give serious thought to, and whether or not it would rejuvenate some part of the input of private money into the industry is a nice question for you to consider.
However, that incidentally brings up, in passing, a principle which was raised and discussed but never fully illuminated in the course of evidence put to the commission, which is that of dribbling down, that if there was an adequate input of new accommodation, over a period of time it would become old accommodation, would command lesser rents and be available for the less economically advantaged; that is, middle-income and poorer parts of the population. It is quite a theory. It is strongly held by some people, that you put in good accommodation at the top and eventually, after several years -- it takes time -- it will be available as cheaper accommodation for those who have not got the money to pay for the better. I just make that in passing. There is nothing going into the top these days of any substance, so there is nothing passing down below. It is a theory which was not well developed in its full impact, it may not be too sound, but it has got something to think about.
However, continuing with the tenant population, in the middle something more than 50% of the tenant population are tenants frequently because they cannot afford to buy a house, often because they are just moving into the world, they have left home, the young people have left home and they want to live by themselves, they are people whose jobs take them here, there and so on, they are movers, they do not want to tie themselves into a house, and all kinds of reasons for being a tenant.
But the category I am discussing is those who can afford to pay reasonable economic rents. Now, what is a reasonable economic rent at the moment? I do not know. Your deputy minister told you that it was average rent somewhere in the range of $500 to $600 a month. I think that an economic rent at today's level is not going to get you much of a rental housing. That is just the average rent that is being paid, which is another question I will come to.
To provide adequate housing that is decent and livable, I think, is going to command a good deal more than $500 if it was available. But there is a large part of the rental population that can pay those rents. They are the ones who benefit from rent control as it now prevails, and it is not too sure to me that they do not -- it seems possible that they are benefiting unduly at the expense of landlords. We are back to this question of return on equity and return on investment. That problem agitated the commission, the inquiry, and consultants. It was the general feeling that rent regulation had reduced the overall rent intake by 10% to 25%, which is quite a lot of money that landlords do not get, and as a consequence they do not get their return on investment and so on and so on.
Whether the levels of rent increases are such that the middle range of tenants benefit at the expense of landlords is a question I have not an answer to. The landlords think it is so; the tenants feel that it is not so. I put myself in the position of a tenant. If the system is such that you can pay less rent than you could afford to pay, well, dandy, let's live on that basis. And this is not to impugn the morals or the fairness or the social responsibility of that group of tenants; it is simply that reducing rents has benefited a great number of tenants, I think, to a degree that is not fair to landlords.
That is a very difficult thing to answer and deal with. It is simply an impression held very strongly by landlords, of course, and I think possibly supported if you take a somewhat dispassionate view of the whole industry. Those are the tenant situations. It is very difficult to devise a rent control scheme that is adjusted to those ranges of tenants -- the poor, the middle-income and the rich. Yet we have one rent control scheme that goes across the whole board, and I tell you quite frankly, I do not think it is working. I think you know it is not working.
The deputy minister, who gave you evidence last month, drew your attention to the situation that prevails with regard to the rent review system. It has become an extraordinarily complicated legislative provision, and that is the consequence of landlords who`think that they just cannot live with the controlled rent levels they have to otherwise enjoy. You now have a bureaucracy. I do not know how many people are involved. I know what it is costing the government, about $40 million? Has somebody got a current figure? When the inquiry finished, it was $7 million; 10 years ago it was $2 million or $3 million.
The rent review legislation, and I speak as a person who at one time was involved in income tax, is one of the most complicated and difficult pieces of legislation and regulation that you can well expect. You have heard that from tenants and you have heard that from landlords. I do not think any regulatory system that has got itself in that condition can be considered to be a good system, and the minister, in his discussion paper, very properly points out that he is going to make an effort to devise in some way a regulatory system that will be simpler.
Here I again become very personal: I think he is going to fail. I do not think that as long as you try to impose a cost-pass-through system you are going to get anything but more and more complicated legislation for the very reason that landlords who think they have to get more rents than they would otherwise get under the controlled levels are going to think of ways for increasing the benefits they want to get and think they have to get.
