Vol. 12 No. 5 November 2019
Canadaâ€™s #1 most widely read publication for Apartment Owners, Managers and Association Executives
Following up on the Federal election Canada has a new minority government. What does that mean for the industry?
City of Ottawa rejects landlord licensing The City review determined that the overall quality of accommodation was high, and the few issues are best addressed with enhanced enforcement and education.
Theofficial officialpublication publicationof: of: The
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RENTT: The challenges in developing and building purpose-built rental housing
Rental Market Forecast
What does rental demand look like in 2020?
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EDITOR’S NOTES GROWING THE FAMILY
This past month, my nephew and his wife baptized their son, who just turned four months old. It was a glorious occasion for all of us, as my great-nephew has made us a four-generation family, which includes my mother. We brought together various members of our extended family to celebrate the occasion, eat some excellent food, and reflect on how our family is fortunate to be able to share this special day. By the way, in Italian, I’m a “prozio”, which is pretty cool. And my daughter is no longer the youngest, which makes her very happy for some reason. This month’s issue of RHB Magazine includes a RENTT panel on the challenges of constructing purpose-built rental properties. We brought together private owners to discuss issues that affect developing and building new rental housing, how land costs and government legislation affect their decision-making process, and factors that impact the cost of building rental properties. They also talked about the government pressures to include affordable housing in new developments, and potential incentives to build more affordable housing. In the previous issue, we provided a federal election primer to inform our readers on important issues. Now that the election is over, and we have a minority government, we’ve taking a look at the numbers behind the election, the makeup of the current cabinet, and some key election platform issues that can affect the rental housing industry. We also published an article on CMHC’s rental market forecast, based on its 2020 Housing Market Outlook. As usual, RHB Magazine provides a lot of great information, including an article on the trend of co-living in Canada. Make sure to read CFAA’s newsletter, National Outlook, as well as the Regional Association Voice. If you have any comments or questions, send them to david@ rentalhousingbusiness.ca. I look forward to hearing from you.
Enjoy the issue! David Gargaro Senior Editor
4 | November 2019
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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 All contents copyright © RHB Inc. Canadian Publications Mail Product Sales Agreement No. 42652516
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VOL.12 NO.5 2019
CMHCâ€™s Rental Market Forecast What does the rental market look like in 2020 for major urban centres?
The challenges in developing and building purpose-built rental housing
Regional Association Voice Regional Association Voice features the latest industry news from four member associations.
Following up on the federal election
Canada has a new minority government. What does that mean for the industry?
6 | November 2019
Suite Count Co-living is a growing trend in North America as rents continue to rise.
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PRESIDENT’S CORNER Now that the federal election is over, rental housing providers and CFAA need to deal with the fallout. Found at page 35, the lead article in National Outlook deals with the capital gains tax issue. The NDP wants to raise the capital gains inclusion rate, and the Liberal Party’s election platform promised “a comprehensive review of government spending and tax expenditures to ensure that wealthy Canadians do not benefit from unfair tax breaks.” That effectively promises a consultation on possible revisions to the capital gains tax regime (and other tax measures). Any increase in the taxes on capital gains could be devastating for rental housing.
CMHC has announced it will hold a Housing Conference in Ottawa on May 12 -13, 2020, for those who share in CMHC’s aspirational goal that “by 2030, everyone in Canada has a home that they can afford and that meets their needs.” See page 35 of the Sept/Oct issue of RHB Magazine for some of the problematic ideas the invited speakers put forward at CMHC’s 2018 Conference. Finally, save the dates June 8 to 10 for CFAA - Rental Housing Conference 2020, which will take place in Halifax, Nova Scotia. We hope to see you there!
With that in mind, CFAA will establish a working group to address the capital gains tax issue, including arguments against any change, and a review of possible alternate approaches, in case it turns out that the government insists on making a change. The fact that the current system does not include inflation adjustment is a key argument in favour of not increasing the current tax burden on capital gains. Introducing inflation adjustment as a part of a new capital gains tax system could potentially turn the reform into a win for the rental industry rather than a loss. (In turn, a win for the rental industry could address housing affordability, which is a key issue across government.) While CFAA can address the capital gains tax issue with our current resources, more resources would allow CFAA to take more action to advance the interests of the rental housing industry on the capital gains tax file. National Outlook includes some details, as well as notes about the new and returning cabinet ministers who are important for rental housing issues, and why those portfolios are important. CMHC rental market survey, taken in October, is to be released on January 15, 2020.
8 | November 2019
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In this issue of... NATIONAL OUTLOOK 35. Will the new government increase capital gains taxes? What is the timeline for the review? What is CFAA doing to mitigate the risk, or to turn the review into a win?
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
37. What does the rental housing industry need to do to mitigate the risk of a capital gains tax increase, or to turn the review into a win?
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
38. Who are the key new and returning cabinet ministers? Why do they and their portfolios matter to rental housing providers?
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
To subscribe to CFAA’s e-Newsletter, please send your email address to email@example.com.
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 $480 billion rental housing industry. For more information about CFAA itself, see www.cfaa-fcapi.org or telephone 613-235-0101.
10 | November 2019
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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S E C N I V O TOP 6 PR T N E R E L ALLOWAB ES INCREAS ND A L S I D R DWA E E C N I R P MBIA U L O C H BRITIS
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RENTT: The challenges in developing and building purpose-built rental housing
By David Gargaro
Iesteemed n this monthâ€™s issue, we asked our RENTT (Rental Executives National Think Tank) panellists, who are private owners, to discuss the challenges of developing purpose-built rental housing in Canada. Our panellists discussed issues that affect developing and building new rental housing, how land costs and government legislation influence their decision-making process, and factors that can raise or lower the cost of building rental properties. They also talked about the impact of government pressures to include a percentage of affordable housing in all new developments, and potential incentives for building more affordable housing.
14 | November 2019
RENTT experts: Nicolas Denux, Partner, Group Denux
Jason Birnboim, President, Beaux Properties
Peter Polley, Owner, Polycorp
RHB: Welcome to RHB Magazine’s RENTT panel. We appreciate the time and effort involved in participating in today’s discussion and sharing your experience. Our readers will benefit from your input. Today we’d like to talk about developing purposebuilt rental properties. What do you feel are the main challenges in developing and building new rental housing in Canada?
Nicolas Denux: Some municipalities are much quicker than others in approving projects due to their existing zoning or approvals for rezoning. This certainty of expediency of projects is a great motivator as an investor of where to invest. For example, in the Victoria area, some municipalities take several years to approve projects. Municipalities need to look at their internal approval processes if they are trying to increase their rental offering. In terms of location, we are not merchant developers who build and resell after. We build to keep and manage, so really looking at the competitive advantage of a location and how the community is currently and will likely evolve at a later date is key.
rentalhousingbusiness.ca | 15
Important are nearby services, shopping, views, employment nodes, transit, schools, and overall desirability. For costs, we are competing with condo developers for sites in many markets. Land prices that work for rental buildings at rent levels that are workable long term is a big challenge. On the construction side, costs have come up a lot in the last 6-7 years in BC so that is also a challenge. Some of the increase is due to exchange rate and some to market activity. We are most active on Vancouver Island and the island factor creates a shallower pool of suppliers and trades when compared to larger cities. Jason Birnboim: I operate mostly in the Greater Toronto Area. There are major challenges, such as the yield on project development cost is too low, which makes it difficult to be economically viable. There are real costs of development, and I employ a conservative pro forma to evaluate those costs. Zoning is a major obstacle when doing site plans and going through final approvals. Toronto and other municipalities have an arduous process, as there are a lot of different layers and a lot of bureaucracy, which is time consuming and expensive. Peter Polley: The key challenge is trying to get the project elements to work. With inflation, labour, materials, and other costs have gone up dramatically. Since we started 20 years ago, we are paying four times as much for drywall hanging and taping, while labour rates for carpenters have doubled. This has greatly outpaced rental rate increases. There is compression on cap rates, while the cost to produce decent quality multi-residential projects has gone up by a factor of three compared to 20 years ago. Rents have not gone up by the same magnitude. There is also quality creep in rental suites. There is an expectation in the marketplace of what units will have for finishes, features, and amenities, which has impacted the cost to build rental units.
RHB: How does the price of land and the cost per square foot to build rental property affect your decision making in developing and building rental housing? Nicolas Denux: As stated previously, it is an important factor. As building owners and managers, we worry about long-term rental sustainability of any new build. If one cannot deliver rental buildings at prices that people can afford, the project will not work, as turnover and vacancy will be too great.
