RHB Magazine August 2021 by Marc Cote

Vol. 14 No. 3 July/Aug 2021

Canada’s #1 most widely read publication for Apartment Owners, Managers and Association Executives

The official publication of:

Making the case for the redevelopment of rental properties

Screening tech stays ahead of emerging challenges Residential property managers need the right tools to complete their screening processes remotely.

Dealing with the challenge of retaining talent

A virtual talent onboarding program is one solution to training and retaining employees.

Analyzing tenants’ preferences and the rental housing market

What do tenants want when they’re looking for a place to live?

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EDITOR’S NOTES Creating positive habits I recently read Atomic Habits by James Clear, which I highly recommend if you want to develop positive habits and cut out bad habits. You can break down the keys to changing your behaviour into four key elements: make it obvious, make it easy, make it attractive, and make it satisfying. I’m a huge fan of making things easier for myself to ensure that I achieve the specific goal. One simple thing I did in my life recently to improve my health was cut out late-night eating (particularly potato chips). It’s helped with my blood pressure and my weight. The July/August issue of RHB Magazine features an article on the controversy surrounding redevelopment of rental properties and evictions. Tenant advocacy groups like to use the terms “renovictions” and “demovictions” to paint redevelopment in a negative light. This article examines the issue from the rental property owner’s point of view to explain why evictions are a necessary by-product of the redevelopment process. The second article analyzes the results of Informa Canada’s Multi-Res Tenant Rental Survey, which polled 36,000 tenants on their preferences and needs on a host of issues, such as location, amenities, outdoor space, package delivery, student housing, virtual tours, and more. The third article discusses the challenge of retaining your key employees, who are leaving due to COVID-19 and other factors, and how a virtual talent onboarding program can help you to address this issue. Check out CFAA’s newsletter, National Outlook, as well as the Regional Association Voice. The Final Take Away from Yardi Canada explains their thoughts on screening technology. We’ve added a new section to the magazine called Multi-Unit Review, which provides market analysis and investment trends. We support two-way communication, so send your comments or questions to david@rentalhousingbusiness.ca. I look forward to hearing from you. Stay safe and take care!

Co-founder, Publisher

Marc Côté marc@rentalhousingbusiness.ca

Associate Publisher Nishant Rai

Editorial

David Gargaro david@rentalhousingbusiness.ca

Contributing Editor

John Dickie, President CFAA jdickie@rentalhousingbusiness.ca

Creative Director / Designer Scott Clark

Office Manager Geeta Lokhram

Subscriptions

One year $49.99 Cdn Two years $79.99 Cdn Single copy sales $9.99 Cdn Opinions expressed in articles are those of the authors and do not necessarily reflect the views and opinions of the CFAA Board or management. CFAA and RHB Inc. accept no liability for information contained herein. All rights reserved. Contents may not be reproduced without the written permission from the publisher. P.O. Box 696, Maple, ON L6A 1S7 416-236-7473 Produced in Canada

Enjoy the issue! David Gargaro Senior Editor

4 | July/Aug 2021

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CONTENTS

VOL.14 NO.3 2021

Dealing with the challenge of retaining talent A virtual talent onboarding program is one solution to training and retaining employees.

RHB’s forum for rental housing associations to share news, events and industry information

Making the case for the redevelopment of rental properties Rental property owners have a right to increase their buildings’ value while providing quality housing for tenants.

Hot Topics: HDAA addresses the COVID-19 situation in Hamilton, including new instructions from Hamilton’s Medical Officer of Health for buildings of 12 storeys or more, the status of licensing, and a proposal for a City of Hamilton tax on vacant homes to try to address housing affordability. pg. 45 LPMA notes the beginning of the term of its new President, Shane Haskell, and discusses tenant insurance, including obtaining proof, different kinds of coverage, coverage for alternate accommodation, and the positive impact of insurance in municipalities with Fees and Charges by-laws. pg. 49 EOLO addresses RTA/LTB changes in claiming against tenants for utility arrears and in claiming against former tenants, as well as reporting on the requirements of the City of Ottawa Rental Housing Property Management By-law, listed in time priority order. pg. 53 WRAMA reports on water efficiency subsidy programs in the Waterloo region, WRAMA’s plans for upcoming programs, major changes in the information needed in applications for termination for renovations, demolitions or personal use, and a new mandatory L2 form from the LTB applicable across Ontario. pg. 57

The Member Associations

Regional Association Voice RAV features the latest industry news from four member associations.

Analyzing tenants’ preferences and the rental housing market What do tenants want when they’re looking for a place to live?

6 | July/Aug 2021

Final Take Away Screening tech stays ahead of emerging challenges.

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PRESIDENT’S CORNER Canada is now in a federal general election. CFAA e-Newsletters will report on what rental housing providers can expect from the different political parties, based on what the parties have advocated, and done, over recent years, and based on their platforms. Visit www.CFAA-FCAPI.org for the latest information, or to sign up.

The Home Depot remains a key CFAA Strategic Partner. By registering your membership in CFAA (either directly or through one of our 11 member associations) with Home Depot Pro, you benefit yourself and CFAA. The support of The Home Depot has helped CFAA weather the pandemic. We look forward to a continued partnership benefitting every rental housing provider reading this magazine.

While it is unlikely to become an election issue, a key issue for rental housing providers with more than $10M or $15M of taxable capital is the Liberal government’s plan to adopt an Interest Deductibility Limitation. See page 35 for more details.

At Virtual RHC 2021, YARDI was the Principal Presentation Partner. Along with Yardi and The Home Depot, Wyse Meter Solutions, HD Supply and Gryd also played major roles in supporting CFAA through these challenging times. We thank them, and all of the sponsors of CFAA Virtual RHC 2021 (listed at page 41), as well as all members of CFAA Suppliers’ Council, shown at page 48.

In the long term, another key issue is climate change policy. See page 38 for an explanation of where many governments in Canada are headed on measures to fight climate change, and what impact some key steps would have on renters and on rental housing providers of all sizes. CFAA looks forward to hosting an in-person Rental Housing Conference in May 2022. We will be meeting in downtown Toronto, for a building tour, two days of education and networking, and the annual CFAA Awards Dinner. We hope to see you there! For 2021, CFAA held our annual Conference as a virtual conference, complete with a virtual Tradeshow and virtual booths. CFAA invites you to visit the virtual Tradeshow booths of the 14 Tradeshow exhibitors, at no charge, and any time, 24/7. Find out what the exhibitors are offering to make your business more successful! Go to www.CFAA-FCAPI.org, and click on Events & Awards. CFAA does not provide your contact information to the exhibitors without your consent. There is a contact form in the top right-hand corner of each booth for you to use if you wish.

8 | July/Aug 2021

John Dickie, CFAA President John Dickie, CFAA President

rentalhousingbusiness.ca | 9

In this issue of... NATIONAL OUTLOOK 35. An interest deductibility limitation (IDL) is back under active consideration. What problems would that create for rental housing providers? How can the rental industry best seek an exemption, like the U.S. exemption?

38. H ow much would your income taxes go up with the imposition of an interest deductibility limitation (IDL), with moderate leverage, or with high leverage? How many times would your income tax go up? How much would your after-tax income fall?

40. W hat needs to be done to retrofit apartment buildings to heat them with heat pumps? How much does it cost? What are Canadian governments thinking of doing to mandate such changes to cut Greenhouse Gas emissions?

41. W hat can rental housing industry suppliers offer you to serve your tenants better, to make your life easier, or to make more money? See the CFAA exhibitors whose virtual trade show booths you can visit 24/7.

To subscribe to CFAA’s e-Newsletter, please send your email address to communication@cfaa-fcapi.org.

The Canadian Federation of Apartment Associations represents the owners and managers of close to one million residential rental suites in Canada, through 11 apartment associations and direct landlord memberships across Canada. CFAA is the sole national organization representing the interests of Canada’s $525 billion rental housing industry. For more information about CFAA itself, see www.cfaa-fcapi.org or telephone 613-235-0101.

10 | July/Aug 2021

CFAA Member Associations Eastern Ontario Landlord Organization (EOLO) www.eolo.ca P: 613-235-9792 Federation of Rental-housing Providers of Ontario (FRPO) www.frpo.org P: 416-385-1100, 1-877-688-1960 Greater Toronto Apartment Association (GTAA) www.gtaaonline.com P: 416-385-3435 Hamilton & District Apartment Association (HDAA) www.hamiltonapartmentassociation.ca P: 905-632-4435 Investment Property Owners Association of Nova Scotia (IPOANS) www.ipoans.ns.ca P: 902-425-3572 LandlordBC www.landlordbc.ca P: 1-604-733-9440 Vancouver Office P: 604-733-9440 Victoria Office P: 250-382-6324 London Property Management Association (LPMA) www.lpma.ca P: 519-672-6999 Manufactured Home Park Owners Alliance of British Columbia (MHPOA) www.mhpo.com P: 1-877-222-4560 Professional Property Managers’ Association (of Manitoba) (PPMA) www.ppmamanitoba.com P: 204-957-1224 Saskatchewan Landlord Association Inc. (SKLA) www.skla.ca P: 306-653-7149 Waterloo Regional Apartment Management Association (WRAMA) www.wrama.com P: 519-748-0703

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Making the case for the redevelopment of rental properties Over the last few months, tenant advocacy groups have pushed the media to denounce “renovictions” as unfair to renters to pressure provincial governments to further restrict the rights of rental property owners. The advocates allege that rental property owners are using building renovations to force tenants out of their units and increase rents above the legally allowed amount. They’re making it seem like rental property owners are either breaking the rules or acting in a nefarious manner, using new legislation to their advantage. The reality is much different, as it usually is. Rental property owners have a right to earn a living from their rental properties. They must also regularly maintain and repair the units and buildings to ensure that they provide safe living conditions. There are times when it makes sense to demolish an existing rental property because it would either cost too much to repair or developing a new rental property would provide a better end result. 14 | March/April 2021

By David Gargaro

Redevelopment versus “renovictions” and “demovictions” Tenant advocates, by their name and nature, focus on how the actions of rental property owners impact specific tenants who happen to rent particular rental units at particular times. The advocates operate on the assumption that every tenant has the right to live in the apartment they rent, at a similar rent, for as long as they want to live there. They picture tenants as having all the benefits of home ownership without many of the costs. Tenant advocates often speak as though tenants should not have to pay for any major repairs their homes need, such as new roofs, balcony repairs, elevator replacement, or refurbishment of common areas or units. They seem to believe that repairs do not create noise or dust, and that major renovations can be split into smaller jobs over periods of many years while all the tenants individually choose to leave when it is convenient for them. They also speak as though every tenant in a six-, 12- or 20-unit building should not have to move for demolition until they each want to. Of course, if a building is to be demolished, all the tenants need to vacate at the same time for the building to come down. When tenant advocates complain about “renovictions” and “demovictions”, what they are actually referring to is redevelopment. By evoking eviction, those terms focus on how redevelopment will affect the current tenants. However, the rental property owner’s goal is to improve the use of the building and land, as well as the related income

stream and building value by providing better, more desirable housing for current tenants or future residents. The truth is that eviction is not the goal; it is a side effect of obtaining possession to improve the use of the land or the building.

