RHB Magazine November 2017

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Vol. 10 No. 5 November 2017

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

Perspective on 2017 RHB offers thoughts, opinions and perspectives from rental housing associations all across Canada on what happened in 2017.

An increase in rates, an increase in questions With the projected increase(s) in interest rates for 2018, there are questions about how they will affect the rental housing industry.

“We are prepared to adjust to changes in the market rates for at least the next five years.” – Ron Schuss, p. 26 Lessons learned with Housing First

Energy & finance

Waterloo Regional Apartment Management Association shares its experience with Housing First and how it will take the lessons learned forward to the future.

Energy financing and third-party investing are options for building owners looking to fund their energy-efficient upgrades.

Tax reform – what’s coming? CFAA offers updates on what is happening with Canada’s proposed tax reforms.


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Editor’s notes

What a strange year As we wind down 2017, perhaps we should reflect on how unusual a year it actually was, from a variety of perspectives. Or we could just pretend that we’re Jim Carrey in Eternal Sunshine of the Spotless Mind and have all those terrible memories wiped from existence. I’m a fan of this approach in limited circumstances. However, we learn from our mistakes, and the mistakes of others, so it does us no good to forget the “bad” and only remember the “good.” Some good things did occur and people are learning from the bad. Let’s all do the same. RHB Magazine decided to have a look back at 2017, as well as a look forward to 2018, by engaging a number of apartment associations from across Canada in a Q&A session. We discussed a number of topics, including tax policies, marijuana legislation, municipal charges, housing policy and more. The result is a clearer picture of what happened this year, and what to expect in 2018, in the rental housing industry. We also take a look at interest rate hikes that occurred this year, and what is projected for 2018. The article includes interviews with two landlords who experienced the high interest rates of the 1980s, as well as Benjamin Tal, Deputy Chief Economist of CIBC World Markets, for his views on where interest rates are going and how they could affect the rental housing industry. As usual, RHB Magazine provides a lot of great information in its magazine, including a close look at two alternatives to financing energy-efficient upgrades for rental properties. Make sure to read CFAA’s newsletter, National Outlook, as well as the Regional Association Voice (which includes different perspectives on the Housing First program). Don’t forget to check out “Spin Cycle” at the end of RHB Magazine. This issue also includes the EPIC Toronto reference guide and directory, which will go out to our 2,000 Toronto subscribers. As usual, we enjoy hearing from our readers and support two-way communication. If you have any comments or questions, send them to david@rentalhousingbusiness.ca. I look forward to hearing from you.

Co-founder, Director

Juan Malvestitti juan@rentalhousingbuisness.ca

Co-founder, Publisher

Marc Côte marc@rentalhousingbusiness.ca


David Gargaro david@rentalhousingbusiness.ca

Contributing Editor

John Dickie, President CFAA jdickie@rentalhousingbusiness.ca

Design Wendy Tabor

Office Manager Geeta Lokhram


One year $37 Cdn Two years $59 Cdn Single copy sales $9 Cdn Opinions expressed in articles are those of the authors and do not necessarily reflect the views and opinions of the CFAA Board or management. CFAA and RHB Inc. Accept no liability for information contained herein. All rights reserved. Contents may not be reproduced without the written permission from the publisher. P.O. Box 6967, Maple, ON L6A 1S7 416-236-7473

Enjoy the issue! David Gargaro Senior Editor

4 | nov 2017

Produced in Canada All contents copyright © RHB Inc. Canadian Publications Mail Product Sales Agreement No. 42652516

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VOL.10 NO.5 2017

contents A look at 2017

President’s Corner

RHB offers thoughts, opinions and perspectives from rental housing associations all across Canada on what happened in 2017.

CFAA President shares the coming changes that are in Canada’s new National Housing Strategy.

Interest rates – Looking forward and back With the projected increase(s) in interest rates for 2018, there are questions about how they will affect the rental housing industry.

Tax reform– still a concern CFAA offers updates on what is happening with Canada’s proposed tax reforms.

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Financing alternatives for energy-efficient upgrades Energy financing and third-party investing are options for building owners looking to fund their energy-efficient upgrades.

Regional Association Voice In this issue of the Regional Association Voice, WRAMA shares what they learned about Housing First.

Spin Cycle Spin cycle discuss the importance of brand management and how it affects the decisions of consumers.

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president’s corner Just as this issue went to print on November 22, the Government of Canada announced its new National Housing Strategy (NHS) after a lengthy public and stakeholder consultation. That strategy will re-establish federal leadership on housing. Over the next 10 years, the government plans to support the construction of 110,000 new housing units in mixed income communities with grants and loans amounting to $21B. Billions will also be spent on repairing existing social housing with provincial cost-sharing.

For more information on the NHS, go to www.placetocallhome.ca. See page 15 for the details of the planned Canada Housing Benefit. For the advantages which housing benefits offer, see page 35.

In an important new initiative, the federal government expects to spend $2B (with $2B of provincial matching funding) to create a Canada Housing Benefit. The Benefit will be paid directly to low-income renters in marketrent units in social housing, and in the private rental market. It is to be administered by the provinces. In order to allow time for the federal-provincial negotiations, the plan is to roll out the Housing Benefit in 2020 (after the next election.)

The federal government still plans to reform corporate taxation. For more details see page 38.

CFAA believes the negotiations and program design could take place more quickly since many provinces already have limited housing benefit programs, which they could expand. However, the federal support --- and 50 per cent funding --- for housing benefits is a historic shift in federal housing policy. CFAA and member associations have been advocating for that shift for decades. Through hard work and collaboration with research and charitable foundations and various housing groups, CFAA finally moved the government. Now, CFAA and member associations need to work more to make sure a workable program is actually brought in by the federal and provincial governments.