It is just human nature. It is going to be what happens. It is like the income tax, which is now an enormously complicated statute because people seek to get the advantages, the benefits, the concessions from their payment of income tax. It is one of the features of control or, in this case, in the case of income tax, of a tax levy. Your regulatory system is going to become increasingly complicated. I do not need to produce witnesses in that regard; it has become increasingly complicated. Some of you may had the opportunity to look at the volume of regulations in the statute. It is an unhappy situation. It makes everybody in the industry unhappy. It results in a very large bureaucracy of very well-intentioned, hardworking, intelligent people who might much better be employed perhaps in some other form of activity.
Let me turn now perhaps to the scheme of rent regulation which you now have and go back in history. By the way, how much time have I got, Mr Chairman?
The Vice-Chair: Well, Mr Thom, we have allowed you an hour and I would think you now have about 35 minutes.
Mr Thom: Oh, all right. I will go on for a while.
The Vice-Chair: I am sure though, sir, the members would like to ask you some questions.
Mr Thom: I want to go back to the history of your statute -- of the statute, not your statute necessarily. It is rather gossipy but it is kind of relevant. Some of you perhaps do not recall 1975, the 1970s. Without going any earlier than 1975, inflation was running out of control -- 10%, 12%, 15%. That was the year that Mr Trudeau first of all dumped on Mr Stanfield and then turned around and brought in the Anti-Inflation Board and imposed rent control.
The federal government said to the provinces, "Look, our inflation control isn't going to work unless you control rents among other things," and under that pressure and under pressure from tenants who were feeling the heat and problems of inflation the government of the day went to the people with a promise that it would impose some form of rent regulation.
The pressure on the government of the day was accentuated by a very astute political leader -- and I am not going go in for names, but some of you may know of him -- who discovered gouging. Like these excessive rent increases which you heard a good deal about in your deliberation so far, gouging was a bad thing, very large rent increases. Gouging took the public fancy and the government of the day said, "We'll promise rent regulation." And they were returned, I think with a minority at that time -- am I right -- and they were held to their promise, I think perhaps more than they expected would happen, but nevertheless they were. They had to cooper up a rent regulation system. They laid on a ceiling on rent increases, 8% at that time, but they were under pressure from landlords and I may say I imagine to two thirds of the then cabinet rent regulation was a bad thing.
So to ease that pressure, they brought in cost passthrough. Cost pass-through, and I do not need to describe it to you, is to take care of those landlords whose costs exceeded the ceiling and to make their economic position viable they had to get more than the ceiling rent. Cost pass-through, I think, was intended as a temporary device until that happy day when the government of that day thought that it could get rid of rent regulation.
In fact, you may recall the original bill had a curfew -- what is the word I want -- to expire in two years. It ran on a bit, but the idea was to get rid of it. Anyway, cost passthrough was a safety valve, a blow-off valve. It was intended to make the landlords happy. When I say politicians, do not misunderstand me. I have got a very high regard for politicians because you have a very difficult job and you have got to answer to a lot of constituencies, pressures from all sides.
This system, which was devised, I think, quite out of the blue and in a great hurry in 1975, was meant to satisfy two sides of very strong constituencies, the landlords and the tenants, and you got cost-pass-through rent control. The history of course was that you never got rid of it -- "you" being the government of the day -- never got rid of rent control. The cost pass-through became looked upon almost as inherent in rent regulation and all that has happened is, as I have already mentioned in some general way, the complexities of cost pass-through have almost taken control of the whole system, in an effort to be fair to tenants and landlords and make sure that the cost passthrough did not exceed what would be considered reasonable.
Now I am going to make another general statement: I do not think that the wit of man as now displayed by economists, politicians, bureaucrats -- I am using those words in a strictly neutral and favourable sense -- can devise a system that can take the place of the market. The market has to be controlled, but the market looks after these other factors of our landlords getting too much, our tenants paying a fair rent and so on. It seems to me to be evident from the complexities of the present system that the effort to impose, by increasingly complicated regulation, what the market used to do clumsily, crudely, harshly perhaps and all those things, is just not going to work. If you will permit me, I think perhaps that is what we have seen happen in eastern Europe. Some kinds of controls over economic life just are too much for the wit of man to devise.