Demolishing existing rental properties In built-up urban areas, there are few pieces of vacant land that are zoned as residential. Therefore, to build new rental properties, developers often have to demolish existing buildings, focusing on those that are lower density or in a poorer state of repair. Demolishing a threestorey building to replace it with an 18-storey building would typically provide six times as many rental units. The building location may be excellent; as a society, we should not force all development to take place on the outskirts of our communities. Having redevelopment take place near existing subways, transit lines, and other services is both cost effective and environmentally friendly. All buildings have a limited life span. Over time, even well-maintained buildings will, at a minimum, need major renovations or upgrades to be kept in a good state of repair. At some point, the only rational decision is to demolish or fundamentally transform a property into something much newer and better. Even if the property owner performs all required maintenance and upkeep throughout its lifespan, a building will eventually need to be replaced. “With 83 per cent of existing purpose-built rental units in Ontario built before 1980, many are in need of substantial upgrades to building

rentalhousingbusiness.ca | 15

infrastructure, such as heating systems, balconies, parking garages, and elevators,” said Tony Irwin, President and CEO, FRPO. “Those repairs often require access to multiple units and cause considerable disruption to residents. Many rental housing providers are also exploring ways to reduce energy consumption and greenhouse gas emissions. While nobody wants to be uprooted from their home, even temporarily, keeping residents safe and mitigating disruption dictates whether it is necessary for units to be vacant to perform the work. It is incumbent on rentalhousing providers to give adequate notice of major repairs and take care to minimize noise and disruption to the greatest extent possible.” Redevelopment that requires demolition involves removing tenants from their units or the building. This typically requires the tenants to leave. They need to find residence somewhere else, either temporarily or permanently. Some rental developers will help tenants to find new accommodation. However, developers cannot identify what will work for tenants as well as the tenants themselves. Tenant activists sometimes encourage tenants to reject alternate accommodation to “stay and fight for their rights,” which creates problems for everyone involved.

demand imbalance makes rental property owners more interested in seeing tenants move on so that they can achieve higher rents. Market rents have increased more than the costs to renovate or redevelop, although those costs have gone up too. Therefore, there is more interest in improving the use of the land to put more rental units or more condos on any given piece of land.

“While nobody wants to be uprooted from their home, even temporarily, keeping residents safe and mitigating disruption dictates whether it is necessary for units to be vacant to perform the work.” Allowing residential development on land that is zoned for commercial or industrial uses would enable more residential development without the need to demolish existing rental buildings. Owners can seek zoning changes, but the process is time consuming and onerous. That could work well, provided enough commercial space is left to serve residents, and is subject to the question of where people will work in the community. “An adequate supply of units across the housing continuum are important to have so that tenants have housing options when renovations or demolitions need to occur,” said Cameron Choquette, CEO, SKLA. “To support an adequate supply, governments need to have developmentfriendly policies and incentives that encourage investments into Canada’s rental housing supply, including affordable or subsidized housing for low-income renters.”

Dealing with reasons for conflict Terminations have always been a source of conflict. However, depending on the economic cycle, tenants used to have less incentive to try to stay, while rental property owners used to have less incentive to see them leave. Over the last few years, the supply of rental housing has not kept up with the increase in demand for rental housing. That has left tenants with fewer options, particularly tenants with low incomes. As a result, tenants are more inclined to stay where they are, and tend not to move without termination notices. At the same time, the supply-

16 | July/Aug 2021

How provincial governments are addressing the issue BC has just implemented new legislation specific to renovations that will increase transparency and provide landlords with a clearer path to proceed with renovations that may necessitate vacating of the unit, thereby eliminating tenant conflicts. In addition, BC has introduced a new Additional Rent Increase (ARI) process for capital expenditures that is also transparent and more streamlined than the AGI process that exists in Ontario. “LandlordBC led much of the conversation with the Residential Tenancy Branch to design the continued on page 20

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What is the solution to inconveniences resulting from redevelopment?

By John Dickie, CFAA President

In many communities with growing numbers of people and households, Canada needs more housing, especially rental housing. However, many factors combine to restrict and delay new housing supply. Due to overly restrictive and outdated zoning by-laws, rental property owners are restricted in where, and in what density, they can develop in-fill housing. Greenbelts restrict development on the immediate outskirts of major cities. Many cities face limitations from physical geography, such as the ocean, lakes or mountains. As well, excessive taxation applies in the form of the GST/HST, usually at 13 to 15 per cent of the building’s value, at the time of initial occupancy. Development charges, community amenity charges, and other municipal charges can also easily amount to 8 to 10 per cent of the costs of construction and land. Building regulations also impose substantial increases in cost, through excessive parking requirements and other limitations that drive up overall costs. Insufficient staffing in planning departments, and lengthy processes, delay development and impose increased costs. All in all, the wonder is not that new housing is scarce and expensive, but rather that new housing is not more scarce and more expensive than it is. The high price of new housing draws up the value and price of existing housing at all price points in the market, including old rental housing at the low end of the market. That is what makes it difficult for low-income tenants to find alternate housing at rents they can afford, when they need to move to allow major renovations or demolitions to occur, or when they want to move for other reasons.

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Moreover, as Avrom Charach points out in his comments about Manitoba on page 20, when there is ample new housing, there is less incentive to perform major renovations. As well, when there is no rent control, as in Saskatchewan, there is less incentive to perform major renovations and there is a higher vacancy rate so that more alternate housing is available to tenants who want or need to move. In fact, far from being a solution to tenant displacement on redevelopment, rent control is a major part of the problem. Rent control discourages new development, which increases market prices and market rents. That is the effect on the supply side, which most people understand. Rent control also encourages tenants to hang on to the rental units they currently occupy, even if those units are larger than the tenant household now needs or they are situated in a location less valuable to the current tenant than the location or size of unit would be to tenants who want to move there. That is the effect on the demand side of the rental housing market. While little recognized, that effect is as damaging as the effect of rent control on the supply side. Trying to dictate market prices never works. When prices (or rents) are constrained by law, shortages and misallocations always result. The way for governments to minimize the inconvenience that occurs on redevelopment or major renovations is to eliminate or reduce rent control restrictions, free up redevelopment and new development, and cut back on the land use restrictions, charges, and taxes that make new housing so expensive.

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process and we are pleased with the outcome,” said David Hutniak, CEO, LandlordBC. “The new ARI process will benefit the rental housing ecosystem in BC by providing a vehicle for partial recovery of important capex investments for landlords, while ensuring the quality of housing for tenants is maintained at the highest standard.” In Ontario, legislation that was enacted a year or two ago is being brought into force as of September 1, 2021. It provides that, on many eviction applications, landlords must disclose if they have previously evicted tenants from any address for demolition, renovations or personal use. The LTB can consider those other evictions and what ended up happening; and the LTB can provide more compensation than it could before in situations where the landlord gives notice in bad faith.

Trying to dictate market prices never works. When prices (or rents) are constrained by law, shortages and misallocations always result. Those provisions should help ensure that terminations for demolition or renovations are legitimate, and not an excuse to try to move a tenant out who is paying a low rent to move a different tenant in at a higher rent. That happens occasionally, and most rental housing providers agree that tenants should have the right to stop that. That right assumes rent control for renewing tenants is the norm. In numerous countries, provinces, and states, rental property owners have the right to insist that a tenant pay the market rent at each renewal date. Rent control provides substantial benefits to renewing tenants. However, it comes at a substantial cost to landlords, and at a substantial cost to people seeking accommodation who want to rent the units that specific tenants occupy at any particular time. Under Ontario’s rent control system, rentalhousing providers can apply for an above guideline increase (AGI) in some or all the rents in their building. If the application is approved by the Landlord and Tenant Board, the LTB’s order allows the recovery of a portion of the cost of the major repairs through an approved rent increase over time. The recovery takes place through an AGI that stays in the rent for the length of time the LTB

20 | July/Aug 2021

expects the work to benefit the building and the tenants. “Even though the cost of the repairs can exceed the building’s total annual rent, the AGI is limited to a maximum of 3 per cent of each tenant’s rent in each of three years, for a total maximum AGI of 9 per cent,” said Irwin. “That means the rental provider pays the repair costs up-front, and through their rents, residents reimburse the rental-housing provider for a portion of the costs over 10 to 20 years.” These conflicts are less prevalent in Manitoba, but major renovations are also less prevalent in Manitoba. Unlike most other provinces, Manitoba controls rents when rental units turn over. Historically, that discouraged new rental construction and building upgrades. In fact, until recently, rent control, the income tax rules, and the economics of rental development had resulted in rental housing shortages, and a negative impact on Manitoba’s economy. However, in the last five years, a fair bit of new housing has come online. In the last year or two, excess new rental stock has become available, which has created vacancies in the existing rental stock. Now, fewer renovations are taking place because the new rental supply makes it difficult to recover the costs of renovations through higher rents for the improved units, especially with all the administrative burden required. “The Manitoba rules allow a landlord to apply to the Residential Tenancies Branch for the approval of a rehabilitation scheme as defined under Part 9 of our Act,” said Avrom Charach, Director of External Relations, PPMA. “That can be either a whole building program or for 10 per cent of the suites or fewer. There are pre-renovation inspections of the building and the suites, and post-renovation inspections, before the landlord is allowed to adjust the rents. The application process is a significant restriction on the ability of rental providers to improve and modernize buildings. In addition, in the case of single unit rehabilitations, the government forces a landlord to prove the previous tenant left voluntarily.” Saskatchewan has not experienced as many conflicts relating to building rehabilitation or renovation as other provinces. The province has had a consistent supply of new units come onto the market over the past five years. Rents have remained stable for the past three to four years, trending near or below inflation, and the vacancy

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rate has varied from 6 to 9 per cent. The rental landscape is also made up of numerous small and medium-sized providers who cannot renovate entire buildings at once due to capital constraints. All of these factors have influenced rental housing providers to renovate during turnover so that capital costs can be stretched over a longer period of time, vacancy can be mitigated, and cash flow can be maximized. “In the single family market, we have seen more evictions due to renovation because property owners have chosen to sell their property in the rising real estate market and are renovating to maximize their properties’ value,” said Choquette. “This trend seems to be a symptom of the pandemic, and we don’t expect it to continue over the longer term.”

Understanding the need for evictions Major renovations are disruptive. Often the power or the water needs to be turned off. Tearing out walls removes fire separations. It is not safe or practical to perform major renovations with tenants in place. Some rental providers raise rents when they do renovations or major repairs to recover the cost of the repairs. Some tenants find it hard to

“In the single family market, we have seen more evictions due to renovation because property owners have chosen to sell their property in the rising real estate market and are renovating to maximize their properties’ value.” pay the higher rents. Yet buildings have aged. Standards are higher today than they were when the buildings were originally constructed. Governments want higher railings for safety, better insulation and better heating plants to reduce greenhouse gas emissions, and a whole variety of other upgrades. At a certain point, elevators need to be replaced. In buildings with single elevators, that leaves some tenants unable to come and go. Other repairs create a great deal of noise and dust, making it unpleasant to try to stay in the rental units.

