F O R B U I L D I N G O W N E R S , A S S E T A N D P R O P E R T Y M A N AG E R S
VOL. 25 NO. 5 • OCTOBER/NOVEMBER 2018
SUPPLY SQUEEZE
HOUSING HAND-WRINGING CONTINUES
PA R T O F T H E
P A R T
O F
T H E
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TABLE OF CONTENTS
CONTENTS 06
16 20
COVER STORY
06
AFFORDABILITY TOPS THE AGENDA Interest rates, tariffs and land supply figure in concerns
IN THIS ISSUE
10
PIPEDA COMPLICATES BACKGROUND CHECKS
16
NO AMNESTY FOR CARBON POLLUTION
Amendments to privacy law took force in November
Federal government fulfills promise to impose pricing schemes in truant provinces
13
ZIP, BUT NO ZIP CODE
20
RENT CONTROL CRITICS ABOUND
Toronto considered an outlier on Amazon's HQ2 short list
Industry advocates deem the Rental Fairness Act a supply suppressant
21
LICENSES PROVE COMPLIANCE Diligence is a must when engaging electrical contractors
“REGARDLESS OF WHERE AMAZON CHOOSES TO GO, ONE KEY TAKEAWAY FROM THIS WHOLE EXERCISE IS THE GROWING IMPORTANCE THAT QUALITY OF PLACE PLAYS IN LURING NEW COMPANIES, LARGE OR SMALL, TO CITIES TODAY.” CHRIS FAIR PRESIDENT & CEO, RESONANCE
AFFORDABLE SUPPLY
AFFORDABILITY
TOPS THE AGENDA
Interest rates, tariffs and land supply figure in concerns BY KAVITA SABHARWAL-CHOMIUK
T
he real estate sector is carefully monitoring recent tariff negotiations around steel and climbing interest rates, which could result in further affordability issues for Canadians. Developers, investors, lenders and other experts are cautiously optimistic about the real estate sector, according to the recent Emerging Trends in Real Estate 2019 report, published by PwC Canada and the Urban
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Land Institute (ULI). However, the report indicates a positive outlook for flex spaces, PropTech and seniors’ housing. According to the report, residential land supply is the main concern heading into 2019. The report finds that all levels of government must increase their focus on the supply side of the issue, not just focusing on demand. For example, real estate markets in Edmonton and
Montreal were able to bring new housing supply into balance with rising prices, but markets like Toronto and Vancouver have yet to follow suit. “Dealing with the affordability issue is a shared responsibility between government and developers. While government addressed demand by introducing measures like tighter mortgage rules and foreign taxes, they
AFFORDABLE SUPPLY
MORTGAGE STRESS TEST PERFORMING AS INTENDED
neglected the supply side,” said Frank Magliocco, National Real Estate Leader for PwC Canada, in a press release. “Reducing regulation and making more land available for development in a timely manner will help address the affordability issue.” “The real estate industry is at a crossroads where it needs to work with many other sectors in order to thrive in
Worrisome harbingers of borrower instability have faded somewhat since a mortgage financing stress test went into effect, Canada’s financial monitor reports. A recent analysis from the Office of the Superintendent of Financial Institutions (OSFI) cites a narrowing loan-to-value ratio in some particularly hot housing markets, like Vancouver, as evidence that new rules for underwriting residential mortgages are starting to have the intended effect. “The revisions were necessary after OSFI identified potential risk and vulnerabilities caused by high household indebtedness and imbalances in some real estate markets that, left unchecked, could add greater risk to financial institutions and possible disruptions to the financial system,” a report in the OSFI newsletter states. “Key revisions included measures to ensure financial institutions apply greater rigour in income verification and increased vigilance when assessing a borrower’s ability to repay their mortgages.” Since January 2018, borrowers must prove they can manage a rise in interest rates equivalent to the greater of the Bank of Canada’s five-year benchmark rate or two per cent above their contracted rate. Lenders have new requirements for risk assessment in determining the portion of the home’s value the loan will cover. “Improvements are evident in the quality of new mortgage loans, including higher average credit scores and lower average loan-to-value at mortgage origination,” OSFI observes. “There are indications that fewer mortgages are being approved for highly indebted or over-leveraged individuals.” Among the continuing concerns, the report notes some lenders are still relying on the equity of the property, rather than the borrower’s ability to repay the loan, when approving mortgages. “OSFI will be taking steps to ensure this sort of equity lending ceases,” the report reiterates. The Appraisal Institute of Canada (AIC) commends that pledge. “The