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Canada’s Voice for Apartment Owners, Managers and Association Executives

Vol.5 No.4 November 2012 rentalhousingbusiness.ca

RENTAL HOUSING BUSINESS

EDISON PROPERTIES & PPMA PROFESSIONAL PROPERTY MANAGERS ASSOCIATION

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The US economy and Canada’s rental housing market

In a wrong-headed move, Hamilton considers licensing Capital cost allowance and rental properties

National Outlook

Now in RHB


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Formerly Profile Magazine

Vol. 5 No. 4 CO-OWNER, DIRECTOR

Editor’s Note

Juan Malvestitti juan@rentalhousingbusiness.ca

CO-OWNER, PUBLISHER

Marc L. Côté marc@rentalhousingbusiness.ca

EDITORIAL

David Gargaro david@rentalhousingbusiness.ca

CONTRIBUTING EDITOR

John Dickie jdickie@rentalhousingbusiness.ca

DESIGN

Thomas Calvert

PHOTOGRAPHY

Adam York Photography

OFFICE MANAGER Kayla Clark

SUBSCRIPTIONS Canada: One year $27.00 Elsewhere: $39.00 Single copy sales: Canada $9.00 Elsewhere: $12.00 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 Modern Empire Inc. accept no liability for information contained herein. All rights reserved. Contents may not be reproduced without written permission from the publisher.

P.O. Box 696 Maple, ON, L6A 1S7 416.236.7473 www.modernempire.ca

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s most Canadian hockey fans, I am disturbed by the fact that I cannot watch my favourite team play hockey. This is a national issue, as hockey is a Canadian pastime and many decisions are being made by people who did not grow up with the game as we did. Although I am not a Jets fan, I was happy to see them rejoin the league after many years away, and I definitely feel for their fans as they had to deal with their team being returned and then taken away in the span of a year. On the brighter side (and more relevant to this magazine), this month’s issue of RHB Magazine takes a closer look at the rental housing market in Manitoba (and Winnipeg more specifically). This includes an article on the Professional Property Managers Association (PPMA). We spoke to two of the key members of PPMA, and found out more about the issues that impact members of the association and the province’s rental housing industry. We have a profile of Edison Properties (formerly known as Edison Rental Agency), a full-service property manager that specializes in multi-family residences. The company has rebranded to better describe what it does, but it plans to remain true to its family-owned and operated roots. It is also returning to the property development game with a new rental housing development that will bring much-needed units to Winnipeg. We would also like to announce that National Outlook, the newsletter of the Canadian Federation of Apartment Associations, is becoming a regular feature of RHB Magazine. The newsletter covers political developments and policy issues that are important to rental housing providers, landlords and investors in rental properties. You can read more about this new merger in the interview with John Dickie, President of CFAA. Other interesting features this month include an interview with Benjamin Tal on the US economy, an article on CCA with respect to the rental housing market, results of a compensation and an article on licensing. We also have industry news and information that relate directly to the rental housing industry. Enjoy the issue!

David Gargaro All contents copyright © Modern Empire Inc. Canadian Publications Mail Product Sales Agreement No. 41608530

To view the online edition of RHB, please go to www.rentalhousingbusiness.ca


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FAA is delighted to announce a further strengthening of the partnership between itself and RHB Magazine, through the addition of National Outlook as a new regular Supplement. National Outlook is CFAA’s newsletter, which is distributed electronically through CFAA’s member associations. Starting with the next issue, an RHB edition of National Outlook will be part of each issue of RHB Magazine. Following page 22, find out what you can expect and how National Outlook will differ from the rest of RHB Magazine. Also in this issue of RHB Magazine is an article on landlord licensing in Hamilton. Wrong-headed though it is, a number of Ontario municipalities are forcing all small landlords, responsible or not, to jump through hoops to license their rental buildings. Costs range up to $450 per rental unit per year. See page 34 for a summary of the reasons landlord licensing is bad policy, and alternate suggestions for addressing the issues that are driving licensing. Learn also what you can do to stop the spread of landlord licensing.

Professional Property Managers Association (“PPMA”), which is CFAA’s member association in Manitoba. President Mario Lopes, and Government Relations Chair Avrom Charach, share with readers how PPMA has come to be and where it intends to go. Finally, please save the date for CFAA’s 2013 Rental Housing Conference, to take place in Toronto from June 11 to 13. The 2013 conference will include a building innovation bus tour (during the afternoon of June 11), an evening social event (June 12), two full days of educational sessions (June 12 & 13) and lots of networking opportunities. CFAA looks forward to hearing Benjamin Tal’s latest economic update. We urge rental housing providers from across Canada to save the date and attend Canada’s Rental Housing Conference.

John Dickie John Dickie, CFAA President

Don’t miss “In the Know.” At page 22 Pal Benefits Inc has provided information on the average salary increase planned for 2013 by rental housing providers. Page 23 provides a recap and update on the recent changes in CMHC mortgage insurance rules and how they are affecting landlords, both small and large. CFAA is continuing to monitor the situation for landlords as CMHC approaches closer to its $600 billion underwriting limit. Other articles in this issue tell the stories of one of Winnipeg’s largest landlords, now known as Edison Properties; and the

CFAA Member Associations British Columbia Apartment Owners and Managers Association (BCAOMA) www.bcaoma.com P: 604.733.9440, 1-877-700-9440

Kingston Rental Property Owners Association (KRPOA) www.kingstonrentals.com P: 613-572-7276

Rental Owners and Managers Society of BC (ROMS BC) www.romsbc.com P: 250-382-6324, 1-888-330-6707

Eastern Ontario Landlord Organization (EOLO) www.eolo.ca P: 613-235-9792

London Property Management Association (LPMA) www.lpma.ca P: 519-672-6999

Saskatchewan Rental Housing Industry Association (SRHIA) www.srhia.ca P: 306-653-7149

Federation of Rental-housing Providers of Ontario (FRPO) www.frpo.org P: 416-385-1100, 1-877-688-1960

Manufactured Home Park Owners Alliance of British Columbia (MHPOA) www.mhpo.com P: 1-877-222-4560

Waterloo Regional Apartment Management Association (WRAMA) www.wrama.com P: 519-748-0703

Greater Toronto Apartment Association (GTAA) www.gtaaonline.com P: 416-385-3435

Multiple Dwelling Standards Association (of Toronto) (MDSA) P: 416-362-6372

Hamilton & District Apartment Association (HDAA) www.hamiltonapartmentassociation.ca P: 289-440-3185 Investment Property Owners Association of Nova Scotia (IPOANS) www.ipoans.ns.ca P: 902-425-3572

New Brunswick Apartment Owners Association (NBAOA) www.nbaoa.myidealhome.com P: 506-640-1460 Professional Property Managers’ Association (of Manitoba) (PPMA) www.ppmamanitoba.com P: 204-957-1224

The Canadian Federation of Apartment Associations represents the owners and managers of close to one million residential rental suites in Canada, through 15 organizations across Canada. CFAA is the sole national organization representing the interests of Canada’s $80 billion rental housing industry. For more information about CFAA itself, see www.cfaa-fcapi.org or telephone 613-235-0101


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TABLE OF CONTENTS

Miriam Bergen and Frank Koch-Schulte of Edison Properties (page 12) with Mario Lopes O’Shanter Development Company – pg 12 and Avrom Charach of the PPMA (page 26)

12

EDISON PROPERTIES

26

PPMA

Edison Properties has a new name and brand, but the property management company plans to return to its roots by developing its first rental housing property in more than 20 years.

The Professional Property Managers Association (PPMA) represents the residential industry in Manitoba, serving as the voice for landlords, building owners, investors and suppliers to the industry.

Special preview

NATIONAL OUTLOOK

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Benjamin Tal, Deputy Chief Economist of the CIBC, responds to questions regarding the US economy and how it will affect Canada’s rental housing market.

32

By David Gargaro National Outlook, the newsletter for the Canadian Federation of Apartment Associations (CFAA), is becoming a regular component of Rental Housing Business Magazine (RHB). Since late 2011, CFAA has partnered with RHB to publish news, profiles, features and information of interest to members of the rental housing industry. Incorporating National Outlook into RHB Magazine further solidifies this partnership and provides readers of the magazine with additional news and insights to members of the rental housing industry. I sat down with John Dickie, President of CFAA, to learn more about National Outlook and discuss the ramifications of marrying these two publications. RHB: What is National Outlook, and what will it become? JD: National Outlook is the official newsletter of the CFAA. Until now, National Outlook has been published quarterly, and distributed electronically to members of CFAA member associations across Canada. Going forward, National Outlook will become a regular component of RHB Magazine (rather like a supplement), and will be published six times per year. It will be sent by mail to readers of the magazine, including many members of the rental housing industry who do not currently receive National Outlook. CFAA will also publish an electronic version of National Outlook six times per year, which will provide information that adds to what is published in the printed version.

FRPO’s MAC Awards: Raising the Bar for Rental Housing Excellence FRPO’s Annual MAC (Marketing, Advertising and Construction) Awards celebrate the industry’s achievements and help to raise the bar for the entire apartment sector.