Now, I do not want to be thought negative, and maybe there are people who can devise a regulatory system that will do all those good things, but what has happened is that, step by step, your control of the rental housing market has become more intrusive, more complicated, more elaborate, more expensive. It is still unsatisfactory. That is the point. The minister makes that point again in his discussion paper. It is not getting anywhere, unfortunately.
You have the rental housing protection system -- I forget the name of the act -- the one that says landlords cannot get rid of their buildings, cannot just turn them into some other kind of income form, the one that says they have got to maintain their building up to a certain standard of acceptability to the tenants. Each of these is a further step to compensate for the fact that landlords say: "We're not getting enough money. We can't do these things." And these are, many of them, sincere, honest people who just think they cannot do it.
When I say that, I am not blowing any horns for landlords. I hope not. I am not intending to. The facts speak for themselves. You have had to introduce these restrictive controls, these further boards and committees to make landlords do what they say they cannot do because they have not got the money, and which they used to do in order to keep their tenants. The market saw that if you did not keep your building up, a tenant would go down the street and get another building.
Which brings me, of course, to the very important point of what has rent control done for tenants apart from reducing the amount of rent they have to pay in total. A good thing perhaps. It is nice that they do not have to pay so much rent, I am sure. They can spend it on something else, and we all like to spend money on something else if we have it, but what has happened to their housing milieu is there is no vacancy rate. That is another topic I might touch on before I run out of time. It used to be that if a tenant was not getting the kind of service, was not living at the kind of building he thought he should have for the rent he was paying, he could go down the street and there would be a vacancy available where he could make a deal with the landlord and get better accommodation.
The absence of the vacancy rate, and that was brought home to you by the deputy minister last month, has been a very severe detriment to tenants. On top of which they have suffered loss of services and poorer accommodation. Mind you, they pay less rent but they have not had compensating benefits. In fact, it is a nice question that I have got no answer to, where the balance lies, whether they really benefited, in net, by rent regulation. I am not talking about that middle range of tenants who cannot afford the high rents.
By the way, there are lots of vacancies in the high rental market. They get lots of looked after; the landlords are begging them to rent. Just as I diverge a moment, condominiums are a dime a dozen on the market these days. If you can afford to pay $1,500 or $2,000 a month for rent, you have no problem with finding good accommodation and landlords anxious to do things for you. It is the middle-range tenants again who are suffering because there are no vacancies in their particular range of rental level, and nothing is being provided by way of new accommodation.
The rent system therefore is just running into deeper and deeper trouble, and if I sound a bit extreme, the minister himself recognizes that and says, "I'm going to do my best to cure it." And with great respect to him and those who advised him, I don't think he is going to do it by intensifying the rigours of rent regulation and the cost-pass-through system. That is an opinion that I express personally. It is not held by some people. All I can say is that when you look over the last 15 years, getting on to 16 now, and see nothing but increasing rigour, increasing control, more intrusive controls, more expenditure, less benefit except lesser rents for some people, more government money required to provide what the private money did not provide, I think you perhaps should recognize -- and that is for you to decide of course; I am just making some personal thoughts -- that perhaps some other way of controlling the market should be thought about and tried.
Back to my point, before I go on to other ways, the market, I think, as I have said, requires in some degree to be controlled. It is slow. It is harsh. It is hard on some people, particularly as it is slow in many respects and does not quickly, and as we now expect should be, respond to tenants' problems the way it should. It also, by the way, is sometimes very hard on landlords. Back in the early 1970s there had been heavy overbuilding. Landlords were in the middle 1970s seeking to find tenants to occupy properties which were in overabundance. However, that is history; never mind about that.
With these situations facing it, the commission inquiring back in 1983 and 1984, when we tried to grapple with this situation -- and really it has not changed in essence except I think become more of a problem, if anything -- tried to think of some way that would control the market, provide tenants with the protection they are entitled to have and at the same time afford landlords a reasonable chance of getting the return on equity. In that way we keep private money in the industry and attract new money to maintain, preserve and increase the availability of rental accommodation, which led to the inquiry's own concept of rent regulation.