22 | July/Aug 2021

The cost of the upgrades needs to come from someone. Rental housing providers bear the initial costs, but they understandably want to recover those costs over time. “Manitoba’s AFRI program allows cost-recovery, over time, for renovations done while tenants occupy suites,” said Charach. “AFRI orders allow a calculated rent increase based on passing through the actual costs of work completed, over time periods that vary with the expected useful life of the major repairs. One can see that landlords always need either pre-approval or post-work audits to ensure that rent increases are appropriate. There are flaws in this system as well, not the least of them being how onerous those applications can be; and so, removing some of those barriers would help.”

Conclusion Redevelopment of rental properties is a necessity. Major building renovations and demolition require tenants to vacate for the work to be done, which often necessitates evictions. Rental property owners have a right to recoup the costs of the work, which means higher rents for better quality and safer units. Vilifying rental property owners in the news, holding tenant strikes, and imposing stricter legislation won’t change these facts, although it can reduce the availability of rental stock and drive rental property owners out of the market, thereby reducing rental supply and making tenants worse off across the board rather than better off.

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Analyzing tenants’ preferences and the rental housing market Rental property owners are very knowledgeable about rent levels and vacancy rates in their buildings and surrounding area. However, it can be advantageous to have more data on tenants’ wants and needs, especially during a pandemic, as it will help with providing a better rental experience. This information is essential for keeping and attracting good tenants. RHB Magazine analyzed data acquired from Informa Canada’s annual Canadian Multi-Res Tenant Rental Survey, which polled approximately 36,000 Canadian rental tenants in 2020 to understand their preferences and identify trends. Last year, questions focused on preferences, amenities, programming, lifestyle choices, technology, and operations. The current survey prioritized COVID-19, including more detailed questions on how tenants felt about various issues before and during the pandemic. To collect the data, Informa Canada partners with rental property owners and managers to distribute surveys through their portals, newsletters, emails, flyers, and other media. It also conducts independent outreach through social media and other channels. Members can benchmark tenants’ responses against market responses to help evaluate tenants’ satisfaction with services and amenities, as well as guide their decision-making. The 2021 survey expanded its reach to include more market segments, including students and condo renters. Questions dove deeper into specific issues, such as tenants’ reasons for staying or leaving their current units, preferences around specific features, and changes in behaviour due to the pandemic. New questions were added since 2020, including tenants’ preferences about retail spaces in their building, gym use, transportation, communications preferences, and more. Answer options were also updated to accommodate changes, such as new technology options. The survey just concluded with more than 36,000 resident responses, providing Informa Canada with a five-year data history of about 100,000

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individual tenant responses to more than 200 questions. “The survey results, which will be made available for purchase in October, will be presented at the Canadian Apartment Investment Conference, which takes place in a virtual format on September 22 and 23,” said Sarah Segal, Director, Real Estate, Informa Connect. “CAIC enables owners, managers, developers, investors, and lenders to network and gain valuable insights on major trends, issues, opportunities, and strategies in Canada’s multi-unit residential market.” To follow are some key findings from the Canadian Multi-Res Tenant Rental Survey, as well as general comments on the market from our research and interviews.

Who are the tenant respondents? Tenants span all walks of life, age groups, family situations, and backgrounds. Demographics can vary widely between buildings located in different neighbourhoods, cities, and provinces. Most survey respondents were between the age of 31 Age of Respondents 71+ 61-70 55-60 51-54 41-50 31-40 26-30 25 and under 0%

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and 40 (27 per cent), with more than 60 per cent under the age of 40. More than 40 per cent of the tenants who responded were single. Nearly half (46.1 per cent) were employed full time, while slightly less than 20 per cent of those surveyed were out of work due to COVID-19.

What does the rental market look like going forward? During the pandemic, many renters vacated downtown cores and small apartments for more space in small towns and suburbs, where they could get more space for a lower or equivalent monthly rate. This led to higher vacancy rates in some downtown cores, which drove down market rents in select parts of the country. Now, as people are returning to work, tenants are returning to city apartments and rental condos, particularly on the fringes of downtown where the units tend to be somewhat larger than in the core. Millennials and other young renters are looking for their own space after being cooped up with their families for extended periods. A rise in leasing rates will drive down vacancy rates, with average rents expected to move upward. Looking forward to 2022, technology will continue to play an important role in tenants’ lives and the rental housing experience. The pandemic fuelled numerous innovations, encouraging people to adopt new technologies and approaches. This includes how tenants search for and view properties, communicate with property managers and owners, shop and receive packages, and work from home. As we eventually move on from COVID-19, there will be changes in tenants’ activities and preferences, which could affect the level of interest in outdoor spaces, in-unit amenities, and desired building location. “It’s great to see that tenants overall were satisfied with how property owners and managers handled the pandemic,” said Segal. “They were pleased with the level of communications with management, as well as how they approached restrictions and maintained the buildings during this time.”

What types of rental properties are in demand? While smaller units make up the majority of the rental market, on a year over year basis, larger units (i.e., three- to five-bedroom units) are in greater demand. There is a significant increase in searches and views for four-bedroom units. There is also reduced demand for one- and two-

26 | July/Aug 2021

bedroom units. Rental demand is increasing in secondary and tertiary markets, since many people are working from home and not worrying about commuting distance, choosing space and cost savings when looking for a place to rent. Lifestyle preferences, rather than proximity to transit and work, is driving tenants to rental spaces in outlying smaller towns and cities.

How important is building location to tenants? Rental property owners have no control over the neighbourhood amenities. However, knowing what matters to tenants will help with promoting what matters to attract and retain tenants. Safe, clean neighbourhoods and buildings will always matter to tenants, as well as being close to amenities that would make their lives more convenient or enjoyable. “In 2019, the building’s proximity to work or school was the most important factor, followed by its walkability, or location relative to retail and neighbourhood amenities, with rental amount being third most important,” said Segal. “However, in 2020, those numbers shifted, as building location took a back seat to rental amount, which became more important than proximity to work or school and walkability.”

What features and amenities are important to tenants? Even after the lockdowns ended, many tenants were spending more time at home, particularly those who were required to work from home. This has led to some shifts in what was important to tenants with respect to features and amenities. Tenants are most interested in having a balcony or private outdoor space, natural lighting, soundproof walls, a bathtub, and a dishwasher. High-speed Internet and space to work are also highly desirable. Renovated or high-end kitchens are still high on the list, but interest has fallen. There is also interest in elevator access and having air barriers between units. “People spent a lot more time in their units during lockdown, so they tended to pay more attention to the quality of their living space,” said Segal. “COVID-19 changed what tenants valued in their personal space. There was greater focus on the types of features they had and the quality of those features.” Tenants have also shown sustained interest in building programs, which is partially due to the inability to use some building amenities, but also

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because there is demand for the ability to interact with others. The survey showed that respondents were most interested in social events, yoga and Pilates classes, cooking classes, health and wellness events, and the ability to volunteer.

What do tenants want in outdoor space? Outdoor space has always been important to tenants. Around 57 per cent of tenants have access to outdoor space, and about 45 per cent would never rent a unit that does not have private outdoor space (such as a balcony or a patio). Feelings about outdoor space have changed due to the pandemic. The percentage of people who wanted a private balcony or a premium shared outdoor space increased during COVID-19. How did your feelings change about outdoor space? 40% 35% 30% 25% 20% 15% 10% 5% 0% I wanted a private I did not want luxury I did not care either way I wanted shared luxury balcony but was fine with shared space and only / Outdoor space at my outdoor space over my premium shared outdoor wanted a private balcony building was not own small private space important to me balcony Before Covid-19

During Covid-19

How did tenants manage packages during the pandemic? Online ordering is prevalent, and it makes sense for rental property owners and managers to adapt to how tenants shop and live. Setting up an automated package locker system would enable tenants to safely receive packages at their building. However, nearly two-thirds of respondents said their building does not have an automated package locker system, even though they would want one.

Survey findings pre-pandemic and during the pandemic paint an interesting picture. The percentage of people purchasing groceries alone, as well as groceries and goods, increased during COVID-19. More people overall shopped online during the pandemic.

How effective are virtual tours in making rental decisions? Virtual tours became a necessity during the pandemic, as potential renters needed a safe way to view units for rent. While the technology has improved immensely and helped rental properties fill their empty units, approximately two-thirds of respondents stated they would still need to visit the rental property in person before making a

28 | July/Aug 2021

Younger cohorts more comfortable making a rental decision based on a virtual tour

80% 70% 60% 50% 40% 30% 20% 10% 0% 25 and under

26-30

31-40

41-50

51-54

55-60

61-70

71+

I am open to virtual property tours but I would need to visit in person before making a decision I do not like virtual property tours and will only rent a property if I can see it in person I like virtual property tours and could make a decision based on one

decision. Less than one-quarter of respondents did not like virtual property tours and would only rent a property if they could see it in person. There was a direct correlation between age and the percentage of people who liked virtual property tours. The younger the respondents, the greater the likelihood that they would rent a property by using a virtual tour alone. Respondents under the age of 25 made up the largest cohort of people who liked and would make a rental decision using solely the virtual tour. The percentage decreased almost steadily as the age of the survey respondents increased.

What do student renters want? There’s an interesting difference in students’ preferences for student housing. More than 70 per cent prefer to live in new purpose-built rental. However, the majority of those respondents would prefer to be in a rental property operated by a third party rather than one operated by their school (41 per cent versus 32 per cent). Nearly half of the respondents made a decision on the property based on the available amenities, and continue to use and value them today. “Even though most students were living, or wanted to live, in new purpose-built rental, looking post-graduation, about 90 per cent of students believe they will be living in a rental property that has the same or higher quality,” said Segal.

Conclusion Having access to more information on tenants’ wants and needs will assist rental property owners and managers with providing a better tenant experience. The Canadian Multi-Res Tenant Rental Survey and other sources of tenant data will provide key data and insights that can help with adapting to tenants’ changing needs and preferences, as well as attracting and retaining good tenants.

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Multi-Unit Review Market Analysis and Investment Trends

Kyle Church, Broker

Multifamily properties continued to be a highly desirable product in the commercial real estate market in the first half of 2021. Despite minor challenges with vacancy rates, the fundamentals of apartment investing remain strong as investors look to take advantage of a recovering economy and record low interest rates.

Another recurring trend across the country has been rising vacancy rates. Increased vacancy is largely the result of the pandemic with many young people moving home or into shared accommodations, while we have also seen reduced immigration over the past year. Rising vacancy rates are of minor concern to landlords; with the vaccination rollout well underway and pandemic restrictions being lifted, these vacancy rates are expected to decrease in the months ahead. Despite a small increase in vacancy rates – when compared to other asset classes – the multifamily market has proven its resiliency throughout the pandemic, which has undoubtedly led to more equity flowing into the market and driving demand higher.