34

IN A WRONG-HEADED MOVE, HAMILTON CONSIDERS LICENSING The Hamilton & District Apartment Association is opposing a move by the City to impose licensing. Read five key objections to landlord licensing, and what you can do.

RHB EDITION

a vital new part of RHB Magazine

Hope, Change, Decline, Status Quo or...

36

CAPITAL COST ALLOWANCE ON RENTAL PROPERTIES Capital cost allowance (CCA) is the annual deduction that can be claimed against income for tax purposes, based on the cost of certain business assets. Learn rules that apply to additions or improvements to those assets, and other key limitations.

continued on page 3

Inside this edition Housing allowances being expanded into new areas In National Outlook (electronic edition) Available at www.cfaa-fcapi.org

CMHC lending status Population changes affect rental demand Up-coming provincial elections New BC apartment association leaders

CFAA leads new coalition for energy retrofit tax reform CFAA’s key political goal is to achieve tax reform for the rental housing industry. We are seeking tax deferral on sale and reinvestment, an end to the tax bias in favour of homeowners, HST reform, and other measures to improve the tax position of rental housing. On some of those issues we have allies in the real estate sector, and allies certainly help since many politicians do not see measures that help landlords as great vote getters. Recently CFAA turned its attention to the tax treatment of major energy efficiency retrofits. According to the income tax rules, improvements in a building need to be added to the building’s capital cost, and claimed through capital cost allowances (CCA). At a maximum CCA rate of 4%, that is a much less positive tax treatment than claiming repairs as operating costs. continued on page 6

National Outlook - RHB Edition 1

RHB_Nov2012.indd 23

11/15/12 9:09:52 PM

NATIONAL OUTLOOK National Outlook, the newsletter of the Canadian Federation of Apartment Associations (CFAA), provides political news, policy updates, association news and other information to keep rental housing providers up to date and ready for future opportunities and risks.


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[ Edison Properties ]

EDISON PROPERTIES Edison Rental Agency is no more. However, there is no need for alarm, as the company has not closed up shop. The owners have rebranded the company as Edison Propertiesâ&#x20AC;&#x201D;a new name for a firm that has been managing rental properties in Winnipeg since the 1960s.

8 november 2012


[ Edison Properties ]

Rental Housing Business 9


[ Edison Properties ]

And while the name may have changed, the company will continue to manage its rental properties with the same standards and philosophy that have helped it to reach the level of success that it has achieved to date. Edison Properties is also returning to its roots with a new rental housing development in Winnipeg. Background Martin Bergen (founder of Edison Rental Agency) immigrated to Canada from Germany in 1953, and soon after started his own painting and decorating company. In 1955, he married his wife Ruth, and their daughter Miriam was born a year later. Several years later, Martin partnered with Jake Letkemann to form Marlborough Development Corporation Ltd. In 1962, the company made its first foray into the rental housing industry with two small apartment buildings, the Edison Court and Lady Marica, each consisting of 26 units. In 1964, Marlborough built its first large venture, the General Grant, with 100 rental units. That same year, the company built Eiffel Towers A, which was one of the first all-electric buildings; Eiffel Towers B followed in 1965. The 191-unit L-B Towers was the first Canadian residential building to use precast hollow-core floor construction. Marlborough built two shopping malls in 1966 and 1968, and then continued to build two or three apartment buildings per year. The partners would occasionally sell one of the company’s previous developments to fund the construction of the next property. “My father started Edison Rental Agency in 1969 to provide property management for the buildings that he developed through Marlborough,” said Miriam Bergen, President, Edison Properties. “He started with four employees, running the company from a basement office in a commercial building constructed by Marlborough.” Marlborough built its first two seniors residences—Granite House in 1970 and Fort Agassiz in 1971—as well as an arena and another office building. Jake retired from Marlborough in 1974, by which time the company had become the largest developer of multi-family housing in Winnipeg. Martin continued to build and manage apartment buildings, including Oakland Gardens I and II in 1978 and 1979, which consisted of two buildings connected by a pedestrian walkway on the top floor. The buildings were made entirely of precast units that were manufactured off site and then assembled on site. Marlborough’s last development was one of Martin’s greatest achievements. In 1988, the company completed construction of Fort Garry Place. This $65-million development included three towers with 924 rental units, as well as office space, banquet halls, shopping mall and a revolving restaurant. The property remains a significant portion of Edison’s property management portfolio, as well as a recognizable landmark in downtown Winnipeg. Over a period of more than 25 years, Martin built more than 30 apartment buildings, adding more than 6,100 rental units to

10 november 2012

Winnipeg’s rental housing market. Edison continues to provide property management services to 23 of those rental properties, with more than 4500 units in its portfolio. “I grew up in this business, working in the office during the summers and, at one time, running our family restaurant,” said Miriam. “After my mother passed away in 2001, health issues required that my father increasingly scale back his role within the company. I took on the day-today business after my father retired in 2006.” A new name On October 1, 2012, Edison Rental Agency changed its name to Edison Properties as part of its strategy to revisit how the company does business. Although the company had been around many years, and the name “Edison” is well known in Winnipeg and throughout the residential rental property industry, management felt that “Rental” was too vague a description of what they did, while “Properties” underscored the company’s involvement in management of residential and commercial rental properties. “We’ve been called different things by different people in different sectors, including our tenants, the trades and our partners,” said Frank Koch-Schulte, Vice President and General Manager, Edison Properties. “We’ve received cheques with different iterations of Edison, and we’ve also received phone calls from people asking if we rent farm equipment or tools. Edison is our core name, and adding ‘Properties’ more accurately reflects what we do.” Edison Properties worked with a branding agency to create its new name, as well devise a new logo and rework the company’s image. The firm engaged in an exercise to define its corporate philosophy and how it wanted to be perceived. Management wanted to modernize the organization as part of its strategy to move forward and grow its property management business. However, Edison Properties wants to maintain the family atmosphere that drives how the company has done business, and stay true to its core values. The company has been family owned and operated throughout its existence, and as such has developed an internal operating environment based on camaraderie and loyalty. Many of its employees, from maintenance to management and office staff, have been with the organization for more than 20 years. For example, Frank Koch-Schulte, the company’s vice president and general manager, worked with Edison throughout high school and university, and later returned to help modernize the company’s computer systems. Many of Edison Properties’ tenants have also been in the buildings since they first moved into their apartments. Tenants have stayed in the units because the property management firm has been able to keep rents affordable while still maintaining high levels of cleanliness, safety and service.


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Rental Housing Business 11


[ Edison Properties ]

“Our goal is to engage tenants more fully and provide them with the information they need at their fingertips.” Frank Koch-Schulte

“Edison has become known for providing its tenants with affordable and quality housing,” said Miriam. “We have a high standard of cleanliness and maintenance, and we’ve kept rents relatively low. We want to remain true to our core values, which include being fair and honest with our tenants.” The renaming process included evaluating Edison Properties’ current situation, and moving to a strategy that would enable the company to grow based on an established corporate structure. However, management also wanted to maintain elements of the family atmosphere that have enabled it to keep its employees. When hiring new staff, management has endeavoured to gauge their personalities, as opposed to strictly examining their skill sets, and to understand their values to determine if they will fit the Edison Properties environment. Management has been working diligently to update its methods of doing business with modern technology and processes. Edison Properties moved away from paper-based systems almost 10 years ago and has been continually improving upon its systems to provide greater connectivity throughout its office and with site staff. The organization integrated its systems to allow better sharing of information between employees, and improved its communications to provide greater access to property managers. Wireless apps enable people to stay in regular contact, while

metrics enable management to measure performance, find inefficiencies and make improvements to how they manage their properties. “We are also planning to launch our new website before the end of the year, which is part of both our branding and modernization efforts,” said Frank. “Our goal is to engage tenants more fully and provide them the information they need at their fingertips.” More than property management Edison Properties is a full-service property manager, providing its rental properties with services such as rent collection, tenant screening, maintenance, management of capital projects and more. The company takes a long-term approach to maintaining its buildings, often pursuing projects, such as parkade restoration, that provide long-term value to its properties to help retain and attract tenants. One aspect of Edison Properties’ management style that will not change going forward is its focus on the quality of on-site staff, including resident managers and caretaking personnel. The company ensures that its employees receive a high level of training so that they can provide tenants with optimal levels of service. It also maintains good relationships with suppliers to ensure quick responses to service requests. Continued on page 18

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Rental Housing Business 13


Photo courtesy of MMP Architects

[ Edison Properties | New Construction ]

By David Gargaro

New multi-family residential development Edison Properties is returning to its roots with a new construction project in the North Kildonan area of Winnipeg. The company plans to build a multi-family rental complex on the site of an old shopping mall that it owns. The project will include three 10-storey towers with 214 apartments on a three-storey podium, with street-level retail, underground parking for more than 140 vehicles and a standalone bank. Most of the suites will include two bedrooms and two bathrooms. The bank is expected to open in mid-December of this year, with piling to begin in early December. The expected completion date is the end of the summer of 2014. The project has gone through several different plans and iterations. In fact, Edison Properties initially planned to work with a hospital that would develop a care home group on the property, which used to be the site of a shopping mall that had fallen into disuse. However, that development deal fell through, so management decided to pursue other potential projects with different developers. After going through some initial plans and discussions, those deals fell through for various reasons. Edison Properties eventually decided to develop the land itself, determining to build a multi-family residential complex, which was reminiscent of Fort Garry Place, although on a much smaller scale. “We felt that this would be a good opportunity for Edison Properties to get back into developing multi-family residential properties,” said Frank. “There seems to be a growing trend in Winnipeg, as well as other cities, to build properties that combine multi-family residences with commercial amenities