At this point, I think it was perhaps a good idea. To my knowledge, it has never been publicly taken apart, dissected, maybe shown to be nonsense, by any responsible economist or other government body. It simply is there. It is still there.
You would think I am trying to sell you something. I am. I think this is a possible alternative to a rent regulation system which, as I have said, I think is just getting deeper and deeper into trouble.
A rent regulation system proposed by the inquiry had two aspects, first of all to control what was considered to be a major problem, that landlords were making too much money, that the industry was charging as an industry too high rents, and proposed there should be a ceiling on rent increases. A ceiling would be such as to provide the landlord industry -- not specific landlords, the landlord industry -- with a fair rent. All that is discussed at length in the report and it is a complicated matter and I am not going to go into it in detail here. But a fair rent is one that would give the industry a fair return on investment, and in that regard a leaf was taken out of the book of other regulated industries, in which there are boards which seek to devise what should be a fair return on the investment in that industry and how to determine what charges should be made in order to ensure a fair return to those who put their money into the industry.
I am not an economist. I have even yet problems in explaining it and defining it. It is in the inquiry. People who I thought were competent in these lines of activity gave evidence that led the inquiry to believe that you could devise a system of rent control whereby a rent increase ceiling would be put at such a level that the landlord industry would get a fair return on its investment. The industry was treated as a total industry.
That brings me to a point that I think is of considerable importance. The effort to deal with individual landlords and treat each of them as a separate problem to see whether that landlord gets a fair return is where your problem lies. Landlords have different histories, the buildings have different histories, they were built at different times, the mortgage is different, the capacities of land owners are different. You have to treat the whole industry as the subject of your concern, and does it get a fair return.
Finally, my one point, Mr Chairman -- you are about to give me the hammer, the gavel -- is that the second aspect of the inquiry's rent regulation proposal is that you have got to get rents back into some level of equality among like rental units. At the present time, as you have been told, rents for similar and like units are all over the place and the inquiry recommended that there be a study made of the whole industry, so far as it wanted to expose itself to it, so that like units in the same building or in the same area or the same city would pay like rents and start them off -- equalization in other words, which I may say is a no-no to tenants but I think, considering the present irregular levels of rents paid by the tenant population, is a necessity in order to be fair for the tenants.
You start, then, with a fair basis of equality of rents in relation to the type and nature of the accommodation and impose a rent ceiling which will assure the landlord industry of a fair return and those who are good landlords will survive and, like any other activity in the market, those that will not will have trouble. It will not be the business of the government, it will be the market that will then come into play, provided that the industry is assured it can get a fair return.
That is just stating things in generalities. I think I have given you the substance of my feelings about the matter. Have I used up my time, Mr Chairman?
The Vice-Chair: Well, Mr Thom, I was thinking that the members would like the opportunity to maybe focus the discussion on things of interest to them. You have raised a number of issues, so perhaps we could further explore it through the questions of the members.
Mr Thom: I think I have run through my points.
Ms Poole: Welcome to our committee, Mr Thom.
Mr Thom: Thank you, Ms Poole.
Ms Poole: I very much appreciated your comments this evening and your very commonsense approach to this very difficult issue. At the end of your remarks you have suggested a ceiling on the industry where rents would be capped but would allow landlords a fair rate of return, and I assume by that, landlords would then best determine how to run their buildings within this --
Mr Thom: They would be quite free to run their own buildings, yes. They would have to stay within the limit, that is all.
Ms Poole: One question I would have for you, if we were to change our system to this concept, how would you recommend that we take care of that one-third portion of the tenants that you referred to who are disadvantaged, or poor, and simply could not afford to pay any type of increase of that magnitude? Do you have any specific ideas of how you would deal with this?
Mr Thom: Yes, I have. I think that is where government has to play its positive parts. You have to provide some sort of a housing or welfare allowance for that part of the tenant population that cannot pay economic rents. Whether you are spending a great deal of money on rental housing, I think you have to actually give the tenant population the money required to pay the rent.
Ms Poole: So what you would be proposing would be that a certain proportion of a landlord's units would be set aside for those who would need government subsidy?