16 | November 2019
Jason Birnboim: Most development opportunities involve land that we already own, and we attribute a nominal cost of the land to the development. You have to factor in the market value of land for new acquisitions or mark to market for existing land. It’s a major factor. Toronto’s rental market is strong, and I understand the market’s frustration, as it’s hard to keep up with rent. But the cost of land is high, and rental developers have to compete with condo developers, who can pay more for land because they can make certain assumptions on sale price. Even though condo development is a risky game, it’s less risky than developing a rental property. Condo developers know their revenue as soon as they start selling, and they know their costs. When building new rentals, you don’t know your total costs or your revenues, as rents are cyclical. Peter Polley: With the rental buildings we’re constructing, we need to plan on owning them for a long time for the economics to make sense. It’s not worth the time, effort, and risk to build if we’re going to sell the building when it’s completed. Of course, there are exceptions. There is not a lot of created value in the cost to construct rental properties. If you’ve already bought the land, rezoning or added density can help to widen the spread. For the typical building paying full retail for land and then developing the building, project economics don’t make sense. It can work with current mortgage rates at 2 per cent, but if they go up to 3 or 4 per cent, it will make a huge difference in project economics.
RHB: How has government legislation or requirements - new or existing - affected your ability or plans to construct new rental housing? Nicolas Denux: Municipal approval times have been mentioned. On the provincial level, we like to see stable Tenancy Act regulations to provide certainty for these multi-year investments. On the financing side, provincial and federal programs, such as CMHC, to encourage private sector purpose-built rental developments are interesting and we are looking at them. But the bureaucracy can be onerous and require a certain commitment in time and effort on the part of the developer. Jason Birnboim: Over the last few years, the government has trended toward facilitating new rental housing, with most incentives geared toward building new affordable rental housing. This has its own dynamics.
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“Once rates go back to normal, The supply of rental properties will dry up.” There’s been nothing for new market-rate housing. CMHC has been flexible in financing new market-rate housing, which has made development more affordable and worth looking at projects. Municipalities are giving incentives to build affordable housing, but there is still not enough for private developers to take on affordable housing.
It may or may not tip the scales in favour of affordable housing being mixed into regular developments. If it works, then great, as there is a market for this type of project, and it’s easier to rent when there are affordable units. However, the impediment is always property taxes. Rental properties receive unfair treatment, and all three layers of government need to address it.
Peter Polley: Government legislation is the single biggest issue, as it affects the supply and price of land, development charges, and so on. Most levels of government view the real estate development industry as a giant ATM, and will constantly hit the industry with new fees and development charges. Then they talk about the lack of affordable housing. The biggest problem is determining land price based on supply, and the development approval process. Nova Scotia charges 15 per cent HST for new construction, and offers a token GST rebate for multiresidential. You get 36 per cent of 5 per cent in GST rebate for new rental housing construction, which is a joke compared to other jurisdictions. Nova Scotia has undergone a 10 year regional planning exercises, and the requirements will increase construction costs. Government policies have a huge impact on the cost to produce, the supply of land and units, and rents. Once a development is complete, single family homes have their assessments capped while apartment assessments go up 2 to 10 per cent year, and property taxes are going through the roof. The tax load is getting disproportionately shoved onto the rental housing sector. The only thing saving us right now is that interest rates are close to the lowest point of all time. Once rates go back to normal, the supply of rental properties will dry up.
Peter Polley: Historically, there has been no requirement. There is a new centre plan that includes a density bonus program. It’s supposed to encourage affordable housing. When this planning exercise is started, it was supposed to encourage private development of affordable housing. Now developers have to pay a tax on the land by the square foot, and these fees are given to non-profits and charities to build affordable housing. They cannot operate competitively compared to private developers. It’s like giving money to a church group to develop the infrastructure for a grocery store, rather than talking to grocers to make food more affordable for purchase. Even if we want to develop multi-residential projects that include affordable housing, and enrol in the CMHC’s affordable housing program, as well as the province’s affordable housing program, we would still have to pay the same fees that other developers pay, which is counterproductive.
RHB: If applicable in your area, how has the governments’ new pressure or requirement to include a percentage of affordable housing units in all new developments affected your ability or plans to construct and develop new rental housing? Nicolas Denux: This is not applicable where we are building. Jason Birnboim: We factor this into the pro forma. There are different layers of taxes and quasi-taxes in development.
18 | November 2019
RHB: What incentives or reforms would encourage you to build more rental housing that includes an affordability component? Nicolas Denux: I do not have a single solution, as we are not building in cities like Vancouver and Toronto that have extremely acute rental affordability problems. Reducing developer fees or bonus density for more affordable units may be a solution in some markets. For immediate rent relief, we also believe provincial governments could simply expand their rental assistance programs, as this is much faster than multi-year building of new rental apartments. BC has two programs: the RAP program aimed at working families and the SAFER program targeted at seniors. Quebec also has the “Supplément au Loyer” rental subsidy program for lower income households but it is quite cumbersome administratively for the landlord. So streamlining and expanding
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New rental housing construction across Canada Canada is going through a boom period in the construction of purpose-built rental housing. In June 2019, there were 62,604 rental units under construction in June, which is the most that have ever been built since at least 1990. This is an increase of 3.6% from May, and an increase of 18.53% from June 2018, a new high. The annual growth rate has been increasing since April 2014, which makes it the longest expansion of the rental housing market since 1990. British Columbia From January to September 2019, BC had 23,504 new apartment units started, and 19,072 apartment units completed. In June 2019, there were 9,702 rental units under construction, which is the most units under construction in 30 years. This is an increase of 1.29% from May and up by 14.15% from June 2018. Ontario From January to September 2019, Ontario had 26,406 new apartment units started, and 17,915 apartment units completed. Toronto is building a record number of purpose-built rental properties. In June 2019, there were 7,869 rental units under construction, which is the most units under construction since 1990. This is an increase of 13.89% from May and up by 14.91% from June 2018. Quebec From January to September 2019, Quebec had 25,117 new apartment units started, and 24,342 apartment units completed. Montreal has also reached record levels of rental housing construction. In June 2019, there were 15,445 rental units under construction, which is the most units that have ever been recorded being built. This is an increase of 3.14% from May and up by 30.36% from June 2018. Nova Scotia From January to September 2019, Nova Scotia had 1,727 new apartment units started, and 1,082 apartment units completed. Halifax has seen the number of apartment units breaking ground reach its highest levels since 2015. In June 2019, there were 460 units (that were not single detached) under construction. The number of new rental housing units climbed by 62% compared to June 2018. Other provinces From January to September 2019: • Alberta had 7,374 new apartment units started, and 6,621 apartment units completed. • Saskatchewan had 531 new apartment units started, and 1023 apartment units completed. • Manitoba ad 2,517 new apartment units started, and 1,559 apartment units completed. • New Brunswick had 1,050 new apartment units started, and 381 apartment units completed. • Newfoundland and Labrador had 74 new apartment units started, and 53 apartment units completed. • Prince Edward Island had 576 new apartment units started, and 114 apartment units completed.
20Source: | March 2019Mortgage and Housing Corporation (CMHC) Canadian
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“Development charges are the main expense. We pay the same development charges for different size units. ” this sort of program could help immediately. If governments are serious about affordability, they could expand on these sorts of programs and the private sector will continue to develop rental housing to meet the demand we believe. Jason Birnboim: There needs to be better recognition of property tax factors, which is a big property cost. Municipalities need to relax parking requirements on the construction side. There is a draconian requirement where parking must be below grade. One of my sites had surface parking hidden from view but City planners did not want it. Burying parking increases costs. It’s better for the City to look at sprinkling this parking requirement across the board instead of doing it in clusters. Provide a density bonus based on how many affordable units are added, as this will help to generate more affordable housing. Peter Polley: We did one project through the CMHC’s RCFI program, which let us access higher loan value at a lower interest rate with a reduction in our insurance premiums. This means that capital was not tied up in the project, which allowed us to build more projects. A supply side program would help to increase the supply of rental construction. Let the market sort out the rents. Make financing available to lower the cost of capital. Provide a PST rebate for affordable housing programs. In general, government policies favour single family homes through property taxes, energy efficiency programs, sales tax rebates, and so on. The government views construction businesses as fat cats that don’t need to be treated well. Multi-residential developers are treated worse than single family home developers.
RHB: What government action or reform would help lower the cost of building rental properties, or conversely, what factors increase the cost of developing rental properties? Nicolas Denux: There is not a single factor as rental developers deal with three levels of government. Each has varying impact on costs and income of a project.
