Rent Control: the Detrimental Effects A Change Would Bring
In a just society, the ruling authority must decide what is right when allocating wealth to its individual citizens. The same ruling authority does this by intervening with the inner workings of a marketplace to uphold its fundamental values and ideals. The aim of government intervention is to create a just society that will reflect the people's values. Governing bodies do this by establishing laws that enforce fairness or 'equity'. The
government passed the Rent Control Act in 1975. The law levels the playing field between landlords and tenants. New units are exempt from controls for their first five years after which the controls are put into place. The controls put a ceiling on annual rent increases. Under current law, a landlord may only increase a tenants' rent by 2% plus inflation.1 As with all other markets, the housing market is based on supply and demand. If the nature of the market were allowed to take its course, then the price of housing would become unaffordable for most citizens. An unfair situation would be created where power and money would be disproportionately appropriated to land owners. Rent control laws were established by previous governments to protect society and its people from inflated and uncontrollable housing costs. The Harris government now wants to repeal these laws. On June 25 the Minister of Housing, Al Leach, released a policy paper outlining the changes that are to be made to Ontario's rent laws. Conservative legislators plan to pass the proposed 'Tenant Protection Act' in the fall. The omnibus legislation will rescind the Rent Control Act, the Landlord and Tenant Act, the Rental Housing Protection Act, Residents' Rights Act, the Land Lease Statute Amendment Act, the Vital Services Act.2 The most objectionable change allows the act to lift controls off vacant units. The 3.2 million renters in Ontario are very concerned about the changes.3 The housing ministry will accept written submissions from the public until August 30. Public hearings are also planned in hope that they will ease the transition. However, most people are indignant towards the idea. Changing the rent control laws would be detrimental to society as they threaten citizens' positive right to affordable housing, harm their mobility rights and increase the gap between the rich and the poor. The proposed 'Tenant Protection Act' assaults peoples' right to affordable housing. If people are to adhere to a basic standard of living, then the cost of their homes must be affordable. But what exactly is affordable? The Ministry of Housing released a report stating that 70,000 Toronto house holds (20% of the city's population) do not have affordable housing. The report explains that a tenants' housing is unaffordable if they are paying more than a quarter of their gross income in rent. This is an alarming thought since some renters are paying 70-80% of their gross income in rent.4 The problem of high housing costs is combated by rent control to allow people a minimum quality of life. Housing like medical care is not normal good or service. It is a basic need. Renters need to buy more than landlords need to sell. If the renter does not get a place to live, he is on the street. If the landlord has no tenant, he just has an empty apartment. In short, there is a mismatch of power in the rental market. The laws of supply and demand are unfairly applied against the buyer. Thus controls came into being precisely because the market does not work. Lifting controls would hurt people's ability to bear the cost of housing without serious harm. The government justifies this action by arguing that something must be done about Toronto's apartment shortage. Because apartments are offered below their market value, they are sold faster new ones can be created. Toronto has a vacancy rate of .8% with only twenty new apartment units built in Metro last year.5 Currently, two thirds of renters move once in five years. Since controls are lifted off vacant apartments, the government believes that after a few years, most apartments will be decontrolled and the supply problem would be solved. In truth, areas that are already decontrolled are not seeing new apartments. Instead of building moderately priced, modest apartments, developers find it far more profitable to build condominiums. Clearly, condos do not fall under the category of affordable housing. Yet, the province is making it easier to convert apartments into these extravagant units. Under the proposal, if there is a conversion, the warning time a tenant must receive would be cut from 240 days to 120. Even if developers wanted to build new apartments, the government's rationale is still flawed. When the controls are lifted off vacants, tenants will not be able to afford to move. Moving means and end to rent control. In other words, the mobility assumption that they make is wrong. With the price of vacants skyrocketing, and a notice that a tenant's apartment is being turned into a condo, where is a not-so-well-off tenant to go? Luckily, previous governments have established non-profit housing. Also called co-op housing, the Ontario Housing Corporation manages 1200 of these publicly funded housing projects across Ontario. On these sites 84,000 units were sold to the low end of the housing market. They are provided to ensure affordable housing. Someone who cannot afford a condominium can easily take up residence in a moderately priced co-op apartment. This would solve any claims to affordable housing rights that people would be scared of losing under the proposal. Unfortunately, soon after taking office, the Conservatives decided that they would no longer support the building of non-profit housing, and withdrew funding for 70% of planned non-profit projects. The total reduction in funding to the O.H.C. was $82 million. This was done in light of a waiting list of 40,000 people. Funding needs to be increased, not reduced. 