Capitalization rates continued to compress in the major Canadian markets of Toronto, Vancouver, and Montreal, as well as tertiary markets in close proximity to the major urban centres. As we look across the country, cap rates range from their lowest in Vancouver (2.25 per cent) and Toronto (2.75 per cent) to their highest in Edmonton and Winnipeg still seeing deals transact as high as 6.0 per cent. Astute multifamily investors recognize that capitalization rates should not be relied upon as the primary metric when evaluating acquisition opportunities. With cap rates at record lows, apartment owners must look to increase the property’s value through finding operational efficiencies and increasing rents up to market upon tenant turnover. Despite the global pandemic, rents have been observed to continue increasing in most markets across the country; Toronto saw the largest gain at 4.7 per cent. Other markets in Ontario, including Waterloo Region and Ottawa, saw significant gains as well. City

The strength of the multifamily market has resulted in a large volume of transactions taking place over the past 12 months, as some investors look to reposition their investments and take advantage of significant increases in value. In the strongest markets, properties are obtaining multiple offers with competitive terms from strong buyers already established in the Canadian market. We anticipate this trend will continue in the coming months as investor demand continues to outweigh the availability of properties coming for sale.

Capitalization rate

Average rent

Rent increase

Vacancy

Calgary

4.00% - 5.50%

$1,195.00

0.00%

6.60%

Edmonton

4.00% - 6.00%

$1,153.00

0.80%

7.20%

Halifax

4.25% - 5.50%

$1,170.00

4.10%

1.90%

Montreal

3.00% - 5.00%

$891.00

4.20%

2.70%

Ottawa

3.50% - 4.75%

$1,358.00

4.50%

3.90%

Toronto

2.75% - 4.00%

$1,523.00

4.70%

3.40%

Vancouver

2.25% - 4.00%

$1,508.00

2.00%

2.60%

Victoria

3.25% - 4.25%

$1,275.00

3.30%

2.20%

Waterloo

3.00% - 4.50%

$1,221.00

4.00%

2.10%

Winnipeg

4.50% - 6.00%

$1,107.00

3.00%

3.80%

30 | July/Aug 2021

MULTI FAMILY INVESTMENTS We help investors buy and sell mid sized apartment buildings in Southwestern Ontario

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SOLD IN 2021

Recent Transactions

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If you are interested in buying or selling apartment buildings in Southwestern Ontario, please subscribe to our mailing list to receive our quarterly report, market updates and exclusive listings. Visit principalinterest.ca

Kyle Church

Andrew Macallum

Broker

kyle.church@royallepagecommercial.com

Royal LePage Grand Valley Realty, Brokerage 15C-370 Highland Road West, Kitchener, N2M 5J9 www.principalinterest.ca

Sales Representative andrewmacallum@royallepagecommercial.com

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Not intended to solicit sellers or buyers currently under contract. Royal LePage® is a registered trademark used under license. All offices are independently owned and operated unless otherwise noted. ©2021 Bridgemarq Real Estate Services Manager Limited. All rights reserved.

Dealing with the challenge of retaining talent By David Gargaro If you’ve seen the news over the last few months, you know that employees are quitting their jobs in droves, particularly in the U.S. There have been mass resignations over the summer, as employees determine that they are burned out due to pandemic-related stress or, having worked from home for the first time, they will look for employment that enables them to leave the office behind. Canada is seeing evidence of a similar trend. The pandemic has created a number of challenges for businesses across numerous industries, including real estate as a whole and rental housing specifically. While the lockdowns and work-from-home movement have inspired a great deal of innovation, they are also driving a focus on connecting with and retaining quality talent. According to RBC, the number of people who left their jobs in June tripled compared to the same month in 2020. Retirements are also on the rise. According to statistics published in the Financial Post, RBC expects 125,000 Canadians to retire in the second half of 2021 as Baby Boomers opt out of the rigours of returning to work on a daily basis. That means a lot of experienced talent will leave the employment pool, which will leave some companies bereft of knowledgeable and skilled employees. Corporate leadership is concerned about how to retain its top talent. However, offering to increase pay and benefits and providing flexible work options will not satisfy many employees’ expectations to a sufficient degree to encourage them to return to work. According to a recent study conducted by Angus Reid on behalf of International Work Group, around 33 per cent of Canadians are only willing to travel up to 15 minutes to work one way. Management will have to find new ways to retain top talent, and level up new and existing employees to make up for the top talent shortfall.

32 | July/Aug 2021

Putting the right systems in place is one solution, particularly in the real estate sector. This strategy will help businesses to continue their operations and address the dynamism and uncertainty of what will eventually be a post-pandemic world. Implementing these systems will also empower teams to succeed in their positions and realize job satisfaction. Virtual learning is becoming a key component of helping businesses to retain and upgrade their talent, and has gained traction when companies were forced to remain physically distant. Implementing a virtual talent onboarding program has become a critical part of companies’ maintenance and growth strategies since the start of the pandemic. With technology helping companies to manage operations while employees were working from home, it has created opportunities for businesses to provide their employees with online training. This is helping staff to deal with the varied challenges of social distancing, collaborating with teammates, and engaging with clients.

Online learning systems can provide existing and new employees with remote access to role-based training through courses, webinars, knowledge centres, and other resources. Productivity is important for maintaining and supporting business growth. However, it’s vital to establish a positive workplace culture to support employees when output is high. Ensuring that companies maintain communication of goals and responsibilities between management and employees will help with keeping productivity consistent, support cohesion between teams, and make staff feel like they are part of the

organization. Belonging is essential to retention, which is difficult when employees are working from home. Online learning solutions can help here as well. “Delivering creative learning options enhances talent management, which is why Yardi has developed Yardi Aspire for its clients and their teams,” said Peter Altobelli, Vice President, Yardi Canada Ltd. “This product offers online courses and live webinars in areas ranging from software skills and compliance to company policies and custom career development. By hosting all of the organization’s training-related course content and documents in a centralized platform, Aspire reduces the time needed to create, maintain, and administer courses.” Online learning systems fill a gap that was once filled by mentoring, webinars, class-based training, and other forms of in-person learning. COVID-19 has spurred new legislation and requirements for real estate businesses, while technological advancements have progressed at such a degree that it’s difficult for employees to stay current. Online learning systems can provide existing and new employees with remote access to role-based training through courses, webinars, knowledge centres, and other resources. Real estate businesses can also issue new content to

promote professional and personal development that can help fill knowledge gaps and boost employee confidence. “Aspire’s automated reporting functionality was developed to assist management to easily track learning progress and identify organizational trends, providing greater visibility into job performance and satisfaction,” said Altobelli. “By having interactive, mobile-friendly courses in the Aspire Learning Management Solution, companies are better prepared to target and retain the best talent.” This year has highlighted the importance that people play in ensuring the sustainability of the real estate sector. Business leaders are coming to understand the value of their talent pool now more than ever. As a result, they have been putting more focus on looking inward and building their brand and talent pool. Online learning is becoming more relevant, thanks to its ability to provide greater accessibility to resources and growth, alleviate the pressure on management to train their teams, and provide staff with numerous avenues to learn. As the world evolves into a new normal, it is becoming clearer that virtual tools will thrive and fuel growth through talent development, communication, and collaboration in the real estate sector.

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JULY/AUG 2021

Interest Deductibility Limitation back under active consideration By John Dickie, CFAA President

Eighteen months ago, CFAA’s representations (and COVID-19) turned back a federal proposal to impose an interest deductibility limitation (IDL) for the computation of taxable income –-fixed at 30% of net operating income for all businesses. However, the issue has arisen again in the 2021 Federal Budget. The proposed interest deductibility limitation (IDL) would artificially inflate taxable income on rental properties by disallowing some of the actual costs incurred. That will result in the imposition of taxes on income which owners do not actually receive. See Tables 1 and 2 on pages 37 and 38 for samples of the effect of an IDL on rental housing providers.

What the 30% limit will apply to Technically, the 30% interest limitation test will apply to earnings before interest, taxes, depreciation and amortization (EBITA). That is close to net operating income. For a transition year, the limitation is to be 40%. One year is far too short a transition period, given the length of time for which rental housing providers have mortgage and loan commitments. There is to be an exemption for businesses with taxable capital of less than $15 million dollars, but taxable capital includes loans; and so, an owner could have that much taxable capital while only having equity of $2M or $3M or less.

If an IDL goes forward now, that would be a problem for many rental housing providers, since rental housing is capital intensive. An IDL would be a very serious problem for highly leveraged rental providers or developers. The issue could affect many more rental housing providers when interest rates rise, which is bound to happen at some time. CFAA is advocating an exemption for all real estate businesses, including rental housing. Our best policy argument is that Canada needs more rental housing, and governments want to encourage a larger supply of rental housing, whereas an IDL would have the exact opposite effect on rental supply.

Why do rental housing providers have high interest costs? Rental owners certainly provide on-going services like cleaning and repairs, and pay utilities and insurance, but the bulk of what rental owners provide is the use of a suite in a building. That has been paid for by equity and borrowing, and most buildings are still encumbered with substantial mortgages on which substantial interest is paid. As mortgages are paid down over time, mortgage financing is typically increased to pay for major repairs and renovations, including energy and other building upgrades. Most rental owners finance their properties to 40, 50 or 60% of value on an on-going basis. Many rental housing providers finance new construction or acquisitions at a higher rate than that, often at 80 or 90%. To encourage rental development, CMHC insures mortgages on new construction at up to 90% of property value. As a result, many rental owners pay between 30% and 50% of EBITDA in interest payments! The IDL plan was triggered by work done by the Organization for Economic Cooperation and Development. That is an organization of 38 member countries, including Canada, the US, Australia, Japan and most European countries, which seeks “to build better policies for better lives”.The OECD pays considerable attention to government policies. Many developed countries have become concerned about international corporations, or corporate groups, shifting taxable

rentalhousingbusiness.ca | 35

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NATIONAL OUTLOOK income to low-tax jurisdictions. To prevent that being done by inter-group loan allocation, the OECD has called on all countries to impose an IDL of not more than 30% to prevent “base erosion and tax shifting” (BETS). (The US took a different tack on BETS by calling for all countries to adopt minimum corporate tax rates.) However, there are only a limited number of rental housing providers in Canda which borrow abroad, or which operate as part of an international corporate group. In borrowing within Canada, the interest payments are subject to Canada’s tax laws, and thus are generally subject to tax as income in Canada. Not being part of an international corporate group means there is no opportunity for base erosion or tax shifting. As well, Canada and the US have similar rental housing sectors, which are very different from those in the rest of the OECD. Only the US and Canada have any significant presence of large-scale corporate developers creating and holding large portfolios of multi-unit residential properties. The US government has effectively exempted all real estate businesses from its IDL rule, which is section 163(j) of the US Tax Code.

Conclusion There is no base erosion or tax shifting problem in rental housing to solve, but imposing an IDL would create a major problem for the rental housing industry, and run counter to other important government policies which seek to increase rental housing supply and facilitate the financing of energy saving and other building retrofits. The Government of Canada should exempt all real estate businesses and partnerships from any interest deductibility limitation.