guidelines require lenders to utilize appropriate numbers of on-site inspections and third-party professional appraisals to verify the value of collateral. On-site appraisals help to mitigate risk for both the lender and borrower in cases where there is a high loan-tovalue ratio, when markets are in flux, or when the creditworthiness of the borrower may be lacking,” maintains Peter McLean, the AIC’s President. Thus far, there is little sign of predicted negative fallout from the mortgage financing stress test. Federal regulated mortgages represented almost the same share of all residential mortgages issued between July 1, 2017 and June 30, 2018 as in the previous 12 month period — falling by just 20 basis points to 76.7% from 76.9% — suggesting there has been no mass uptake of alternative options. Meanwhile, rates for renewals and new mortgages have remained on par, despite fears that borrowers would face higher rates upon renewal and have more limited ability to switch to another lender. “The proportion of uninsured mortgages with amortization periods greater than 25 years has decreased from 51% to 47% over the same April to July period, suggesting that lenders are not extending amortization periods to allow borrowers to meet stress tests requirements,” OSFI concludes. – REMI Network
www.REMInetwork.com
7
AFFORDABLE SUPPLY
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the future,” added Richard Joy, Executive Director at ULI Toronto. “We’re seeing more and more collaboration between architects, construction companies and the technology sector working to redefine how Canadians live.” The proportion of household income necessary to be able to manage the costs of a single-family home grew to 53.5% in the first three months of 2018, with Vancouver leading the pack with a minimum income of 119.3%. High housing costs are leading Canadians, particularly millennials, to abandon the idea of owning a home in the city in favour of the suburbs or other markets with more affordable housing. Rising interest rates and higher tariffs on foreign steel are top of mind for developers and owners, as they can ultimately place further pressure on housing affordability due to higher input costs on residential and commercial builders. In the world of commercial real estate, co-working or flex office spaces continue to trend upwards and are expected to make up 30 per cent of corporate real estate portfolios by 2030. “Creating a co-working space isn’t so much about cost as it is building a community and sharing experiences and knowledge between different people and industries,” said Magliocco. The multi-family apartment sector continues to perform well, but segments of the retail sector are forced to reinvent themselves following less-than-ideal results. The industrial sector continues to perform well, and the report predicts that the recent legalization of recreational cannabis will provide opportunities across the country as emerging companies look
AFFORDABLE SUPPLY
to find industrial space to grow the product and retail space to sell it. Senior lifestyle housing is one of the top development prospects for the next year, as the number of Canadians over the age of 65 have surpassed those under the age of 15. In 2017, 31% of Canadians over the age of 85 lived in seniors’ communities, and that number will only grow in the coming years. New on the scene is PropTech, which refers to everything from new lending services to investment platforms and digital brokerages, which is changing the way properties are bought, sold and managed. According to the report, PropTech is predicted to contribute US$5.2 billion in new investment globally across 454 equity deals this year, after reaching a record US$3.4 billion in 2017 across 367 deals. However, only 10 per cent of CEOs in global real estate are concerned about the speed of this technological change. “While the intersection of real estate and technology has been slow until now, we have seen a significant change in interest and focus in the PropTech industry here locally and globally,” added Magliocco. Drones were the number-one real estate disruptor listed in the report. Potential exists to use drones to show job-site progress and others are looking to integrate docking stations into communities to accommodate last-mile delivery needs. Autonomous vehicles, cybersecurity and construction technology were also recognized as main technology real estate disruptors. The report also noted other factors including GDP growth and affordability issues impacting various real estate markets across Canada. The top five markets to watch in 2019 are Toronto, Vancouver, Montreal, Ottawa and Quebec City. ■
“DEALING WITH THE AFFORDABILITY ISSUE IS A SHARED RESPONSIBILITY BETWEEN GOVERNMENT AND DEVELOPERS.”