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On other matters, the marijuana issues have largely moved to the provinces since they can now regulate or prohibit home growing. Quebec plans to ban all home growing. Saskatchewan plans to ban home growing in multiple dwellings units.

Learn more about all these issues, and about solutions to many other operational concerns, at CFAA Rental Housing Conference 2018, being held in Vancouver from May 14 to May 16. See page 41 or www.CFAA-RHC.ca for more information.

John Dickie

CFAA President

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Page 35

Page 38

Page 41

How bad is core housing need in Canada, and what can be done about it?

Feds back away from some of the controversial proposed corporate tax changes, but trouble may still be afoot.

Are you meeting the right people to grow your business? Join your colleagues at CFAARHC 2018 in Vancouver.

NATIONAL OUTLOOK – DIGITAL EDITION available at www.cfaa-fcapi.org CFAA Member Associations Eastern Ontario Landlord Organization (EOLO) www.eolo.ca P: 613-235-9792 Federation of Rental-housing Providers of Ontario (FRPO) www.frpo.org P: 416-385-1100, 1-877-688-1960 Greater Toronto Apartment Association (GTAA) www.gtaaonline.com P: 416-385-3435 Hamilton & District Apartment Association (HDAA) www.hamiltonapartmentassociation.ca P: 905-632-4435

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Investment Property Owners Association of Nova Scotia (IPOANS) www.ipoans.ns.ca P: 902-425-3572

Professional Property Managers’ Association (of Manitoba) (PPMA) www.ppmamanitoba.com P: 204-957-1224

LandlordBC www.landlordbc.ca P: 1-604-733-9440 Vancouver Office P: 604.733.9440 Victoria Office P: 250-382-6324

Saskatchewan Landlord Association Inc. (SKLA) www.skla.ca P: 306-653-7149

London Property Management Association (LPMA) www.lpma.ca P: 519-672-6999 Manufactured Home Park Owners Alliance of British Columbia (MHPOA) www.mhpo.com P: 1-877-222-4560

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

The Canadian Federation of Apartment Associations represents the owners and managers of close to one million residential rental suites in Canada, through 11 apartment associations and direct landlord memberships across Canada. CFAA is the sole national organization representing the interests of Canada’s $480 billion rental housing industry. For more information about CFAA itself, see www.cfaa-fcapi.org or telephone 613-235-0101.

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from an associations’ perspective Association Members: British Columbia

David Hutniak, CEO, LandlordBC

Al Kemp, Executive Director, Manufactured Home Park Owners Alliance of BC



Avrom Charach, Director of External Relations, Professional Property Managers’ Association of Manitoba

Jim Murphy, President and CEO, Federation of Rental-housing Providers of Ontario

Arun Pathak, President, Hamilton and District Apartment Association

Andrew Macallum, President, Waterloo Regional Apartment Management Association

John Dickie, Chair, Eastern Ontario Landlord Organization

This year was marked by numerous issues that have not yet reached a resolution – tax policies, marijuana legislation, municipal charges, housing policy and so on. Things are a bit murky for the rental housing industry in Canada, so RHB Magazine spoke to a number of landlord associations across Canada to see if we could get a clearer picture of what happened this year, and what is projected for 2018. 14 | nov 2017

RHB: How have changes in tax policies over the past year affected your members? Are there any strategies that members are employing to reduce their tax load, at any level of government? David (LandlordBC): The small business tax that the Federal Government originally proposed was cause for concern for a cohort of our members. Al (MHPOABC): There have been none; however, manufactured home community owners and residents are double taxed. Owners pay property taxes on the value of their land with homes on it. Homeowners pay taxes on the value of their homes on a community site. This situation requires changes in about five different provincial Acts, and provincial politicians won’t make any change that is detrimental to municipalities – most of them cut their political teeth as municipal mayors or councillors. Avrom (PPMA): None of note – we do have concerns around some of the federal proposals but provincially there is not much happening. John (EOLO): Mid-size third-party property managers are concerned about the proposed federal corporate tax changes. As in other business sectors, forward-thinking corporate rental owners and managers are thinking about paying out dividends ahead of the tax changes, because the tax changes will come with decreases in the dividend tax credits, which will raise the effective rate of tax on some income which was earned, but not paid out, before the small business tax and dividend credits rates are changed. Jim (FRPO): The Ontario government recently introduced property tax measures that will benefit our members. All new rental projects in the province must be assessed at the lowest residential rate, usually single-family homes. The province also froze property taxes for existing rental buildings if they are two times or more the lowest residential rate. Members may be impacted by the federal changes to small business and incorporation. Members can also appeal their property taxes, which many do. Andrew (WRAMA): WRAMA’s members are concerned about increased property taxes and other building costs. In some cases, we cannot increase rents to cover those costs, so that maintenance and other services to tenants suffer. RHB: How are members preparing for the impending legalization of marijuana, and its impact on their tenants and buildings?

