Ontario’s Unfair Housing Plan

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by Steve da Silva

This past April, the provincial government has finally made what appears to be a serious intervention into southern Ontario’s housing crisis. On April 20, Kathleen Wynne’s Liberals announced sixteen new measures and regulations in their ‘Fair Housing Plan.’ Renters in Toronto have been clamouring for measures to restrict landlord abuses and runaway rent increases, while prospective homebuyers have been hoping for measures that would bring residential property back within financial reach.

But a close examination of Ontario’s ‘Fair Housing Plan’ reveals that it will neither halt rising rents in and around Toronto, nor is it designed to deflate value in the overpriced real estate market. To the contrary, Ontario Minister of Finance Charles Sousa reassured homeowners in the lead up to his announcement. “The seller of a home has a right to maximize their value in the sale of their home . . . how they achieve it, that’s something that’s in the market.” In the wake of the April 20 announcement, Sousa reaffirmed that “it’s a free market and market forces will prevail ultimately as we proceed forward.” So who is this plan really ‘fair’ for?

Each of the three major sectors of housing– social housing, market rental units, and home ownership– needs to be accounted for in order to take full stock of the housing crisis. An analysis of each sector reveals the extent to which the “market forces” and their profit motive is ruining the lives of more and more people in the GTA.

 

The slow death of social housing

In the mid-90s, the Canadian government, led by Jean Chrétien’s Liberals, cut federal funding for social housing and “downloaded” responsibility for social housing onto the provinces. Next, Ontario’s Conservative government under Mike Harris followed suit by further downloading the responsibility onto the municipalities.

Two decades later, Toronto Community Housing is literally crumbling due to its severe state of disrepair. Currently, some 25,000 TCH units out of a total of 58,500 are in ‘critical condition,’ with about a third of these at risk of being shut down completely in the coming years. Social housing units are being boarded up at an average rate of more than one unit a day. As the provincial government was announcing their housing plan in front of towering condos in Liberty Village, on the opposite side of the city in Jane-Finch two housing blocks consisting of 134 units in the Grassways community were closed for good. Some 108 families will now have to be relocated across an already insufficient housing stock, with more than 181,000 applicants behind them also waiting to be housed.

The City of Toronto has committed to a $2.6 billion 10-year repair plan to address the long-overdue maintenance and repairs backlog. But its full implementation relies on the provincial and federal governments to each contribute one-third of the total costs.

Now, the Trudeau government announced that its Federal budget will be allocating $11 billion to housing over the next 11 years. But as Professor David Hulchanksi of the University of Toronto has written on this budget, most of this funding will not touch the ground before the next Federal election.  This means that it is not guaranteed. It’s contingent on the re-election of another Liberal majority government. As Hulchanksi writes, “Let’s face it: there is no new money for housing this year, and almost nothing for next year. The ‘$11 billion’ is an alternative fact for partisan political use.”

Meanwhile, in what would have been the perfect moment to demonstrate its commitment to housing, Premier Kathleen Wynne made no announcements of new spending for social housing in her ‘Fair Housing Plan.’

Among the Wynne government’s 16 measures will be a program that “leverages the value of surplus provincial land assets across the province to develop a mix of market housing and new, permanent, sustainable, and affordable housing supply.” But it remains unclear if this actually means the construction of new social housing. But we shouldn’t hold our breath on it, as it’s unlikely that a sitting government approaching an election next year would pass up an opportunity to score some political points by downplaying or bury details of new money for social housing in the budget.

All signs point towards social housing continuing to endure its slow death. And more people in the rental market– people spending as much as 70% of their incomes on housing and surviving out of food banks– means more people competing in the market for Toronto’s limited supply of housing, which means higher rents.

 

Rental market reforms

The most celebrated of reforms in the province’s new housing plan is its new rent control policy. Rent increases for existing tenants who are renewing leases will be limited to the rate of inflation, with an upper limit of 2.5%.* Under the previous policy, those living in buildings constructed after 1991 have been seeing their rents get hiked by hundreds of dollars year after year. In some cases, people have seen a doubling of their rent.

Those living in post-1991 buildings certainly let out a heavy sigh of relief upon receipt of this news. By contrast, developers have been whining loudly that the expansion of rent control will throttle investment into rental properties. But landlords know that they have other means to jack up the rent, and some have been bold enough to even remind us of this.

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CAPREIT, one of Canada’s largest landlords with over 22,000 rental units in the market,  published a press release in the wake of the province’s announcement to reassure shareholders that the new rent control regulations would have no impact on their revenues. “Rental property owners can continue to apply for permission to raise rents higher than the guideline rent increase based on specified capital improvements made to individual properties.” CAPREIT is referring to the Above Guideline Rent Increases (AGIs) regulation, which permits landlords to apply to the Landlord and Tenant Board to increase rents beyond the limit in order to pay for capital expenditures, increases in utility rates, or municipal taxes.

