Mr. Ernie Hardeman (Oxford): I rise to speak in final third reading on Bill 109, An Act to revise the law governing residential tenancies. I think first of all, I just wanted to touch on the title just for a moment. We heard a lot of this at committee, and the minister talked about the extensive committee hearings. I do want to touch on that a little bit, too. One of the things we heard was the public coming forward and saying that they had a problem with the title of the bill. This doesn’t happen very much. In fact, most of the people that come forward on issues like this are concerned about the contents of it, not so much just the title. But the people who were coming forward, particularly tenants—in fact, all tenants and tenant groups—were concerned with the fact that the tenant protection part of the purpose of the bill seems to have disappeared. It seems to be a bill to control housing markets, but very little to protect tenants. That was their impression from that. I think the issue I just wanted to point out, that this no longer has tenant protection in the bill, so that’s no longer the real purpose of the bill.

I also want to just quickly go a little bit on. The minister spoke about the length of time that they’ve had for consultation and the amount of input that the public has had, opportunity to put their input into this bill and have their wishes realized or their concerns addressed in the bill. I just wanted to point out that there was a very industrious deputant who made a presentation to the committee. I have his presentation here. I just wanted to go

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(Mr. Hardeman) ... I just wanted to point out there was a very industrious deputant who made a presentation to the committee, and I have his presentation here. I wanted to go through it because it’s rather important for people to understand the amount of involvement the people had and what impact that involvement had on the end result of the bill. The minister spoke of all the amendments we’ve made, but we have to remember we were hearing deputations one day and the amendments were due the following day. In fairness to the people, I don’t think many of the changes were being considered in the amendments; they were recognizing that the government already had the amendments written when we were hearing the last of the presentations.

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This here deputation was kind of interesting. It speaks, first of all, a little bit to the bill we’re speaking of today, and then it refers to the bill it is replacing, the Tenant Protection Act. It’s longer than this, but I won’t use the whole thing—just the part that relates to the length of time:

“Two years ago, you held town hall meetings.” He’s referring, of course, to this bill and the present government. “But those were mostly about the previous government’s laws and its flaws. None of this remains on the public record. It was not done through this committee, and so was never recorded in Hansard.

“You also did an online consultation in 2004, but you, the government, set all the parameters. You selected the background information people should read before they answered your questionnaire. You selected the questions and you selected the answers people had to choose between.” I think this is rather interesting.

“The most ??egregious example of the government’s biased survey was question 6.” This is the question: “‘In your opinion, how high should a region’s vacancy rate be before the government looks at removing rent control?’”

Mr. Marchese: I was going to use that, too.

Mr. Hardeman: Yes. It says, “The only choices you provided were: ‘3%,’ ‘higher than 3%,’ or ‘I have no opinion at all.’” That’s not really leaving it open as to what the options might be. I think a lot of tenants would have answered that question with “never,” but that’s not one of the options.

Mr. Marchese: It’s not there.

Mr. Hardeman: That’s not there at all. It goes on. We’ll skip a few paragraphs:

“The problems with this government’s process can be best summed up by quoting a complaint already submitted to the committee 10 years ago from page 4 of the Liberal dissenting report on rent control consultations, September 21, 1996.” And this was presented to our committee: “Liberal members of the committee and many presenters were frustrated that very limited time—20 minutes—allowed to each group permitted very little opportunity for dialogue or discussion. It was also unfortunate that of over 400 groups that applied to appear before the committee, there was only adequate time to allow for 260 presentations.” The Liberals were complaining about what was happening.

Now they’re referring together the previous act, the Tenant Protection Act:

“In 1996 the Harris government held Hansard-recorded meetings of this committee on their tenant discussion paper, hearing 260 deputants over more than 80 hours.” These were the hearings the Liberal report castigated them for, because they only gave each deputant 20 minutes. “In 2004”—and this is going back to this present legislation—“your government held town hall meetings outside of this committee, giving each deputant only five minutes, with no public record of what was ever said.

“In 1997, the Harris government held hearings on their Tenant Protection Act, Bill 196, in seven cities over 49 hours, hearing some 140 deputations, giving each organization 20 minutes and each individual 15.” This compares now to 2006. “The Liberal government is holding hearings on Bill 109”—

Mr. Marchese: How many cities?