David (LandlordBC): LandlordBC is actively liaising with the Solicitor General of BC on this matter and collaborating with numerous municipal leaders and stakeholders to ensure that personal grow-ops, in particular, are banned from rental housing in BC. Al (MHPOABC): Our association has made submissions to both the federal and provincial governments recommending that growing marijuana not be permitted in rental properties, whether apartment buildings, manufactured home communities, single rental homes, or basement suites. This is critically important from safety, health, and potential property damage perspectives. Avrom (PPMA): We have made presentations to the government and our membership. We are endeavouring to allow landlords to make rules around growing and smoking in suites. We have had monthly discussions regarding the surrounding provinces and regarding the concerns we have. Jim (FRPO): Ontario has not yet finalized rules for household use that would affect rental buildings. FRPO has advocated that the growing of marijuana plants for personal use not be allowed in rental units. We have raised several concerns over how the growing of marijuana plants would be treated, e.g., issues around unit condition, access to unit. Arun (HDAA): HDAA members have no idea how to prepare for the impending marijuana legislation and its impact on their tenants and buildings as Ontario’s legislation has not been clarified. Our members’ main concern is that growing marijuana in multi-unit dwellings poses safety hazards and could result in damage to buildings and loss of insurance. Other concerns include overloaded electricity systems and potential damage from mould that can thrive in the humidity created by marijuana plants. At the last HDAA dinner meeting, we had a member raise the question as to how to handle smoking in buildings. What are the rights of landlords for those that are disturbed by another tenant’s smoking? Can we stop them from growing marijuana in their units? There have been many articles written in the papers about their concerns but there are no definite answers as everything is still up in the air. Andrew (WRAMA): Members and their tenants are anxiously waiting to see whether the new mandatory provincial lease will address marijuana growing and marijuana use, or at least allow landlords to do so. There is no doubt that growing plants and smoking marijuana will impact the

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physical structure of a house or building - and also negatively affect other tenants who live in the same house or building. WRAMA sincerely hopes that the government recognizes the rights of nonsmokers, families and children. John (EOLO): Most people seem to be waiting for the provincial rules. Some people are modifying their leases to prohibit the growing or smoking of marijuana, although whether such rules are enforceable will depend on the attitude of the Landlord and Tenant Board. The upcoming mandatory, standard lease will also have a significant impact on how landlords are able to police marijuana growing and smoking and other tenant behavior issues. RHB: Compared with past years, what is the situation for your members with regards to bedbugs and pest control? David (LandlordBC): Their knowledge level is higher so the situation has improved, or at least has not worsened. Al (MHPOABC): This is not an issue in manufactured home communities, as the residents own their homes, plus bedbugs can’t migrate from one self-contained home to another. Avrom (PPMA): Pest control has become all consuming in many ways. It has been very difficult to properly control bedbugs, especially if tenants fail to co-operate. That being said, the government has been very supportive of our needs for tenant compliance. Jim (FRPO): A number of major municipalities, in Ontario, are reporting a rise in the incidence of apartment bedbug infestations in 2017. FRPO’s Certified Rental Building (CRB) program has partnered with the City of Hamilton to develop a new Best-In-Class Integrated Pest Management program that encompasses new policy approaches, promotes a number of early preventative measures, and introduces new educational programs for both frontline staffs and tenants. These new measures introduce a shared responsibility for pest control, and are expected to significantly help reduce the incidence of major bedbug infestations. The new CRB IPM program is expected to launch early in the new year. Arun (HDAA): This year, HDAA has made a pointed effort to help landlords rethink the way they approach pest control – specifically bedbugs. Along with FRPO, HDAA has worked with the City of Hamilton and sat on the committee that developed Hamilton’s Integrated Pest Management program. Some techniques

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to pest management include encourage early reporting, conduct annual pest inspections, educate tenants, simplify the tenants’ role in treatment, take steps to avoid the spread of pests, work closely with pest control professionals, and ongoing monitoring and documentation. Andrew (WRAMA): At this point, this is not a prevalent issue for members. John (EOLO): On average, EOLO members find the current bedbug situation to be similar to recent years, although cockroaches seem to be getting worse. However, some members are struggling, while others see their situations getting better. EOLO is working with various social agencies in a recently formed Bed Bug Information Group on ways to address bedbugs more aggressively and effectively. While private owners have some problematic buildings, the more extensive problems seem to be in social housing buildings. Problems occur in all buildings when tenants do not prepare their units as required. EOLO is looking for help on that problem from the Property Standards Officers and from social agencies. RHB: If there has been a change in provincial government, how has that affected your members? If the government is still in place, have there been any changes in legislation that has affected your industry provincially? David (LandlordBC): There is a new government as of the end of June 2017, with the NDP assuming power, supported by the Green Party. The new government is very focused on increasing rental housing supply. Legislative change surrounding fixed term tenancies with a vacate clause in process to close a loophole that a steadily increasing number of landlords were using to avoid rent control. (Royal Assent is likely during the third week of November.) Legislation will also enhance housing security for tenants. LandlordBC is a strong supporter of the legislative change, as this form of tenancy was being misused, causing harm to the broader industry. Al (MHPOABC): There is the usual pressure when an NDP government takes power in BC to freeze rents – ideally forever. Avrom (PPMA): We have had a new government for almost two years. They inherited large deficits and have spent much of their energy concentrating on government efficiency. They have not made any changes to our legislation. We are trying to work with them to effect positive change but it can be difficult to have meetings