Impact of a 30% interest deductibility limitation on rental housing providers

Table 1 shows two typical situations for a rental building which has been held for five or ten years: first, a typical income, expense and tax situation for a principal business corporation (a PBC), and second, the situation for a real estate investment company, with five or fewer full-time employees. All the figures are based on one unit in a multi-unit building. Both situations assume a 50 per cent borrowing ratio (loan-tovalue), and a 3.25 per cent interest rate. (That rate would be high for a CMHC-insured mortgage today, but it is not high by historical standards, when much current debt was taken on.) Table 1: Typical income, expense and tax situations with low leverage Section

Building item (per rental unit)

Basic building facts

Current tax situation Apparent proposal

Comparison

Principal Business Corp (PBC)

Real Estate Investment Corp

Property value

$180,000

Gross rental income

$12,000

NOI (= EBITDA)

$7,200

Interest payments per year

$2,925

Capital cost allowance claimed

$2,000

Net income before tax

$2,275

$830

$1,140

Total corporate tax (fed & prov - approx) Net income after tax

$1,445

$1,135

Interest payment allowed (30% of NOI)

$2,160

Notional net income for tax calculation

$3,040

Total corporate taxes (fed & prov - approx)

$1,110

$1,525

Actual net income (from above)

$2,275

Actual net income after tax

$1,165

$750

$279

$380

33.5%

Increase in tax (in dollars) Increase in tax (as percentage)

rentalhousingbusiness.ca | 37

JULY/AUG 2021 Notes (applicable to both tables) 1. Net operating income is a real estate term, which is similar to EBITDA. Therefore, using NOI based on rents for the calculations is a close approximation of EBITDA. 2. Provincial taxes on corporations vary slightly. Some are slightly above Ontario’s, and some are slightly below Ontario’s. Ontario’s is used in the table. Table 2 shows two typical situations for a rental building which has been acquired recently and given major repairs or renovations: first, a typical income, expense and tax situation for a principal business corporation (a PBC), and second, the situation for a real estate investment company, with five or fewer full-time employees. All the figures are based on one unit in a multi-unit building. Both situations assume an 80 per cent borrowing ratio (loan-to-value) and a 3.25 per cent interest rate. (That rate would be high for a CMHC-Insured mortgage on property today, but it is not high by historical standards, when much current debt was taken on.) Table 2: Typical income, expense and tax situations with high leverage Section

Building item (per rental unit)

Basic building facts

Current tax situation

Principal Business Corp (PBC)

Real Estate Investment Corp

Property value

$180,000

Gross rental income

$12,000

NOI (approx. = EBITDA)

$7,200

Interest payments per year

$4,680

Capital cost allowance claimed

$2,000

Net income before tax

$520

Total corporate tax (fed & prov)

$190

$2600

Net income after tax Apparent proposal

$330

$260

Interest payment allowed (30% of NOI)

$4,680

Notional net income for tax calculation

$3,040

Total corporate taxes (fed & prov - approx)

$1,110

$1,520

Actual net income (from above)

$520

($590)

($1,000)

$920

$1,260

485% approx. 5 times

Actual net income after tax (loss) Comparison

Increase in tax (in dollars) Increase in tax (as percentage), and a multiple

A new 30% limit on interest deductibility for Canadian corporations, REITs or partnerships would dramatically increase income taxes on rental housing, taxing notional income which owners do not actually receive, and forcing some rental housing providers into a loss position.

GHG reductions and the cost of heating rental buildings

Energy issues are coming to the forefront of public policy, with suggestions that homeowners and rental housing providers be forced to reduce greenhouse gas (GHG) emissions by changing from heating buildings with oil or natural gas, to heating with electricity instead. That is called “de-carbonization” or “de-gasification”. In most areas, that change would reduce greenhouse gas emissions, but it would result in major retrofit costs which would be borne by both rental housing providers and renters, unless government subsidizes those costs. CFAA is ramping up our efforts to minimize the negative impact of energy moves at the federal level, including seeking to increase access to beneficial programs and incentives for rental housing providers. Provincial and municipal policies and rules are generally issues for the various provincial and regional associations, but CFAA seeks to facilitate information exchange on such nation-wide issues, for the benefit of rental housing providers across Canada.

38 | July/Aug 2021

NATIONAL OUTLOOK Examples - across Canada and abroad As one example of the possible public policy moves, the City of Ottawa has adopted a Climate Change Master Plan. Part of that plan is the “Energy Evolution” action plan for how Ottawa will meet its target to reduce greenhouse gas emissions to zero by 2040 or 2050. The City of Toronto has adopted a similar plan, known as Transform TO, while Vancouver has adopted its own Climate Emergency Action Plan, and other cities across Canada are considering similar plans. The U.K. is banning gas boilers in new homes from 2025. Cities in the states of California, Washington and Massachusetts are also trying to phase out the use of natural gas. Some Canadian provinces are working with the federal government on a Retrofit Building Code, which would require energy upgrades to existing buildings. In BC, Manitoba, Ontario and Quebec, where the provincial power grids do not produce a lot of GHG emissions, fossil fuel combustion to heat buildings represents a major source of GHG emissions. Buildings heated with fossil fuels can cut some of their emissions by reducing the need for heating through actions like better insulation and reusing “waste” heat. But in order to make a big difference, the green building industry and governments are looking to electrify heating. The City of Vancouver is trying to come up with regulations and incentives for homeowners to electrify their home heating. Those or similar regulations may be applied to rental housing too.

Heating technologies Currently in Canada, the most common way of using electricity for heating is through baseboard heaters. They are powered by electrical resistance heating, just like a toaster or an oven. Electric forced-air furnaces, electric convection heaters and electric radiant floors also use electrical resistance heating. Baseboard heaters are popular because they are very cheap to buy and easy to install. However, those and other kinds of electrical resistance heaters result in high electricity bills. Obviously, if the landlord pays for the electricity, high electricity costs are undesirable. Even if the electricity is paid by a tenant directly to the utility company, an inefficient heating system is undesirable because such a system makes the total cost of the tenant’s housing higher, which reduces the rent which the tenant is willing to pay to their landlord. Heat pumps are generally a more efficient electrical heating method because they move heat into homes, rather than generating heat. There are two kinds: • Air source heat pumps, which draw heat from the air, and • Ground source heat pumps, which draw heat from the ground. Ground source heat pumps are sometimes referred to as geo-exchange or geothermal heat pumps. They have a high capital cost since pipes need to be placed underground. They also need land under which to place the pipes; and so, they may not be feasible in dense urban settings, where many rental buildings are located. Heat pumps are much more efficient than electrical resistance heating. It is possible to obtain 300 per cent efficiency from a heat pump at 15 degrees C. In comparison with the heat that electricity can create through resistance, three times as much heat can be extracted from the air or ground and moved into a building. Air source heat pumps are especially efficient when the outside temperature is not too low, such as in the spring and fall in most areas of Canada. Currently, the established technology works down to about minus 10 degrees C, which will not suffice as the only heat source in most of Canada. Some manufacturers are now claiming that their new cold climate heat pumps can deal with outside temperatures as low as minus 25 C or minus 30 C. However, heat pumps tend to produce a lower temperature heat than burning fossil fuels, or resistance heating, and therefore they don’t heat a building as quickly. That means to use a heat pump, a building needs to be airtight and well insulated to keep the heat from escaping, and to reduce the “heating load”.

The economics of heating with electricity Switching to any form of heating via electricity usually results in lower GHG emissions, with the exception of provinces where electricity is largely generated by burning fossil fuels, such as Alberta, Saskatchewan

rentalhousingbusiness.ca | 39

JULY/AUG 2021 and Nova Scotia. In other words, electric heating does not save as much in emissions if generating the electricity uses carbon. Where a substantial amount of coal, coke or oil-based fuel is used, converting to electric heating might even increase GHG emissions. At current energy prices and retrofit costs, it is not economic to convert from natural gas to heat pumps anywhere in Canada. Compared with the energy provided, electricity is expensive compared with natural gas. In fact, in Ontario, electricity is 4.5 times more expensive than gas. The ratio ranges from 3.8 times higher in Alberta, through 2.5 times higher in Quebec and B.C., to 2.1 times higher in Manitoba. Even with a carbon tax on natural gas of $170 per tonne of GHGs, electricity would still be three times more expensive than gas in Ontario, and close to twice as expensive as natural gas in other provinces. The second stumbling block is the cost of deep retrofits to make rental buildings sufficiently airtight and well-insulated to reduce the “heating load” enough to make heat pumps practical in Canada.

Deep building renovations A major rental housing provider recently evaluated the conversion of a 250 unit apartment building in Ottawa from natural gas to electrically powered air source heat pumps. The main components required for a deep retrofit would be: • Triple-pane windows; • Envelope over-cladding with 4” exterior insulation; • Replacing existing perimeter radiators with a low-temperature perimeter heating system; • In-suite ventilation units; and • Replacing all but one gas boiler with heat pumps. The one gas boiler would be retained to be used during the coldest days to supplement the heat from the heat pumps. The in-suite ventilation units are needed because once an over-cladding project is done and the building envelope is “tight”, one cannot rely on leakage around windows and other wall joints to provide ventilation. Instead, mechanical ventilation is needed to avoid humidity and air quality issues (including mold growth). Heat recovery would be included, but outside air has to be heated and moved inside, using fans powered by electricity.

The cost of deep retrofits vs. the on-going savings The retrofit cost would be close to $78,000 per unit. At a 3 per cent interest rate, the interest that would have to be paid on that would be $2,340 per year, or almost $200 per month per unit. Amortizing the capital cost over 30 years would require another $1,600 per year, for a total outlay of $330 per month per unit. Yet, at today’s energy prices, the utility savings would be only $410 per unit per year, or $35 per month, a small fraction of the cost of the required building retrofits. While the natural gas costs would shrink, electricity consumption and costs would go up, not only to power the new heat pumps, but also to power the new building mechanical ventilation, which is needed when the building is sealed. In most other provinces, electricity is somewhat less expensive than in Ontario. However, subject to small variations due to differences in the average temperature in each location, the utility cost savings would still be dramatically lower than the cost of the retrofits needed to achieve them. The utility cost savings would likely range from $38 per month in Alberta to $49 per month in Manitoba. It is not surprising that rental housing providers are not rushing to adopt heat pump technology to heat rental buildings. The utility cost savings rise as the price of natural gas rises, but even with a potential carbon tax of $170 per tonne, natural gas prices are not projected to rise enough to make deep energy retrofits economic. In Ontario, by 2030, the utility cost savings from a conversion to heat pumps could reach $100 per month. At a high natural gas price, using Manitoba’s low electricity rates, the utility cost savings could reach $118 per month. That is still only slightly more than one third of the retrofit cost of $330 per month.

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NATIONAL OUTLOOK Conclusion Rental housing providers need to be alert to the unintended consequences of climate change policy measures. Before installing higher efficiency heating equipment, making buildings airtight and well-insulated to reduce the heating load can be a good plan, because those measures support costeffective building heating via any means. However, care must be taken to leave enough ventilation to avoid the need for mechanical ventilation, or the costs of adding mechanical ventilation need to be factored into the retrofit and operating costs. Choosing upgraded furnaces or boilers should be done with an eye to how much energy they will save, how much emissions they will eliminate, and how long they will last, as well as the tie-in with building ventilation. Heating technology, energy costs and building regulations are likely to change significantly over the next 30 years.