Mr Thom: Possibly in a transition period that might be so, but in the end result the hope would be that that would not be required, that there would be available housing from the industry, from the private side of the industry, for those lower-income tenants who, with the assistance of welfare or rental housing allowances, could afford to pay the economic rents.
Let me just add that is a very contentious issue and when I make that proposal I know that it has been argued back and forth and I know further that it is anathema to the tenants, for the simple reason that they think it is putting money in the hands of landlords.
I have answered your question, I hope.
Ms Poole: Yes.
The Vice-Chair: I will go to Mr Tilson. I think we will just go one question at a time around and that will be the fairest way to proceed.
Mr Tilson: Mr Thom, I must confess, watching you give your report without notes on two volumes is interesting, and it is interesting, the fact that you were first asked to look into this subject of residential tenancies in 1982 and Bill 51, of course, was released prior to the release of your second volume, and of course at a cumulative cost, at least in 1987, as I understand it, of over $3 million. It is astounding that this is the first time that you have come to a government committee to give your comments. However, here you are and I certainly appreciate someone of your stature coming to enlighten us.
When your second report was brought to the government, it was the Minister of Housing of the day who immediately rejected your report, pointing out the initial implementation cost of $300 million. At least that is what I understand from looking at previous press stories as to why the government did not proceed. Do you have any thoughts on that now?
Mr Thom: No, I have not. It was admitted in the report that there would be a transition period during which government would continue to have to provide housing, by subsidized housing and by housing allowances, to look after the fact that there was not available accommodation and that some people could not pay the rents. How much that would be, the minister gave your estimate. How long the transition would be, I do not know. I have to admit that it would be somewhat of an act of faith to switch horses, shall I say, and move to another form of rent regulation. How much it would cost -- maybe the minister was right.
Mr Tilson: One of the thoughts that has come up of course is the issue of subsidies, which you have alluded to with Ms Poole, and that is a remark that has come to us over and over again, specifically from tenants' groups, and indeed from members of the government, saying that tenants will simply say, "Well, with respect to subsidies, we'll simply touch the money as it passes on its way to the landlords and it's not really going to help us at all." That has been a criticism, of course, of the thought of subsidies. Do you have any thoughts on that?
Mr Thom: The answer might be that you would hope the landlord would put some money into rental housing, and what the balance between government input to that third who cannot pay economic rents would be as compared to the investments you would hope to get from landlords who are getting an economic rent and were reinvesting in the industry I do not know. One would hope that it would be a fair balance. There is certainly going to be a cost to government, no matter what sort of system you have or none at all, to provide support for the third of the tenant population.
The Vice-Chair: Mr Tilson, I think we will go over to Mrs Harrington and we will come back around.
Ms Harrington: I would like to thank you very much for coming. I also have a little note here from our caucus to let you know that one of our members, Dennis Drainville, at this moment is chairing our caucus meeting, which unfortunately always happens Tuesday night at 7 o'clock, and also our other member, Noel Duignan, is at 8 o'clock making a presentation to caucus which had been arranged some time before, so we apologize for not being here in full force.
Mr Thom: I am just happy enough to be here.
Ms Harrington: Thank you. I did go over and underline all kinds of things last night in my bedtime reading here. My first question actually was very similar to what I think Mr Tilson asked, and that was, when your report was released, the second volume, in 1987, I was wondering if you could speculate on why it was not acted upon.
Mr Thom: I have no personal direct knowledge because I had no communication with either a minister of government or a member of the ministry. As has been mentioned, the government had introduced its own rent regulation act in the late fall of -- when was it?
Ms Harrington: In 1986.
Mr Thom: In 1986, and was committed to a continuation of the cost pass-through system and -- I can understand it, perhaps, in a way -- was not prepared, having taken that step, to switch horses simply on the strength of this report.
Ms Harrington: Just to clarify a little bit, if that was the case, I am wondering, who commissioned you to do this? It was the same government? Does it go way back, in 1982?
Ms Poole: The Tories did.
Ms Harrington: But the second volume then was commissioned by the same minister?