F I NE ME TAL F I NI S H I NG ELEVATORS - ENTRANCES - VINTAGE AIRCRAFT
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K A V I TA S A B H A R W A L- C H O M I U K I S AN ONLINE EDITOR WITH REMI NE T WORK. THE COMPLE TE TE X T OF E M E R G I N G T R E N D S I N R E A L E S TAT E 2 0 19 C A N B E F O U N D AT W W W . P W C . C O M / C A / E N / I N D U S T R I E S / R E A LE S TAT E / E M E R G I N G -T R E N D S - I N R E A L- E S TAT E - 2 0 19. H T M L
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www.REMInetwork.com TylerWilliams _Ad_Oct_CPM_2018v1b.indd 1
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2018-11-06 1:01 PM
PIPEDA COMPLICATES BACKGROUND CHECKS Amendments to privacy law took force in November BY CHRIS SEEPE
A
ll private businesses across Canada, from small residential landlords to large multifamily portfolio owners, will be impacted by the latest changes to the Personal Information Protection and Electronic Documents Act (PIPEDA) beginning November 1, 2018. PIPEDA is Canada’s federal private sector privacy law that sets out the ground rules for how businesses must handle personal information in the course of their commercial activity, and it was significantly amended when The Digital Privacy Act received Royal Assent in June 2015. Under PIPEDA, all landlords must: • Obtain a tenant’s consent to collect, use or disclose a person’s personal information;
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• Identify the reasons for collecting the personal information (before collection) and ask only for the limited information needed for what a reasonable person would consider appropriate to the circumstances; • Provide individuals with access to the personal information the holder has obtained and allow them to challenge its accuracy; and • Use a tenant’s personal information only for the purposes for which it was collected.
information is protected by the appropriate safeguards. These might include: locking filing cabinets; restricting office access; employing alarm systems; strengthening technical tools (i.e. passwords, encryption, firewalls); and boosting organizational controls (i.e. security clearances, staff training, agreements, etc.). In short, there’s a lot to know about PIPEDA and how, beginning November 1, it will affect all rental housing operations. The following Q&A covers some key points.
As of November 1, 2018, PIPEDA will include a mandatory requirement for organizations to give written notice to affected individuals and to the Commissioner about privacy breaches, while maintaining records for 24 months about each breach. All businesses — including landlords of every size — must ensure that personal
Q: Do landlords require a tenant’s SIN number for most things? A: No. Q: Do landlords need permission to capture a tenant’s face on a surveillance camera? A: Yes, but that permission can be implied.
REGULATORY UPDATE
Q: Do landlords need written permission to do a credit check? A: Yes. Q: What minimum information is needed to do a credit check? A: At minimum, a full name, address and date of birth. Q: Is it against the law to demand a tenant’s SIN number? A: No law currently prevents landlords from asking for a SIN for purposes of identification. Q: Can landlords deny a tenancy applicant if he/she will not disclose a SIN number? A: No Q: Can landlords use the SIN as a general tenant identifier — in the accounting system for example? A: No.
Q: Can landlords set up surveillance cameras in their buildings that capture tenants' faces? A: Yes, but strict rules apply here, too. Q: Can tenants ask what information is held about them? A: Yes. Q: Can other tenants collect information on a tenant? A: Generally, no. Q: How long can a tenant’s information be retained? A: There is no prescribed period, but not indefinitely. Q: Is there a prescribed process for personal information destruction? A: No, but it must be done appropriately.