14 november 2012

that would appeal to tenants and the community in existing residential areas.” Several factors contributed to the decision for Edison Properties to take the plunge into building the multi-residential complex. The new development will provide newer units to its current inventory, which includes properties from 25 to almost 50 years old. This will help to balance their life-cycle costs, and provide tenants with more modern options. Another key factor is the timing of the development, as vacancy rates in Winnipeg are very low at around 1%. However, Edison Properties is not alone in this thinking, as other developers are getting into the market with new rental properties within the same time period. New apartments should be able to garner decent rental rates by attracting tenants interested in living in newer buildings. “With the low vacancy rates, affordable rental accommodations are difficult to find,” said Frank. “We’ve received a lot of interest in our project, with more than 100 people signing up to be on the list for our apartments, including tenants from our other buildings. This will open more affordable options for other tenants looking for less expensive units.” Interest rates are also at historic lows, so Edison Properties felt that it would be relatively straightforward to get the financing necessary to fund the project. Management looked at different options, including CMHC financing and life insurance companies, before settling on a blended solution that left them open for future development opportunities. Edison Properties is


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Rental Housing Business 15


           

    

   

 

    

 

           

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[ Edison Properties | New Construction ]

Edison Properties decided that it would be prudent to work with experienced partner firms to help them move the project forward, and provide expertise that they did not possess, as the company had been out of the business of building rental properties for almost 25 years. Management hired MMP Architects to design the development, and brought in Akman Construction to help manage budgets and timelines, deal with permits and other issues, and keep the project on track from the beginning.

As the property had already gone through several rounds of feedback from city planners and community members, Edison Properties felt that it was well positioned to come up with a design that met community members’ concerns. Some residents were concerned about the buildings casting shadows over their properties and balconies overlooking their yards, so the designers kept the height to 10 storeys by spreading units over three towers and designed the buildings to address other issues. As the area is already densely populated, the designers laid out the property entrances and exits to provide more equal distribution of traffic.

“ The project has gone through numerous iterations, and we believe that through collaboration with our experienced partners we have achieved a design that is not only sensitive to community concerns but also revitalizes the area,” said Frank. “We are very cognizant of the importance to stay on budget, while also ensuring a balance of form and function in the design and construction of the buildings.”

Edison Properties also paid great attention to the demographics of their future tenants. The buildings are geared toward people aged 55 and up, which is an underrepresented market. Management will be looking at services and retailers that appeal to this market, such as medical services and restaurants. It will also look into providing services that appeal to today’s younger seniors, who might have more interest in convenience than meal programs.

Edison Properties spent a great deal of time and effort in ensuring that the development would work within the community in which it was being built. The neighbourhood dates back to the 1950s, where most of the homes are bungalows. It is viewed as a “transitional” area, with many older residents having lived in the neighbourhood since the homes were built.

“We worked very hard to address residents’ concerns, while also creating something that will appeal to future tenants,” said Frank. “Most of the units will be two bedroom and two bath, and the buildings will have a condominium feel. Parking will be underground, and we’ve included street-level retail to add value to the neighbourhood. We’ve received a lot of calls from people who live in the area that want to move into the building.”

Photo courtesy of MMP Architects

taking a long-term approach to its building project, which will be reflected in its design and choice of building materials.

Rental Housing Business 17


[ Edison Properties ]

“Edison was built on ‘old school’ values in the days when a handshake sealed the deal.” Miriam Bergen

Continued from page 12

“We frequently hold barbecues and holiday parties for employees, which contribute to maintaining that family atmosphere,” said Frank. “We’ve also shifted to sending socially conscious gifts to our tenants at Christmas, including fair trade products, to better reflect our cultural values.” Edison Properties set up meal programs at many of its seniors’ residences and some of its other managed properties to show that these programs could work. The company provided funding and support to turn unused recreation rooms into kitchens, as well as a cook who provides freshly made lunches three times a week. It then turned over the program to local seniors groups or the Winnipeg Regional Health Authority (WRHA) for ongoing management. “Many of our properties have large recreational rooms, which are made available for seniors programs, social events, health clinics and other activities,” said Miriam. “It’s part of our goal to engage residents and attend to their needs.” Moving forward Edison Properties plans to continue managing rental properties in Winnipeg, pursuing moderate growth and serving the community that has been its home for many years. Management is focused on serving Winnipeg and the communities in which its buildings are located. This includes continuing to support local projects and charities and providing the same level of housing and service that it has provided to tenants for years. Over the short term, Edison Properties is moving its head office to a more central downtown location to help better communicate with and service their buildings throughout the city. Management will also explore new opportunities in the multifamily residential sector as they arise, ensuring that they fit within its plans and core values (see “New multi-family residential development” on page 14). “Edison was built on ‘old school’ values in the days when a handshake sealed the deal,” said Miriam. “I am extremely proud of what our company has accomplished and look forward to a dynamic future as Edison Properties.” RHB

18 november 2012


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Rental Housing Business 19


HOPE, CHANGE, DECLINE, STATUS QUO OR ...

The US economy and Canada’s rental housing market By David Gargaro

This month, I had the privilege of interviewing Benjamin Tal, Deputy Chief Economist, CIBC, on his views regarding the US economy and how it will affect Canada’s rental housing market. RHB: What is your opinion of the direction of the US economy over the next six to 18 months? BT: There are two conflicting forces at work that will have a significant effect on the US economy. On the negative side, there is the “fiscal cliff” that will result due to enacted legislation, which will lead to significant tax increases, spending cuts and a reduction in the budget deficit. If all the legislative changes are put into place, the end result would be a 4% reduction in US economic growth. However, some concessions are expected to mitigate this reduction to 1.5%. On the positive side, I see the US housing market turning a corner. There are several key reasons for this change, including the consumer’s willingness to start taking on debt again and the banks’ willingness to lend money. Consumers have reduced their current debt to manageable levels, and are now starting to take on more debt. As a result, credit levels are rising (and there is a pent-up demand for credit), which is positive for the economy. This is tied into the improvements in the housing market, which seems to be turning the corner. What is most positive is that the market is leading the way. More investors are willing to buy distressed properties, and 50% of these transactions are in cash. These investors are renovating these properties and then renting them out, which is also strengthening the US rental market.

20 november 2012

RHB: Are you optimistic or pessimistic about the US economy over the short term? BT: Time changes everything, but what makes me most optimistic about the US is that the changes in the market are sustainable. Current housing market solutions are based on market forces, not government-based solutions. The rental market is very strong, jobs are being created, and banks are willing to lend money to spur investment and growth. Even though interest rates have been low for some time, this strategy was ineffective because banks were not interested in lending and no one could afford to borrow. The velocity of money changing hands will increase. It’s not the level of activity that is important, but rather the change in the direction of the activity. RHB: How will other key issues (such as the presidential election, Eurozone situation, China and possible war in Iran) affect the US economy? BT: Over the short term, the election of a new president (or the return of a sitting president) has very little impact on the economy. The fiscal cliff will have a greater impact on economic growth and interest rates than whoever happens to be President. However, with Obama winning a second term, the impact of the fiscal cliff could be greater than it would have been under Romney. Monetary policy will be less “dovish” but interest rates should increase at a slower rate. Ironically, the Eurozone situation should help the housing market. Had it not been for the difficulties in Europe, five-year mortgage rates


[ Economy ]

would have been higher, which would have negatively impacted the rental market as well. Interest rates will remain low, but the factors that keep interest rates artificially low have been mostly removed. China is a source of uncertainty for the global economy. The overall economic impact will depend on whether the Chinese economy has a hard or soft landing. I believe that it will be soft because of China’s fiscal, monetary and fiscal ability to mitigate the fall. However, there will be some impact on Canada’s commodities market, which will negatively affect the Canadian economy, especially in western Canada. This will also affect that region’s rental housing market. There should be no change to interest rates, so that is positive, but that could change if China has a harder landing than expected.

so I project a stronger Canadian rental market going forward. Any changes in the US economy will affect the Canadian economy to some degree, and the rental housing market is no different. What has perhaps had a greater impact is Canada’s overall fiscal responsibility, which prevented a housing collapse as seen in the US. Even

though the Canadian economy and the housing market will soften, there will be interesting pockets of growth in different areas of the economy, which includes the rental housing market in various Canadian markets. Variations in demand and supply will affect vacancy rates, but on a country-wide basis the market should experience relative equilibrium. RHB