1228 units need to be built each year just to keep up with the exigency.6 How are positive rights to affordable housing supposed to be upheld after such a drastic cut? The government explains that they expect the private sector to support the low end of the housing market through the continuance of the Shelter Allowance Program. This encourages landlords to build and maintain affordable housing. In 1994 the government funding for the program reached its peak at $2.4 billion. This favoritism of landlords was fiercely protested by the Coalition to Save Tenants' Rights. Why was the responsibility of affordable housing cut from non-profit community volunteers, and not landlords? The C.S.T.R. had this to say: "To develop housing for the lower end of the housing market if rent controls are lifted, the landlord lobby, FRPO, presents a list of demands: lower property taxes on rental properties, no GST on new building, no development charges for sewers, roads and parks. Home owners will pick up the slack for property tax and development charge shortfalls and everyone for the GST. These too, are a form of government subsidies. Yet, FRPO persuaded Mike Harris that the government shouldn't be in the housing business because the subsidies are too high. Ah, we get it! Subsidies are okay if they're being shoveled into the pockets of private landlords. But they are a bad thing if they're going to non-profit community groups that build affordable housing. Money spent on co-ops is used far more efficiently than the shelter allowances wasted on landlords."9 In addition to subsidies, landlords say they will not build affordable housing unless taxes are lifted from the building process. The end result is that the proposed 'Tenants Protection Act' would cause no new affordable housing to be built. Only higher rents, which will result in more evictions. An altogether vicious circle. As more and more sources of affordable housing are disappearing, basement apartments may become the only ones left. It is not known for certain, but estimates number the amount of basement apartments in metro to be in six figures. Many people rely on basement apartments for a home simply because of the affordability of the unit. To their comfort Bill 120 was passed as the Residence Rights Act in 1994, legalizing basement apartments. Bill 120 also afforded protections to tenants by strengthening eviction laws in their favor. To their dismay, Bill 20 was passed as the Land-use Planning and Protection Act on November 20, 1995. Bill 20 gives municipalities the choice of weather or not to allow the building of any new basement apartments. Bill 20 which was passed by the Conservatives, is only a foreshadowing of what is to come. The proposed 'Tenant Protect Act' declares all basement apartments illegal again. The gains made for peoples' positive right to affordable housing would be lost. Declaring a potential supply of small apartments illegal would worsen an already bad shortage. This shortage of apartments will not be solved by lifting rent controls. This would only result in the further development of lucrative condominiums. With a reduction to public housing and the of barring of basement apartments, affordable housing in Ontario is falling left, right and center. The shortage is now worse. Affordable housing is not only vital, but is a persons' right to be able afford himself shelter. All of society is hurt when its citizens can not allow for basic living expenses. By ending affordable housing, the repeals to Ontario's rent laws would harm its populace by infringing on their mobility rights. The changes would compromise tenants' mobility by sentencing them to their apartments. With controls lifted off vacants, tenants will not be able to afford to move. Conversely, landlords who wish their unit to be decontrolled will have to force tenants out. This will create "class war" of landlord-tenant relations. Because landlords have the upper hand in the housing market, tenant rights would be jeopardized. This mismatch of power would result in landlords harassing tenants, withholding repairs, and eventually, evictions. Landlords have had a history of strong-arming tenants to get their wishes. With no rent control on vacants, they will declare an open season on tenants. Tenants would have little recourse but to take their complaints directly to the Ministry of Housing, and file a lawsuit to be settled in the courts. If the proposed 'Tenant Protection Act' falls through, the sheer volume of harassment complaints are expected to be so numerous, that the lawsuits would put an unbearable strain on the legal system. In the anticipation of the overload, the Ministry of Housing has established a complaint line. The 24 hour message system will be brought up to screen less important tenant problems and to declog the Tenant Complaint Office.7 Leach also plans to create a quasi-judicial tribunal. Complaints would be diverted from courts to the tribunal for everything from increases to evictions. Both parties would be given a short time to present evidence and make their case. Shortly after, a judgment would be made. Since there are no appeals, both parties would be expected to abide by the decision. If one party complains that the other has breached the ruling, the tribunal would send out their 'anti-harassment unit' to investigate and slap fines. Drive-thru justice? One-stop shopping? This 'Band-Aid' solution to the problem of tenant harassment will in no way protect tenants. Striping their legal