Mr. Hardeman: “—your Residential Tenancy Act, in only one city”—that being this one, Toronto—“listening to 49 deputants for a total of eight hours, and each deputant, of course, only getting 10 minutes.” So in time—

Mr. Marchese: How does it compare?

Mr. Hardeman: Oh, in time, it’s exactly half as long that each deputant got.

Then:

“It appears that your government is far more guilty of the very accusations you made against your predecessor. Why the sudden rush to get this law passed after all this time? What is the government afraid of? And why the lack of proper ...

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... guilty of the very accusations you made against your predecessor. Why the sudden rush to get this law passed after all this time? What is the government afraid of? Why the lack of properly recorded consultations with sufficient deputation time based on the government’s own publicly demanded criteria?

“Tenants want real rent controls, but most of all we want honesty in government, not spin.” That was a presentation made, and I couldn’t agree more with them. What they wanted was honesty in government and not spin. What they got here was spin.

Of course, we have to go back to the start of the bill, when the government of course in their Liberal party platform, three years ago, said that in the first year of a Liberal government they would introduce what they called “real rent control” that worked. Of course, that was supposed to be in one year. We are now three years and then some—no, not quite; we’re just under three years. We have almost three. Now we have a piece of legislation. The most interesting part about it, that part which they were promising the tenants was going to change is that part of the bill that doesn’t change.

I’m not here to suggest that it should change. I was part of the government that put that in place—the vacancy decontrol, which allows the marketplace to level itself and find its level based on the availability of accommodations and the number of people who want it in order to try to get investment into the industry and get more investment and, of course, make it a competitive marketplace.

If we just go to that for a minute—a quote in the news release in Toronto from the Federation of Rental-Housing Providers of Ontario. They believe ?? “ ... the proposed reforms to Ontario’s rental housing legislation”—that’s this legislation, of course—“goes too far. There is strong evidence that the rental market in Ontario is working better than ever for tenants. These proposed changes are a discredit solution in search of a problem. These reforms go too far. They bring back rent control systems which have been tried and failed. They also are an undertaking and major overhaul of the dispute resolution system which will bog down an already overburdened system and resulted in even greater delays of justice.”

I think that is the part that I just wanted to touch on just right quickly as the minister spoke about the default provision in the eviction process. Presently, in the old act, if the rent is not paid—if a tenant has not paid the rent, the landlord can issue notice. If they do not respond to the notice, the notice can go 20 days after the non-payment of the rent. Then, if they don’t respond to that in five days, in fact the eviction can take place and the process can take place without going to a hearing.

Of course, as the minister said, there’s some concern that some people in that time period—maybe it was a lack of understanding of what the notice was or some family circumstances that made it very difficult for them to deal with that in the five days, and they end up having an eviction without ever having their day for a hearing. But the solution to that is saying that every application for eviction now for non-payment of rent, whether the tenant believes that they’re at fault and whether they know they haven’t paid the rent and they have no reasonable excuse, they still have to go to the hearing.

That will increase the length of time or amount of time required for the hearing’s board to deal with these situations. There is nothing in the bill, of course, and nothing in what the minister has said so far that they’re going to increase the capacity of the tribunal to hear these applications—the increased number of applications that will be there.

Of course, if we don’t have something to increase their capabilities, then the length of time—not only will it be the extra 30 days to go to the hearing, but there will be another length of time beyond that that will make every eviction or every non-paying tenant in the non-paid-for accommodations for an extra month. Of course, that’s at the expense of the landlord.

I think the minister needs to look at a way to find an accommodation between the two to make sure that if we’re going to have more hearings ...

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I think the minister needs to find an accommodation between the two to make sure that if we’re going to have more hearings, we can have more hearings with the capacity at the board to have them heard in an acceptable length of time.

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The other thing that creates a problem in the legislation is that when you go to those hearings, the bill allows the tenant, without ever having notified the landlord prior to this time, to come to the hearings and he can tell the hearings board, “The reason I haven’t paid my rent is because there is work that needs to be done on the accommodations and the landlord seems to have resisted doing it. I’ve told him about it. He hasn’t done anything about it, so I’m not paying my rent until he does it.”