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As for a potential war with Iran, any projections are pure speculation, as we have no real idea as to whether there will be a war. However, a war with Iran will have significant impact on oil prices, which will then have a recessionary impact on the economy. How long it lasts will determine the severity of the economic impact. RHB: How will the US economy affect Canada’s rental housing market? BT: Improvements in the US housing market will not directly affect the Canadian rental market. However, those improvements will have an indirect impact. Since interest rates will remain low in the US, interest rates will remain low in Canada as well. I think that we will not see any interest rate increases until possibly early 2014, as the Bank of Canada will not want to move differently than the US Federal Reserve. While I see improvement in the US housing market, I believe that Canada’s housing market will soften rather than collapse. The most significant factors include recent changes to mortgage insurance regulations, which have served to price out first-time homebuyers. However, this is positive for the rental market, as these prospective buyers are now moving into rental properties. As interest rates increase, more prospective homebuyers will turn toward renting homes,

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Rental Housing Business 21


IN THE KNOW Before Deciding on Salary Increases Understand the Numbers (DFK IDOO KXPDQ UHVRXUFHV FRQVXOWLQJ Ã&#x20AC;UPV UHSRUW RQ VXUYH\Ã&#x20AC;QGLQJVUHJDUGLQJDQWLFLSDWHGVDODU\LQFUHDVHVIRUWKH FRPLQJ\HDU7KHQXPEHUVDUHLQWHQGHGWRSURYLGHJXLGDQFH WR &DQDGLDQ HPSOR\HUV DV WKH\ Ã&#x20AC;QDOL]H WKHLU DQQXDO VDODU\ EXGJHWV6RPHRUJDQL]DWLRQVVLPSO\RSWWRDZDUGWKHDYHUDJH VDODU\ LQFUHDVH Ã&#x20AC;JXUH DFURVV WKH ERDUG WR DOO HPSOR\HHV +RZHYHUWKHUHLVDPRUHVWUDWHJLFGHFLVLRQPDNLQJSURFHVV WKDWHPSOR\HUVFDQIROORZLQRUGHUWRXVHVXUYH\GDWDWRWKHLU EHVWEXVLQHVVDGYDQWDJH When it comes to salary increases, an essential SUHOLPLQDU\TXHVWLRQLVZKHWKHUWKHRUJDQL]DWLRQZDQWVRU LV DEOH WR JLYH DQ LQFUHDVH DW DOO )RU RUJDQL]DWLRQV WKDW DUH SODQQLQJ WR JLYH D VDODU\ LQFUHDVH WKH FKDUW EHORZ SURYLGHVDVXPPDU\RISURMHFWHGDYHUDJHVDODU\LQFUHDVHV IRUDOOLQGXVWULHVSRVLWLRQVDQGORFDWLRQVLQ&DQDGDIRUWKH last five years*. 7KH  DYHUDJH RI  LV WKH LQFUHDVH &DQDGLDQ RUJDQL]DWLRQV DQWLFLSDWHG ZKHQ VXUYH\HG WKLV VXPPHU  $W WKHDYHUDJHLQFUHDVHIRUWKH3URSHUW\0DQDJHPHQW ,QGXVWU\LVKLJKHUWKDQWKHDOOLQGXVWU\DYHUDJH30Ã&#x20AC;UPVWKDW VHUYLFH&RPPHUFLDODQGRU5HVLGHQWLDOSURSHUWLHVSURMHFWHGDQ LQFUHDVHDW)LUPVLQ6HQLRUV+RXVLQJSURMHFWHGDORZHU increase of 2.75% Property Management

2013 Projected Salary Increase

Commercial and/or Residential

3.11%

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2.99%

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2.75%

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3.01%

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3.00%

8

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3.33%

4

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2.67%

3

Seniors Housing

3.00%

British Columbia

3.23%

Commercial and/or Residential

3.63%

Residential/Rental Housing

3.04%

Seniors Housing

3.00%

Ontario

2.87%

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2.88%

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2.99%

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2.65%

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22 november 2012


Special preview

NATIONAL OUTLOOK

RHB EDITION

a vital new part of RHB Magazine By David Gargaro National Outlook, the newsletter for the Canadian Federation of Apartment Associations (CFAA), is becoming a regular component of Rental Housing Business Magazine (RHB). Since late 2011, CFAA has partnered with RHB to publish news, profiles, features and information of interest to members of the rental housing industry. Incorporating National Outlook into RHB Magazine further solidifies this partnership and provides readers of the magazine with additional news and insights to members of the rental housing industry. I sat down with John Dickie, President of CFAA, to learn more about National Outlook and discuss the ramifications of marrying these two publications. RHB: What is National Outlook, and what will it become? JD: National Outlook is the official newsletter of the CFAA. Until now, National Outlook has been published quarterly, and distributed electronically to members of CFAA member associations across Canada. Going forward, National Outlook will become a regular component of RHB Magazine (rather like a supplement), and will be published six times per year. It will be sent by mail to readers of the magazine, including many members of the rental housing industry who do not currently receive National Outlook. CFAA will also publish an electronic version of National Outlook six times per year, which will provide information that adds to what is published in the printed version. continued on page 3

Inside this edition Housing allowances being expanded into new areas In National Outlook (electronic edition) Available at www.cfaa-fcapi.org

CMHC lending status Population changes affect rental demand Up-coming provincial elections New BC apartment association leaders

CFAA leads new coalition for energy retrofit tax reform CFAAâ&#x20AC;&#x2122;s key political goal is to achieve tax reform for the rental housing industry. We are seeking tax deferral on sale and reinvestment, an end to the tax bias in favour of homeowners, HST reform, and other measures to improve the tax position of rental housing. On some of those issues we have allies in the real estate sector, and allies certainly help since many politicians do not see measures that help landlords as great vote getters. Recently CFAA turned its attention to the tax treatment of major energy efficiency retrofits. According to the income tax rules, improvements in a building need to be added to the buildingâ&#x20AC;&#x2122;s capital cost, and claimed through capital cost allowances (CCA). At a maximum CCA rate of 4%, that is a much less positive tax treatment than claiming repairs as operating costs. continued on page 6

National Outlook - RHB Edition 1


NATIONAL OUTLOOK

RHB: What types of articles will be included in National Outlook? JD: National Outlook covers political developments and policy issues that are important to rental housing providers, landlords and investors in rental properties. For example, National Outlook includes commentary on reforms proposed for CMHC, and articles on how tax reforms in the rental housing industry can help the economy. National Outlook also publishes key news about apartment association activities across Canada. RHB: How will National Outlook differ from the rest of RHB? JD: National Outlook and RHB could cover some of the same topics. However, National Outlook will delve more deeply into political and policy issues, and matters that have a long-term effect on the rental housing industry. For example, the current CMHC mandate review will not have a shortterm impact on rental housing providers, but it will likely have significant long-term implications, and National Outlook will discuss those impacts at length. National Outlook will also report on the national implications of provincial or regional events and issues. RHB: Why is National Outlook a good fit for RHB Magazine? JD: National Outlook will provide useful, in-depth content on issues that property owners, property managers and investors in rental housing need to know about. National Outlook’s mandate is to provide readers with information that is good for them and their business. RHB’s mandate is to provide readers with information that they want to read. RHB is the steak and french fries; National Outlook is the broccoli and baked potatoes. RHB: What benefits does National Outlook offer to readers of RHB? JD: National Outlook focuses on upcoming issues that impact the rental housing industry, and provide details on how CFAA is working to amend regulations to benefit people working in the industry. It also reports on regulatory amendments and changes that help or hinder landlords. For example, many landlords and property managers want to reduce their buildings’ energy usage, so they’ll install energy-efficient boilers and energy control systems. However, they are often limited by their buildings’ structure, especially when the buildings were built 40 or 50 years ago. Due to high retrofit costs, it might not be economically feasible to install the most energy efficient equipment, so they need to be able to install boilers with

2 National Outlook - RHB Edition

special preview

slightly lower energy efficiency so that the whole project is also cost effective. However, the federal government imposes restrictions on types of boilers that can be used, and can require higher energy efficiency even though the needed retrofit makes the project less cost effective as a whole. National Outlook reports on what CFAA is doing to address such issues and protect landlords’ interests. In contrast, RHB will report on the program changes once they have been made. RHB: What are your goals for National Outlook and RHB? JD: CFAA wants to reach out to more landlords and rental housing suppliers than the current readership of National Outlook. We want RHB (and now RHB – National Outlook) to be the only recognized national trade magazine for the rental housing industry. National Outlook will be a valuable component of the magazine by providing landlords and members of the rental housing industry with valuable information about issues that will affect their future, thereby improving their ability to engage in long-term planning. We want to address housing policy issues and federal policy changes that affect all landlords. We also want to get landlords involved, challenge their thinking and get input from them on topics of concern to the industry. RHB: Why should rental property owners and managers read National Outlook? JD: Besides addressing the issues that will affect them over the long term, rental owners and managers should educate themselves on what the government is doing that will affect their businesses. Rental properties provide housing for 8 million Canadians, a good portion of whom fall into the lower half of the income spectrum. Rental housing is an important service that does not get the same respect as other essential services. Property owners and managers should be aware of the issues so that they can become a part of the growing chorus of voices demanding respect for the rental housing industry. RHB: Why should industry suppliers advertise in the National Outlook section of RHB? JD: Forward-thinking rental housing owners will read National Outlook, and they will consistently look for ways to improve their business in areas of operations, financing, investments and supplies. They will make changes to their business when there is room to improve, and that includes finding new suppliers who can help them to achieve their goals. RHB readership is increasing with every issue, and so being part of a well read and sourced section of the magazine is good business.