Q: Can landlords disclose tenants' personal information to pursue a debt? A: Strict rules apply. Q: Can police agencies demand tenant information be provided to them? A: Strict rules apply here too and specific documentation is required. Q: Can police agencies demand the landlord allow them entry to a tenant’s unit? A: Maybe, if police declare it an emergency. Otherwise, a warrant is usually required or 24-hours’ notice to the tenant. Strict rules apply. Beginning November 1, 2018, landlords should have all of these risk exposures covered in their rental application forms and Standard Lease appendix B clauses. ■
____________________________________________________________________________________
Q: Can a landlord ask for a driver’s license, tax information, pay stubs? A: Privacy law doesn’t prevent such requests, but any information obtained must be fully protected. Q: Can a landlord look into a tenant’s background by checking his/her social media postings or calling another landlord? A: Informal checks are still considered a collection of personal information; therefore, permission is required and privacy laws do apply. Q: Can a tenant’s name be placed on a "bad tenant" list? A: Not to an unregulated or ad hoc list. Q: Can a landlord verbally disclose bad tenant behaviour to other landlords — for example, during a phone reference check? A: No. Despite bad behaviour or poor payment history a landlord doesn’t have the right to disclose such information, which can be construed as "vigilante" actions. Formal, regulated mechanisms such as credit agencies may be notified in appropriate circumstances. Q: Can landlords take pictures of a tenant’s apartment and contents if they suspect a tenancy agreement breach? A: Yes, however strict rules apply.
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ECONOMIC DEVELOPMENT
ZIP, BUT NO ZIP CODE Toronto considered an outlier on Amazon's HQ2 short list
A
snub from a residential real estate specialist underscores the prevailing view that Toronto fails the location, location, location test for hosting Amazon’s second headquarters. Punditry emanating from the United States characterizes Toronto as an outlier on the short list or overlooks it entirely. For example, the respected think tank, the Brookings Institute, cites “data incongruence” for leaving Toronto — frequently recognized as one of the world’s most multicultural cities — out of an effort to rank the diversity and social inclusiveness of the 19 other Amazon HQ2 contenders. Realtor.com offers no explanation for Toronto’s absence from its comparison of housing markets in the short-listed cities. Recent data-driven analysis from the research and advisory firm, Resonance, affirms that Toronto is akin to a fabulous house on the wrong street. It ranks as the second-best match to the criteria Amazon set out in its initial request for proposals from bidding cities, but the economic development consultants conclude the more favourable U.S. tax regime will knock a Canadian city out of the running. Resonance President and Chief Executive Officer Chris Fair predicts New York — the only city to surpass Toronto’s performance — will
also be passed over. Its deemed Achilles heel is the challenge of a securing adequate land to accommodate a vast campus in its densely developed real estate market. (While Toronto’s bid identified 10 potential development sites, New York’s listed available office space spread across four boroughs of the city.) “That leaves Chicago, Northern Virginia, Los Angeles and perhaps Boston as the most likely candidates,” Fair surmises. Resonance rankings of the 20 short-listed cities were derived through analysis of six criteria: Talent: Educational attainment in the population and the ranking of institutions of higher education Cultural Community Fit: Diversity measured by the percentage of population foreign-born and percentage that speak a language other than English at home Quality of Life: Crime rate, average time to commute to work, and the quality of neighbourhoods and landmarks www.REMInetwork.com
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ECONOMIC DEVELOPMENT Housing Affordability: Affordability of housing relative to the median household income Recreational Opportunities: Access to quality parks and outdoor activities Stable and Business-friendly Environment: The number of Fortune 500 companies Resonance analysts also considered the depth of the local talent pool given Amazon’s stated objective to fill as many as 50,000 positions at the new headquarters. Toronto easily met the benchmark of at least 150,000 advanced industry workers. Other assessments have been less flattering. The investment and financial news site, InvestorPlace.com, named Toronto at the top of its list of the seven cities that don’t stand a chance of hosting the new headquarters, citing lack of tax incentives and the cost of housing as two significant barriers. Projections from Business Insider rank it as the 17th most likely choice, ahead of only Columbus, Indianapolis and Los Angeles. A recent CNBC ranking assigns Toronto a B- grade — on par with New York and Chicago — and placed Austin and Dallas at the top of the scale, both with grades of A-. “While there are concerns up north that U.S. tax reform has wiped out Canada’s competitive advantage, the economics of a Toronto headquarters are hard to ignore. The city also has a strong, well-educated workforce, though it is heavily unionized, and inclusiveness is enshrined in federal law,” says Scott Cohn, the CNBC special correspondent who also produces the annual