Of course, the landlord, even if they’re at the hearing—and they would be at the hearing; I presume, they’re called to the hearing—would not be aware of this coming forward. There would be no way that they, at that hearing, could produce the evidence or the justification of what had happened to deal with that issue, so they would have to have an adjournment. Again, we’re looking at setting up a new hearing and we have another month where nothing is happening.

Landlords, generally, are very concerned that tenants—and again, it’s not the tenants the minister was talking about, it’s the other tenants. The minister keeps talking about good landlords and good tenants. That’s not what this legislation was supposed to deal with. This legislation is supposed to deal with problem areas. There is real concern that tenants will use that as a delaying tactic and another month of not paying rent. Again, that’s a real concern that the good folks who represent landlords brought forward to committee.

Another area I just quickly wanted to touch on—and I have a colleague who would like to speak to this and she’s anxiously awaiting the opportunity.

But the one that I have a real problem with, and it’s the conservation and the smart metering of electricity, changing the multi-residential units that are presently single metered and where electricity is part of the rent. The bill deals with changing that over to individual metering for individual units and then, of course, taking it out of the rent and making it payable directly by tenants.

Of course, we would all agree with that being a good idea because it does conserve energy. I know in the city of Woodstock in Oxford county, we have a program, what they call smart meters where you pay as you go. You purchase electricity, put the card in your meter and you can actually see how much you’re using. When they did that, on average, it was somewhere between 18% and 20% savings in the amount of electricity when people could see what they were using. So to be able to pay for electricity yourself, I think you can then find a way to reduce your cost and it’s a benefit to you. If you use less, you conserve it. It’s good for the province, good for the environment and good for the people themselves. If it means nothing to them, why would they turn out the lights? I’m sure we’re all aware of that. When you know you’re going to pay the hydro bill, you’re much more apt to turn off the switch.

But the problem is how they’re going to implement that. They have to find a way to come up with a cost per unit of how much the rent should be reduced when they pay their own hydro, and I think that makes good sense. Obviously the people in these apartments should not pay both ways. I would have thought you would just take the average consumption in the building and divide it by the number of units and say that’s how much each unit would have their rent reduced, but that’s not what this bill does.

This bill says the landlord puts in the meters, they operate them for a year and then each individual unit will have their rent reduced by the amount of hydro that they’ve consumed that year, then they will start paying their own hydro. Now, I’m sure that very few people would do this. But the more you use that year, the more your rent will go down. I don’t think that’s a very good option for conservation. It seems to me that there would be a real benefit to—

Mr. Rosario Marchese (Trinity–Spadina): Brad knows better.

Mr. Hardeman: Exactly, Brad knows better. I think that’s what Brad thought.

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I think that’s what Brad though thought.This is from the Federation of Rental Housing Providers of Ontario, and it deals with the metering. I just want to read some of the quotes:“Unfortunately, provisions in the legislation introduce so many liabilities and risks for owners who sub-meter individual units that few units will be metered. Several owners who were considering sub-metering have already notified” the federation “that they absolutely will not sub-meter under this new legislation. The reaction to the section has been universally negative from FRPO members. Therefore, we do not think the section will help the government meet its objectives.”Mr. Marchese: So who are they listening to?

Mr. Hardeman: Obviously, I don’t know who they’re listening to, but they didn’t listen to that. That should have been an amendment, but it wasn’t.

I’m going to stop at that, but I want to say that that was one of the things—we speak of the amendments and the minister spoke of all the amendments. There were 80 amendments, but because of the time restrictions—first of all, closure motion on second reading, closure motion on all the committees, with three days of committee hearings, a closure motion to say that the clause-by-clause would last two hours and no more, and then third reading will end at 5:50 this evening, all based on a resolution this government passed. There was no time to deal with the 80 amendments. In fact, more than half of those amendments were never read into the record because there was not sufficient time. Of course, the government had their amendments and they just voted them all in, but the government members’ who voted had not read the amendment they voted for. They were just told, “If they’re government amendments, put your hand up. If they’re someone else’s amendment, keep your hand down,” and that’s the way it went.