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PRESIDENT’S MESSAGE Summer is in full swing here in Ontario, which is a great reprieve from the long winter months in lockdown. Ontario is now in stage 3 of its reopening plan with most things open, although some restrictions are still in place and masks are still required. COVID-19 numbers are down significantly and vaccination numbers have reached the target thresholds. Things are looking positive in Ontario and in Hamilton, with many hoping that this means a gradual return to a more normal pre-COVID-19 life. Still, we look to many other parts of the world that are experiencing fourth waves of the virus, and hope we have done enough in Ontario to prevent the same from happening to us, but we will surely see how it unfolds as we draw closer to fall and winter. Hamilton has been weathering the storm but the effect of the pandemic is still being felt. Although the LTB is now open in Ontario, the backlog of hearings to be heard has still been quite detrimental to the rental environment. - Tina Novak, President, HDAA

Hamilton COVID-19 update The City of Hamilton continues to fight the pandemic, but we are doing well. We are currently averaging around 16 new daily cases with just under 140 active cases in the City, and approximately 60 per cent of the adult population is fully vaccinated. The trends are positive and hopefully we are in a position that will allow us to avoid any future waves. The LTB in Ontario is once again open but the backlog of hearings means many landlords still have significant waits before a resolution occurs. Currently, the average wait time for a hearing date is approximately six months, which is debilitating for many small landlords. The LTB is implementing new strategies to decrease these wait times by prioritizing mediation, putting measures in place to reduce delays, and improving the quality of dispute resolution. They are also working on ensuring that sameday mediation services are available, as well as dispute resolution services. They have also added more adjudicators. Although these are all positive measures, they should have been implemented many years ago. It is easy to blame

the pandemic for these delays, but as we know the LTB was already facing significant backlogs before the pandemic. Of course, all changes take time to be felt. Hopefully these new measures have the intended results soon. The City of Hamilton’s Medical Officer of Health has recently released a Letter of Instruction, which mandates COVID-19 measures in highrise apartments and condominiums that are 12 storeys or higher. It includes requirements that certain cleanliness measures be followed to prevent the spread of the virus and mandates that a COVID-19 safety plan be in place. The requirements encompass everything from cleaning requirements to availability of sanitation stations to HVAC system requirements. The timing of this is somewhat peculiar, as we are a year and a half into the pandemic. While many large rental providers were taking many or all of the measures all along, this information would have been very helpful to other housing providers earlier in the pandemic when many things were uncertain, but any information from the City in these times is helpful.

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Licensing update The plan for deciding on landlord licensing in Hamilton has been very uncertain. The licensing issue, which is to be brought before the Planning Committee, has been delayed for several months and is currently due to be discussed in August, but it may be delayed yet again. The HDAA continues to prepare our submissions and delegations, alongside many of our sister associations who have joined us in our fight, with regard to the licensing issue. We will continue our fight against it. The HDAA has also created a petition against licensing that we have circulated to our members and on social media. You should find it on Change.org if you search “Hamilton Licensing”. If you would like to participate in delegations or provide submissions, please reach out to us.

Supply issues & vacant homes tax In an effort to help ease the current housing supply issues, the City of Hamilton is looking to draft a bylaw for City Council to approve to bring a vacant home tax to Hamilton. With the lack of affordability and lack of supply in the City, the City is looking at ways to help solve the issue and it seems this is the next avenue they wish to explore. The supply and affordability issues have indeed been quite alarming. Hamilton was declared the third least affordable housing market in North America when comparing income to housing prices, which is shocking, and points to a lack of planning, proper policies, encouragement of development, and overall poor foresight of future issues. The housing supply in Hamilton is certainly not meeting demand, as this was an issue before the pandemic, and it became much more apparent as many people from Toronto flocked to “more affordable” markets, making the problem much worse and raising prices to all-time highs. This has also trickled into the rental market with rents rising higher due to greater demand for the limited supply. The rising home prices have exacerbated the issue as many rental units are being converted to single-family homes due to landlords, who have struggled throughout the pandemic, wanting to take advantage of rising home prices and get out from under the landlord-tenant legislation that is increasingly skewed against landlords This issue is not going to go away anytime soon, as housing inventory is at the lowest point it has been in decades. As long as the pandemic continues, many will be hesitant to make a move or downsize and put their homes on the market. This same mentality applies to the rental market with many tenants staying where they are to avoid the hassle of moving during a pandemic when facing a lack of better options. It is no surprise then that the City is looking at a vacant homes tax as an avenue to help with these issues. Currently, the City does require owners of vacant properties to register them on a city register, with a cost of $297 to register and $840 for yearly inspections. This has made the City aware of 221 vacant residential properties. The City is considering implementing a mandatory property declaration as well to obtain a more accurate number by identifying more properties. Depending on the tax rate implemented, the City hopes to generate between $800K to $1.6M in revenue through the vacant homes tax and put more supply on the market, either for sale or for rent. Whether this bylaw will have the intended results in Hamilton remains to be seen, but there are examples of other cities that have already implemented a similar program, as well as other cities that are considering doing the same. Vancouver implemented their vacant homes tax in 2017 and has apparently generated significant revenues and reduced the number of

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vacant properties from approximately 2,500 to 1,900. Toronto has already approved a home tax plan with a planning start date of 2022, while Ottawa has also approved moving forward with a vacant residential unit tax in principle, although the design is still to be determined. Anything that complicates the housing market or adds an additional cost is not positive on its face, but with the issues surrounding supply and affordability it is no surprise that more cities are considering such a tax. Whether their efforts should be more concentrated on actually providing more supply and making development easier is perhaps an issue for another edition.

With the City of Hamilton once again discussing the Licensing regime and whether it should be implemented, it is important that we continue the fight against licensing and form a united front to prevent its implementation. The HDAA will continue to keep our members informed and updated on developments on licensing.

Past events

The Letter of Instruction requires all persons responsible for high-rise apartment buildings and high-rise condominium buildings, with 12 or more storeys in the City of Hamilton, to adhere to certain COVID-19 safety requirement to reduce the spread of COVID-19, including having a COVID-19 safety plan in place by July 17, 2021.

June 22 – Licensing Town Hall The HDAA held a Licensing Town Hall to provide updates on landlord licensing to our members, as well as provide members the opportunity to ask questions and learn how they can become more involved. Tina Novak, HDAA President, provided a brief history of landlord licensing and the outcome of our past efforts in the fight against it. The Town Hall was well attended, with many great insights from our members on their current struggles and suggestions on how things can be improved.

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July 27 – Letter of Instruction for High-rise Buildings The HDAA and Hamilton Public Health Services hosted an information session on the recent Letter of Instruction released by Hamilton’s Medical Officer of Health and its requirements and enforcement framework.

The information session was aimed at supporting operators with implementing their COVID-19 safety plan requirements. The session was very well attended. Great suggestions were provided on how to continue to keep tenants safe, what strategies housing providers should implement to make adherence easier, and what the City of Hamilton’s bylaw officers would be focusing on.

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CFAA SUPPLIERS COUNCIL CFAA thanks the members of the CFAA Suppliers Council for their continued support. CFAA could not continue all of its current work for the rental housing industry without them. CFAA Suppliers Council Members receive recognition as supporters of the rental housing industry, exposure on the CFAA website and in RHB magazine, and priority in sponsoring CFAA events.

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PRESIDENT’S MESSAGE Shane Haskell takes the helm as LPMA president Welcome everyone! I’d like to introduce myself as LPMA’s new president, a position I’m looking forward to holding for the next two years. COVID-19 has been a whirlwind, but it has also created opportunities for change in how we do business. My goal is to streamline processes and implement new ways of doing things administratively while adding value to everyone’s membership. I’m also excited to announce that LPMA is planning a revamped website. The marketing committee is establishing a wish list of new features that will improve the website’s appearance and functionality. We hope to have it ready by the end of this year.

Shane Haskell

Our famous LPMA golf tournament is back and is scheduled for September 13 at Firerock Golf Club. Watch for registration details and sponsorship opportunities. See you there! In the meantime, I’m looking forward to communicating with everyone through LinkedIn or by email. Best wishes until my next update.

- Shane Haskell, President, LPMA T E N A N T I N S U R A N C E I S T O O I M P O R TA N T T O F O R G O — FOR LANDLORDS AND TENANTS In the rush to pack and engage a mover, some tenants leave loose ends, including applying for tenant insurance. Others may be thinking of saving a little money each month. Either way, renters who don’t have insurance could jeopardize their savings — and their housing — if they accidentally cause a fire or flood, experts say. London lawyer Joe Hoffer said when tenants have tenant insurance, the cost of a claim may be spread out over both the landlord’s and the tenant’s insurance companies. If a tenant accidentally caused a fire, for example, the landlord’s insurance company would cover the damage to the affected units and the building. The insurer would then pursue the tenant’s insurance company to recover those costs. Hoffer said a Divisional Court decision shows that not having tenant insurance interferes with landlords’ legal interests and could constitute grounds for eviction. And if tenants are held responsible for accidentally causing a fire or flood, they can be sued. “They can be sued personally for negligence and,

without insurance, it can be financially devastating for them,” Hoffer said. However, tenant insurance protects renters from lawsuits if they unintentionally cause damage to the building, covers the cost of replacing their possessions, and accommodates them elsewhere while their unit is being repaired.

Joe Hoffer

Hoffer recalled one case in which a tenant unintentionally caused a fire. “This tenant didn’t have insurance so the landlord incurred $34,000 of expense,” he noted. While the unit was being repaired, the renter was obligated to continue paying rent even though he wasn’t able to live in the apartment. Costs mounted and, without tenant insurance to cover them, an eviction notice was served requiring the tenant to pay the cost of the damage.

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Hoffer said the Divisional Court decision supported the issuance of the N5 notice to terminate the tenancy. “We had evidence and satisfied the Landlord and Tenant Board that it does interfere with the landlord’s interest where a tenant fails to have insurance in place,” he said. “The other risk for tenants is they could lose their housing.”

Confirming proof of insurance The LPMA lease requires tenants to have adequate tenant insurance. Hoffer advises landlords to confirm that renters have insurance before they give them the keys to their unit. Landlords should also request that tenants have relocation costs covered in their policy in case they need to temporarily vacate their unit. Although landlords can’t stipulate that tenants use a particular insurance company without being in breach of the Residential Tenancies Act, they can make it easy for them by suggesting two or three options. Hoffer also suggests that landlords tell existing tenants that they’re going to enforce the tenant insurance provision of the lease, even if they don’t already. Landlords should point to the term of the lease that states they must have tenant insurance and that they must also show the landlord that they have it. Some tenants may complain that the landlord hasn’t previously enforced the provision. However, a no-waiver clause in the LPMA lease states that even if landlords haven’t enforced a provision of the lease in the past, they aren’t precluded from enforcing it in the future, Hoffer said.