22 | November 2019
I believe most developers would like to see a stable, predictable, cost-effective and expedient framework for developments. In BC, maybe exempting new rental buildings from all rent controls would encourage more rental developments in higher land cost markets. At the federal level, reforming the GST credit on new rental construction to have GST 100 per cent deductible on new rental purpose-built apartment buildings would be extra help. Also expanding on the CMHC insured programs for new rental developments would be of help. Unfortunately, and not to be too cynical, politicians prefer shovel turning photo ops and ribbon cuttings to simply adjusting and expanding existing programs. Jason Birnboim: Development charges should be relaxed, and the approval process should be shortened. Property tax abatements would be a huge incentive. Cities should relax parking requirements near transit. The market does not require it, and it’s expensive and hard to maintain. Bicycle parking requirements also drive up the cost, which is ridiculous. The City is vastly overdoing it on green space. Toronto has a lot of parkland, but they are hyper-focused on block-byblock park requirements. It’s challenging to have to dedicate space to parkland. The City should be more sensitive to a building’s surroundings. Peter Polley: Development charges are the main expense. We pay the same development charges for different size units. We try to develop less expensive units but pay the same fees as any other units. The government should waive the fees or right size the fees for affordable housing programs. Tax rebates would be helpful. There is no revenue for the government if we don’t construct the buildings. Having to pay 15 per cent HST on newly constructed rental properties is a lot of money, and this tax has to be financed to be paid, and you have to pay interest on that tax for the life of the building.
RHB: Thank you for your input and participation
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Following up on the Federal election By David Gargaro It has been just over a month since the Federal election. Justin Trudeau and the Liberal Party were re-elected with a minority government. The Prime Minister and the Liberal Party will have to do things differently this time around, as they will have to work with the other parties to get things done. What can we expect from a minority government? We’re going to find out soon, as Parliament is set to resume on December 5. We’ll also learn more about whether the Prime Minister will be able to fulfil his campaign promises, some of which are discussed below.
Looking at the numbers The Liberal Party won 157 seats, which is a 27-seat loss compared to the 184 seats it won in 2015; it is also a 20 seat loss compared to the 177 seats it held at dissolution in September. The Liberal Party was 13 seats shy of reaching a majority. It did not win any seats in Alberta or Saskatchewan. The Liberal Party received 33.1 per cent of the popular vote, second to the Conservative Party. The Conservative Party won 121 seats, which is 22 seats more than the 99 seats it won in 2015; it held 95 seats at dissolution. While it came in second place in seats, the Conservative Party received the greatest share of ballots cast, winning 34.4 per cent of the popular vote. The Bloc Québécois finished in third place, winning enough seats in Quebec to claim official party status. The party won 32 seats, which more than tripled its results from 2015 when they won 10 seats. The Bloc received 7.7 per cent of the popular vote, less than half of what the NDP received. The NDP had a significant decline in this election, as they won only 24 seats. This is a reduction of almost half from the 2015 election, when they won 44 seats; the party had 39 seats at dissolution. However, the NDP was third in the popular vote, receiving 15.9 per cent of the total vote. The Green Party won three seats, one more than it had prior to the 2019 election. It made history by winning its first ever federal seat in Atlantic Canada (Fredericton). Across Canada, the Green Party received 6.5 per cent of the popular vote. Jody Wilson-Raybould, former Liberal Party cabinet minister, was the sole candidate to win a seat as an independent. The People’s Party of Canada did not win any seats; its leader, Maxime Bernier, lost his seat to a Conservative Party opponent. However, the party did receive 1.6 per cent of the popular vote.
24 | November 2019
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The new federal cabinet Two Liberal Party cabinet ministers – Ralph Goodale and Amarjeet Sohi – lost their seats in the Federal election. On November 20, Prime Minister Trudeau announced his new cabinet, increasing the number of ministers from 31 to 35. The new cabinet includes the following changes and re-appointments: • Chrystia Freeland becomes Deputy Prime Minister and Minister of Intergovernmental Affairs • Anita Anand becomes Minister of Public Services and Procurement • Navdeep Bains becomes Minister of Innovation, Science and Industry • Carolyn Bennett remains Minister of Crown-Indigenous Relations • Marie-Claude Bibeau remains Minister of Agriculture and Agri-Food • Bill Blair becomes Minister of Public Safety and Emergency Preparedness • Bardish Chagger becomes Minister of Diversity and Inclusion and Youth • Francois-Philippe Champagne becomes Minister of Foreign Affairs • Jean-Yves Duclos becomes President of the Treasury Board • Mona Fortier becomes Minister of Middle-Class Prosperity and Associate Minister of Finance • Marc Garneau remains Minister of Transport • Karina Gould becomes Minister of International Development • Steven Guilbeault becomes Minister of Canadian Heritage • Patty Hajdu becomes Minister of Health • Ahmed Hussen becomes Minister of Families, Children and Social Development (responsible for CMHC and housing) • Melanie Joly becomes Minister of Economic Development and Official Languages • Bernadette Jordan becomes Minister of Fisheries, Oceans and the Canadian Coast Guard • David Lametti remains Minister of Justice and Attorney General • Dominic LeBlanc becomes President of the Queen’s Privy Council for Canada • Diane Lebouthillier remains Minister of National Revenue • Lawrence MacAulay remains Minister of Veterans Affairs and Associate Minister of National Defence • Catherine McKenna becomes Minister of Infrastructure and Communities • Marco Mendicino becomes Minister of Immigration, Refugees and Citizenship • Marc Miller becomes Minister of Indigenous Services • Maryam Monsef becomes Minister for Women and Gender Equality and Rural Economic Development • Bill Morneau remains Minister of Finance • Joyce Murray becomes Minister of Digital Government • Mary Ng becomes Minister of Small Business, Export Promotion and International Trade • Seamus O’Regan becomes Minister of Natural Resources • Carla Qualtrough becomes Minister of Employment, Workforce Development and Disability Inclusion • Pablo Rodriguez becomes Leader of the Government in the House of Commons • Harjit Sajjan remains Minister of National Defence • Deb Schulte becomes Minister of Seniors • Filomena Tassi becomes Minister of Labour • Dan Vandal becomes Minister of Northern Affairs
26 | November 2019
Minority government: With a minority
government, the Prime Minister will have to rely on support from another party to pass legislation. Some experts believe that the NDP will be most likely to offer the required support, which could make them more aggressive on certain issues, such as climate change and corporate oversight. Given the lack of Liberal representation in Alberta and Saskatchewan, there could also be issues related to the energy sector and the Trans Mountain pipeline. Prime Minister Trudeau is expected to face a number of challenges in dealing with Andrew Scheer and the Conservative Party, although they have already had preliminary discussions to find areas of common ground. Prime Minister Trudeau also met with the premiers of Alberta and Saskatchewan to discuss issues, which included the carbon tax and challenges in the oil and gas resource sector. Given that the renewed Liberal government has no federal representation in those provinces, finding ways to address their issues could help in getting other legislation passed.
Housing: The National Housing Strategy, a 10-
year, $55+ billion plan to create more affordable housing, will continue as it was established prior to the election. To date, it has already provided funding for community housing, and for private rental development under the Rental Construction Financing Initiative (RCFI). Upcoming stages of the strategy are to provide a Canada Housing Benefit to help low-income Canadians pay the rents in each province. The First-Time Home Buyer Incentive was promised to be expanded for people living in Victoria, Vancouver, and Toronto, with the value of a qualifying home increasing from $500,000 to $800,000. “For-profit rental providers have been well satisfied with the National Housing Strategy,” said John Dickie, President, Canadian Federation of Apartment Associations. “However, the NDP wants to see more spending on community housing development, and on the Canada Housing Benefit. Such changes in the National Housing Strategy will impact on the balance of supply and demand and thus affect both renters and rental housing providers.”
Taxation: The Liberal Party promised a number
of initiatives to help lower income families. This includes increasing the Basic Personal Amount (BPA) to $15,000 for taxpayers whose annual salary is less than $147,000, which will save the average family $600 per year by 2023-24. The Liberal Party also promised to raise the federal minimum wage to $15 per hour. Potential changes to the capital gains tax, as laid out in campaign promises from the Liberal Party and the NDP, could lead to an increase in taxation for rental housing providers. At present, 50 per cent of capital gains
28 | November 2019
are included in income for tax purposes, while the other 50 per cent is not subject to income tax. In its election platform, the Liberal Party promised “a comprehensive review of government spending and tax expenditures to ensure that wealthy Canadians do not benefit from unfair tax breaks.” The NDP promised an increase in the capital gains inclusion rate from 50 per cent to 75 per cent. “Such a capital gains change would have a devasting effect on rental housing,” said Dickie. “Since its inception in 1972, the capital gains tax has allowed a rough offset against inflation. The partial inclusion rate also compensated for risk, and encouraged capital investment. One would think that discouraging investment in rental housing would be the last thing the government would want to do, but a philosophy of raising taxes on the rich can bring a lot of unfortunate, unanticipated consequences.”
Climate change, the environment, and energy efficiency: The Liberal Party
made a number of campaign promises with respect to addressing climate change and the environment. This includes completing a flood map and developing an action plan to assist home owners with relocation for those at risk of repeat flooding, investing $1 billion over the next 10 years in the Disaster Mitigation and Adaptation Fund, and planting 2 billion trees over the next decade. It has also set a goal of net-zero emissions by 2050. Some campaign promises should also directly affect the rental housing industry. For example, interest-free loans of up to $40,000 and free energy audits will be available to homeowners and landlords to pay for retrofits. The federal government will help retrofit more than 1.5 million homes over the next five years to make them more energy efficient, as well as better protected against climate-related risks. “Rental providers hope for incentives to improve buildings rather than demands for building alterations with no financial support for those demands,” added Dickie.