I think that’s really what’s wrong with this process. There seems to me to be no reason why we couldn’t have taken our time and done it right, rather than rushing it through the way it’s being done. Thank you very much for the time.

Ms. Lisa MacLeod (Nepean–Carleton): I appreciate the remarks from the member of our party from Oxford. He offered a very thorough précis and synopsis of why our party is going to oppose this piece of legislation. My remarks will cover three main areas, namely informed opinion about rent control, whether Ontario needs a change in current rent rules and four practical problems with Bill 109.

It is now widely accepted around the world that price controls, including rent controls, do not work. Eight Nobel laureate-winning economists have addressed rent controls, and all have rejected them as being counterproductive. Of the eight, I’m going to focus on two.

Gunnar Myrdal is no laissez-faire opponent of government intervention. He is widely credited with designing Sweden’s cradle-to-grave social security system. He has also expressed strong criticism of the income inequality in American society. Despite those predispositions, he is a critic of rent control.

James Buchanan has commented on rent control in Canada. Conversations from the Frontier is a work published by the Frontier Centre for Public Policy on October 25, 2001. The frontier centre is a Canadian research institute based in Winnipeg, Manitoba, which had rent controls like those in Ontario from 1976 to 1998. In that work, the Nobel Prize winner James Buchanan captured the problem with tightening rent controls in one simple paragraph: “Rent control is one policy that economists universally would oppose. It is a grossly inefficient way of allocating housing space and, of course, it inhibits construction and creates the very thing it is supposed to alleviate,” namely shortages of affordable housing. “It is one of those things where people simply don’t understand simple economics and, therefore, put in for political reasons what will damage the very people that it is designed to help.”

I turn now to whether Ontario needs a change in the current rules. Bill 109 will replace the Tenant Protection Act, or TPA. One very important point of comparison: The TPA has produced better results for tenants than all previous rent control regimes. Vacancy rates are up, customer choice is up, affordability has improved, investment in capital repairs is up and job creation is up. In the early 1970s, purpose-built rental starts averaged 30,000 units per year in Ontario. In 1975-76, rent controls were introduced. Rental starts plummeted to less than 5,000 units per year and then fell even further in the 1990s. Coupled with the excess demand caused by rent control, the reduction in starts caused shortages of rental housing. Those ongoing shortages

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... and then fell even further in the 1990s. Coupled with the excess demand caused by rent control, the reduction in starts caused shortages of rental housing. Those ongoing shortages manifested themselves in much-reduced vacancy rates. Under the rent control regimes from 1976 to 1998, the vacancy rate for Toronto averaged less than 1%. That is exactly what the Nobel Prize winners would predict. Since 1999, the vacancy rate has increased to an average of 2.4%. That meant choice for tenants, and it is too exactly what the Nobel Prize winners would predict.

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Since the TPA was introduced, the highest vacancy rates have been at the lowest end of the rental market. For example, in Toronto in October 2005 the vacancy rate was 3.7% overall, but 5.9% for units under $700 and 5.5% for units between $700 and $800 per month. In Ottawa, my city, the vacancy rate was 3.3% overall, but was 4.6% for the most economical 20% of units, i.e., the lowest quintile.

Under the legislation before the TPA, Toronto experienced no significant vacancies at any rate level. Under the TPA, there is availability and choice in all rent ranges. In my city, Ottawa, rents are falling. That is good news. From October 2004 to October 2005 the average rent for a one-bedroom apartment fell by 1.2% from $771 to $762. The average two-bedroom rent fell by 2.1%, from $940 to $920.

CMHC reports that between 2001 and 2005 the price of Ottawa’s average-priced resale home rose 41% to $247,000, and the estimated principal and interest carrying costs on this home rose 26%. By contrast, the average two-bedroom rent only rose by 1%. Over that time period, inflation was 9.5%.

From 1971 to 1996, every census showed more Ontario families paying more than 50% of their income on rent. That is exactly what the Nobel Prize winners would predict. After the loosening of rent control by the TPA, the number of families paying more than 50% of their income on rent fell. That is exactly what the Nobel Prize winners would predict. Given the path of rents and wages since 2001, we can expect further improvement when the 2006 census results are known, yet the Minister of Municipal Affairs and Housing has the gall to stand before this House today to turn back the clock, and he will not help low-income renters.