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with our minister who also is responsible for Justice. While the government has not been making changes, there has a been a push, through the Human Rights legislation, to allow comfort animals in all suites even though legislation does not make that allowance. Jim (FRPO): 2017 has been a very busy year on the regulatory and government relations front. The Ontario government in April brought in Bill 124 that ended the post-1991 exemption for new rental buildings, eliminated the ability of property owners and managers to apply for Above Guideline Increases related to utilities, and toughened eviction rules for personal use. The government also began a process to introduce a standard lease for landlords and tenants. FRPO opposed these changes and proactively tabled alternatives including a rolling exemption or increase in the guideline formula of CPI plus for new rental buildings. FRPO has insisted that additional items, such as contents insurance and parking, be allowed in any standard lease. FRPO has initiated an extensive public relations campaign with the hashtag #rentON to encourage more rental supply and to promote rental lifestyle. The vacancy rate in Toronto and Ontario is low and going lower. More supply is the answer. FRPO is working proactively in the lead-up to the June 2018 provincial election by reaching out and meeting with all three main political parties and informing them of the importance of rental housing and the need for practical, balanced rent control legislation. FRPO has undertaken to research reports to support our efforts on supply, and on the economic importance of vacancy decontrol. Arun (HDAA): There have been no changes in government but bad policy from the Ontario Liberal government. Andrew (WRAMA): The greatest change has been the introduction of Bill 124, the Rental Fairness Act, as a part of Ontario's Fair Housing Plan. The RFA effectively eliminated the new building exemption to rent increase rules, and now requires landlords to compensate tenants if they wish to terminate a tenancy for personal use. The latter has a striking similarity to severance pay. RHB: Have there been any significant changes in municipal charges or taxes, and if so, how have they affected your members? David (LandlordBC): Other than constantly going up, no. Al (MHPOABC): There have been no significant changes; however, the assessment of property

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values for property tax purposes can result in tax increases as high as 50 per cent. This is because BC Assessment places significant weight on recent property sales. Where there are a number of fixed building sales in an area, the impact tends to even out. However, when one manufactured home community sells in an area where there haven’t been any comparable sales for several years, BC Assessment uses the sale price to unrealistically and exorbitantly increase the assessment of other communities in the area. Jim (FRPO): In July 2017, the City of Toronto introduced a New Apartment By-law #354 that includes a new Registration program for multi-res buildings (three or more stories and ten units or more); a number of mandatory Apartment Building Management requirements; and an enhanced building inspection/audit regime. This new by-law represents a landmark of increased regulation for the multi-res industry. The by-law requires property owners to provide a myriad of information about the age, condition, and physical operating systems of their multi-res building as well as paying an annual registration fee of $10.60 per unit annually to the City. The annual registration fee is expected to cost the Toronto purpose-built rental industry up to $3.6 million annually. The added cost of registration fees, plus the burden of additional regulatory requirements in Ontario’s rent control marketplace, will no doubt negatively impact the amount of annual capital spending, as well as impede new purpose-built rental construction. Arun (HDAA): Reassessment has led to higher taxes for some but others have found that their taxes have dropped, triggering a reduction in rents. Andrew (WRAMA): The City of Waterloo continues to enforce its residential rental housing licensing by-law (no. 2011-047) giving the City the "...ability to manage low-rise residential rental housing in the City." Proving compliance with the licensing requirements adds significant costs. Those new costs drive up the costs of providing rental housing, and will be ultimately reflected in rents. John (EOLO): Mayor Watson has led the City of Ottawa for the last seven years. In 2014, he promised to hold property tax increases to 2 per cent for this term of Council, and he has kept that promise. In 2017, some rental owners experienced assessment-driven tax increases, while some others received tax decreases. Tax decreases of more than 2.49 per cent are

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rentalhousingbusiness.ca | 21

passed through to residential tenants by way of mandatory rent reductions. EOLO members whose buildings received the tax decrease are in the process of providing those rent reductions. Leading EOLO members also provide voluntary rent reductions when buildings receive tax decreases of between 0.5 and 2.49 per cent. Members with significant tax increases can apply for above-guideline rent increases to pass through tax increases. RHB: Are there new housing programs in your area (such as Housing First or housing benefits paid to tenants or more social housing), and if so, how have they affected your members? David (LandlordBC): Housing and rental housing in particular is front-of-mind for all levels of government. Purpose-built rental is increasingly the focus of zoning relaxation, financial incentives, free government-owned land, etc. While there are many positive measures and the beginnings for some momentum, the scale of need far exceeds the supply under construction or in the pipeline. The new provincial government has committed to produce or facilitate production of 114,000 units of housing (primarily rental) over the next 10 years. The City of Vancouver is looking to end “exclusionary” zoning in single-family neighbourhoods to permit gentle intensification. Al (MHPOABC): Nothing has changed recently. The new NDP government has pledged to build 114,000 housing units over the next 10 years. Avrom (PPMA): The provincial government has been cutting back on payments of rent for clients on social services. That has led to calls from social housing advocates for returns to previous levels. John (EOLO): The City of Ottawa is slowly moving to a Housing First model in which people who are homeless are given supplementary income supports and, if need be, social service supports. Over the past three years, over 400 individuals were moved into supportive housing and into private market housing with supports. Many of them had lived in the homeless shelters for five or ten years. There have been some hiccups, but the new approach is effective overall. RHB: How are you addressing current housing programs? Are you seeking changes? David (LandlordBC): LandlordBC is advocating to (cajoling) provincial and municipal leaders throughout Metro Vancouver, Victoria, the Okanagan and other jurisdictions to support building of new purpose-built rental housing, and to do it fast.