Conclusion: With Parliament set to resume
soon, the Federal government will finally return to the business of running the country. Given that it will involve a minority government, it will be interesting to see how things actually function, and whether it will run as smoothly as we all hope. As members of the rental housing industry, we have a stake in ensuring that the government continues to invest in affordable housing, the environment, and energy efficiency
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CMHC’s rental market forecast By Dav i d G a r g a ro
FORECASTS BY MAJOR URBAN CENTRE
Vancouver The rental market is expected to remain tight across the region; average rents will continue to increase faster than inflation. The increasing share of new, more expensive rental units in the market, as well as rents for existing units rising to market levels, will contribute to higher average rent levels. Calgary Apartment vacancy rates are expected to move lower in 2019 as stronger population growth takes hold and outpaces new construction of rental units. Improving labour market conditions and related effects are highly correlated to movements in the apartment vacancy rate.
Every year, Canada Mortgage and Housing Corporation (CMHC) publishes a Rental Market Survey. CMHC conducts this survey every October in all urban areas with populations of at least 10,000 people to estimate the relative strengths in the rental market. It targets privately initiated structures with at least three rental units that have been on the market for at least three months. The survey collects market rent levels, availability (outside Quebec), turnover and vacancy unit data for all sampled structures. “CMHC is constantly reviewing the Universe of rental structures in the rental market Universe to ensure that it is as complete as possible,” said Bob Dugan, CMHC’s Chief Economist. “Every year, any newly completed rental structures with at least three rental units are added to the Universe. In addition to this, CMHC undertakes comprehensive reviews by comparing the Universe listing to other sources of data to ensure that the list of structures is as complete as possible.” The results of the 2019 Rental Market Survey will be available on January 15, 2020. RHB Magazine worked with CMHC to share some of the findings in this article. CMHC also created a forecast based on its 2020 Housing Market Outlook (HMO). CMHC expects that rental demand will remain strong in Canada’s largest markets, particularly in British Columbia and Ontario. The Prairie provinces are expected to continue to see recovery in their rental markets as economic conditions improve, while Quebec and the Atlantic provinces will see slightly stronger growth in demand relative to supply next year. “Demand will be underpinned by positive net migration, stable economic fundamentals, and strong population growth,” added Dugan.
32 | November 2019
Edmonton The rental market is projected to tighten up over the next two years. Vacancy rates will continue to trend lower in the next year before increasing in 2021. Landlords will react with lagged rent increases over the forecast horizon. Rental demand will be supported by the 2018 economic recovery, which helped to regain net-migration, largely driven by migrants moving to Edmonton. Saskatoon Apartment vacancies are expected to trend lower over the forecast period. Demand will be supported by continued growth in employment, income, and population. Rising costs of home ownership will delay some renters’ entry into this market. Rental demand will increase slightly faster than supply, which will put downward pressure on the vacancy rate. Regina The apartment vacancy rate has been elevated over the past several years, and is expected to increase in 2019. Newly completed rental units in 2018 will cause supply to outpace demand, pushing the vacancy rate higher. However, new supply to the rental market and construction activity have been slowing so far this year. Winnipeg The increase in demand for rental units is partially driven by a shift from home ownership to the rental market due to higher carrying costs. The growing demand for rental units is supported by an increase in the population of young adults and positive net international migration. The vacancy rate is expected to remain relatively stable in 2019 and increase slightly in 2020.
Toronto Demand for rental accommodation will remain strong. Anticipated increases in the millennial and senior populations, and support from strong immigration inflows, will ensure that the average vacancy rate remains below 1.5% over the forecast horizon. Hamilton The overall vacancy rate will increase slightly in 2020 and 2021. However, it will remain at a level that produces rent growth that exceeds inflation. The vacancy rate will edge up as primary rental apartment stock is expected to increase more than demand. Some renter households will switch over to the secondary rental market, since many condominium rental apartments will be completed over the next two years. Montreal Rental-housing demand will increase slightly faster than supply, which will put pressure on the vacancy rate. In 2020 and 2021, demand will stay significant, but the new supply will stabilize the proportion of available units.
Halifax High net migration and an increasingly aging clientele switching to rentals will support demand. Renters looking to move into home ownership will face difficulty because of fewer homes for sale and rising price levels. The vacancy rate is forecast to trend downward in 2019 before rising slightly in 2020 and 2021, as new supply marginally outpaces demand. CONCLUSION It appears that rental demand is either strong or increasing across Canada. Vacancy rates will vary by city according to different demographic, economic, and regional factors. Once CMHC finalizes the results, it will publish the comprehensive findings in the 2019 Rental Market Survey. RHB Magazine will also publish some of the key data in the 2020 edition of theANNUAL.
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A Key New Risk Facing Rental Housing Providers By John Dickie, CFAA President
Canada’s rental housing providers now face a new challenge because of the October 21 election, and the campaign promise of the Liberal Party and the NDP. Background Currently 50% of capital gains are included in income for tax purposes. (The other 50% are not subject to income tax.) Fifty per cent is the capital gains inclusion rate (“CGIR”). That rate has applied since 1972, except for the period from 1988 to 2000 when the CGIR varied between 66.67% and 75%. In their election platform in September, the Liberals promised “a comprehensive review of government spending and tax expenditures to ensure that wealthy Canadians do not benefit from unfair tax breaks.” That effectively promises a consultation of possible revisions to the capital gains tax regime (and other tax measures). Capital gains tax example A capital gain occurs when a property is sold for more than it was purchased for. The difference (less the costs of disposition) is the amount of the capital gain. No adjustment is made for inflation. A
B (with a 75% CGIR)
Capital gain included in income
Total income for tax purposes
Federal taxes payable
Provincial taxes (approx.)
Total taxes payable
Taxpayer Rental Income
The risk of an increase in the CGIR being decided in the next few months is very small. CFAA has taken steps to mitigate that risk by communicating with our key contacts in the Finance Department and the Office of the Minister responsible for housing. The risk of an increase being included in Budget 2020 without consultation is minor (say 10%). CFAA will communicate with our key contacts and others to find out whether an increase in the CGIR is being contemplated for the budget, and present the case against such an increase. The most likely path for a possible increase in the CGIR would be a consultation in keeping the Liberals election promise to review tax expenditures, which would include the CGIR. That could result in an increase in the CGIR at January 1, 2021 or in Budget 2021, or subsequently.
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NATIONAL OUTLOOK CFAA’s initial action plan – an industry working group
For several reasons, maintaining the status quo is probably the best result to seek. However, it would be advantageous for the rental industry to have a good Plan B, in case it turns out that the government insists on making a change. To help decide what to consider for a Plan B, CFAA will perform or commission some academic research and an international comparison, and form a working group. Once options have been refined and given at least a preliminary review, we will consult with CFAA’s members, both association members, and direct landlord members. We plan to schedule a retreat in Toronto to review the issues between March 24 and April 1. At CFAA’s Capital Gains Tax Retreat, we will discuss the following issues: • Introducing inflation adjustment as a part of a new capital gains tax system • Lower rates for longer hold periods (with higher rates for shorter hold periods, such as one year or less) • Different rates for different asset classes (with lower rates for rental housing) • Other ideas for a “Plan B” • Whether the current system is the rental housing industry’s preferred result. Please let CFAA know if you want to participate in the working group as soon as possible, and in any event by January 10, 2020. E-mail your interest or your input to firstname.lastname@example.org.
Fighting higher capital gains taxes
Now that the rental housing industry faces the risk of higher taxes on capital gains, it is more critical than ever that CFAA be properly resourced. To prevent an increase in capital gains taxes, or to mitigate a change in the capital gains tax system, the rental housing industry needs to: • come together as an industry with a consistent message • be ready with the arguments and evidence that higher capital gains taxes are bad for the economy, bad for workers’ incomes and bad for rental affordability • present that evidence, and advance those arguments, with the right people at the right times. CONTINUED ON PAGE 38
WANT TO STAY UP TO DATE WITH NATIONAL OUTLOOK? Sign-up for CFAA’s National Outlook e-newsletter to receive up-to-date news on what is happening across Canada, as well as industry insights and insider information on CFAA happenings. Email email@example.com to start receiving National Outlook today!
rentalhousingbusiness.ca | 37
NOVEMBER - DECEMBER 2019 CONTINUED FROM PAGE 37 CFAA is well positioned to lead that work. We can do the basic work with our current resources, but with more resources we can: • consult more with rental housing providers of all types, sizes and locations • commission more academic research to strengthen the arguments • contribute to or lead a coalition of like-minded associations • meet more government decision makers, and meet the key decision makers more often. Join CFAA now as a direct member, and receive: • prompt notice of new developments on capital gains tax changes • templates to assess the impact of possible changes on your holdings • all of CFAA’s newsletters about other tax issues and housing policies, information and issues. For more information about the CFAA direct landlord membership program, visit www.cfaa-fcapi.org or email firstname.lastname@example.org.