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NATIONAL OUTLOOK

RHB: What does CFAA offer through National Outlook? JD: CFAA provides greater insight into how the federal government affects the rental housing industry. Many people are unaware of how much influence the federal government has on our industry. Besides the onerous federal income taxes, all provinces except Quebec use the federal income tax rules to levy their income taxes. The federal government controls CMHC, which is of vital importance to the rental housing industry. The federal government determines national housing policy, and how housing money can be used. Its housing program agreements with the provinces often drive or limit their decisions. Until recently, the federal government directed housing funding to the construction of subsidized housing instead of direct assistance to tenants. CFAA succeeded in getting the rule changed to enable the provinces to use federal money to assist low-income tenants directly. That supports or underpins the private rental market, whereas funding new subsidized rental construction reduces the demand for private rental housing, and undercuts the private market. CFAA will use National Outlook, and RHB, to address other major issues that arise in the future. National Outlook and RHB will help CFAA to reach a larger audience. Getting more people in the industry involved and educated about the necessary messaging will enable the rental industry and

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4 National Outlook - RHB Edition

special preview

CFAA to influence the federal government to make policies that are better for rental housing. RHB: Why did CFAA partner with RHB? JD: RHB provided CFAA with the opportunity to get our message out to the broader landlord community. RHB reaches nonmembers, suppliers to the rental housing industry and members of CFAA (and other associations) who do not necessarily pay enough attention to the new developments affecting the industry. RHB Magazine is now the one definitive national trade magazine the industry needs and has always wanted. RHB: What does the partnership between RHB and CFAA mean to the rental housing industry? JD: This partnership allows for much better communication between CFAA and landlords, as well as other members of the rental housing industry. We believe RHB will become the one national forum for landlords as the magazine grows and adds new content and features. For example, we want to include news of people moving between provinces and companies in the industry. We plan to invite landlords and other interested members of the industry to write letters to the editor and express their views. RHB: Why should members of the rental housing industry join CFAA? JD: People involved in the rental housing industry who care about national issues, such as the impact of changes to CMHC and income taxes, should join CFAA. By increasing CFAAâ&#x20AC;&#x2122;s membership, the rental industry will be able to grow its voice and have a greater influence on the government. In turn, that will help to achieve policy and tax reform favourable to the rental industry. A larger membership will mean more resources to lobby the federal government, which will result in a better regulatory, tax and operating climate for members of the rental housing industry. As president of CFAA, I have found that we have had the greatest impact on moving the government to more favourable decisions when the government has already started making reforms that affect the rental housing industry. For the future, CFAA wants to be able to influence the government to address policies that they have not already decided to reform. Growing our membership and strengthening our voice will improve our ability to communicate our membersâ&#x20AC;&#x2122; needs and change government policy. When landlords approach the government individually, their messages are often in conflict and can easily be ignored. To achieve real and positive change, there must be one national voice representing the rental housing industry at the national level.


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NATIONAL OUTLOOK

special preview

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Some green energy work can be included in CCA Class 43.2, and effectively be claimed against taxable income over four years. Gaining that tax treatment would be very good for rental housing providers, as well as for energy retrofit providers, and the environment. To seek that reform CFAA has brought together the Building Energy Efficiency Coalition (“BEEC”) which currently consists of the following groups: s #ANADIAN &EDERATION OF !PARTMENT !SSOCIATIONS s !SSOCIATION OF %NERGY %NGINEERS s #ANADIAN #ONSTRUCTION !SSOCIATION s #ANADIAN )NSTITUTE OF 0LUMBING AND (EATING s %NERGY 3ERVICES !SSOCIATION OF #ANADA s 2ENTAL 0ROPERTY !SSOCIATION OF #ANADA 2%!,PAC s 4HERMAL )NSULATION !SSOCIATION OF #ANADA More environmental and energy groups are expected to join the CFAA-led coalition shortly. CFAA is also seeking the involvement of several labour unions, since the reform would be good for job creation in the energy retrofit sector.

CFAA received critical assistance from the Toronto Atmospheric Fund (TAF) to prepare the detailed reform proposal and to bring together the coalition. As structured, the proposal should not reduce the government’s total tax revenue; the savings to landlords come from lower energy consumption and lower energy costs, which creates a win-win situation for the rental industry and the government. Revenue neutrality is a critical part of seeking tax reform in the current deficit-fighting environment. Moving forward, CFAA and other BEEC members will meet with officials in the Department of Finance and in Natural Resources Canada, as well as with Members of Parliament and the government’s key decision makers. For the full proposal, go to CFAA’s website at www.cfaafcapi.org. Click on the proposal under either “Recent news” or “Submissions to government”. CFAA will continue its advocacy for federal measures to help the rental housing industry to become more environmental friendly, more efficient, and better able to provide quality rental housing to Canadians, while increasing profitability.

Housing allowances being expanded into new area For many years, CFAA and most provincial apartment associations have advocated for government housing money to be spent on direct assistance to tenants, such as portable housing allowances. In our view, such assistance has many advantages over subsidizing rental units, and tying subsidies to the occupancy of the subsidized units. Advantages include s THE ABILITY TO HELP MORE TENANTS FOR THE SAME COST s mEXIBILITY s SPEED IN BEING ABLE TO PROVIDE ASSISTANCE s GREATER LABOUR MARKET ATTACHMENT AND MOBILITY s AVOIDING STIGMA s ACHIEVING INCOME MIXING AT MINIMAL COST Direct assistance to low-income tenants also supports the private rental market, rather than undercutting it. Thanks to CFAA’s advocacy work, many advocates and governments across Canada are now looking at direct assistance to tenants as the preferred policy approach for new housing subsidies. The focus of the new programs to reduce homelessness is “Housing First”, and with shortages of supportive housing, policy makers are moving to provide social service and metal

6 National Outlook - RHB Edition

health supports in private market rental housing supported by financial subsidies. It is positive that governments are waking up to the advantages of portable housing allowances in delivering financial support for housing. However, the new emphasis on housing allowances as a delivery mechanism for Housing First for the homeless carries risks. CFAA and provincial apartment associations focussed on portable housing allowances as the best way to delivery support for the vast majority of people in housing need, who just need financial support to meet their other needs and their obligations as tenants. The new programs are using housing allowances for people who need both financial support and mental health (or social service) supports. Advocates for portable housing allowances need to be clear that other issues are involved when recipients need mental health (or social service) supports. When significant supports are needed, congregated supportive housing may be the more effective approach. As these issues are worked out, CFAA will continue to advocate for housing policy that is beneficial for low-income tenants, for taxpayers and for the rental housing sector.


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50 Speakers

16 Panels

Investment Conference Building Innovation Tour

Breakfast with Your DelegatesA larg Discussion Group

Facilities Management Conference Evening Social Event

Your Thoughts Matter! Conversations start June 11 to 13, 2013 in Toronto. Join the industry as we discuss key issues that affect you and your buildings. Hear from other landlords and industry experts on what matters to you. Network with colleagues and help shape the future of the rental housing industry.

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Here is what delegates said about the 2012 Conference: It was great to hear different landlord perspectives! Very clear and concise presentations from a wide range of speakers. Excellent variety of topics and networking opportunities!

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Rental Housing Business 25


Avrom Charach (left) and Mario Lopes (right)


Professional Property Managers Association The Professional Property Managers Association (PPMA) represents the residential rental industry in Manitoba. Its members manage more than 60,000 rental units in both the private and public housing sectors, which constitutes more than one third of all rental units across the province. PPMA’s members include more than 60 property owners and managers and more than 120 associate members who supply products and services to the residential rental industry. PPMA was founded in 1984 by a small group of property management companies that came together to address how the City of Winnipeg was planning to charge for garbage collection. The founders discovered that they had other common issues that affected their businesses, such as rent control, difficult tenants and safety concerns, so they decided to form an association that would enable them to work together to address those issues more effectively. PPMA continued to grow over the years as it attracted other property managers in Winnipeg and throughout Manitoba, as well as companies that work within the residential rental industry. “In 1998, PPMA started an initiative to open the membership to associate members, which consisted of companies that provide products and services to our industry,” said Avrom Charach, Director, PPMA. “When I joined, we had only 13 member companies, but within a couple of years that number grew to more than 100 property owners, managers and associate members.” Service offerings PPMA’s primary goal is to serve as the voice of its members and the residential rental industry in Manitoba. Association representatives meet regularly with government officials, including Director of the

Rental Housing Business 27


[ PMAA ]

Residential Tenancies Branch and Assistant Deputy Minister, about housing, landlords’ rights, standards for property managers, rent control and other issues. PPMA continually works to represent its members, and to challenge the government on issues that make it more difficult for landlords and property managers to operate their buildings effectively. “Rent control has been a long-standing issue in Manitoba, especially with respect to decisions related to applications for increases above guideline,” said Mario Lopes, President, PPMA. “Our members have been particularly challenged by applications that are accepted one year and rejected the next year with little explanation as to how decisions are made. We have been talking to the government about ways to provide greater clarity on how decisions are made, and to streamline the application process.” Education and raising landlords’ standards are central tenets of PPMA’s service offerings to its members. The association maintains a code of ethics and has established bylaws for its members to follow. It provides seminars (as well as takeaway information) on topics of interest to landlords and property managers, such as the basics of running rental properties, filing paperwork, maintaining safe buildings and dealing with

annual golf tournaments, annual holiday luncheons, charity events and other functions. The association also recognizes the achievements of its members with awards for high levels of service and achievement. “PPMA also works with different charities, primarily those that deal with housing or homeless issues,” said Mario. “We typically select one key partner per year (such as Winnipeg Harvest), and direct most of our fundraising efforts from various events to that charity. Some of our individual members also make their own contributions to charitable causes.” Residential rental housing issues PPMA consistently deals with a wide range of issues that affect its members and the residential rental industry. Rent control is one of the most significant concerns that challenge landlords’ ability to operate their buildings in a financially positive manner. Under the current system, landlords can only increase rents through an application for an increase above guidelines that proves they have either made significant improvements to their buildings or operating expenses (such as taxes and utilities) have increased significantly.