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Al (MHPOABC): We are working on educating municipal and provincial politicians and the media on the value of manufactured home communities on the housing spectrum. A young family can buy a new 1500 sq. ft. home placed on a site in a manufactured home community for $250,000 to $300,000. While they are paying site rent in addition, this compares with the cost of a traditional home in a suburban or semi-rural area of $500,000 to $1 million and to rents of $1800 to $3000 a month. Avrom (PPMA): We support portable shelter benefits and fair benefits to help low-income tenants pay their rents, while still affording their other necessities. Jim (FRPO): To address income issues, FRPO has been a strong supporter of rent supplements and portable housing benefits. The Ontario government has introduced three basic income pilots, which FRPO supports. FRPO also believes that a part of the National Housing Strategy must include a portable housing benefit. Arun (HDAA): Hamilton has been working on its poverty reduction strategy. This is a 10-year plan that relies on millions in increased dividends from the Horizon Utilities merger and money drawn from the Future Fund. This will include money to repair up to 200 unusable social housing units, more funds for portable housing allowances for families, help to keep families in their homes and “rapidly re-house” those who lose housing, some funding for shelter diversion strategies and some funds for “indigenous-led” strategies to fight poverty and homelessness. Andrew (WRAMA): We are advocating collaboratively with FRPO. John (EOLO): Supplementary income support often comes in the form of a portable housing benefit paid by the City of Ottawa to supplement the inadequate Ontario Works or Ontario Disability Support Program shelter allowances. The use of housing benefits attached to the tenant rather than to the rental unit has been a long standing policy advocated by EOLO, as well as FRPO, HDAA, WRAMA, LandlordBC, MHPOABC, PPMA and CFAA. EOLO used CFAA’s lobbying material to achieve this program move by the City of Ottawa. Announced on November 22, the National Housing Strategy includes a plan to create a Canada Housing Benefit that will attach financial support to low-income renters rather than to rental units, starting in 2020.

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Interest rates – Looking forward and back You might recall that interest rates in Canada stayed unchanged for about seven years. The recent interest rate hikes in 2017 – and the ones projected for 2018 – have some people in the rental housing industry quite nervous. They might not remember what happened in previous decades (such as the 1980s) when interest rates were much higher than today, and the Bank of Canada increased interest rates further.

RHB Magazine interviewed Ron Schuss and A. Britton Smith, two owners with a combined 100 years of experience, on their recollection of how interest rates affected their business and the rental housing industry. We also spoke to Benjamin Tal, Deputy Chief Economist of the CIBC, to get his views on where interest rates are going, and how an increase could affect the market. Looking ahead to 2018 In 2017, the Bank of Canada increased interest rates twice – in July (from 0.5 to 0.75 per cent) and in September (to 1.0 per cent). Some experts predicted a third interest rate hike in October, which did not occur. Following recent statements from Stephen Poloz, governor of the Bank of Canada, on the direction of the economy, some experts expect more increases to come for next year. “I see the Bank of Canada raising rates by 25 basis points twice or three times during the course of 2018,” said Benjamin Tal, Deputy Chief Economist, CIBC World Markets. “That would be a total interest rate increase of 50 to 75 basis points, which is a total of one half or three quarters of one per cent over the year. The Bank of Canada will go slowly because of the elevated Canadian dollar, slowing growth and increased sensitivity to higher interest rates.” Inflation appears to be the key factor behind the interest rate hikes. The Bank of Canada stated that inflation will emerge at some point in 2018, which is one key reason to raise the interest rate. However, some experts (including Tal) believe

24 | nov 2017

that the inflation rate will be relatively muted in the coming year. Canada’s GDP was stronger than expected in 2017, and a stronger economy can also push interest rates higher. Other factors, such as tensions with North Korea and the NAFTA negotiations, could also affect interest rates in 2018. “The North Korean situation is a risk that can lead to higher long-term interest rates,” said Tal. “Any serious problems with the NAFTA negotiations – or especially an outright cancellation of NAFTA – would tend to lead to lower interest rates, as the market will discount a slower economy.” Impact on rental housing Rising interest rates, as well as tighter housing rules, should slow down Canada’s housing market. However, as we have already seen, the impact won’t be evenly felt across the country; some markets will remain hot while others will stagnate. Housing prices in Toronto, Vancouver and other cities will continue to increase, as slightly higher interest rates will not deter homebuyers from getting in on the action. Some cities (such as Montreal and Halifax) could see declining housing prices, with the increasing interest rate an influencing factor. “Interest rates in the past have gone through a number of dramatic changes, all of which our industry has absorbed, although around 1990 new construction came to a dead stop as it was impossible to arrange financing,” said A. Britton Smith, Executive Chairman, Homestead Land



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rentalhousingbusiness.ca | 25

“We are prepared to adjust to changes in the market rates for at least the next five years,”

Holdings Limited. “Today an upward change in interest rates would bring about an increase in cap rates and lower values. There might be a few sales and some reduction in new construction.” The impact on rental housing will depend on the rate at which interest rates rise. Slower, smaller interest rate increases should have a relatively modest impact on housing prices and mortgage rates. However, the overall impact of higher interest rates and higher qualification rates for prospective homebuyers will increase demand for rental units. “Even though more people turn to renting, there are still many vacancies, as people and families try to stay together as much as possible,” said Ron Schuss, President and Founder, Dorset Realty Group. The past is a good indicator of what will happen to these markets when interest rates rise. Interest rates were quite high in the 1980s, and when they rose, there was an increase in foreclosures and “fire sales” of buildings. The rental housing industry took a few years to recover after the downturn. “The long-term consequences have been a period of great profit and high real estate values,” said Smith. “The profit margin in the industry is at an all-time high and there is plenty of room to pay higher interest without increasing rents. Higher interest rates will reduce profit but we have had the butter on both sides recently.” However, the amount of debt is much higher than it was in the past, due in part to higher housing prices and rents compared to income levels. This means that people would be more sensitive to an interest rate increase than they would have been in the past. Increasing the interest rate by one point is more significant than it would have been previously. As a result, the Bank of Canada does not have to raise interest rates as much today to have a substantial effect, although some people