New Federal Cabinet Ministers important to rental housing issues
On November 20, Prime Minister Trudeau introduced his new cabinet. This sets out some background on the five Ministers who are of particular relevance for Canada’s rental housing providers. Minister of Finance – Bill Morneau Bill Morneau is returning as the Minister of Finance. He has been the Minister and the M.P. for Toronto Centre since 2015. Over the past term, Minister Morneau has overseen an increase in the income tax rate on the top bracket, changes in the taxation of small businesses, an expansion of the Canada Pension Plan and four deficit budgets. He and the government also considered, but rejected, an increase in the taxes on capital gains. The key issue for rental housing will be the Liberals’ promised review of “government spending and tax expenditures to ensure that wealthy Canadians do not benefit from unfair tax breaks.” That effectively promises a consultation of possible revisions to the capital gains tax regime (and other tax measures). It could include a review of the capital gains exemption for principal residences, perhaps setting a limit on that exemption. CFAA will work with Minister Morneau on the key capital gains tax issue, and other tax issues. 38 | November 2019
NATIONAL OUTLOOK Minister of National Revenue - Diane Lebouthillier Diane Lebouthillier is returning as the Minister of National Revenue. She has been the M.P. for Gaspésie–Les Îles-dela-Madeleine, Quebec, since 2015. Previously, she earned her Bachelor of Social Work from the University of Moncton, and spent over 20 years working in social services. CFAA will renew our work with Minister Lebouthillier’s office, seeking improvements in CRA’s tax treatment of building repairs. Minister of Families, Children and Social Development – Ahmed Hussen Ahmed Hussen has been appointed the new Minister of Families, Children and Social Development, responsible for CMHC. He has been the M.P. for York South—Weston (in Toronto), since 2015, and was previously the Minister of Immigration. After immigrating to Canada in 1993 at age 17, Minister Hussen worked with the Hamilton Social Services Department. He went on to become the president of the Regent Park Community Council, and helped to secure the revitalization project of Regent Park, advocating for its residents. He has also served as National President of the Canadian Somali Congress, and on an income security task
force chaired by the Toronto City Summit Alliance. After receiving his law degree from the University of Ottawa, Minister Hussen practiced criminal defence, immigration and refugee, and human rights law. CFAA works with CMHC and the Minister about housing policy and housing subsidy programs, including the Rental Construction Financing Initiative and the new Canada Housing Benefit. The Minister will be appointing members of the new National Housing Council, as described on page 41 of the Sept-Oct issue of RHB Magazine. As the minister responsible for housing, Minister Hussen may also have some influence on any attempts to increase capital gains taxes on rental housing property. Minister of Natural Resources – Seamus O’Regan Seamus O’Regan has been appointed the new Minister of Natural Resources. He has been the M.P. for St. John’s South—Mount Pearl, Newfoundland, since 2015, and was previously the Minister of Indigenous Services. He has held many political staff positions within the federal and Newfoundland governments, and co-hosted CTV’s Canada AM for 10 years. NRCan is important to rental housing providers because of its work on building alterations and retrofits seeking reduced energy use and GHG emissions. CFAA will work on those issues with Minister CONTINUED ON PAGE 40
rentalhousingbusiness.ca | 39
NOVEMBER - DECEMBER 2019 CONTINUED FROM PAGE 39
Minister of Environment and Climate Change – Jonathan Wilkinson Jonathan Wilkinson has been appointed the new Minister of Environment and Climate Change. He has been the M.P. for North Vancouver, British Columbia, since 2015, and was previously the Minister of Fisheries, Oceans and the Canadian Coast Guard.
The building features a fantastic view of the Halifax harborfront, and is connected to restaurants, bars, a farmers market and Keith’s Brewery. Amenities include a beautiful common room, a gym, café, an 11,000 square foot terrace, and custom courier lockers. To learn more about CFAA’s Rental Housing Conference and other buildings that will be featured on the Building Innovations Tour, read the next issues of RHB or sign-up for CFAA’s newsletter by emailing email@example.com.
As a young man, Minister Wilkinson was a Rhodes Scholar. During more than 20 years in the private sector, he has worked for many companies focused on green technologies, providing him with experience in energy and environmental technology. His previous experience includes CEO and other senior positions with QuestAir Technologies, BioteQ Environmental Technologies and Nexterra. CFAA will work with Minister Wilkinson on climate change policies and their impact on rental housing buildings.
CFAA Building Tour Spotlight At CFAA-Rental Housing Conference 2020 in Halifax, Nova Scotia, CFAA’s Building Innovations Tour will tour a number of exceptional new builds in Halifax’s booming rental market. One of the exceptional buildings featured on the tour will be the 2019 CFAA Development of Year finalist, the Alexander, from CFAA Direct Member, Killam Apartment Properties. Built on Historical Brewery Square, The Alexander is 22-storey, 239 unit rental development that was completed in Fall 2018. The Alexander blends old and new with its use of an ironstone base, a material used in many of the buildings around it, and an elegant and modern glass tower.
40 | November 2019
Conference and tour sponsorships are available. Email firstname.lastname@example.org for more information.
NATIONAL OUTLOOK CFAA Rental Housing Conference 2020 in Halifax
Join CFAA and your peers in the rental housing industry in Halifax for CFAA Rental Housing Conference 2020 from Monday, June 8, to Wednesday, June 10. CFAA-RHC 2020 will feature unmatched education, networking opportunities as well as some famous east coast hospitality. Below is the schedule in brief:
Registration to open in December. Sponsorship and exhibition opportunities are available. Email email@example.com for more information. To receive updates, sign-up for CFAAâ€™s e-newsletter by emailing firstname.lastname@example.org.
CFAA Rental Housing Compensation Survey 2019-2020 The only Canadian survey of rental housing employee compensation and benefits. Find out market compensation for all key positions in the sector, at the city or provincial level. To purchase the survey, e-mail email@example.com.
Visit www.cfaa-fcapi.org for more information.
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RHBâ€™s forum for rental housing associations to share news, events and industry information
Hot Topics: LPMA reports on the shortage of housing that is affordable in London, with comments from key City of London housing officials. pg. 45 WRAMA recaps fire safety and energy management information from its October meeting, and reports on the cancellation of the provincial amalgamation review, including local commentary and issues. pg. 49 EOLO reports on the City of Ottawaâ€™s rejection of landlord licensing, and the enhanced rental regulation enforcement action which the City is taking instead. pg. 53 HDAA announces changes to its staff and Board of Directors, as well as tips from the new and continuing directors about ways to increase tenant satisfaction and the bottom line. pg. 57
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PRESIDENT’S MESSAGE ’Tis the season of colourful trees and fallen leaves with winter fast approaching. One highlight of the fall season was our dinner seminar, Property Management 101, which took place on November 5. It covered three main topics: leasing, rent rules, and maintenance and repair issues. The second part of the series was held on November 21. These informative seminars and monthly meetings are just one way that LPMA supports its members and helps to increase their knowledge. In the spirit of the holidays, I hope to see all of you at our annual Christmas party on December 10, from 5:00 PM to 8:00 PM, at RiverBend Golf Club. Please remember to bring an unwrapped toy for The Salvation Army toy drive or donate to The Salvation Army’s kettle. For details, please refer to our calendar at www.lpma.ca.
- Shirley Criger, LPMA President
LONDON’S HOUSING CRISIS AFFECTS THE CITY’S MOST VULNERABLE
Core housing need refers to households that need to pay more than 30 per cent of their before-tax income on housing, which is large enough for their household. “Why is there such a distance between who we are as a vibrant community and who we are as a community in need? How can we be both? That’s the complexity that is impacting the housing market in London right now,” Giustizia says. The statistics are alarming: One out of every five people in London needs to spend more than 30 per cent of their income on housing and more than half of that population spends more than 50 per cent of their income on housing. Forty per cent of Londoners rent and homeowners earn 2.5 times as much as tenant households, according to City statistics. Although London’s rental vacancy rate is 2.1 per cent, that figure is closer to one per cent for one-bedroom apartments, Giustizia says, which is the size of unit in the greatest demand. The average available one-bedroom unit costs at least $1,100 a month and for someone in a retail/sales job earning $29,000 annually, affordable shelter costs would need to be less than $725 a month, according to the Canada Mortgage and Housing Corporation.
The story of London is one of two cities: the first is a diverse community with growing suburban developments and gleaming high-rise towers. The other has grinding poverty and a severe shortage of rental housing affordable to those who work in low- and modest-income jobs. Reconciling those two realities is a constant challenge for the people who work with the City’s most vulnerable citizens.