“Rent control has been a long-standing issue in Manitoba, especially with respect to decisions related to applications for increases about guideline.” tenants. Members receive regular industry-related media advisories and quarterly newsletters, and have access to industry reports and research. PPMA also works to educate non-members (and associate members) on issues related to residential rental property issues. “We’ve engaged in efforts to share best practices with other associations in Manitoba and across Canada, including our code of ethics,” said Avrom. “We’ve encouraged our members to share their knowledge with other landlords, property managers and associate members so that they can learn from others who have faced similar situations.” PPMA hosts an annual conference and trade show, which provides attendees with opportunities to learn more about the association and industry issues, as well as network with landlords, property managers and companies that service the residential rental industry. Members have numerous opportunities to network with, and learn from, other members, including monthly membership breakfasts, monthly meetings,

28 november 2012

The latter option has been a source of much difficulty for landlords. Based on industry reports, inflation has outpaced rent increases in Manitoba by more than 38% since 1982. Guidelines are often lower than inflation (e.g., 1% for 2013 while inflation is over 2%), which means that increases in operating expenses often outpace rental income. The apparent lack of transparency on decisions related to setting guidelines has also made it difficult for landlords to know how to proceed with the process. The government determines the guidelines and does not have to explain the factors or reasoning behind the decision. “Even when tenants have voluntarily vacated rental units, landlords have not been allowed to increase rental rates over what was paid by the departing tenant,” said Mario. “This is quite different from what is done in other provinces, so it would be a great benefit to landlords to be allowed to raise rental rates by some percentage after tenants voluntarily vacate their units.”


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Rental Housing Business 29


[ PMAA ]

PPMA also works with the government on issues that directly affect tenants. For example, the association is trying to get the government to amend legislation to make tenant insurance mandatory. Individual tenants’ financial constraints have made it difficult for some to afford this insurance, so the association is working with the government to develop a system that makes it more affordable. PPMA believes that insurance will protect tenants and create a better environment for landlords in lower income housing situations. “Several years ago, the government set up a position for a tenant advisor, who would be available to provide free advice to tenants having difficulty accessing the residential rental housing system,” said Avrom. “We approached the government to also create a position for a landlord advisor, who would provide a similar service to smaller landlords, offering advice and support on rental housing rules, legislation, preparing for hearings and so forth. This new advisor is now in place.” Board of Directors All members of PPMA’s Board of Directors volunteer their time to serve the association. Even though they own and/or manage companies within the industry, they are also committed to improving the overall rental industry environment for landlords. These volunteers handle all lobbying and organization efforts, with only administrative support being provided by a paid professional. Finding the time to support the association and its membership, as well as fulfill their obligations to their businesses, demonstrates their commitment to promoting Manitoba’s residential rental industry. Mario Lopes is current president of PPMA. Born and raised in Winnipeg’s inner city, he attended Red River College and the University of Manitoba. Mario is involved in many aspects of the real estate industry. He has been a realtor since the age of 20, owns a real estate investment firm (M.R. Lopes Investments Inc.), manages a number of rental properties, and runs a home and property development firm (Mario Homes). In 2010, he won a CMHC housing award for renovations conducted at one of his rental properties. He will soon be one of only 1,000 people worldwide to possess both the CCIM (Certified Commercial Investment Member) and CPM (Certified Property Manager) designations. Mario sits on numerous boards and committees that address issues related to social housing, property development and construction, and rental housing. He volunteers with stakeholder committees that deal with industry issues throughout Manitoba (e.g., garbage collection, waste and water recycling, energy conservation, Power Smart initiatives). Since joining PPMA in 2003, Mario has been involved with many of its committees, which includes serving as chair of the energy and environment committee, and sitting on the association’s bedbug task force (as well as serving as co-chair of Manitoba’s bedbug coalition).

30 november 2012

“I decided to run for president after determining that I would be able to make the time commitment to help our association’s principal members and tackle the key issues affecting our province’s landlords,” said Mario. Avrom Charach has a well-rounded professional background, having worked in the not-for-profit sector and as an accountant, achieving his CGA (Certified General Accountant) designation and recently the FCGA designation for dedication to the profession and community. In 1995, he entered into property management, joining Kay Four Properties Inc., where he eventually became vice president. When Avrom’s firm joined PPMA in 1997, he became involved in various association activities, including chair of the education committee and ethics committee, where he was responsible for developing PPMA’s code of ethics. He has served as association vice president, and is currently a member of the Board of Directors, PPMA representative on the CFAA board, and chair of PPMA’s political action committee. Avrom recently completed his P.Mgr. (Professional Manager) designation. “Working with PPMA has taught me how to communicate with the government, which often makes decisions based on public perception rather than strictly financial reasons,” said Avrom. “I’ve also learned how to manage the needs and expectations of diverse groups of people, such as tenants, property managers, employees and government officials.” Future plans PPMA is planning to hire a part-time lobbyist who will represent the association in government discussions. This move is part of its plan to expand its role in improving the rental housing situation in Manitoba. In 2012, members of PPMA joined a minister’s round table on affordable housing, and they have also been consulted on improving housing issues. The association plans to continue working with different stakeholder groups on improving standards in the residential rental industry, as well as improving standards for tenants and landlords. PPMA would like to bring back founding members to get them more involved with the association, and to demonstrate respect for the work they did in establishing the association. PPMA also plans to attract new members, especially smaller property managers and landlords, to increase the diversity and breadth of its membership. Updating the association website is part of PPMA’s plans to expand its communications efforts, as well as reach out to more members and grow the association. “Our goal is to reach more individuals with one or two rental units, address their issues and get them involved in our association,” said Mario. “Expanding our membership will make it stronger and help it to achieve a more optimal level of growth. This will give us a much louder voice and help our members to become more effective in working together to achieve our common goals.” RHB


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Rental Housing Business 31


[ Rental News ]

FRPO’s MAC Awards:

Raising the Bar for Rental Housing Excellence 2012 Gala to be held November 29th in Toronto

David Suzuki, 2012 FRPO MAC Awards Gala keynote speaker

Jeff Brown of Pinedale Properties accepts his FRPO MAC Award for 2011 Leasing Manager of the Year

The rental housing industry in Ontario is continually innovating and improving quality and service in apartment accommodations. Every year, individuals and companies are excelling at new achievements to ensure tenants benefit from better rental housing. For the past twelve years, the Federation of Rental-housing Providers of Ontario (FRPO) has been pleased to highlight the positive things that our members are achieving and celebrate the industry’s accomplishments. We do this through FRPO’s Annual MAC (Marketing, Advertising and Construction) Awards. Besides celebrating the industry’s achievements, FRPO’s annual awards gala helps raise the bar for the entire apartment sector. Each year, in categories such as suite renovations, new buildings, and advertising techniques, the standard for quality gets better and better. FRPO’s industry awards have been effective in setting a higher benchmark each year for excellence. Most of all, FRPO’s awards ceremony is fun and keeps our members involved and committed to the overall success of our industry association. Held near the end of the year, the MAC Awards are one of the industry’s most eagerly anticipated events, as members are treated to Oscar-like red carpet treatment, complete with a lavish gala dinner and suspenseful award announcements. Almost 800 members and guests attend the awards dinner. Exciting keynote speakers for the Gala have included CBC’s Peter Mansbridge, Dragon Den’s Kevin O’Leary, and economist Richard Florida. This year, David Suzuki will deliver the keynote address, complementing

the event’s “Green Scene” theme. Mobray Sifton, of Sifton Properties Ltd, will be honoured for his lifetime achievement to developing rental housing in Ontario.

32 november 2012

The Benefit of the FRPO MAC Awards Members know the value of winning the industry’s highest honour. The official FRPO MAC Award logo is used by award winners in their rental advertisements and property signage. Prospective tenants are drawn to properties that have demonstrated their commitment to being the best of the best. Only FRPO members are eligible for MAC Awards. FPPO accepts nominations for fourteen different award categories, and an independent volunteer committee reviews applications to select the winners. Last year, FRPO received 120 applications for the different awards. Extensive effort and time go into making FRPO’s annual awards dinner a success, with several months of planning needed to ensure the logistics of the dinner and awards process are successful. This work is worth it, and now FRPO’s annual awards have become a permanent feature of the rental housing industry and an important way for us to continue promoting the professionalism and standards FRPO members are known for achieving. RHB Mike Chopowick, Federation of Rental-Housing Providers of Ontario, www.frpo.org.