Fees and Charges bylaw Another consideration is the Fees and Charges bylaw, which industry professionals believe will spread to municipalities beyond the GTA. The Toronto bylaw encompasses three conditions: a “substantial portion” of the building must be declared uninhabitable by the appropriate regulatory authorities because of vital service disruptions; the building must be three or more storeys in height or have 10 or more units; and the landlord does not provide alternate accommodations for tenants. Hoffer recommends that landlords have an emergency management plan in municipalities where the Fees and Charges bylaw exists to ensure they move as quickly as possible to re-house tenants, even if the accommodations are in a hotel or a colleague’s apartment building. “It really turns on the circumstances because if the landlord does that then that part of the Fees and Charges bylaw can’t kick in if that condition hasn’t been met,” Hoffer said. Landlords can recover their costs by requiring tenants to cover the bill for their accommodations. Renters who have tenant insurance most likely have relocation coverage included. Those who don’t have tenant insurance should have it, Hoffer said.

Components of tenant insurance coverage Michael Sroka, an insurance agent with Desjardins Insurance, said tenant insurance is reasonably priced. Many factors affect the rate but an average policy, which covers insured perils (including fire, theft, wind, and water) ranges from $25 to $35 per month. A minimum of $15,000 in personal contents coverage is available without a maximum, along with a $2 million liability limit. Tenant insurance includes three main components.

50 | July/Aug 2021

Michael Sroka is an insurance agent at Desjardins Insurance

Legal liability coverage protects tenants from lawsuits if they unintentionally cause damage to their rental unit or to the building due to an insured peril. Tenants are also covered if a visitor is accidentally injured in the tenant’s unit, Sroka said.

Rebecca Werden is sales manager at Desjardins Insurance

Additional living expenses coverage pays to accommodate tenants in a hotel or another rental unit while their apartment is being repaired. Without tenant insurance, renters would have to find their own accommodations. It also covers other needs, such as food.

Personal contents coverage pays to replace a tenant’s personal property, including clothing, furniture, and electronics. Rebecca Werden, sales manager at Desjardins Insurance, said it’s important for tenants to insure the replacement value of their belongings instead of their current value. Affordability is often the sticking point for tenants who don’t apply for tenant insurance. Some view it as an additional expense or don’t believe that anything unfortunate will happen to them, Werden said. Others assume their landlord’s building insurance will pay for the loss of their possessions when it’s the tenant’s policy that covers them. “It’s lack of understanding and lack of knowledge of who’s responsible for what,” Werden said. “I think landlords need to make it really clear what their policy covers and what the tenant’s policy covers, and the importance of it.” Generally, only one or two per cent of clients cancel their tenant insurance after they move into their unit. “It helps them if they have car insurance and we bundle it so it gives them a bigger discount,” said Sroka, adding that the contents of a vehicle are covered in a tenant insurance policy. “It’s a bigger win that way for them.”

Werden said landlords should ask tenants annually for confirmation of tenant insurance. It lowers their liability and reduces risk for the insurance company that provides coverage for their building, although that doesn’t always translate into a substantially lower premium for landlords.

Finding alternate accommodations for tenants Coverage to temporarily relocate renters helps to simplify the events that follow a fire or flood. Hoffer recalled an incident in downtown London that occurred when a valve broke on the top floor of a new high-rise. The valve controlled the water that supplied the fire system and, when it failed, water poured out and ran down more than 20 floors. Many tenants, who had to be moved out of the building and into temporary accommodations, proceeded to make claims against the landlord. The Board has made it clear that if the landlord isn’t in breach of its repair obligations under the lease, tenants won’t receive any damages. In this case, the landlord wasn’t liable because it didn’t cause the flood, Hoffer said. In other situations involving insured perils, renters who have tenant insurance don’t need to apply to the Board to seek to recover their costs to repair or replace their damaged property, and cover the costs they incur, such as money for meals and a place to stay, since their insurance covers those costs. “That’s an example of where having tenant insurance in place would look after the needs of the tenant and would look after the costs that they’ve incurred,” Hoffer said. “It makes their lives a lot simpler.” When tenants have tenant insurance, the situation can be resolved expeditiously. The alternative involves undergoing a lengthy litigation process, Hoffer said. While waiting for a hearing, tenants pay for expenses with money they may not have. But if they have insurance, the money to help them is available.

London Property Management Association (LPMA) is a non-profit organization, located in London, Ontario, Canada, that provides information and education to landlords. LPMA represents the interests of both large and small property owners. The association has more than 400 landlord members representing approximately 35,000 rental units. Membership is open to landlords and property management professionals who own or manage one or more residential rental units.

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Chair’s message The City of Ottawa Rental Housing Property Management By-law is to come into force on August 31, 2021. EOLO has provided extensive information and detailed templates for our members. On the following two pages, we provide all readers with information and references to the City of Ottawa’s templates, in the priority order in which we recommend rental housing providers address any outstanding issues to comply with the new by-law. While work is required, rental providers should remember that, in Ottawa, we avoided licensing fees and licensing applications. In addition, the information requirements are much less extensive and intrusive than the requirements in Toronto, Oshawa, and several other Ontario cities. As a separate matter, a number of amendments to the Residential Tenancies Act will be brought into force on September 1, 2021. See the article below and the article on pages 58 and 59. - John Dickie, EOLO Chair

RTA/LTB changes effective September 1 A number of amendments to the Residential Tenancies Act (RTA) will be brought into force on September 1, 2021. The following summary covers significant amendments involving claims against current and former tenants.

Claims against current tenants for City fines or utility arrears As of September 1, rental housing providers can seek compensation for reasonable out-of-pocket expenses that arise from the conduct of tenants, occupants or guests, where they substantially interfere with the landlord’s reasonable enjoyment or other lawful right, privilege or interest. This will cover items such as City fines for excess noise or garbage by-law violations. To claim compensation for expenses because of a tenant’s failure to pay utility charges, rental housing providers will be required to apply to the Landlord and Tenant Board (LTB), instead of having to proceed in Small Claims Court.

Claims against former tenants at LTB, not Small Claims Court If a rental housing provider wants to enforce a claim against a former tenant who vacated a rental unit on or after September 1, 2021, they need to apply to the LTB rather than Small Claims Court. The LTB has created a new form, L10, for this purpose. Applications can be made for the following reasons:

• Rent arrears • Compensation for use of the rental unit after a tenancy is terminated • Compensation for undue damage caused by a former tenant, guest or occupant • Compensation for reasonable out-of-pocket expenses incurred due to conduct by a former tenant or others they are responsible for • Compensation for expenses incurred due to a former tenant’s failure to pay utilities. Landlords can no longer claim against former tenants in Small Claims Court. Instead, landlords must apply to the LTB. The landlord is responsible for serving (i.e., delivering) applications and notices of hearing naming former tenants. The landlord must also use specified methods of service. If an applicant is unable to serve by an approved method, they can apply to the LTB for approval of alternate means of service. Rental providers need to collect tenants’ email addresses, and follow best practices for seeking a former tenant’s new address.

Renovations, demolition or personal use For changes in the rules about terminating tenancies for renovations, demolition or personal use, see the section on pages 58 and 59.

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City of Ottawa requirements for rental housing The City of Ottawa’s new Rental Housing Property Management By-law comes into effect on August 31. EOLO has provided several webinars and e-Newsletters explaining the new requirements. This article lists the key City requirements and the templates available from the City. ALL residential landlords (from one unit and up) in the City of Ottawa are required to comply with all requirements except for the capital maintenance plan. (See below for the exception to that requirement for some small landlords.) There are five new requirements. They are listed below in priority order. It is advisable to review and act on this information and the template addressing each topic separately. Taken separately, each requirement is manageable. Taken all together, they can easily seem overwhelming.

General information The City’s templates, a link to the by-law, and many other resources can be found at www.Ottawa.ca/landlords. The City’s templates can only be downloaded from the City’s website in PDF form. However, the City has provided EOLO with the City’s templates as Word or Excel files. Anyone can download those versions from the EOLO website, www. eolo.ca. On each requirement, EOLO is providing its members with EOLO’s own template, EOLO’s slide deck, and a recording of EOLO’s webinar.

URGENT FOR AUGUST 31 (and potentially obvious if it is not done) Tenant information letters When signing a lease with any new tenant on or after August 31 for a rental unit in the City of Ottawa, the landlord is required to give them an information letter specific to the unit they are renting. The City has created a template that covers the eight required areas of information, specified in the By-law. Similar tenant information letters must be delivered to all tenants by November 30. Pest control As of August 31, all Ottawa landlords are required to have an Integrated Pest Management (IPM) Plan. For many landlords, IPM is no more expensive than reactive measures because pest infestations are prevented, or found at an earlier stage, when they are easier to address. The City has created a template IPM Plan. According to the by-law, the Plan must include a schedule for a proactive pest inspection for each rental unit. EOLO suggests that you schedule your proactive pest inspections with your annual maintenance inspections. Then, after dealing with the other aspects of the by-law, you should evaluate whether to advance or delay the proactive inspections for particular buildings or units. The IPM Plan also needs to include “standing pest treatment plans”. In practical terms, that means having on hand the information sheets that pest control contractors provide landlords to direct tenants on the preparation they need to do before treatments for the various pests occur. If you do not have them already, pest control contractors can probably help you with the preparation sheets you need. You are also required to post a notice in the lobby when you do any pest treatment in a common area accessible to tenants, and to keep a copy of the notice to give to a by-law officer on request.

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As part of their work, pest control contractors may agree to post that notice and send you a copy (either when they post it or with their bill for the treatment).

REQUIRED FOR AUGUST 31 (but less apparent if you are still working on it) Tenant service records (and tenant support registry) All Ottawa landlords are required to have a process for addressing tenant service requests, and to keep a record of tenant service requests, which includes certain data points. Property management software tracks most of the data points, but not necessarily all the required data points. If you are using property management software, check that the system records all of the required data points, and add any other required data points. An easy way to do that is to compare your unit service reports with either the City’s template or the EOLO template. If you do not currently use property management software, then adopt the City’s template and amend your records to comply. Even better, EOLO members can adopt the EOLO template or compare their current records with the EOLO template. The tenant support registry is new. All landlords should create a record following either the City’s template or the EOLO template. Capital maintenance plan The requirement for a capital maintenance plan (CMP) only applies to the owner or manager of any “apartment building”, which is defined as “a structure, other than a townhouse or rowhouse, that contains multiple rental units and is three or more storeys in height or contains 10 or more rental units.” By the definition, single family home rentals are exempt from the CMP.

Buildings that are divided vertically (and not horizontally) are considered townhouses, and are exempt from the CMP even if they are three or more storeys, or contain 10 or more units. However, triplexes are covered, along with duplexes and stacked townhouses with three storeys or more. Condo rentals are exempt from the CMP by subsection 41 (2) of the by-law. That exemption applies not only to the rental of a few condo units by an investor, but also to rental buildings held in condo title. The CMP consists mostly of a list of when building elements were last inspected. If the element is in good or adequate condition, that is all that must be noted. If the building element is defective, then a projected repair or replacement date must be noted. The City has created a template. All the foregoing records are to be in place by August 31, 2021.

REQUIRED BY NOVEMBER 2021 Delivering the tenant information letters Tenant information letters specific to each rental unit are to be delivered to each tenant (other than tenants who received the letter on move in). Under the by-law, you need to deliver a copy and ask the tenant to sign a copy for you to keep on file. If the tenant refuses, you can then record the fact that the tenant received the letter in a statutory declaration, or send them another copy by registered mail, or courier, keeping proof of doing that. As a concession to the pandemic, and until they give further notice, the City will accept distribution by registered mail or courier without a previous in-person request for a signature, provided there is proof of delivery. Likewise, email can be used provided there is proof of receipt.