right to have a say in a real court is only done to keep tenants out of the Minister's hair. When asked about the anticipated problem of tenant complaints Al Leach was quoted as saying: "We intend to keep them out of the courts as much as we can."8 Tenants' cases would be rushed through to keep the line moving. Although efficient, this does not do justice to tenants concerns. Even if tenants were to receive a fair decision that would ask the landlord to stop the harassment, it is not enforceable. The small, underfunded 'anti-harassment unit' would not be able to deter the amount of harassment anticipated. Their threat to enforce the rule of law is an empty one. A joke. The government told the C.S.T.R. that it will protect tenants by doubling the fines for harassment. Fines could be quadrupled and it still would not matter because they are flawed in their application. C.S.T.R. states: "Given that the Tories are slashing workplace health and safety inspections, food inspectors and virtually every other kind of enforcement of public interest laws you can think of, what makes you believe their promise to enforce 'anti-harassment by landlords'?" 10 Anti-harassment laws under the proposed 'Tenant Protection Act' are unenforceable and ineffective due to budget constraints. Harassment protection afforded to tenants would become nil and an open season would be declared on them. The first thing that landlords would do to pressure tenants to move would be to deprive them of repairs. This sort of behavior is frowned upon by the government. Under the proposed changes, they shall show their displeasure by doubling the repair fines. Nonetheless this change, like the harassment fines, is an empty threat. Sixty percent of Ontario apartments are greater than 25 years old.11 They either need extensive repairs or they are so deteriorated, that they are ready to be replaced by condominiums. This fact plays into the landlords' pressure strategy nicely. If a tenant does not want to move, he has to stand and watch as his home degrades all around him. When the old furnace breaks down, he will freeze. When the sink stops working, he will have no water. It would only be a matter of time before the tenant realizes that his struggle is useless. He will have to move. Landlords have gone as far as charging tenants an extra fee of $180 per month for having "unauthorized appliances" such as washers, dryers, and air conditioners.12 If the landlord does not want to see his unit degrade for the sake of higher rent, there are other options available to him. He can scare the tenant out of his home. Landlords infamous for using strongmen for this purpose. Washed out boxers or thugs looking to make a quick buck are a landlord's best friend. Tenants are told to move, or else. If they do not get the message the first time, then the strongmen would reinforce their point. What is worse than no repairs, or the threats of an enforcer? Eviction. If a tenant does not leave because of the slumlike conditions or intimidation, he will be flat out thrown out. Landlords do not like to resorting to this, because of its expense and the time needed for the legal process. Evictions can take up to four months. But if the changes are passed, eviction may prove to be a landlord's pastime. The Residence Rights Act was passed by the N.D.P. government in 1994. This made tenants far more difficult to evict. Under the proposal, eviction laws under the Residence Rights Act would be repealed. Landlords would be given much more discretion in evictions. The time it takes to evict would be shortened and there would be no appeal process. Changing rent control laws would not only harm peoples' mobility rights in that they will not be able to afford to move, but insult would be added to injury in that landlords would not let them stay. Where would they go? They would end up on the streets. Repealing rent control would make the rich richer, and the poor, poorer. If controls are lifted, the inherent mismatch of power in the housing market would cause a shift in the wealth between landlords and tenants. Owners and developers would become richer from the higher rent their land yields, while those who can not foot the increases would be deprived of a home. The forces in the market would cause tenants to be caught up in an 'affordability gap'. This is because the cost of building housing has increased at a higher rate than average tenant incomes for the last ten years.13 The poor would be especially hit hard. From 1982-1994, monthly incomes of tenants living in projects actually fell, from $717 to $661. Eliminating rent control is supposed to raise vacancy rates. However, vacancy rates do not deal with affordability. Since 85% of renters fall on the bottom third of income earners, empty apartments would come from those who could no longer afford them.14 If the 'Tenant Protection Act' is to pass, rent supplements should be worked into the proposal. Supplements would help tenants fill in the affordability gap created by lifting controls. This is not the case under the proposal. Lifting controls would seriously harm many people. Toronto's city planning and development department blames the affordability gap for the increased usage of food banks. They say that if controls are lifted, people will not have enough money for food. This will result in unmanageable lines at the food bank.15 Alternative housing is another housing program that is going to come under attack by the changes. Also called special-care housing, this program is the only thing keeping 47,000 people across Ontario off the streets.16 Alternative housing puts up single mothers, seniors, the disabled and people who would be otherwise homeless without it. The Residence Rights Act protects