To put the situation into further perspective, figures from Statistics Canada show that London has 175,000 units of housing for a population of about 400,000.
Stephen Giustizia, chief executive of the Housing Development Corporation (HDC), which works with developers and non-profits to create affordable housing, says that London is the 10thlargest urban centre in Canada experiencing the fourth-highest rate of core housing need.
HDC’s work has resulted in about 150 units a year being added to the City’s housing stock on average for the last three years, only half of what Giustizia says is needed. London needs 3,000 new affordable housing units to help close the housing affordability gap.
“It’s not about whether we have enough housing. It’s about whether the housing we have is accessible to those who need it,” Giustizia says.
rentalhousingbusiness.ca | 45
The situation is desperate, particularly for 200 people who are experiencing unsheltered homelessness, says Craig Cooper, manager of homeless prevention for the City. “We’re seeing people living in alcoves on Dundas Street, we’re seeing people who are overusing shelters. Our shelter occupancies are regularly 100 per cent. The solution is not to build more shelters. It’s to find more housing to house those people who are living in shelters and that’s been our big challenge.” Doug Calderwood-Smith, manager of strategic program and partnerships for the Housing Services Division of the City of London, says more than 5,000 individuals are on the wait list for social housing and the wait time is as long as seven years. He has heard people applying for social housing talk about their current living situation as sharing a bachelor unit with six other people. “How do you not enter into a precarious mental health crisis or stress when you don’t have stability in your housing situation?” he says. “The demand for social housing will only grow as there is less private market stock available in the most-needed price ranges.” The City’s housing scene started to shift a few years ago as the lack of housing in Toronto drove up prices, resulting in people selling their homes (sometimes for $1 million) and coming to London, attracted by affordable housing prices and rents. Sparked by the demand, houses began to soar in value. The apartment vacancy rate plummeted as tenants remained in their units, unable to buy their first homes, and rents began to rise dramatically on turnover. Having renters and buyers from the GTA drive development, while positive, means it’s occurring in a small range of the market. “The new housing is almost exclusively on the higher end,” Giustizia says. The housing crisis has caused the City’s dollars to be stretched to the breaking point. Cooper’s department, which oversees the management of money from three levels of government to deal with homelessness prevention, provides first and last month’s rent, covers utility arrears and provides short-term rent subsidies, which bridge the gap between social assistance shelter allowances and market rent. It used to pay no more than $400 when units cost less than $800 a month, but the supplement for a new client is now about $900. “Realistically, it has to be if we want to get people housed,” Cooper says. “It might be what we have to do in the short term, but it’s absolutely not sustainable.” Even rooming houses are charging far more than they ever have before and have wait lists, which Cooper says he has never before seen in London. Calderwood-Smith says many people entering social housing need supports to maintain housing stability. For example, some of the landlords his department works with forge relationships with agencies that act as an intermediary to help resolve issues between landlords and tenants. Others have been willing to integrate support services, such as nurses and personal care workers, into their buildings. The RentSmart program teaches tenants life skills, including how to keep an apartment clean and pay the rent.
46 | November 2019
“It’s not enough just to give people a lease and a set of keys,” Calderwood-Smith says. “We need to make sure people are successful in the long term, which means supports.” Giustizia believes a different way of creating housing is needed, such as incorporating purpose-built secondary suites into new homes; encouraging development by pre-zoning land and making lots permit-ready; and working with developers to access vacant or surplus land, including former hospital and school buildings, and using it for affordable housing. It’s also important for the City to control the number of homes and apartments that become Airbnb rentals to prevent further erosion of the City’s housing stock. It needs to be easier across the province, as well, for developers and non-profits to build multiple units in multiple places, Giustizia says. A nonprofit generally builds one affordable housing development on one piece of land, which requires all of its resources. There is currently no mechanism to replicate a development multiple times. “We need ways to better support non-profit housing organizations to more quickly and efficiently build more quality affordable housing,” he says. In addition, Cooper says City planners are working to make development charges and other
municipal fees and services easier on developers and to provide tools for them to create affordable housing. Tied to housing is the lack of good-paying jobs. Many Londoners earn less than $20 an hour in service industry jobs and the housing market for them is almost zero. For example, people who work in malls and fast-food outlets don’t live in the area where they work because they can’t afford to. It’s also problematic for Fanshawe College and Western University students — a population the City most wants to retain — who graduate with large debts. They will move elsewhere if there isn’t housing that’s affordable for them, Giustizia says, adding that stable housing leads to a stable workforce. Cooper says every sector of the community needs to contribute to solutions. “The City can help to be a vehicle but, at the end of the day, we can only do so much and it has to be a community response.” Adds Giustizia: “We can do everything we can possibly do within our municipal, federal, and provincial toolkits related to incenting and advancing. We will not solve the problem alone. We cannot.”
rentalhousingbusiness.ca | 47
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PRESIDENT’S MESSAGE Many thanks to City of Cambridge Mayor Kathryn McGarry, who made time to meet with me and Asquith Allen, Director, Policy & Regulatory Affairs, Federation of Rental-housing Providers of Ontario, in late October. With the City of Cambridge’s population at approximately 150,000 people and growing, the meeting was a great opportunity to discuss ideas that support purpose-built rental development, effective regulation, and rental housing providers within the City and region, all to address housing issues.
- Andrew Macallum, President
Mayor Kathryn McGarry (centre) with Asquith Allen, FRPO (left) and Andrew Macallum, WRAMA (right)
WRAMA Education Event Thanks to all those who presented at our WRAMA Education Event in October. Taking place during Fire Prevention & Safety Week, the presentation from Al Bastien at Chubb United Technologies about Fire and Life Safety inspections was timely and well received. “We strive to ensure our communities are equipped with the best product, service, accessibility and knowledge, leading to safer and sustainable practices. We are delighted to be working together.” – Stephanie Lopez, PMA Sales and Solutions, Chubb Fire & Security With a dynamic presentation about the cost of natural gas and electricity by Paul Weingarten from ECNG Energy Group, many property owners in the audience were surprised to hear about changes coming to electrical bills on November 1, 2019. “We want to be your members’ energy management subject matter experts – we are happy to assist all members regardless of question or concern.” – Elliott Jones, ECNG Jeff Nosal from Garland Canada Inc. spoke to the importance of flat roof maintenance and using thermal imaging to help detect small roof problems before they become big ones.
Pictured l-r: Andrew Macallum, WRAMA; Al Bastien, Karim Mahdi & Stephanie Lopez - Chubb United Technologies; Elliott Jones, Paul Weingartner - ECNG Energy Group; Jeff Nosal - Garland Canada Inc.
“Thermal scans are a fantastic way to identify issues within a roof system. They are essentially like an X-ray for a roof and allow us to identify issues before they become large-scale problems. Garland also complements the thermal scans with no-charge visual inspections of your roof. After the inspection, a report is provided offering visual evidence of deficiencies as well as recommendations for immediate repairs, preventative maintenance, and budgets and timelines geared around the life expectancy of your roof. No one likes surprises regarding needing a roof replacement. Garland gives building owners the opportunity to plan for this expense, and also help extend the life of your existing roof.” - Jeff Nosal, Garland Canada Inc.
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Amalgamation update The Greater Kitchener Waterloo Chamber of Commerce presented the Provincial Leaders Speakers Series on Friday, October 25, 2019, featuring Ontario’s Minister of Finance Rod Phillips (seated left). A surprise visit from Minister Steve Clark (Ontario Ministry of Social Affairs and Housing, seated right) added to a great event – all on the day of the amalgamation announcement. Chamber President Ian McLean (standing right) provided questions to each of the Ministers. The municipalities that compose the Region of Waterloo – the cities of Kitchener, Cambridge, and Waterloo, and the townships of Woolwich, Wellesley, North Dumfries and Wilmot – had been included on a list of 82 upper and lower municipalities that were under review for amalgamation. The review sought input on eight regional governments (Durham, Halton, Muskoka District, Niagara, Oxford County, Peel, Waterloo, York), Simcoe County, and their lower-tier municipalities. The Ministry of Municipal Affairs and Housing launched its Consultation: Regional government review “...to ensure that... municipalities are providing the vital services that residents and local businesses depend on” with a submission date of late May 2019. On Friday, October 25, 2019, the review and any movement toward amalgamation was cancelled when the provincial government announced that it would not force amalgamation of municipalities. This may have been welcome news to local politicians who will remain in their roles, but the case for amalgamating Waterloo Region remains a strong one. Reaction to the consultation review included: “Polishing our brand: Review of Waterloo Region’s governance is an opportunity to strengthen our community’s identity. We would carry far more unity and weight than we do as a group of smaller communities.” – Mallorie Brodie and Lauren Lake, Mar. 27, 2019, Waterloo Region Record “A community of 600,000 people has eight local governments, 59 elected politicians, eight municipal chief administrative officers, and a host of other bureaucrats and bureaucracies all multiplied by eight. It also has seven fire departments – though it somehow manages to do very well with one police force and one ambulance service, both run by the region.” – OPINION, Oct. 30, 2019, Waterloo Region Record “Aside from being told how many submissions from the public were received – more than 8,500 in fact – we don’t know what the results of the exercise were and we won’t any time soon as the government plans to keep it a secret. It will come out, via a freedom of information request or a leak, but until then we can only speculate on its contents. That said, it’s practically unthinkable that Michael Fenn and Ken Seiling, the two advisers appointed to lead the review, recommended no changes.” – Sean Pearce, Oct. 31, 2019, YorkRegion. com “Does it make sense, for example, that we have one regional police force and paramedics service but a hodgepodge of seven different fire services?