Cushman & Wakefieldâ&#x20AC;&#x2122;s Property Tax Services Group is comprised of professionals who are experts at advising you on the right strategy for managing how much you pay in property taxes. Currently seven provinces are in the process of reassessing for the 2013 taxation year. Preliminary analysis shows that in some jurisdictions the multi-residential / apartment property class is Number 1 in terms of assessment increases. It is important to ensure that the information being used to arrive at your 2013 assessed value is correct, fair and equitable, and that you are paying only your fair share of property taxes and no more. Contact us to discuss how we can help you take control of how much you pay in property tax.

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Moving with confidence.


[ Legislation ]

In a wrong-headed move, Hamilton considers licensing HDAA will oppose at key Dec 11 meeting By John Dickie, CFAA President

Unlike in other provinces, in Ontario, various municipalities are looking at licensing landlords as a means of imposing yet more controls on the rental industry. Oshawa, North Bay and Waterloo have imposed costly inspection and reporting requirements on small landlords. London has imposed a somewhat less costly self-reporting program, also on small landlords. Landlords are concerned that licensing will spread to more municipalities and to larger buildings. Hamilton is the latest city to look at licensing rental housing. The Hamilton & District Apartment Association (HDAA) is mounting a strong campaign to oppose landlord licensing in Hamilton. Landlords anywhere in Hamilton, in southern Ontario or in the Greater Toronto area should pay attention and help in this campaign if they can. HDAA wants as many interested landlords as possible to attend the City of Hamilton Planning Committee meeting on Tuesday, December 11, to express their opposition to licensing. The meeting is to start at 1:00 pm in the City Council Chambers at 71 Main St. West, Hamilton. HDAA has prepared a report identifying 5 key reasons why licensing should not be adopted. The report also provides five suggestions to address the concerns that have given rise to the move to look at licensing. For the complete report, go to www.hamiltonapartment association.ca. FIVE REASONS WHY LICENSING SHOULD NOT BE ADOPTED IN HAMILTON

3. Licensing creates redundant bureaucracy, and may contravene human rights and privacy legislation, causing more problems than it solves. Through licensing, the city expects to be able to obtain personal information about tenants and owners, and to force access to tenants’ homes (despite their disagreement). The September staff report lamented the inability of the city’s inspectors to access tenants’ units unless the inspector had the tenant’s consent. A tenant’s home should be their castle just as much as an owner-occupier’s is. Processing information obtained about the many adequate or better rental buildings will consume city resources that could be much better spent addressing problem addresses. 4. The cost to enforce property standards should not sit solely on the backs of the tenants when it improves the entire neighbourhood for all city residents. In the city’s pilot bylaw enforcement project 43% of the orders were made against owner-occupied properties. For orders related to garbage issues, there were more orders against owner-occupied properties than against rental properties. Bylaw enforcement paid from the tax base is sensible; targeting renters is not sensible and not fair.

1. Licensing will deter investment in Hamilton.

5. Licensing will not deal effectively with problem tenants and bad landlords.

Investors are finally recognizing Hamilton as a positive destination. Demand from investors is raising property values, generating more property tax revenue from rental properties. Licensing will drive that investment away, leaving home owners to pay more for their city services.

Charging a landlord for noise made by a tenant will not speed up the eviction of the tenant or stop the noise. It will penalize the owner for what he or she cannot control. Charging the tenant for excess noise from their rental unit is the fair and effective solution.

2. The cost of licenses will take away money from unit upgrades and from tenants, sending more tenants to the food banks, and poverty. Licensing costs money and takes time. Both effects draw resources away from investment in unit upgrades and repairs. Landlords will inevitably pass through the costs of licensing to their tenants. That will erode the affordability of rents and hurt low income tenants.

34 november 2012

Licensing will not give tenants any help in dealing with bad landlords. And tenants already have many tools: tenants can bring in bylaw enforcement, file an application at the Landlord and Tenant Board or contact the Fire Department, the Health Department, the Electrical Safety Authority, the Technical Standards and Safety Authority, or the Enforcement Branch of the Ministry of Municipal Affairs and Housing. Licensing will not add one more power to tenants, who already have numerous avenues to seek repairs or relief.


[ Legislation ]

Is there a hidden agenda?

Non-conforming units

People who have looked closely at landlord licensing wonder if there is a hidden agenda. Is the goal to turn back time, to when neighbourhoods were full of 1950â&#x20AC;&#x2122;s nuclear families, and students lived with their parents or on campus? Is licensing a money grab? Is the goal to drive out students and low-income renters? Are Councillors trying to appease certain groups by showing they are doing something even though they know it will not solve the actual problems, and would likely hurt low-income tenants by raising rents?

When rental units donâ&#x20AC;&#x2122;t conform to antiquated zoning bylaws, critics condemn them as â&#x20AC;&#x153;illegalâ&#x20AC;?, when the truth is they are simply nonconforming. HDAA reports that the lack of zoning enforcement for decades has resulted in an estimated 23,000 unregistered rental units in Hamilton. Eliminating those units would create a social and economic disaster.

Addressing legitimate concerns HDAA has not limited its attention to the negatives of the proposed licensing regime. HDAA wants the legitimate problems to be solved. Here are five suggestions to address concerns effectively for everyoneâ&#x20AC;&#x2122;s benefit: s #ONTINUE WITH CURRENT STEPPED UP BYLAW ENFORCEMENT WORK ON improving the Tenant/Landlord/City Relationship. s #REATE A DIRECT LINE OF COMMUNICATION BETWEEN LANDLORDS AND THE #ITY s 'ATHER CONTACT INFORMATION ABOUT OWNERS COST EFFECTIVELY THROUGH existing data bases like the tax bill addresses s %DUCATE NEW TENANTS ON HOW TO BE RESPECTFUL NEIGHBOURS ESPECIALLY in student housing neighbourhoods near Mohawk and McMaster s !DDRESS ZONING CONCERNS THROUGH A NEW COMPREHENSIVE ZONING bylaw scheduled for the near future

What is needed is a process for legalizing those units while ensuring that they meet reasonable fire safety and building code standards. The unregistered units are very likely a major reason why Hamiltonâ&#x20AC;&#x2122;s rental housing is relatively affordable. Hamilton City Council should not throw away the advantage which affordable housing gives to the Cityâ&#x20AC;&#x2122;s lowincome residents and tenants. Conclusion HDAA wants Hamilton to reject landlord licensing, while proceeding with alternative solutions to improve the whole housing stock. Landlords anywhere in Hamilton, in southern Ontario or in the Greater Toronto area should pay attention and help in this campaign if they can. The Hamilton Planning Committee will consider landlord licensing in the City Council Chambers at 71 Main St West, Hamilton, on Tuesday, December 11, at 1:00 pm. RHB See the HDAA website for any updates. The more interested landlords who attend to express their opposition to licensing, the more likely it is that HDAA can turn back licensing in Hamilton.

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Rental Housing Business 35


[ Taxes ]

Capital cost allowance and rental properties By David Gargaro

Capital cost allowance (CCA) refers to the annual deduction on the cost of certain business assets that can be claimed against income for tax purposes. Assets include the building and/or equipment, as well as additions or improvements to those assets when the assets are expected to last for several years. Land is not depreciable property, so the cost of the land is deducted from the total purchase price when calculating an asset’s value for the purposes of determining CCA. As the full cost of an asset cannot generally be deducted in the year it is purchased, the capital cost can be deducted over several years while you own the asset. Classes of depreciable properties There are different classes of depreciable rental property, and different maximum CCA rates that apply to each class. Some buildings can belong to different classes unless they specifically belong to a certain class. Individual units within a building (including condos) belong to the same class as the building. A building’s year of purchase and type of construction determine its class (which determines the maximum allowable CCA rate, as listed in parentheses). Each class includes certain conditions and exceptions. Class 1 (4%) applies to most buildings purchased after 1987. Class 3 (5%) and Class 6 (10%) apply to most buildings purchased before 1988. Class 3 consists of concrete or masonry buildings that were acquired before 1988. Class 6 consists of some structures made of frame, log, stucco on frame, galvanized iron or corrugated metal. However, Class 6 has very strict conditions: you must have acquired the building before 1979 (or entered into a written agreement before 1979 to purchase the building or started construction of the building before 1979) or the building must have no footings or base supports below ground level. Each class covers additions and alterations to the building, but Classes 3 and 6 include limits on the amounts that qualify. For Class 3 buildings,

36 november 2012

additions or alterations made after 1987 that do not exceed the lesser of either $500,000 or 25% of the building’s capital cost fall in the same class; excess amounts are included in Class 1. For Class 6 buildings, you can claim the first $100,000 of additions or alterations made after 1978 as part of the same class. Any amounts spent above this limit will be treated as either Class 1 or Class 3. Assets within the building fall into different classes. Classes 1, 3 and 6 cover the parts that make up the building, including electrical wiring, lighting fixtures, plumbing, sprinkler systems, HVAC equipment, elevators and escalators. Class 8 (20%) includes property that does not fall into another class, such as furniture, appliances, tools costing at least $500, certain fixtures, machinery, refrigeration equipment, other business equipment and electronic communications equipment. Class 17 (8%) applies to roads, sidewalks, parking lots and storage areas. “Several different classes apply to computer hardware and related systems software, such as equipment used to monitor electricity and water usage,” said Dennis M. Anderson, Partner, Tax Services, Ernst & Young LLP. “In these cases, CCA rates depend primarily on when the equipment was purchased. Passenger vehicles can fall under either Class 10 (30%) or Class 10.1 (30%), which have different capital cost limits; other types of motor vehicles fall under Class 10.” Calculating CCA The declining balance method is used to calculate CCA. This means that you would claim the CCA on the capital cost of the property minus any CCA you claimed in previous years, resulting in a declining undepreciated balance each year. However, in the year that you purchase a rental property, you can only claim CCA on one-half of your net additions to a class. This is known as the half-year rule (or the 50% rule).