As to investment in major repairs and improvements, you just have to look as you drive around Toronto and Ottawa. Many buildings have new windows, and exterior landscaping has vastly improved. Walking into buildings shows the same improvement in lobbies and common areas. A great deal of money has gone into balconies, elevators, furnaces and roofs to deliver tenants the quality of rental accommodation that they want and deserve. These capital investments have created tens of thousands of jobs for Ontario’s workers. However, the continuation of those jobs and the capital improvements that fuel them will be blocked by Bill 109.

I have to applaud the previous Conservative government for bringing in the Taxpayer Protection Act. Like the previous speaker from the Conservative Party said, during the hearings we heard time and time again from rental advocates who were telling us that the name of the bill, if they are going to repeal the Tenant Protection Act, should have remained the Tenant Protection Act, because there is more protection in the legal interpretation for tenants.

I’m going to go on to talk about four major practical problems with Bill 109, as identified by constituents of mine in the Ottawa area to the committee on general government, which reviewed Bill 109. Those problems are:

—section 30: onerous orders prohibiting rent increases;

—section 82, which we heard from everyone across Ontario: joining maintenance claims without notice;

—section 126: new restrictions on AGI applications; and

—sections 137 and 138: rules about smart metering and ratio billing.

I’ll speak about each of them in turn. Because of the current rules in the TPA, deferred maintenance is rare compared to its frequency under the previous legislation. Vacancy decontrol and fair rules for above-guideline increases have created a climate in which landlords are competing vigorously for customers and to retain customers. That is the best possible position for tenants.

For those unusual situations where landlords fail to provide proper maintenance or repairs, the current rules provide ample procedures and ample relief for tenants. First, tenants can call in property standards. That will produce a site visit by a trained property standards officer who knows the minimum standards and can see the alleged defects. If the defects are real, the PSO will issue a work order. The municipalities ...

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... visit by a trained property standards officer who knows the minimum standards and can see the alleged defects. If the defects are real, the PSO will issue a work order. The municipalities have procedures to enforce work their orders and every sensible landlord will respond vigorously to a work order. In passing, I would note that tenants do not have to notify landlords of complaints before calling in property standards. A work order can easily be the first the landlord has known of a problem.

In addition to calling property standards, there is a straightforward application process for tenants to follow. In most areas, the tribunal provides mediation, which often resolves the problems. If mediation fails, then the tribunal will hold a hearing. After a hearing, the tribunal can order the landlord to pay for repairs the tenant has made, authorize the making of repairs or further repairs, order the landlord to make repairs, order the rent to be abated for a past or future time period, order the landlord to pay the tenant for any damage to the tenant’s property.

What is to be added to section 30 is the ability to prohibit rent increases. Such a power existed under the NDP’s Rent Control Act, but it was mitigated in that the prohibition on actual rent increases did not interfere with the usual increases of maximum rent. Thus, when a landlord complied with the order, they could regain the normal rent track for the future. That ability does not exist under Bill 109. The Bill 109 provision is unnecessary and it will damage the rental market. Paragraphs 6, 7 and 8 of subsection 31 should be deleted. At the least, orders prohibiting rent increases should be made, where there is a municipal work order for a serious issue from a property standards officer. Property standards officers are in the best position to determine whether or not the landlord is in noncompliance with municipal property standards. The law should have avoided the duplication of processes and subparagraph 2 of paragraphs 6, 7 and 8 of subsection 30(1) should have been deleted.

Under the current rules, tenants are required to bring their own applications to obtain remedies for maintenance and other claims. A tenant can file an application at any time to make such claims. Landlords then receive notice of the claim. The current system works and is consistent with the rules in every court and tribunal. Under section 82 of Bill 109, tenants will be able to raise maintenance issues at the hearing of an eviction application brought by the landlord without any prior notice to the landlord. The new system will be abused by tenants in order to delay evictions in situations of non-payment. Bad tenants will learn how they can use the system and will routinely name non-existent maintenance claims to buy time. The claims are not common now because legal clinics and other tenant advocates tell tenants they have to bring their own application about maintenance issues, and that such issues are not relevant in the applications for non-payment of rent. As soon as section 82 is enacted, that advice will be reversed and great numbers of tenants will claim that there are maintenance problems in order to buy themselves longer time without paying their rent. Landlords will be forced into a Hobson’s choice: Either they will have to request an adjournment of the eviction hearing to bring witnesses, such as superintendents and maintenance staff, to defend tenants’ claims, or they will run the risk of losing application because of lack of evidence when tenant claims are not valid. Either way, section 82 will increase the cost of doing business. That will ultimately be paid by the good tenants who pay on time and take care of their units. Section 82 is bad public policy and should have been removed from Bill 109.

