Full Rent Control & Ban AGIs

ACORN Lobby Day

Problems with Ontario’s Partial Rent Control System

1. Rent control does not apply to new developments built after November 2018. Doug Ford removed rent control on new builds the first time he was elected. This is why we see double digit rent increases in newer buildings.

• Rent control does not apply to vacant units. This is called Vacancy DE- Control. So when a tenant moves out there is no limit on how much rent can increase. This creates a financial incentive for landlords to push out long term tenants through renovictions and neglecting repairs.
1. According to CMHC, rents for 2-bedroom units in the GTA that turned over to a new tenant were 31.2% higher than those that did not see a change in tenant.

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• Another exemption to rent control is ‘Above - the - Guideline - Increases’ or AGIs that allow landlords to pass down the cost of major repairs or building upgrades to tenants.

power for change.

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Ontario ACORN’s Demands:

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1. Rent control to be applied to ALL buildings
2. Vacancy control
3. Ban Above Guideline Rent Increases (AGIs)
4. Expenses done to fix something because of chronic neglect should be considered ineligible for an AGI
5. Enforcement of rent reductions after an AGI expires should be on the LTB and landlord, not the tenants.
6. Energy conservation related expenses such as retrofits should not be covered under AGIs

Rent Control on ALL buildings & Vacancy Control

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1. Rent control to be applied to ALL units, not just those built prior to November 2018.
1. One common myth is that rent controls hurt housing supply - however - the evidence says otherwise. A 2020 CMHC study analyzing almost 50 years of data found that rent control had NO impact on housing starts.
2. What the CMHC study did find though was that rent control exemptions for new builds like in Ontario, lead to higher rents.

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• Vacancy control so that there is a limit on how much rent can be increased after a tenant moves out. .
• As a result of renovictions (which have increased by 300% in Ontario since 2017), ACORN members see rents double, even triple after the old tenant is evicted

More Information Rent Control:

• Rent regulation prevents price gouging; for that reason, the landlords will always hate rent control.
• In the mid-1970s, the federal government’s anti-inflation measures included pressuring provinces to enact rent controls to slow the escalating cost of living
• Even with rent control, real estate investments remain profitable as demand for housing is constantly growing.
• Important to note that rent controls don’t limit initial rents; landlords set whatever price they deem necessary to make a profit.
• Some claims against rent control are based on the analysis of rent freezes during both world wars (which is different from rent control). Back then, governments enacted rent freezes as emergency measures. Today’s rent controls allow rents to keep pace with inflation and, in some provinces, rent control rules rarely change, creating predictability in the rental sector (which is good for investors).
• Some will say that rent control will lead to disrepair but there’s no evidence of this - vacancy decontrol actually leads to disrepair for tenants in rent controlled units. This also ignores how landlords are legally required to maintain their units under the RTA.

AGIs

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• Ban AGIs
• ACORN’s latest report that analyzed LTB data through freedom of information requests found that nearly 80% of AGIs were filed by big corporate landlords - these are massive companies with billions of dollars in assets.
• AGIs are simply a vehicle for corporate landlords to extract more money from tenants and should not be allowed.

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• Expenses done to fix something because of chronic neglect should be considered ineligible for an AGI
• While banning AGIs is our ultimate goal, there are also changes that could be done in the short term that would make a big difference.
• Currently, in Ontario, the LTB can only consider existing serious breaches of the landlord's maintenance obligations at the AGI hearing. This does not specify clearly if chronic neglect by the landlord led to the landlord applying for the AGI. In BC, their rules won’t allow landlords to apply for additional increases if
• the landlord did not fix or properly maintain the unit
• the landlord has or will be paid for the costs by another source (e.g., rebate, insurance)
• the costs are for regular maintenance (e.g., cleaning gutters)

AGIs

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3. Enforcement of rent reductions after an AGI expires should be on the LTB and landlord, not the tenants.

• AGIs expire! The capital expenditure is considered to have an expected useful life which is 10+ years. After which tenants are entitled to a rent reduction. But currently, there is no tracking system and all the onus is on the tenants to access their rent reductions. This is why:
• the LTB and the landlord should notify the tenant about the expiry of the AGI so that tenants can get a rent reduction once the AGI expires.
• Secondly, once the AGI expires, the rent reduction should apply to all the tenants and not just for those who paid the increased rent.

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4. Energy conservation related expenses such as retrofits should not be covered by AGIs

• A lot of AGIs are to pass down the costs of upgrading windows, furnaces, heating/cooling systems and other types of retrofits. However, we strongly believe that expenses aimed at energy efficiency should not be covered under AGIs.
• We can’t solve one crisis (climate change) by worsening another (housing).
• Given the urgent need to retrofit older apartment buildings to reduce emissions, these expenses should be paid by the government, not low and moderate income tenants.

More Information AGIs:

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• Tenants shouldn’t be paying for landlords’ equity. Tenants are not shareholders and don’t receive anything in return.
• Over the past two decades, the number of AGIs have gone up by 107%. REITS’ annual reports openly brag about using AGIs as ‘revenue opportunities’.
• Between 2017-2022 nearly 600 buildings had more 2 or more AGIs, the most was 8!
• Arguments in favour of AGIs are usually that landlords can’t afford repairs otherwise. But shouldn’t this require proof that landlords cannot afford to pay for capital improvements out of their rent profits? Yet AGI applications don’t require this.
• Data on the finances of large landlords show very large profit margins. Smaller landlords rarely apply for AGIs, suggesting that they are not desperate for that additional increase.
• AGIs allow landlords to double-dip on vacancy decontrol (ie. double rents on vacant units AND substantially increase rents on vacant units through AGIs)
• Another argument is that lazy landlords won’t bother to repair their units if they aren’t incentivized to do so but there is no justification to reward lazy landlords. Stricter rules, fines and enforcement of property standards is a better approach.

Sources

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1. ACORN’s ‘Ontario Renovictions Report’ analyzing the LTB’s data on N12/N13 evictions notices from 2017-2022
2. ACORN’s ‘Rent Control Loopholes Report: The Case of AGIs’ analzying AGI applications filed at the LTB from 2017-2022
3. The CCPA’s report: Rent control in Ontario—facts, flaws, and fixes