Mr Thom: I have to go back a little bit. You may remember November of 1982 was the time of the great Greymac-Kilderkin scam with Rosenberg and Player and Markle and the government was faced with the situation resulting from their activities.
Ms Harrington: I see.
Mr Thom: I say this now with great respect to Mr Elgie, who is a very excellent gentlemen, but also, there is nothing like a commission to take the public's mind off difficult problems.
Ms Harrington: Just one quick question. In your report --
Mr Thom: I have not finished. When the commission brought in its first volume we made some useful things, and while we were deliberating on what to do in the future the government of that day brought in its own bill, as has just been said, and I guess they just did not want to reverse course.
I really wondered at the time why they let me go ahead. Now, you will have to ask some of the ministers of the government of that day, because I have never had an answer. I never asked. I was quite happy to struggle ahead. I was never told, but anyway they let me finish and we brought in a report, a dandy report.
Is that the answer to your question?
The Vice-Chair: If the Chair might be permitted a question, I am interested in your theories but I have some difficulty in believing that the investment community would come back to this industry in a way that might be meaningful, given the highly political nature of this industry and of the issues, how they might, whatever regime was put in place, believe that that regime would be in place long enough for their investment decisions to be secure.
Mr Thom: Do you expect me to answer that, sir?
The Vice-Chair: I am just wondering if you might speculate a little bit on it. It has troubled me that, from my perspective, investment might ever return to this industry, given the fact that governments are wont to change their mind and electorates are wont to change governments.
Mr Thom: It is a speculation that has troubled many people and one that has to attract considerable support. I can only think that if it is imperative to get private money back in, the system has to change to give expectation of fair return with less hassle than cost pass-through, and that is the hope. It is just a hope; I do not know. I would have hoped it would be the case.
The Vice-Chair: Thank you. Mrs Poole?
Ms Poole: Thank you. I am glad you divorced yourself from my caucus. I thought you were taking my question time there for a moment.
The Vice-Chair: Once in a while I should have a prerogative up here.
Ms Poole: Mr Thom, you are very familiar with these issues, you spent five years of your life studying them, and I assume that you have also had a pretty good working knowledge of what is happening with Bill 4, the current interim rent control legislation.
There is, as you know, a retroactive provision in Bill 4 that is giving a number of us on the committee a great deal of difficulty, and maybe more so for people like me who have been supporting tenants for many years but just find the retroactivity unfair.
In your study of the previous items of legislation, did you take a look at the effect of retroactivity, whether there was notice given in most cases of the rent review changes, what the impact would be of the retroactivity in this particular bill, which is really affecting capital repairs that may well have been done in the spring of 1990 or even back to 1989, and also the phase-in orders that this bill proposes to void? Have you any comments on that or what the possible effect on the trust in the housing industry might be?
Mr Thom: Well, I think no one would advocate retroactive legislation as a general policy. I think we all feel that retroactive legislation is unfortunate. It is, however, not new in rent regulation. The 1975 act, which was passed in late 1975, was related back to 1 July of that year. The 1985 act was retroactive. Degrees of retroactivity and of the impact on the landlord population may differ, but it is not a new thing and perhaps it should not surprise anybody that it has been resorted to again, for reasons which no doubt seem valid to those who devise government policy.
Ms Poole: I agree with you there is always some element of retroactivity, you just cannot get away from it in legislation, but I suppose what I have the greatest difficulty with is that there was no notice. It is not a matter of introducing the bill and then once people see what is in the bill they have noticed that things are going to change and even though the legislation has not passed they have had notice that things are going to change.
In Bill 4 there was not notice and in fact people who expended money under the rules of the law of the land at the time were then told after the fact that: "Well, yes, you may have spent $2~ repairing your property and, yes, the tenants may well have been happy with those repairs, but that's irrelevant. The fact of the matter is that we've changed the rules and it is going to affect you, and that's too bad." There is no grandfathering and there was no notice, and I just feel that this is somewhat more unusual than most retroactive aspects in that regard.
Mr Thom: I do not think that it is in order for me to express personal opinions on the policy of the present government in this regard. You have had landlords fulminating before you, outraged and so on. I am not going to repeat them, you have heard it all.