Section 82 also offends the rules of natural justice by allowing tenants to make claims against landlords and have them heard without giving proper notice. At a minimum, tenants should be required to give notice of the intention to raise specific maintenance issues to the landlord at least five days before the hearing.

Above-guideline applications are typically used to bring up rents of units which have fallen badly behind inflation or when landlords have not taken increases for several years but then the rental market changes. In other words, AGI applications are typically about catching up. Landlords are only allowed to catch up for the lost guideline increases when they have cost increases to justify the rent increases. Ever since rental control was introduced 30 years ago, the system has recognized that landlords need to be able to increase rents for major cost increases. Over the years, the grounds for application have effectively been made fewer and fewer until, under Bill 109, they will be restricted to costs which are beyond the landlord’s control, namely unusual utility cost increases, property taxes and necessary repairs. See subsections 126(1) and subsection 126(7). Despite the strict limits on what costs can be claimed, subsection 126 of Bill 109 limits allowances

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See subsection 126(1) and 126(7). Despite the strict limits on what costs can be claimed, subsection 126(11) of Bill 109 limits allowances to 3% of the rent over not more than three years. Restricting landlords from recovering their full justifiable costs through the above-guideline rent increase application process will discourage landlords from investing in their buildings. The percentage restriction and time limit will particularly prejudice small landlords. In a small building with low rents, a major expenditure like a new roof can justify a substantial rent increase. The 9% limit in subsection 126(11) should be removed.

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Section 137 is an attempt to make smart metering attractive to landlords in order to encourage energy conservation. The section fails to do that. Removing the requirement of tenant consent is of assistance, but the rest of section 137 is unfair, unreasonable and it will discourage smart metering.

It is reasonable to remove from the rent the cost reduction landlords will receive, but it is unreasonable to reduce rents by more than that. That will be the effect of paragraph 137(3)(b). For example, if the average hydro cost was $100 per month before the smart metering, but the cost of the smart meter and the separate billing is $20 per month, it is unreasonable to remove $120 from the rent. The proper way to proceed would be to use the system that has applied for service reductions since 1976. Removing the cost the landlord experienced would mean that in the example, the tenant would be ahead $10 and the landlord would break even. This is a win-win solution that should have been enacted in 109.

Subsection 137(5) is another major impediment to sub-metering. It gives tenants an incentive to run up their energy consumption in order to increase their rent reduction. Most people usually act in their self-interest, so that is a real danger. It is also unreasonable and counterproductive to layer on special energy savings requirements and tenant application as in section 137.

Section 138 has positive aspects because it allows for ratio billing in small buildings. That will allow landlords to divide hydro bills between tenants on a fair basis without going through the expense of sub-metering. However, the other requirements under the legislation will certainly discourage landlords from taking advantage of ratio billing. Many studies and common sense show that tenants will conserve energy when they pay for their hydro directly. The government should encourage the landlords to use ratio billing, not discourage it. That section of the legislation should have had major revisions if the government wanted ratio billing to be attractive.

Experience across many centuries and all continents proves that market forces win out over government regulations. Regulations that attempt to make tenants better off by making things tougher for landlords inevitably drive up the costs landlords experience and make things far worse for good tenants. In tightening the rent control rules and tipping the balance of landlord-tenant rules in favour of bad tenants, not good tenants, Bill 109 will hurt good tenants and our economy. Real tenant protection was found in the TPA. Bill 109 is a political ploy that will be counterproductive and will hurt the very tenants this government says it would like to help. This House should vote down Bill 109 and leave the Tenant Protection Act in place.