[ Taxes ]

For example, suppose that you purchased a building that cost $500,000 (excluding the cost of the land). As a Class 1 building, you could claim CCA in the first year on only one-half the normal amount (i.e., $250,000 at the rate of 4%, or $10,000). The following year, you would be able to claim CCA on the remaining value of the building, which would be $500,000 – $10,000, or $490,000.

assets. One issue to note with respect of CCA claimed is that it can, in some circumstances, cause additional income in future years when a building, or other depreciable asset, is sold. “To the extent CCA has previously been claimed on a rental property and it is sold for an amount greater than the remaining undepreciated cost, the difference, up to the original cost, is brought back into income as

recaptured CCA and taxed as ordinary income,” said Dennis. “The sale proceeds that exceed the original cost are a capital gain and only one-half of that amount is taxable.” RHB For more information, contact:

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You can only claim CCA on a rental property, or any other asset, when it becomes available for use. A rental building is deemed to be available for use on the earliest of:

Dennis M. Anderson, Partner, Tax Services, Ernst & Young LLP (Dennis.M.Anderson@ca.ey.com

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fixtures, appliances). You can then claim CCA for those assets, the building or both. You cannot use CCA to create or increase a rental loss. (However, you can claim a loss if the rental expenses without any CAA exceed rental income for income tax purposes.) For example, suppose that you own three rental properties, where two buildings have a net rental income of $10,000 each and the third building has a net rental loss of $25,000. This would mean that you would have a net rental loss of $5,000 ($10,000 + $10,000 – $25,000). Claiming CCA on these properties would increase your rental loss, so you cannot claim CCA on any of the rental properties or

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Rental Housing Business 37


COAST TO COAST CMHC’s Housing Outlook Conferences Various locations across Canada through the month of November s s s s s s s s

,ONDON /TTAWA 6ANCOUVER  4ORONTO ALREADY HELD (AMILTON .OVEMBER  #ALGARY .OVEMBER  -ONTREAL .OVEMBER  7ATERLOO .OVEMBER  %DMONTON .OVEMBER  1UÏBEC .OVEMBER  6ICTORIA .OVEMBER 

Join CMHC housing industry professionals at CMHC`s Annual Housing Outlook Conferences. Hear experts present their insights on key trends impacting housing demand and supply in the new home, rental, and resale housing markets. For more details, visit the CMHC Conferences & Events web page. LPMA – Property Management 101 Seminars November 20 – Maintaining Your Cash Flow The London Property Management Association is hosting a dinner seminar designed for small landlords, investors and managers of rental property. Whether you are new to the business or long tenured, this seminar is for you. Participants will receive a binder with valuable course material for future reference. Speakers – Chris Surowiak (Paralegal-CMS Legal Services), Shannon Kiekens (Paralegal-Cohen Highley LLP) and Emma Sims (Paralegal-Cohen Highley LLP) will discuss Lease Enforcement, Problem Tenants, Rent Arrears and Damages. To register or for more information, visit the LPMA website at www.lpma.ca. BCAOMA – Best Practices for Landlords 101 November 20 The British Columbia Apartment Owners & Managers Association is offering a seminar that will show you how professionals screen tenants and how to have a successful tenancy. Topics include establishing tenant criteria, completing the tenancy agreement and rules and regulations during tenancy. For more information on this in-person seminar visit the BCAOMA website at www.bcaoma.com.

BCAOMA Best Practices for Landlords Seminar September 18 and November 20 Vancouver, British Columbia The British Columbia Apartment Owners & Managers Association is offering a seminar that will show you how professionals screen tenants and how to have a successful tenancy. Topics include establishing tenant criteria, completing the tenancy agreement and rules and regulations during tenancy. For more information on this in-person seminar please visit the BCAOMA website at www.bcaoma.com or e-mail questions@bcaoma.com. PPMA – General Membership Meeting November 21 The Professional Property Managers’ Association (of Manitoba) (PPMA) hosts General Membership Meetings on the third Wednesday of the month. The November meeting is sponsored by Midland Appliance World and will take place at the Masonic Memorial Temple. For more information, visit the PPMA website at www.ppmamanitoba.com. ROMS BC – Provincial Rental Housing Conference & AGM November 22 and November 23 Victoria, BC – Bear Mountain Spa and Resort The Rental Owners and Managers Society of BC is hosting a two day conference, at the Westin Bear Mountain Golf Resort & Spa on November 22 and 23. The conference features two streams of education for landlords of any size of portfolio to choose from, highlighting knowledgeable ROMS BC Associate members and guest presenters. The conference will also feature an industry trades exhibition, as well as a networking dinner with guest speaker Carol Frktich, CMHC’s BC Regional Economist. To register, contact ROMS BC at 1.888.330.6707 or info@romsbc.com. (To see the full workshop lineup, go to www.romsbc.com/prhc.php.) PM Expo 2012 Canada’s largest property management exposition and conference November 28-30 The 24th edition of PM Expo will offer more exhibits, special features, speakers, and networking opportunities than ever before. The Show will

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facilitate the exchange of ideas, best practices, and product knowledge that will provide you with strategies and cost effective solutions for managing and operating your buildings. For more details visit: www.pmexpo.com.

those opposed to the proposed licensing in Hamilton to attend the Planning Committee meeting to voice their opinion. To see the report or for more details visit the HDAA website at http://www.hamiltonapartmentassociation.ca.

FRPO – 2012 MAC Awards Gala November 29

BCAOMA - Best Practices for Landlords 102 December 18

The Federation of Rental-Housing Providers of Ontario (FRPO) is hosting the 2012 Marketing, Achievement and Construction (MAC) Awards Gala on Thursday, November 29, at the The Metro Toronto Convention Center. Over 800 industry colleagues will be in attendanace to recognize excellence in the rental industry. The special guest speaker this year will be Mr. David Suzuki. For more details, visit the FRPO website at www.frpo.org.

The end of the tenancy can be a complex situation for both the landlords and the tenants. In this seminar we teach you the requirements under the Residential Tenancy Act and how to perform a successful vacate for your tenant including strategies for eviction. Topics include how tenancies end, giving notice to end tenancy, how move outs should happen, frustrated tenancies, serving notices, eviction process, over holding tenants, orders for possession, abandonment of property, move-out inspections, and dispute resolution. For more information on this in-person seminar visit the BCAOMA website at www.bcaoma.com.

ROMS BC - Tenant Selection Workshop November 29 - 9:00 – 1:00 Selecting good tenants is easy - if they really are! How do you identify the ones who would have you believe they are the best you could ever hope for, and which ones actually are? What questions can you ask - and not ask tenancy applicants? Learn the four steps in tenant selection that guarantee you will make the best decision. To register visit the ROMS BC website at www.romsbc.com.

PPMA – Holiday Luncheon December 19

BCAOMA - Open House December 5

CFAA – 2013 Rental Housing Conference June 11-13, 2013

Drop by the BCAOMA office on December 5, from 2:00-5:00 pm for a cup of cheer! Meet BCAOMA Directors, Executive Director and Staff. Visit the BCAOMA website at www.bcaoma.com for details.

In 2013, CFAA will hold its Rental Housing Conference in Toronto on June 11, 12 and 13. The Building Innovations Bus Tour will open the conference during the afternoon of June 11. June 12 will feature investment topics and an evening social event, while facilities management topics will be addressed on June 13. Delegates can attend either day or both days, with or without the building tour or the evening social event. CFAA looks forward to hearing Benjamin Tal’s latest economic update. As they become available details will be added to the CFAA website at www.cfaa-fcapi.org. Conference registration will open in February 2013.

HDAA - City of Hamilton Planning Committee December 11 - 1:00 pm The HDAA is gathering its forces to battle the City’s proposed licensing of Rental Properties in Hamilton. They have released a report, which is available on the HDAA website, outlining their opposition to licensing with alternate solutions to help solve the rental issues in Hamilton. HDAA is encouraging

The Professional Property Managers’ Association (of Manitoba) (PPMA) is hosting the annual Holiday Luncheon on December 19 at 12 noon. Location is to be determined. For more information, visit the PPMA website at www. ppmamanitoba.com.

http://www.cfaa-fcapi.org/ Tel: (613) 235-0101 | Fax: (613) 238-0101 Email: admin@cfaa-fcapi.org Rental Housing Business 39


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40 Profile


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