Toronto tenants crushed by rent hike exemptions

TORONTO TENANTS CRUSHED BY RENT HIKE EXEMPTIONS

Joseph Darius Jaafari, The Globe and Mail 

Image courtesty of: Mark Blinch, Reuters

When residents at the Carnaby, a condo building on Toronto's Queen Street West, were given their rent notices last month, they expected an increase of about 2%, as per the guideline set by the province's Landlord and Tenant Board last year. Instead, they saw their rents skyrocket - in one case by as much as 30%.

Lisa Beam's rent for her 500-square-foot condo jumped 17% to $1,750 a month. She contacted her unit's property manager, Baytree Real Capital, in disbelief before turning to tenant advocates for advice.

"I finally realized that I didn't have much choice in terms of paying it. It was well within their rights to raise my rent that high," said Ms. Beam, a 44-year-old corporate trainer.

The tightening of Toronto's rental market, which has reached record-low vacancy rates, is being felt most acutely by the residents of newly built condos, which are exempt from rent controls. There is no yearly rent cap for properties built after 1991 because of a controversial exemption in the province's Residential Tenancies Act that was designed to spur the development of rental properties. The law accomplished its goal but has drawn the ire of housing advocates who say it has created two classes of renters in Ontario: those who have rights and those who have none.

"You got a tier of renters that are covered under the law who are able to enforce their rights and get stable rent increases that they can try to navigate. And then you have this other tier that have no understanding of what their rents are going to be next year," said Geordie Dent, executive director of the Federation of Metro Tenants' Associations. "That second group? It's growing and it's going to keep growing."

Recent data from Urbanation Inc., a consulting and market research firm that focuses on the GTA's condo market, shows that average rents for condos rose 11.7% in the 4th quarter of 2016 over the same period a year earlier. In the city's core, condos rented for an average of $2,134 a month in the last three months of 2016.

At the same time, Toronto's extremely hot housing market has made it harder to find rental units. First-time buyers who can't afford the rapidly increasing price of single-family homes have been pushed to the condo market, according to an analysis by CMHC. The resulting growth in condo prices has encouraged many condo owners to sell rather than rent their units, according to Urbanation, which found rental listings down 8% in the final quarter of last year.

The exemption for homes built after 1991 was originally part of a piece of legislation with roots in the Residential Premises Rent Review Act of 1975, which sanctified rental guidelines and restricted rental increases and evictions. The 1975 law changed over the course of its lifetime and eventually included a rotating five-year adjustment period that gave newly built homes time to find their appropriate market value; after five years, the home would be placed into rental regulation. The rotating exemption was last updated in 1991. Five years later, after Mike Harris and the Progressive Conservative Party came to power, the law was reworked to say that homes built or occupied after November 1st, 1991, were not included under rental regulation. 

Since then, almost a million housing units have been built in Toronto, according to the city's planning department. Of those, CMHC lists almost a third as condominiums, a majority of which are being used as rental properties.

"The 1991 exemption was to say to any investors big, medium or small that this is what we're going to do as an incentive. The market responded by creating hundreds of thousands of small landlords," said Daryl Chong, president and CEO of the Greater Toronto Apartment Association.

But city councillors such as Josh Matlow (Ward 22, St. Paul's), who chairs the city's Tenant Issues Committee, argued that the exemption was to appease the development community. "You would hope that this would be a matter of public discussion, but this just isn't seen as a priority. It hasn't been that shiny ball that has attracted the attention that it deserves," he said.

Mr. Matlow has joined the growing voice of housing advocates pushing for the exemption to be struck down, but he believes the provincial government - the only power that can help tenants not covered by rent controls - has turned a blind eye to renters.

"One of our big themes over the past two years has been Canada's lack of a housing policy," said Kenneth Hale, the director of advocacy and legal services for the Advocacy Centre for Tenants Ontario. "Well, we actually do have a housing policy, and it's to support home ownership and to leave behind people who can't make it into home ownership and let them fend for themselves."

But landlord groups and developers in Ontario have countered that the exemption has given power back to the market. They oppose any regulation to reel in possible abuses.