America’s Top States for Business report. “There are issues, however. Business regulation is sometimes harsh, the economy is sluggish and infrastructure needs work. And one can only imagine the presidential tweets over such a move.” In harmony with Resonance’s findings, Boston and Northern Virginia make CNBC’s list of strong contenders. So, too, do Atlanta, Denver, Miami and Nashville. Cohn acknowledges that none of these speculative exercises are privy to Amazon’s decision making process and/or the weights that will given to various criteria. Nevertheless, commentators’ attempts to parse and rank Amazon HQ2 contenders could be catching the attention of prospective investors, convention planners and tourists. “Regardless of where Amazon chooses to go, one key takeaway from this whole exercise is the growing importance that quality of place plays in luring new companies, large or small, to cities today. Many of the factors identified by Amazon in its RFP are the very same factors we’ve identified as having a high correlation with both attracting international visitors and investment,” Fair notes. Beyond the shortlist, it’s generally believed that the bid process has helped a handful of other North American cities secure recent investment commitments from Amazon. This includes: a 1 million-square-foot warehouse and distribution centre now under construction in Ottawa; a 450,000-square-foot fulfillment centre in Delta, B.C.; and an expansion of its Vancouver tech hub. ■ ______________________________________________________________
THE COMPLETE TEXT OF THE FIVE CITIES WITH THE BEST SHOT AT AMAZON HQ2 CAN BE FOUND AT HTTP://RESONANCECO.COM/INSIGHTS/
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TAX TRENDS
NO AMNESTY FOR
CARBON POLLUTION Federal government fulfills promise to impose pricing schemes in truant provinces
S
mall and medium sized businesses in Ontario, Saskatchewan, Manitoba and New Brunswick have been promised about $155 million to cushion the initial shock of fuel surcharges when
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the first phase of the four-year incremental rollout of carbon pricing begins next spring. Another $73 million has been earmarked for municipalities, Indigenous communities and the education, health
TAX TRENDS
care and non-profit sectors. Annual disbursements of $385 million for business owners and $185 million for the other designated sectors are projected by 2022. “Canadians know that polluting isn’t free,” Minister of Environment and Climate Change Catherine McKenna reiterated, as she and Prime Minister Justin Trudeau outlined forewarned carbon price and rebate plans for provinces that have ignored the deadline for devising their own schemes. This includes a four-part schedule of surcharges for 22 different fuel types. However, most consumer expenditure is expected to go to gasoline and natural gas price add-ons. A carbon levy of $0.0442 per litre will go on at the gas pumps beginning next spring, rising to $0.1105
per litre by April 2022. The carbon levy on natural gas will begin at $0.0391 per cubic metre (m3) and climb to $0.0979/m3 over the four-year period. Federal strategists are aiming for greenhouse gas (GHG) emission reductions on two fronts. The upfront premium is meant to encourage more efficient use of GHG-emitting fuels, including fossil-fuel-generated electricity. Collected funds can then be invested to develop and commercialize low-carbon technologies and to encourage energy efficiency and a shift to low-carbon energy sources. “The case is clear: Canada needs to cut greenhouse gas emissions that cause climate change, and the best way to do that is to put a price on carbon pollution,”
asserts Minister of Finance Bill Morneau. “Pollution pricing encourages Canadians and businesses to innovate, invest in clean technologies, and take advantage of longterm growth opportunities.” As envisioned, the federal government will collect and redistribute approximately $4.2 billion in Ontario every year (and another $1.44 billion in New Brunswick, Manitoba and Saskatchewan) once the full carbon surcharge of $50 per tonne of carbon dioxide equivalent (CO2e) is in place. The major share of this will be channelled into what’s to be known as climate action incentive payments, to be delivered as rebates directly to residents. In 2019, when carbon is initially priced at $20/tonne, the federal government projects $1.58 billion will be rebated to