26 | nov 2017

(and companies) are more prepared than others to deal with the increase. “We are prepared to adjust to changes in the market rates for at least the next five years,” said Schuss. “Due to our debt-service ratio, we have room to increase financing or increase interest rates, depending on what we need. We can say that, for the foreseeable future, we will be comfortable even with a significant increase in interest rates.” Real estate investment trusts (REITs) and other institutions also have to deal with projected interest rate hikes for 2018. Given that they already experienced two interest rate hikes in 2017, how they react to future hikes will depend on several factors. However, given today’s environment, high quality residential REITS should fare better than lower quality REITs in any real estate sector, as the former have a lower sensitivity to changes in interest rates than the latter. “To the extent that interest rates do not rise as quickly as the market currently anticipates, high quality residential REITs might perform well compared to many other investments,” added Tal. Conclusion While higher interest rates will affect some homeowners with open mortgages and mortgages coming due, it’s not all doom and gloom for members of the rental housing industry. Barring significant increases in interest rates, building owners will continue to proceed as they have over the past year, and construction of new properties should continue unabated. No one knows for sure what to expect in 2018, but being prepared for an increase in interest rates is a good strategy for anyone involved in the industry. By David Gargaro, in collaboration with Benjamin Tal, A. Britton Smith and Ron Schuss

rentalhousingbusiness.ca | 27

Financing alternatives for energy-efficient upgrades When it comes to financing energy-efficient upgrades to rental properties, building owners used to have a limited number of options. You could pay for building upgrades “out of pocket� (i.e., by spending your own cash), which would prevent you from using that money for other expenses, such as purchasing other properties. You could choose to take out a loan (i.e., debt financing) to cover the costs of the investment or renovation, which would increase your debt load and make it potentially more difficult to borrow future funds. You could also employ the leverage approach (i.e., equity financing) to raise the funds, which would impose an encumbrance on your properties. In some cases, you can make use of equipment lease financing (rather than purchasing outright) or equipment rental, which have their benefits and drawbacks as well. Today, building owners have other options for funding energy-efficient building upgrades. Check with your local association, municipality and province to determine if you qualify for an energy financing program. For example, if you are in the Greater Toronto area, you can apply for the City of Toronto Hi-RIS Financing Program.

28 | nov 2017

You can also pursue third-party investing, which employs a different approach than financing.

Toronto Hi-RIS Financing Program The City of Toronto’s Hi-RIS Financing Program provides low-cost, fixed rate financing (up to $2 million for up to 20 years) to apartment building owners who want to make capital improvements that result in energy efficiency and water conservation benefits. To be eligible for the program, buildings must have three or more storeys, and be located in Toronto; those that qualify can receive financing for up to 10 per cent of a building's current value assessment (CVA). Under the Hi-RIS Financing Program, building owners can use the resulting energy, water and operational savings to offset the costs for building improvements over time. They can access up to $100,000 in incentives from Toronto Hydro and Enbridge Gas Distribution, as well as free support services from the City's Tower Renewal Program. The financing is not a mortgage encumbrance, as it is attached to the property, not the owner, so the owner can access other funding sources to address other building priorities. Hi-RIS uses the province's local improvement charge (LIC) regulations to advance funding to property owners.

rentalhousingbusiness.ca | 29

#reflections, with its biopic format, provides us with an inside look into the lives and professional milestones of Canada’s leading real estate executives. Our current episode features Shmuel Farhi of Farhi Holdings Corporation.

To watch the episode now, visit: www.perpetualmediagroup.ca/reflections

30 | nov 2017

rentalhousingbusiness.ca | 31

Hi-RIS does not use simple payback, which divides the retrofit’s total capital cost by annual energy savings generated, to determine the number of years until the measures pay for themselves. It uses the average useful life of the financed equipment to a maximum of 20 years. This enables building owners to choose energy-efficient upgrades that require significant capital expenditures to reduce energy usage and improve building condition and quality.

“Hi-RIS uses the useful life of equipment instead of simple payback to offer term loans,” said Aderonke Akande, Manager, Tower and Neighbourhood Revitalization, Social Development, Finance and Administration, City of Toronto. “Therefore, measures that have above a 20-year payback are easy to finance using our program. This subtle change allows building owners more flexibility in deciding which measures to finance through the Hi-RIS program.”

Third-party investing

The building owner could pay the investor $25,000 per year for up to 10 years, and realize $5,000 in annual utility savings during this time. At the end of the term, the building owner would own the equipment and continue to benefit from the $30,000 in annual utility savings.

Instead of pursuing a financing option, building owners can choose to cover their energy-efficient upgrades through third-party investing. In a nutshell, the third-party investor pays for the equipment and upgrades to the building, and gets paid a portion of the energy savings over a specific term. Energy savings are guaranteed, so that if the forecast savings do not materialize, then the building owner does not pay for those missed savings. At the end of the term, the building owner retains ownership of the equipment. “Since there is no loan, there is no liability on the owner’s balance sheet,” said Matt Zipchen, President, Efficiency Capital. “This allows the owner to use their capital for other obligations, while getting the benefit of having a more energy-efficient building.” For example, suppose that an owner had a $100,000 annual utility bill. After making the energy-efficient upgrades, paid for by the third-party investor, the annual utility bill drops to $70,000. This is a $30,000 annual saving.