BECOME AN EOLO MEMBER NOW! EOLO invites Ottawa area landlords to join the organization. Have your interests and concerns heard, and benefit from EOLO’s support. As an EOLO member, you will be able to: • Receive

prompt emails of relevant City rule changes

• Attend

two networking receptions a year

• Attend

two free education events a year

•

Receive all 6 annual issues of RHB Magazine with current developments, City and provincial funding programs, and landlord-tenant laws.

To apply for membership, go to www.eolo.ca, download the membership application form and send it to us at the contact info on that website.

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Kristin Ley, Partner, Cohen Highley, has joined RHBTV News as an on air legal analyst. Kristin will be answering questions from YOU our viewers. Send your questions to info@rhbtv.ca and Kristin will answer them on upcoming shows

PRESIDENT’S MESSAGE It’s hard to believe that the first half of the year is now behind us. As we start to reopen the economy, evictions are now being enforced, which will help get rents paid, and vaccination rates are soaring. Good things are yet to come for the rest of 2021. To close out our first half of the year in WRAMA’s virtual meetings, we had the pleasure of welcoming the Region of Waterloo Water Services. They provided an overview of the many programs being offered by the Region to help conserve water, upgrade old fixtures, and ultimately save more money. Further details on the meeting can be found below. I am hopeful that many have had an opportunity to enjoy some downtime this summer as we close out the year. The board is busy planning fall virtual meeting topics. However, we always welcome member meeting ideas from both our associate and regular members. Don’t be afraid to let us know if you have an idea for a future meeting. The WRAMA board is always looking for volunteers and potential board members (elections are in November). If you have an interest in supporting WRAMA, don’t hesitate to reach out and note your interest.

James Craig

Lastly, we look forward to starting a slow transition back to in-person member meetings. We are likely still some time away from that. I touch on some thoughts as more restrictions are lifted from Public Heath. I look forward to seeing you again in September. Stay well and heathy!

- James Craig, WRAMA President president@wrama.com

Membership updates The Membee system is designed to renew memberships on a calendar anniversary system. This means that memberships renew throughout the year rather then all going out at the beginning of the calendar year. Historically, they were sent out this way and we wanted to let you know of the change. If you receive your renewal and have any questions or concerns, please ensure that you reach out to membership@wrama.com. We always encourage you to pay online through the WRAMA website, as it is the fastest way to ensure that you have paid and your status stays active. However, if you mailed a cheque, let us know to watch for it and ensure that your membership remains active.

June’s Member event The last event for the first half of the year was a great presentation from the Region of Waterloo’s water team. Joining us for a presentation we had Sedona Cluett and Wayne Brabazon, explaining the many different programs and grants available. The need to conserve water is in everyone’s best interest as the cost of water continues

to rise. Almost all the Region’s water comes from groundwater sources, which is a limited supply. The most common areas with low water use efficiency include toilets, toilet flappers, showerheads, and tap aerators. Rebates and funding are available to upgrade these areas of your building, which will also help to reduce water consumption.

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The above program is part of the multi-residential toilet flapper and fixture replacement program. For larger buildings, the Region also offers multi-residential high-rise funding program, which entails building-wide replacement of toilets, showerheads, and tap aerators. In this program, the rebates are tied to the total project cost and water savings. The Region also offers programs to help sub-meter water consumption, and ultimately put the cost of water onto the tenants. In this process, the Region will share the cost of a third-party water audit and the cost of sub-metering. Water softening programs also are offered to provide alternatives to salt-based systems. Those changes are useful in larger buildings with boilers, among others. If you would like further information, you can reach out to Sedona at scluett@ regionofwaterloo.ca (519-741-6894) or Wayne at wbrabazon@regionofwaterloo. ca (519-588-8796).

Upcoming expert panel - September Member event For many years, September’s Member meeting has always been around the experts in the field of apartment ownership, management, legal, sales, and operation. In continuing with this tradition, we are now finalizing a field of experts who will provide context in their field. In one of the strangest years in recent memory, many changes and new practices have now been implemented across the board. From virtual board meetings to enhanced cleaning protocols, COVID-19 has changed the way we operate on several fronts. If there is a specific topic that you would like to hear about, or have a question to be answered, feel free to reach out to president@wrama. com to let me know what is on your mind.

Return to Fall programing As mentioned in my opening, we are working to bring back meetings to some extent as more and more restrictions are lifted. The goal is to find a way to be able to live stream the meetings (using Zoom), so that if you are unable to join in person, a virtual option will exist. We will likely try this a couple of times to see if it is utilized, and what the user experience looks like. Over the coming weeks, we will seek out locations to host future events. If you have any ideas of a great place to host an event, please feel free to reach out and let us know. Ideally, we want to be in our general area (Kitchener, Waterloo, Cambridge or Guelph). A location that has good access, and works for both members and presenters, would be best.

Changes to the RTA effective September 1 Various amendments to the Residential Tenancies Act (RTA) will take effect on September 1, 2021. Property owners should plan now to adapt to the changes.

Conduct-based applications A new L2 application form is to be required for all conduct-based grounds for terminating a tenancy and evicting a tenant (e.g., persistent late payment of rent, illegal acts, impaired safety). If a rental property owner uses the old L2 form on or after October 1 to apply for termination and eviction on conduct-based grounds, the Landlord and Tenant Board (LTB) could reject the application for failure to use the correct form.

Applications against former tenants See page 53 for important changes to the rule about claiming against former tenants, and claiming unpaid utility bills.

Termination for renovations, demolitions or personal use Major changes to the RTA will affect the processing of N12 and N13 notices. If a rental property owner files an application to terminate for renovations, demolitions, conversions to a non-residential use, or personal or family use after September 1, they must include a statement about whether they have previously served an N12 or N13 on a tenant for any of their rental units within two years of filing the application. If that is the case, the owner will have to include the date any former notice was given, and the address it was given for. If the former notice

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was given for personal or family use, the name of the persons who were to move in are also to be stated. The LTB is to refuse to accept the filing of an application that does not include that information (section 71.1). Before the hearing of an application for renovations, a rental property owner is also to provide tenants and the LTB with any applicable building permits, although they would want to anyway, to establish the need for a building permit, which has been part of the law for decades. The LTB is to consider the prior use of these no-fault grounds of termination in determining whether to allow or reject the current application. Tenants will be better able to defend claims by landlords who use personal or family use often, but do not follow through with genuine personal or family use. Similar issues will apply if a rental property owner has terminated tenancies for major renovations or demolition. If another building slated for demolition has not been demolished, but rather has been re-rented at a higher rent, then a current application for termination to allow the demolition of another building may well not be granted. On the other hand, if a landlord has a history of following through with major renovations or demolitions, then the new requirements should not be a significant barrier.

If the LTB believes the rental property owner used the N12 and N13 forms wrongly, or “too often”, during the two-year period before the current application, the LTB could well find that the current application has been made in bad faith, and dismiss it. Being prepared with evidence of good faith will help to improve the chances of having the current application approved. Tenant remedies have been enhanced in the situations where a tenant has vacated a rental unit in response to an N12 or N13 notice given in bad faith. In tenant applications filed on or after September 1, the LTB can award a former tenant an amount up to 12 months of the last rent charged, as well as the current possible remedies, which include compensation for all or any portion of the increased rent the tenant is paying, and reasonable out-of-pocket moving, storage, and other similar expenses. As well, if a landlord fails to provide a tenant the right of first refusal (which the tenant has duly claimed), then the tenant can apply for a remedy for up to two years after the bad faith termination. Tenants can apply even if a previous application was dismissed for having been filed beyond the existing one-year limitation period. Those changes have been made to respond to the accusations of tenant advocates that landlords use false claims to evict tenants. Landlords with valid claims should not fear being prevented from gaining possession, but everyone must use the new forms and comply with the new procedures.

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Final Take Away

Brought to you by Yardi Canada Ltd

Screening tech stays ahead of emerging challenges By: Yardi Canada

A key pandemic-driven development in Canada’s multifamily industry was a shift of renters from cities like Vancouver, Toronto, and Montreal to tertiary markets such as Halifax and Abbotsford. That movement prompted many landlords to recalibrate their resident screening strategies. When leasing – and screening – slowed dramatically with the shutdown, property managers took advantage of the downtime to consider all elements of screening that impact risk. Screening software providers, for their part, had time to develop new screening capabilities for their clients.

In-migration creates unknowns As the pandemic began to abate, businesses reopened in some parts of Canada and some social distancing guidelines were relaxed. Property managers soon faced the task of processing a surge of new applicants, sight unseen, from distant locations. That prompted some landlords to seek screening systems that placed less emphasis on credit history, traditionally the principal element of screening, in favour of a more comprehensive view of the applicant. Residential property managers needed “the right tools to complete their screening processes remotely,” according to Evan Dalton, a co-founder of background check provider Certn, which screens for employment as well as residential applications. Even as pandemic-driven conditions eventually eased, landlords continued to receive “new requests from prospective residents located outside of the province and Canada. If those property owners verified and accepted new tenants with partial background and reference checks, they are currently exposed to unexpected liabilities and expenses.” To mitigate risk as fully as possible in the screening process, he adds, landlords “need access to as much reliable information as they possibly can get.” Kent Simpson, resident screening industry principal for Yardi®, says the company saw its highest-ever level of screening activity in the second quarter of 2021. He expects a similar surge in the third quarter, especially in Toronto and other major markets, due to the relaxation of social distancing guidelines, a competitive hiring season, and offices returning to work.

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Advanced software drives confident leasing with less risk Implementing a comprehensive approach to resident screening requires adopting new technology capable of completing the full lead-to-leasing process and drawing from thousands of international data sources, negative news and press, and tribunal and fraud records. This in turn drives the eventual digitization and centralization of the entire screening process. Screening software providers responded to these circumstances by creating tiered systems that deliver non-credit data followed by credit checks in an automated workflow accessible through a portal. This type of screening system integrates with the property management platform, automatically populating information from the online leasing portal to the screening application and eliminating the entry of applicant information on multiple forms. Such systems give property managers rental recommendations based on a holistic view of the renter’s profile, helping property managers lease confidently, even when they can’t meet prospects in person. Quick approval of low-risk applicants combined with electronic signatures means faster lease execution and more revenue with fewer vacant units. Reports generated by the system should be designed to help managers understand how approvals or rejections are made and if criteria need to be adjusted. The trend toward tiered screening that relegates credit to secondary status has picked up popularity in the last year. But “changed conditions during the pandemic gave reluctant property managers a unique opportunity to test and adopt new technology, leverage additional data, and incorporate portals and online workflows,” Simpson says. In the post-COVID-19 world, top-of-the-line screening technology can offer residential property managers in Canada and around the world new opportunities to expand their business, increase profits, and mitigate risk. More of them will digitize the screening process, and the inclusion of additional data sets as determining factors will give landlords a greater competitive edge. “That makes the need for reliable information and industry-leading technology that delivers it more important than ever,” according to Dalton.

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