ENERGY STAR TO RECOGNIZE MULTI-RES BUILDINGS A new pilot program aims to take energy efficiency to new heights in residential construction. Mid- and high-rise buildings due to rise in Ontario can now pursue the ENERGY STAR label that has been used to recognize energy-efficient new homes for more than a decade now. Whereas ENERGY STAR for New Homes identifies homes that outperform code-compliant homes by 20%, the ENERGY STAR for Multifamily High-Rise (New Construction) Pilot Program will identify buildings that outperform code-compliant buildings by 15%. The launch of the pilot program responds to the changing face of the new homes market as governments and industry continue to collaborate in the fight against climate change. “With the increased construction of stacked townhouses and high-rises, I am proud to see ENERGY STAR certification being extended to multifamily high-rise buildings,” said Minister of Natural Resources Amarjeet Sohi. “This pilot program will not only contribute to the Government of Canada’s greenhouse gas emission targets, it will also reduce consumers’ energy costs, create good jobs and stimulate innovation in the housing sector.” EnerQuality, a certifier of energy-efficient homes established by the Canadian Energy Efficiency Alliance and Ontario Home Builders’ Association, is managing the pilot program with authorization from Natural Resources Canada. "Trusted by consumers and respected by builders, ENERGY STAR Multifamily is a natural extension of ENERGY STAR for New Homes in a market rapidly shifting to higher-density housing,” maintains Corey McBurney, President of EnerQuality. “EnerQuality is proud to partner with Natural Resources Canada to demonstrate that innovation happens when industry and government work together to lead.” The pilot program is scheduled to run for five years in Ontario. If successful, the program could eventually be rolled out elsewhere. For more information, see the EnerQuality website at www.enerquality.ca.
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INTO-ELECTRONICS INC. AUTHORIZED REPRESENTATIVE
Ontarians, translating to an average of $300 per household. That’s 15% more than the $260 in annual savings the Ontario government claimed to have delivered to average families when it invoked a carbon pollution amnesty through the dismantling of the province’s cap-and-trade system earlier this year. Since rebates are prorated to carbon price expenditures, households in Saskatchewan — where, in 2016, the carbon intensity of the electricity supply was pegged at 660 grams of CO2e per kilowatt-hour (kWh) — are in line for the largest rebates. This is projected at an average of $1,161 when the $50/tonne price is in place versus an average of $697 in Ontario, where the carbon intensity of the electricity supply was 36 grams of CO2e/ kWh in 2016. In addition to these newly announced funds, small and medium businesses, non-profits, Indigenous communities and broader public sector players, such as municipalities, educational institutions and hospitals, have access to the existing Low Carbon Economy Fund to promote energy efficiency upgrades and fuel switching. Meanwhile, Ontarians are invited to submit their ideas to the public consultation on a Made-in-Ontario plan. It’s promoted as an alternative to “the previous government’s insistence on imposing a punishing, jobkilling carbon tax on Ontario families and businesses”. Instead, the current government emphasizes “resiliency efforts, pollution reduction and how government can better partner with the private sector.” Rod Phillips, Ontario’s Minister of Environment, Conservation and Parks, rebutted the federal announcement via Twitter, stating: “Anyone who tries to convince you that any tax will put more money in your pocket should have you thinking twice.” Phillips, the former President and Chief Executive Officer of the Ontario Lottery and Gaming Corporation also labelled it a “regressive tax”. However, the Business Council of Canada endorses the approach. "We support the price mechanism because it provides the economic incentive for consumers to change their behaviour and for business to invest in technologies that progressively reduce their emissions over time,” says Goldy Hyder, the Business Council’s President and Chief Executive Officer. ■
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MARKETDEBATE POLICY TRENDS
RENT CONTROL CRITICS ABOUND Industry advocates deem the Rental Fairness Act a supply suppressant BY ERIN RUDDY
S
ince receiving Royal Assent in May of 2017, the former Ontario government’s Rental Fairness Act (RFA) has been an ongoing concern for Ontario’s rental housing sector. Nearly 18 months later, a shift in government has put rent control back in the spotlight with new research suggesting the RFA's restrictions do little to ease the province’s affordability crisis.