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Does a community of nearly 700,000 people need the bureaucracy of eight individual CAOs, eight different planning and building divisions, eight sets of bylaws, or eight teams to communicate government news to the public?” – Mike Farwell, Nov. 1, 2019, Waterloo Chronicle. Property ownership and the provision of residential rental housing that spans the Region of Waterloo is reflected in the membership of the Waterloo Regional Apartment Management Association. The experience of rental housing providers working with different services that operate independently of each other in each of the cities and townships can provide an opportunity to do better. A handful of examples include:
City of Cambridge tenant water billing
Tenants who rent a home are not able to create a water payment account with the water provider. Instead, the property owner must contact the City of Cambridge and direct the water bills to the attention of the user, the tenant living at the address. In the event that a water bill does not get paid, the property owner is forwarded the bill. The amount, if left unpaid, is added to the property tax roll.
City of Kitchener fire safety plan review
Property owners who submit fire safety plans to City of Kitchener Fire have to wait up to
nine months for the plans to be reviewed and approved. Amalgamation of this essential service would bring a level of predictability to all cities and townships.
City of Waterloo rental licensing
The Landlord and Tenant Board, a provincial tribunal, calls licensing costs an “extraordinary increase in municipal taxes and charges” with this decision being upheld by The Superior Court of Justice in a ruling on December 7, 2017. It is a tax. The City’s licensing requirement for a police record check disregards The Police Record Checks Reform Act, which passed in December 2015 by a vote of 93-0 at Queen’s Park, and became law on November 1, 2018, fundamentally changing the rules around what police can tell prospective employers, volunteer agencies, and governments about Ontarians. As part of the announcement that the government would not proceed with amalgamations, the Ministry of Municipal Affairs and Housing announced an additional $125 million for the municipal modernization program, which will help municipalities review and improve the way they deliver services. Hopefully, rental housing providers will be included as a voice in how this money can be allocated and spent effectively.
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Canada has a new minority government. What does that mean for the industry?
Following up on the Federal election
Canadaâ€™s #1 most widely read publication for Apartment Owners, Managers and Association Executives
The challenges in developing and building purpose-built rental housing
New rental regulation in the City of Ottawa
By John Dickie, Chair, Eastern Ontario Landlord Organization Landlords and tenants have achieved a win in the City of Ottawa. The City has rejected landlord licensing or registration in favour of enhanced, but focused, property standards enforcement. That means money will not be wasted on inspecting buildings in good condition and processing paperwork. That means rents will not be forced up to pay for the cost of new compliance measures imposed on good landlords.
chambers, Councillor McKenney told me about people who were displaced by a rooming house fire in April, who are still sleeping in tents despite the cold weather. She asked if EOLO could help find rental units for $900 per month. I immediately emailed EOLO’s directors. Within two hours, Timbercreek responded that they could offer a unit at $919 per month. I informed Councillor McKenney of the offer.
City staff determined that 90% of rental units have not been the subject of a single property standards order for the last 10 years, and 23% of the orders have been issued against just one half of one per cent (0.5%) of rental units. On that basis, the City staff reported that landlord licensing or registration would provide little, if any, benefit, while wasting resources.
During the debate at the CPS Committee, Councillor McKenney noted that one of the displaced people was likely to be rehoused thanks to “the landlord association [EOLO].” That was a positive note about private landlords, which was helpful in offsetting the negative stories from the progressive advocates’ speakers.
Numerous low-income housing advocates and others had sought a landlord licensing program across Ottawa. The advocates sought an expanded version of Toronto’s “RentSafe” program to make every rental provider with three or more units pay $11 per year (plus potential audit fees) to fund proactive inspections of all building common areas, and make all those landlords meet all the paper burden which applies to landlords of 10 or more units in Toronto.
The CPS Committee on November 15 Given the staff report, the progressive Councillors sought to direct City staff to study and report on a potential pilot “RentSafe” project in Vanier and Sandy Hill. (Vanier is a low-income, low-rent area next to Sandy Hill, which is an historic area around the University of Ottawa.) The key decision took place on November 15 at the end of an 11-hour session of the City’s Community and Protective Services Committee, where EOLO often appears to defend landlords’ interests.
Various landlords of all sizes spoke about the care they take to perform proper maintenance at their buildings, and the costs that licensing or registration would impose on them in paperwork and licensing fees. EOLO Vice-President David Lyman argued that economic theory and experience suggest that increases in rental costs result in reduced rental supply and increased rents. A progressive councillor sought to show that landlords would not increase rents to offset cost increases, and tenants would not have to pay the licensing or registration fee, but David stood his ground. Geoffrey Younghusband and Beverly Johnson, of Osgoode Properties, spoke next, emphasizing Osgoode’s desire to make all needed repairs for tenants immediately, to provide good service and prevent consequential damage. Osgoode Properties operates 3,500 rental units in Ottawa. A councillor asked Geoff how many property standards orders Osgoode had received over the last ten years. He replied, “Three.” No one doubted him.
In the morning of the marathon session, in a private conversation outside the Committee
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Since each association or corporation can only speak once, for five minutes, at the Committee, I had arranged with Doug Ducharme of United Properties Ottawa to allow me to speak for his company later in the afternoon so that I could answer the tenant presentations. United Properties Ottawa owns three rental buildings in central Ottawa with a total of 400 rental units. Over the last two years, United Properties Ottawa has applied for above-guideline increases (AGIs) for extraordinary increases in property taxes. I pointed out to the Committee that if a landlord licensing or registration fee had been brought in during either year, United Properties Ottawa could have added that to their AGI. Councillor Fleury sought to have City staff do a detailed costing and evaluation of a licensing pilot project in Sandy Hill and Vanier, but that was voted down 5 to 3. The staff report on long-term regulation was then carried unanimously.
Conclusion at City Council on November 27 At City Council, the progressives tried again. They garnered 7 votes for staff to do a further study of a landlord licensing pilot, against 14 in favour of the staff report, including Mayor Watson.
Action the City is taking instead of licensing The City Staff recommended enhanced case management, focused enforcement against problem addresses/operators with increased resources, and the provision of additional consumer education for residents. Specific measures recommended by staff and the Committee, and adopted by City Council, include: 1. Enacting a Rental Property Management By-law, requiring landlords to give certain information to tenants in writing 2. Enacting additional pest and vermin control regulations with standards and obligations for both landlords and tenants 3. Charging re-inspection user fees to landlords who fail to comply with property standards orders 4. Adding two additional property standards officers to focus on problem addresses 5. Establishing a consumer protection and education website with: a. educational content on tenant rights and related issues, including social media videos in multiple languages b. an online searchable database to display any history of non-compliance with property standard orders 6. Exploring the feasibility of providing Property Standards Compliance Reports to both tenants and landlords following investigations. EOLO believes that this enhanced enforcement system will be more effective at improving property maintenance, and much less onerous than landlord licensing or registration for good and average landlords.
Large and small landlords working together
EOLO did a considerable amount of work to make the landlord arguments to the Cityâ€™s consultant and the City staff. During the consultation process, EOLO made extensive written submissions, and met many Councillors.
54 | November 2019
Much of our work was reflected in the consultant’s report and the City staff report. EOLO’s submissions and arguments made use of a report that the Federation of Rental Housing Providers of Ontario (FRPO) had commissioned to help the Hamilton and District Apartment Association fight landlord licensing in Hamilton. That report, prepared by Michael Fenn (a former Chief Administrator of the City of Hamilton and a former Deputy Minister of Municipal Affairs and Housing), pointed out the disadvantages of landlord licensing, and a number of alternate approaches to address the problems seen by advocates of licensing. In addition, EOLO met several times with the two associations representing small landlords in Ottawa, the Ottawa Regional Landlord Association (ORLA) and the Ottawa Real Estate Investors Organization (OREIO), to alert hundreds of small landlords and investors to the consultation process and how they could provide input. EOLO also engaged with both small and large landlords about how to stay united, rather than pointing fingers at each other. The work done by EOLO, supported by Ottawa’s large landlords, and the grassroots participation of Ottawa’s small landlords, enabled Ottawa’s rental housing providers of all sizes to avoid landlord licensing and registration fees. This will benefit investors, renters, and taxpayers by keeping costs down, and avoiding the waste of resources entailed in inspecting the many good quality properties, instead of focusing inspection on the small percentage of known problem properties.