32 | nov 2017

“The building owner pays a fixed monthly rate to the third-party investor based on the projected savings,” said Zipchen. “The total amount is then evened out, up or down, at the end of the year depending on the actual savings achieved.” The process begins with an engineer’s analysis and walkthrough, as well as an initial energy audit. This identifies areas for energy savings, with data to back up the proposal, which covers the level of investment and terms involved. The third-party investor will then conduct a deeper energy audit to ensure that it can guarantee the proposed energy savings. Following installation of the new equipment, it will employ a building automation system (BAS) to monitor energy usage and provide reports to illustrate the actual energy savings achieved. The engineers will also look at updating and improving operation protocols,

which ensures that the system runs well and the building’s team makes best use of the equipment. Third-party investing has a number of benefits when compared to traditional financing. It enables building owners to pay for capital upgrades through operational savings. The investment is not on the balance sheet, and no security is taken on the building, so there is no encumbrance to the owner. Since the third-party investor has a vested interest in the building’s energy savings, it makes them a partner in the process, as they verify through monitoring that energy reduction actually occurs. This is especially critical when many other energy efficiency upgrades fail to meet expectations. “Whenever you’re looking for a third-party investor, make sure to look at their track record and references to see how they’ve done with similar investments,” said Zipchen. “Of course, have your accountant and lawyer review the contracts. It’s also important to understand how the ongoing operations and maintenance of the investments will impact their current procedures,

as the engineer’s specs might be different from their current operation and maintenance specs.”

Conclusion With utility costs continually on the rise, making your building more energy efficient will have significant and ongoing benefits to your bottom line, as well as the environment. That’s why you should be proactive (rather than reactionary) in making energy-efficient investments in your building. When doing your annual capital budgeting, determine how you will pay for energy-efficient upgrades, and where you can best put your financial resources. Using alternative investment options to pay for these upgrades can help you to get more use of your funds, and reduce your energy costs.

By David Gargaro, in collaboration with Aderonke Akande and Matt Zipchen

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rentalhousingbusiness.ca | 33

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34 | nov 2017

NOV 2017

New CMHC core need data again shows the need for a portable housing benefit On November 15 this year CMHC reported that 1.1 million renter households were in core housing need in 2016. Since there are a total of 4.5 million renter households, that is about one in four renters. The vast majority of renters in core housing need are in core housing need due to affordability, because they pay more than 30 per cent of their gross household income on their rent (and need to pay that much to rent a unit of suitable size at the median rent in their community.) Among homeowners, 574,000 households were in core housing need out of a total of about 8,840,000 owner households. About

one in 15 homeowners is in core need, while one in four tenants is. Presumably the connection is that if you have a good income, you can buy your home, but if you don’t, you usually rent. CMHC’s data also shows that about one third of households leave core need each year, while roughly the same number of households enter core need. Another one in three households exit core need within two years, and they are also replaced. That churn shows the fallacy of attempting to address affordability mostly through building more social housing.

In April 2016 the federal government and CMHC began the consultation to create Canada’s first-ever National Housing Strategy. Broad consultation showed that affordability was the primary issue. On November 22, Prime Minister Justin Trudeau and Housing Minister Duclos announced a strategy that includes:


$4B for a new portable Canada Housing Benefit (over 6 years, from 2020 – a major step in the right direction) $15.9B to repair and build social and affordable housing (over 10 years) $4.8B to maintain rent subsidies for existing social housing tenants and co-op members (over 10 years).

If by a miracle, or a herculean effort, Canada built a million social housing units to house the renter households who are in core need this year, we would still have to build another half million units the next year, and

Many other features in the NHS are also worthy of approval, including:

The target to reduce chronic homelessness The priority being placed on contributions to repairing and retrofitting existing rental housing The planned campaign to reduce NIMBYism around affordable housing.

For more information, see www.cfaa-fcapi.org.

another half million the year after that, and so on. Building one million social housing units would cost more than 250 billion dollars. Just paying the interest on that money would cost 7.5 billion dollars per year.

cont’d on page 37

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NOV 2017

Energized for Tomorrow 36 | nov 2017

NATIONAL OUTLOOK In addition, the vast majority of households in core housing need are not homeless or living in tents. They are living in adequate housing, which costs them an unacceptably high proportion of their income. Through a housing benefit attached to low-income renters, the problem of housing affordability could be cut in half at an incremental cost of 1.2 billion dollars per year. Then when households leave core need their benefit can be readily re-directed to the households that have entered core housing need. One point two billion dollars amounts to about 15 per cent of what the federal government is now committed to spend on the Canada Child Benefit, or 2 per cent of what it spends on Old Age Security and the Guaranteed Income Supplement for Seniors. A portable housing benefit would target poverty and housing needs in an extremely efficient and cost-effective way. As well as being cost-effective, portable housing benefits: - allow tenants a wide choice of where to live; - achieve income mixing without the cost of subsidizing middle income tenants; - use the existing economical housing stock, rather than newly built (and therefore expensive) housing; - allow the available funding to be spread more equitably among more low-income tenants; - allow flexibility in program design to respond to different regional needs and provincial budgets; - allow the provision of assistance quickly; - can eliminate deep core need regardless of a household’s place on a chronological waiting list; - allow tenants to keep their housing assistance when they move to take a new job (which is good for them and the economy); - avoid the stigma often associated with public housing; - can easily be used in rural areas and small towns where there are no large rental buildings; and - can be administered at very low cost. Because of those advantages, almost all other First World countries use portable housing benefits to a significant extent. Those countries include: Australia, Austria, Belgium, Czech

Republic, Denmark, Finland, France, Germany, Ireland, Netherlands, New Zealand, Norway, Sweden, Switzerland, United Kingdom, United States.