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POLICY DEBATE In fact, the prevailing opinion among market researchers, developers and landlords is that the RFA is having quite the opposite effect. REALPAC, a national association representing many of Canada's most prominent commercial real estate companies and institutional investors, recently tallied what it sees as fundamental flaws in a briefing entitled, Assessing the Impact of Ontario’s Rent Control Regime. It maintains the legislation undermines the feasibility of new purposebuilt construction. It also points to the increased cost of rents for new tenants, imposed development risks for investors, and eroded property rights for landowners. “Ontario’s rent control policy needs to be seriously reconsidered,” asserts Michael Brooks, CEO of REALPAC. “It was brought in with limited consultation and was meant to address a problem that was misrepresented and misunderstood. Not only has the expanded rent control failed to slow down continuously increasing rents, but it also acts as a disincentive for the construction of new rental units — a key goal for the Government of Ontario — despite high levels of institutional capital ready to invest in it. It has become clear that in order to provide the rental accommodation Ontarians desperately need, the Government of Ontario should shift the focus from heavy-handed policies to marketbased tools to enhance housing supply.” As explained in the report, rent control regulations are based on the expectation that the government should intervene in the rental housing market to ensure rents are not increased at a pace existing tenants cannot afford. These restrictions either create a price ceiling that prevents rents from exceeding a certain level, or establish a percentage rate cap up to which rents can increase over a specific period. The goal of these policies is to shelter lower income current tenants from the ebbs and flows of the real estate market, without decreasing the amount of rental housing currently available within the market. ERODING AFFORDABILITY REALPAC’s research suggests that despite protecting existing tenants staying in place, rent controls will make long-term affordability worse by deterring new supply available to future renters. Trish MacPherson, Executive Vice President, Operations at CAPREIT, couldn’t agree more. “The passing of the Rental Fairness Act has put pressure on landlords to re-evaluate the potential for new purpose-built rentals and to charge higher rents for new developments from the inception of leasing C activity,” she says. “This has a large impact on renters in terms of affordability and can also reduce the supply of new rental housing.” M Meanwhile, Toronto-based Urbanation, a leading consulting and Y analytics firm that tracks big picture issues and local market trends CM affecting rental and condominium development, has been conducting MY its own research since the RFA was introduced. A big takeaway, CY according to the firm’s President, Shaun Hildebrand, is that even though Ontario’s rental supply is increasing, new development simply isn’t able CMY to keep up with growing demand. K “Immediately following the introduction of rent control for new development, a number of planned rental projects were cancelled and converted to condominium in the GTA,” he observes. “There was also a slowdown in the number of new proposals for rental projects. Nonetheless, the supply pipeline of new rentals is still growing as developers foresee the longterm demand potential and realize the extent by which rents have escalated in recent years. The fact remains that the condominium sector is unable to supply enough secondary rental units to accommodate the demand.”