special-care tenants from eviction. The proposal would repeal the R.R.A. to give landlords of care homes the power to enter homes without notice to perform bed checks. They would also be able to flash evict abusive tenants who fail to pay rent or damage property. This worries many because these are the people who are at most risk for homelessness. Special-care tenants are not the only ones in danger. Because of this decades' poor economy, the number of metro residents that were evicted doubled from 1990-1995.17 The combined effect of lifting controls and more powerful eviction laws can only worsen the situation. Those who are forced out of their homes to get their controls lifted and cannot afford a decontrolled unit, will slip through the cracks and onto the streets. There would be more evictees with a greater proportion of these people becoming Ontario's homeless. Such was the case for Irwin Anderson. Irwin Anderson was one of three street people who froze to death last winter. The inquest involved linked the deaths to a lack of affordable housing in Toronto. In particular, Anderson had been evicted for non-payment of two months rent. But he had previously paid rent in his apartment in the subsidized complex for five years. An arrangement for repayment could have been worked out. Instead, he was evicted. The frightening truth is that this could happen to anyone, even the well educated. Mirsalah-Aldin Kompani, another of the three who froze last winter had an engineering degree from the University of Kentucky. At this point, tenants would not be shouting about their right to affordable housing, they would be fighting for their basic right to a home. Their only refuge from the cold would be confinement to a crowded hostel. These may be no better than the streets themselves. The Toronto Coalition Against Homelessness states that people loathe these places and that affordable housing should be the central focus since hostels only offer a superficial solution to the real problem.18 Consequently, because of the affordability gap, cuts to alternative/public housing and flash evictions, repealing rent laws would split Ontario's middle class into two, putting half up in condominiums, while incarcerating the others in hostels. Since the strength of society depends on its middle class and its ability to keep people off the streets, the proposal should be rejected. For these reasons, the proposed 'Tenant Protection Act' damages society as it attacks Ontarians' appanage to affordable housing, restricts their movability and erodes the middle class. The change would take away positive intervention and let the nature of the markets decide a redistribution of wealth. Many would live on the land owned by an elite few. This is not equitable so government intervention in the markets must remain. When the majority of peoples' happiness and values are protected against the advantageous elite, then that is a sign that a society is just. Endnotes 1 Ministry of Housing, The 1996 Rent Control Guideline, p.1. 2 Toronto Star, Critics fear pending bill will 'strip tenant rights', June 26, 1996, p.A7. 3 ibid. 4 Toronto Star, High rents leaving no money for food, March 31, 1996, p.A6. 5 Toronto Star, Province plans to protect tenants, June 25, 1996, p.A1. 6 Toronto Star, Ontario prepares to scrap rents controls, September 9, 1995, p.A3. 7 Toronto Star, Tenants get special line to snitch on a landlord, June 24, 1996, p.A7. 8 Toronto Star, Rent controls not scrapped, Leach says, June 7, 1996, p.A10. 9 The Tenant Bulletin, C.S.T.R. fights rent control reform, July 26, 1996, p.1. 10 ibid. 11 Toronto Star, Province plans to protect tenants, June 25, 1996, p.A1. 12 Toronto Star, Tenants get special line to snitch on a landlord, June 24, 1996, p.A7. 13 D. Edwin and R.Vogt, Basic Economics, p.56. 14 Toronto Star, High rents leaving no money for food, March 31, 1996, p.A6. 15 ibid. 16 Toronto Star, New tenant law could hurt most vulnerable, May 28, 1994, p.L6. 17 Toronto Star, Anguish of Eviction Day, July 7,1996, p.A1. 18 Toronto Sun, Aid homeless, Harris told, June 25, 1996, p.15. Bibliography Dolan, Edwin G., and Roy Vogt. Basic Economics. Toronto: Holt, Rinehart and Winston of , 1984. Internet, Usenet. Changes to rent control. Tor.general. July 2, 1996. Ontario, Ministry of Housing. Rent Control Act, 1992 : Queen's Printer for Ontario, 1992. Ontario, Ministry of Housing. Rent Control and Hearings. Pamphlet. December, 1993. What is Maximum Rent? August, 1994. Rent Control and Tenants. August, 1994 A Guide to The Landlord and Tenant Act. January, 1995. Information About An Order Prohibiting a Rent Increase. Fact sheet. October, 1993. The 1996 Rent Control Guideline. August, 1995. Tenant Bulletin. "C.S.T.R. fights rent control reform". July 26, 1996. Toronto Star. "Anguish of Eviction Day". July 7,1996. "6 agencies serving homeless allowed standing at inquest". June 27, 1996. "A free rental-housing market is not a level playing field". June 27, 1996. "Rent control proposals are attacked". June 26, 1996. "Critics fear pending bill will 'strip tenant rights' ". June 26, 1996. "Halfway measures in rent controls". June 26, 1996. "Province plans to protect tenants". June 25, 1996. "Tenants get special line to snitch on a landlord". June 24, 1996. "Helpers for homeless seek role at inquest into freezing deaths". June 19, 1996. "Rent controls not scrapped, Leach says". June 7, 1996. "Minister of 'non-housing' rethinks position". June 2, 1996. "High rents leaving no money for food". March 31, 1996 "Ontario prepares to scrap rents controls". September 9, 1995. "New tenant law could hurt most vulnerable". May 28, 1994. Toronto Sun. "Rent control reform" June 25, 1996. "Aid homeless, Harris told". June 25, 1996.