CAPREIT also reassured shareholders that “rent controls apply only to annual rent increases for current residents. As new properties enter the market, the monthly rents will be established at that time. There is no proposed change to controlling what rent can be charged to new tenants.”

With Toronto’s extremely low vacancy rate, currently hovering around only 1%, landlords have significant leverage against renters. There are no provisions in the new ‘Fair Housing Plan’ that will deal with bidding wars amongst renters. This is what “market forces will prevail” means.

Stricter and expanded rent controls notwithstanding, rising rent levels in Toronto is a foregone conclusion of the “free market” that no level of government has an interest or desire to intervene in.

The only other substantial reforms for renters will be a standard lease that will prevent landlords from imposing illegal or unreasonable clauses on tenants; a tightening of regulations around “landlord’s own use” evictions, which has often been a means for landlords to boot out a tenant in order to bring in higher paying tenants; and a prohibition of any rent increases where elevator work orders have not been completed.

So if we have something to thank the Liberals for, it will be a cleaner and more sanitized fleecing of tenants by landlords.

 

Real estate market reforms

At the center of Ontario’s intervention into rapidly rising real estate values is its new Non-Resident Speculation Tax. This 15% tax will apply to non-resident individuals or corporate entities (except for refugees) purchasing residential properties in sizes ranging from a single-family dwelling to six-family residences. This tax will be limited to the Greater Golden Horseshoe area that spans the area hugging Lake Ontario from Niagara to Peterborough to as far north as Orillia.  

With only about 5% of residential properties being purchased by foreign buyers in Toronto, it’s not clear how much of an impact this will have on real estate prices. The B.C. government implemented an identical regulation within the Greater Vancouver Area back in the summer of 2016, which has been attributed to have caused a mild cooling off of Vancouver’s real estate market in the subsequent months. But there are ways around these measures. Foreign nationals can still invest in property through any children of theirs who have studied in Canada for two or more years.

The Canadian housing market is severely overpriced, with house price to income ratios that outstrip the U.S.

The Canadian housing market is severely overpriced, with house price to income ratios that outstrip the U.S.

 

Other measures in the province’s plan are generally geared towards encouraging (but not guaranteeing) investment in residential construction through a series of enticements or penalties. Vacant residential properties will be taxed more heavily, as will vacant lots of land that are zoned for residential construction. Taxes will also be lowered on the construction of multi-residential apartment buildings. The Province is also creating a $125 million fund that will rebate developers who construct an apartment building part of the cost of their developer fees. This heavy emphasis on lowered taxes and rebates to businesses reveals the extent to which Ontario’s “housing plan” relies on enticing investments out of private capital. Allowing market forces to prevail means allowing private capital to do whatever it wants to with its large reserves of concentrated wealth. That means if there’s more profits to be scored in another industry, then that’s the way it goes. There’s no imperative in the market to meet people’s actual social needs. Only people who can pay to have their needs met.

In short, the province has announced no specific plans to oversee or guarantee the construction of new housing. And with rents sure to continue rising, and real estate in a bubble, which could continue growing, anything that is constructed will still be out of reach for most Torontonians.

Letting the market solve the housing crisis is akin to setting a pack wolves upon the sheep; and fixing a short leash on the wolves just tempers the feeding frenzy. Renters have a few more protections under the Ontario government’s ‘Fair Housing Plan,’ and new regulations in real estate will have at least a small role at least in the short-term in limiting inflation.

In affirming the primacy of the market, the province has taken the side of the wolves: no new social housing; no word of where funding will come from to maintain existing housing stock; a “rent control” regulation that will moderate but not halt rent increases; a few measures against speculation to moderate real estate inflation; and a couple measures to encourage investment, with no guarantees.

The Ontario government’s plan is an unequivocal defense of private capital: a defense of the right of the rich to make more and more money off the misery and enforced desperation of the many. The sooner we renters, people priced out of real estate a long time ago– working-class people– come to terms with the exploitative and extortionist nature of the “market”, the sooner we stop looking to our social opponents in business and government to come save us, the sooner we arrive at working-class solutions.

 

*Editorial Note: At first publication, this article reproduced a factual error that Ontario’s previous annual rent increase guideline limited rent increases to 1.5% for pre-1991 buildings.  In fact, 1.5% was merely the inflation-based provincial guideline set for 2017, but the province has actually been pegging rent increases to inflation with a 2.5% cap since 2013.  The Ontario government’s new policy is a mere extension of this policy to all buildings. Thanks to FMTA for bringing this error to our attention.

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