Under rent control, tenant turnover has declined, putting further downward pressure on vacancies. “In the end, because of the strength in market fundamentals for rental, we will see more supply developed, but not nearly as much as it would have without rent control. So supply will still be a big issue for many years to come,” Hildebrand projects. DEVELOPMENT INCENTIVES NEEDED To rectify a rental housing supply crisis now gripping Ontario, REALPAC asserts that the Ontario government needs to begin by treating developers as partners in city-building initiatives rather than opponents. “Any intervention by government needs to ensure the long-term sustainability of existing stock and encourage the construction of new purpose-built rental housing,” it states. Among other initiatives, REALPAC recommends the following policy options to incentivize further development of purpose-built rental housing in Ontario: • A complete rent control exemption for newly constructed rental units; • Allowing more liberal annual rent increases for existing units to better cover cost inflation and maintenance; • Allowing decoupling of utilities and maintenance costs from gross rent; • Elimination of HST taxes on purpose built rental. ■ ____________________________________________________________
ERIN RUDDY IS THE EDITOR OF CANADIAN APARTMENT. THE COMPLETE TEXT OF REALPAC’S POLICY PAPER, ASSESSING THE BrownBeattie_GTA_March_2017_FINAL.pdf 1 2017-02-01 10:36 IMPACT OF ONTARIO’S RENT CONTROL REGIME, CAN BE FOUND AT WWW.REALPAC.CA.
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HEALTH & SAFETY
LICENSES PROVE
COMPLIANCE Diligence is a must when engaging electrical contractors BY ZANDILE CHIWANZA
O
n April 5, 2014 faulty electrical work by Pro-Teck Electric, a former electrical contractor business in Niagara Falls, left an elderly man dead. Following an investigation by the Electrical Safety Authority (ESA), it was found that the floor system’s heat sensor had not been installed and the heating system was wired to an incorrect voltage level. The defendant pleaded guilty to multiple charges and was fined $537,500. This is the largest fine in the history of electrical contractor licensing in Ontario. Over the course of the trial and sentence hearing, the defendant tried to shield himself from the fines by transferring the corporation’s assets into a newly created corporation. Normand Breton, Registrar and Director of Contractor Licensing at ESA maintains
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the recent successful appeal to recover fines from the owner sends a strong message that an individual can be held personally liable for fines imposed against a corporation and prosecution cannot be dodged in this way. Fines are just one of the potential penalties for someone who’s doing electrical work unsafely or illegally. The courts have also given out jail time. “As it relates to the facility industry, owners and management should know what the law says so they can follow it for their own protection as well as the protection of the people that may be working or living in that facility,” Breton
says. “If something does go wrong, there’s a lot of risks associated with that.” Contractors arriving at a work site are obligated to have a permit in order to do the work. They should display their license numbers on their trucks, quotations and business cards, making them easily identifiable. When the work is complete it should be subject to inspection. Facility managers have the right to ask for a certificate of inspection. Breton warns that the ESA takes the “underground economy very seriously” and pursues charges against people who are undertaking work without a license. “Often the work [done] is unsafe and there are consumer protection issues to consider,” he explains. Facility managers should also ensure that the holder of the valid electrical contractor licence undertakes the work, not an unaccredited employee or subcontractor. “If a facility manager is having trouble locating a contractor in his area, ESA does have a lookup tool on its website,” Breton added. The tool also allows users to look up a contractor by licence number. Facility managers will also need to comply with insurance and WSIB requirements and other regulations under Ontario’s Occupational Health and Safety Act. “Be aware of all the regulations, beyond just contractor ones,” Breton advises. “All of these things are part of our process so that a facility manager ensures he’s hired the right professional and done the job correctly.” ■
____________________________________________________________________________________ ZANDILE CHIWANZA IS AN ONLINE EDITOR WITH THE REMI NETWORK. FOR MORE INFORMATION ABOUT THE ELECTRICAL SAFETY AUTHORITY, SEE THE WEBSITE AT WWW.ESASAFE.COM.
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