Short-term rentals The City staff report recommended allowing short-term rentals by people in their principal residence, but not in other dwelling units (e.g., investor owned condos, the non-owner occupied units of duplexes and triplexes, or in carriage houses, even if the main house is owner occupied). The CPS Committee recommended that approach to City Council, where it was adopted on November 27, with an expanded exemption in rural areas to include secondary dwelling units and carriage houses. The Committee heard from 60 delegations, mostly about short-term rental regulation, which was addressed in the same staff report as the regulation of long-term residential rentals. Speakers were evenly divided between home owners and condo owners who want short-term rentals by investors banned, and rental investors who want them allowed. EOLO took no position on the short-term regulation issue, except that we wanted no new regulations that would suggest that tenants have a right to rent on Airbnb and similar platforms.
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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C H A N G E S AT H D A A The upcoming year will come with many changes for HDAA. Our administrator of nine years has decided to pursue other endeavours and we are excited to welcome a new administrator. We also wish to welcome our newest board members and say goodbye to outgoing board members.
Anna Kusmider Anna is well known in the industry as a Landlord Engagement Specialist. She has also been a member of HDAA and sat on the events committee for the past three years. Her strong administrative background paired with her experience in the rental housing industry is a perfect combination to ensure the association runs smoothly for years to come. She is excited to take on the role of administrator and expand on the direction in which HDAA is already headed.
Diane Currell Diane has been an integral part of the association since she started in 2010. She has helped to develop and grow the association over the past nine years. Although she will be missed, we know she is looking forward to new challenges and we wish her luck in her future adventures.
Jeff Gilpin Some of you may remember that Jeff was one of the original board members of HDAA. He is now the President of River Rock Laundry, a proudly Canadian provider of vended laundry equipment and service to the multi-residential housing industry in Ontario. Prior to founding River Rock in 2018, Jeff spent the previous two decades in various business development and operations roles within the industry.
Anya Heath Anya has a strong commitment to the real estate industry. She has a solid financial background in multiple real estate asset classes. In her current role as Divisional Controller and Assistant Treasurer at Morguard, she oversees an office, industrial, and retail institutional-quality portfolio with a market value of over $3 billion. She has been investing in real estate since 2015 with a current focus on multi-family properties. We look forward to having Anya on the board.
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Lucie Brusse Lucie has been a board member for the past three years. She is passionate about the revitalization of the City of Hamilton. Lucie has been in real estate for more than 13 years. She has proven success in both residential and commercial real estate. She has become a trusted resource to more than 400 agents and brokers that she supports across Canada. She will be missed as a valuable asset to HDAA, as she has contributed to many aspects of the organization including educational seminars, speaking at various dinner meetings, and charity walks.
Robert Fleet Robert has been on the board for well over 10 years. He has been a driving force behind the growth and success of the association. He will be sorely missed but has indicated that First National will continue to support HDAA and all housing providers. Robert is Business Development Manager for First National Financial LP, a gold member of HDAA. He specializes in conventional mortgage financing in addition to securitized mortgage lending. His involvement as a board member and his input over the years has been invaluable.
Recent events November 13 Dinner meeting: Stump the board
A member favourite, this annual Q&A dinner is always informative and is a great opportunity for our members to meet the board and learn from their years of experience. The board gave some helpful tips on ways for housing providers to save money and increase their profits, and various topics were discussed. â€˘
When looking at suite turnovers and vacancies, cost recovery should be well considered. The costs borne to improve a unit or turn over a unit may not be recovered in a potential rent increase, therefore keeping your tenants happy should be a priority.
Laundry should be more of an enjoyable experience for tenants, which can be accomplished by creating a laundry room with a more inviting atmosphere with amenities such as couches, vending machines and WI-FI. Use pricing from your local competitors as a determining factor for your pricing. Also, be more creative with regard to the pricing your washing versus dryer costs. For example, having a $4.00 wash with free drying can in many cases increase your profits, as not everyone dries their clothes.
58 | November 2019
Accounting systems in place should depend on the size of your company. The added expenditure and operating cost should be properly offset by your savings.
Web presence is becoming more important for home providers as tenants who are unit shopping are depending more on searching for units online. Tenant portals or other platforms that allow for online payment, maintenance requests, and general communication are growing in importance.
Pest control should be managed appropriately with an emphasis on ensuring your building envelope is well maintained. It was suggested that yearly inspections greatly increase the chance of mitigating pest infestation.
The style of communication with tenants should be geared toward the demographic of your building, whether that means continuing to have more face-to-face opportunities with staff or creating an online platform for everything from payment to maintenance requests. Younger generations seem to rely more heavily on communicating through apps while older generations prefer face-to-face communication.
Energy savings are best accomplished by ensuring your building envelope is tight and making toilets and light bulbs more energy efficient. Keep in mind that more expensive retrofitting such as window replacement should be balanced with a potential AGI and the fallout from that.
The board discussed their thoughts on the continual demand of rental properties in Hamilton, as well as the belief that ongoing investment in Hamilton will increase as interest grows. They also touched on the difficulties of hiring staff, specifically superintendents. The role of superintendent has evolved dramatically in the past several years to include a broader skill set, which includes better soft skills, accounting, and computer knowledge. It was pointed out that the Hamilton Literacy Council is running a workplace essential skills training for superintendents. This soft skill training includes communication, time management, workplace culture, conflict management, as well as other skills. For more information, contact the Hamilton Literacy Council at info@ hamiltonreads.ca. The board also spoke about rare situations that can be encountered in buildings and by staff, such as the accidental or intentional death of a tenant. It is important that you maintain the proper security of the unit by only allowing individuals into the unit who are able to present proper documentation. It is also important to address how these types of situations may affect your staff; ensuring their well-being is a priority. To finish off the evening, we talked about the impact of the new cannabis legalization on the industry. It is surprising to say that the overall opinion was that there has not been an increase in problems due to cannabis usage. The fear was originally that there would be an increase in costs due to the growing of cannabis in units and an increase of complaints due to the smoking of cannabis. Neither one of these has proven to be a problem so far.
Hamilton and District Landlords Since 1960, the Hamilton and District Apartment Association has grown significantly. Our members manage over of 30,000 units throughout Hamilton, Burlington, Brantford, Guelph, Mississauga, Oakville, St. Catharines and into the Niagara Peninsula. The association is a
Interested? Call us or join online! Ph: 289-208-5445 Web: www.hamiltonapartmentassociation. ca Mailing address: PO Box 33522
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SUITE COUNT RHB SIDEBAR
Capital markets & national investment snapshot
Co-living in Canada DAVID MONTRES SOR , E xe cutive Vice Pre side nt , CBRE - N ational Apar tme nt Group
As average rents continue to rise in most major North American cities, a trend toward the concept of “co-living” has emerged. Largely catered toward millennials and young professionals, co-living provides tenants with access to furnished suites with high-end finishes at lower comparable rents inclusive of utilities and services while trading privacy for communal living. Shared access to additional amenities such as fitness centres and lounges, as well as access to exclusive member events, contribute to an enhanced sense of community. For investors, the potential upside is compelling. While still a nascent sub-sector in Canada, coliving has gained traction in the United States from a few chief proponents including Ollie, Quarters, WeLive, and Common. At Common’s key locations across the United States, market rent per square foot averaged $5.45 in 2018 while market rents for the same regions averaged approximately $3.75 per square foot, representing a 45% premium on rental revenue. Though the co-living model comes with higher maintenance, furnishing, and other operating costs, co-living providers typically aim to achieve a premium on NOI of 20% to 30% compared to traditional purpose-built rental housing. Higher revenues compensate for the more intensive operating profile, resulting in similar expense ratios relative to conventional multifamily product. While the concept is new in Canada, there are co-living developments underway in Ottawa and Kitchener-Waterloo. Common’s Zibi development on the Ottawa River, set to open in 2020, will feature a combination of traditional apartments and co-living quarters. In Kitchener-Waterloo, Node’s co-living development will break ground this fall and is expected to open in 2021. Both Common and Node have cited Toronto as a potential location for further co-living developments in Canada. Announcements for new projects are expected in the near future. As multifamily cap rates continue to compress in many cities across Canada, we expect co-living to provide investors with a higher yield alternative to traditional purpose-built rentals.
Co-living Rent Premium $10.00
$New York - Williamsburg
60 | November 2019
New York - Ridgewood Co-living Rent / SF
San Francisco Market Rent PSF
RHB, RHB Magazine