Speaking simply as a citizen, I think, as I said, retroactive legislation is unfortunate, and when it has a severe effect on some people it is doubly unfortunate, of course. That is not something that requires much thinking on the part of the person who makes the comment. But as to whether this government of the day felt that the circumstances were so severe that they had to be retroactive, I do not know. I have not analysed or thought about the problems that they had and the problems they were coping with. If I repeat what landlords have told you, I think I would be stepping out of the function which I am attempting to serve here.
Mr Tilson: Mr Thom, the subject that you have talked about with respect to landlords receiving a fair return, I was interested in your comparison, of course, of housing as a public utility and your comment that it simply cannot be done. I agree with that. I do not think the taxpayer can even dream of pulling that one off, although that seems to be the philosophy of the New Democratic Party.
If the Homes Now program, the non-profit housing unit or something similar to that, in other words, government operated-type operations, continue to increase, which appears to be the philosophy of this government, in other words, that the private sector may be less dominant than it is, you have commented on that, but if the government is going in the direction that has been suggested, what do you think will happen?
Mr Thom: I hate to put myself on record as to what I think might happen because it is rather a defeatist kind of impression, over which I could go off the record.
I will be foolish. I think that the situation is going to become increasingly difficult until eventually it will be recognized that cost pass-through and all its complications have to be somehow done away with. Now, how bad things have to get before you get to that point I do not know, but my own personal opinion is that it has got nowhere to go except down. That is a very personal opinion and you can discount it all you please, but I hope it is not regarded as being hostile to the tenants, because I think their position is going to continue to suffer as well until the situation is cured.
The Vice-Chair: Mrs Harrington, you have the honour of the last question.
Ms Harrington: Thank you, Mr Chair. In your conclusions and recommendations that we looked at, recommendation 6 said, "That the rate of return on initial capital investment be the landlord's cost of capital." What I wanted to get at, and I think you have answered it here but I just wanted to verify that I understand it, is that we want landlords in this province, we want private landlords who make a fair profit and who I hope are reputable and deal with their tenants in a good manner.
What would you say should be a fair return? I think what I am reading here is that it would be the cost of capital? Is that what you are saying? What would be a fair return?
Mr Thom: I can give you a figure which was put to the commission, somewhere between 15% and 20%. If you start with the most secure kind of investment, a Canada Savings Bond, you are getting about 10% or 11%. The rental housing industry is one that has its ups and downs with the general economic condition of the country and increasing costs and other unpredictable future disadvantages, and a return even twice that might not seem out the way. Those are figures that have been put before the inquiry by responsible people and I could only give it back to you as being the sort of figure that might be spoken of.
Ms Harrington: Over the past, say, 10 years, or 15, whatever you would like to deal with, what do you think has been landlords' -- not just a return, you know, year by year, but overall return as an investment? We are talking about their capital gain into that as well.
Mr Thom: Nobody knows.
Ms Harrington: No one -- you would not --
Mr Thom: It has never been studied.
Ms Harrington: I mean, you are the expert.
Mr Thom: No, no, it would require a very elaborate and difficult and intensive study and it has never been done.
Ms Harrington: Let me ask you to speculate. Would you think it would be 5%, 10%, 15%, 20%, or just -- do you want to give a wild guess?
Mr Thom: No, I cannot make a guess, because it would be a stupid and foolish one. I have not got the intellectual background or the understanding to do it. But I can put this to you, that in the days when there was a free market, some substantial investors put large sums of money into rental housing because they thought they could make a fair return and I would assume they were expecting returns certainly of over 15%. In fact I would think they expect more, considering the vagaries of the rental housing market and the problems that are involved in it.
Ms Harrington: And you think they have got it then? You think they would get that return?
Mr Thom: They would not put their money in unless they thought they would.
Ms Harrington: Right.
The Vice-Chair: Thank you, Mr Thom. The committee has greatly enjoyed your presentation and certainly it has given us a lot of food for thought. So thank you for appearing, sir.
Mr Thom: Thank you for your attention.
The Vice-Chair: The committee will be adjourned until 10 o'clock tomorrow morning.
The committee adjourned at 2046.