Why not implemented in Canada? So with all these features in their favour, why are portable housing benefits not used more in Canada? It comes down to jurisdictional issues among the federal, provincial and territorial governments. For 50 years, the federal government considered that a housing benefit was not really a housing program; and so, year after year it directed its money to subsidizing bricks and mortar through CMHC. Only recently has the federal government allowed the provinces to use its housing money for portable housing benefits or rent supplements. In contrast, BC, Manitoba and Quebec have been using portable housing allowances for 40 years with 100 per cent provincial funding. Only recently have other provinces begun to use portable housing benefits, sometimes with their own funds and sometimes on a cost shared basis. (The problem is that the provincial programs are limited in coverage, in part because federal housing money could not be directed to those programs.)

What other housing supports are needed? CFAA and landlords recognize that some people need more than just financial help to maintain a stable home. For those people other support services can be used along with portable housing benefits or rent supplements. In particular, the chronic homeless require significant supports as well as money, and such supports can sometimes be better provided in supportive housing environments. Therefore, individuals with special needs, including addictions, mental illness, or serious disabilities, may be better served by providing public or social housing, or providing rent supplements and support services, rather than portable housing benefits. However, for the vast bulk of low-income people, portable housing benefits are the optimal housing support.

Want to stay up to date? Sign-up for CFAA’s National Outlook e-newsletter to receive up-to-date news on what is happening across Canada, as well as industry insights and insider information on CFAA happenings. Email communication@cfaa-fcapi.org to start receiving National Outlook today!

rentalhousingbusiness.ca | 37

NOV 2017

Proposed tax reforms – still a concern By John Dickie, CFAA President On July 18, 2017, Finance Minister Morneau proposed the most significant changes to the Canadian tax system in 40 years. Over 21,000 Canadians, businesses and associations made submissions on the issues by October 2. Thanks to that outcry and the work of the Canadian Federation of Independent Business (CFIB), CFAA, and over 80 other associations in the Coalition for Small Business Tax Fairness, the government has now retreated somewhat from its proposals. This article sets out what Finance Minister Morneau proposed on July 18, what he has now proposed as of October 20, what is still to be fleshed out and what position CFAA is taking.

The proposed federal tax changes only apply to people who receive income as dividends derived from private corporations, or who hold real estate through corporations. There are apparently no plans to affect public companies or REITs or people who hold real estate in their own name (or with their spouse). Investors who currently pay tax at the top personal rate on passive income should also not be affected. Readers should remember that for landlords the small business tax rate of 15% is typically only available for the income that results from management activities or fees. Most rental income is considered to be passive income and is taxed at the highest corporate tax rate of 50%, which is almost the same as the highest personal tax rate of 53%. The rental income of corporate landlords with more than five full–time employees is treated as active business income, and taxed at 26.5%. When that income is paid out as dividends it attracts the recipient’s personal tax rates. (All tax rates quoted above are combined, rounded federal and Ontario rates in 2017.)

October 20 proposals and what is still be fleshed out

July 18 proposals

CFAA and Coalition plans

Income Sprinkling (Income Splitting) Business owners were to be required to justify dividends to family members by identifying contributions to the business by those family members.. It was unclear whether past contributions would justify current dividends.

Past contributions will qualify. The rules for past and current contributions will be made simpler and easier to apply. The actual rules and legislation enacting them are still to be released, even though this change is still slated to take effect January 1, 2018.

CFAA and the Coalition are seeking further changes which would, at a minimum, exempt spouses from the new limits on income sprinkling. That would reduce the impact of the new rules substantially. We also want the change deferred to 2019.

Lifetime capital gains exemption (the “LCGE”) New rules would have prevented business owners from transferring businesses to several family members thereby multiplying the LCGE. The new rules would have made it even more onerous to transfer a business to family members than to unrelated parties.

The government will not proceed with the proposed new rules on the LCGE , but will consult with various associations to seek other ways to address the issue.

The Coalition may take part in the consultation and address any proposed new rules. CFAA will work to address landlord-specific concerns. When that consultation takes place, CFAA will want input from members who are affected.

Income stripping New rules were to be enacted to prevent income stripping (in which dividend income is converted into capital gains.) The new rules would have had negative unintended consequences, especially on foreign investment in Canada.

38 | nov 2017

The government will not proceed with the proposed new rules to prevent income stripping, but will consult with various associations to seek other ways to address the issue.

The Coalition may take part in the consultation and address any proposed new rules. CFAA will work to address landlord-specific concerns. When that consultation takes place, CFAA will want input from members who are affected.

July 18 proposals

October 20 proposals and what is still be fleshed out

CFAA and Coalition plans

Raising the tax rate applied to certain passive income Corporations may invest active business income in other businesses or investments, including real estate, which produces passive income. Currently, that passive income is generally taxed at the high rates, but the government’s objection is that the active income that went into the investments was taxed at lower rates, and that gives those owners an advantage over other people who paid tax on their “first generation” income at the higher rates. The government proposed to increase the tax rate on such “second generation” income above normal rates, potentially to 73%.

CFAA applauds the decision to refrain from applying new rules to existing investments. The government now proposes to apply the higher tax rate “only” to new investments, not existing investments. It also proposes an exemption of $50,000 of income on those new investments. The government also says the higher rate will not apply to money which is at any time reinvested in the business, although how that would be done is unclear.

However, CFAA and the Coalition are seeking to have the passive income changes put on hold until their impact can be thoroughly assessed.

CFAA is also addressing the fact that many mid-size landlords achieve active business status for their rental income by having more than 5 full time employees. They should be able to continue to do so for all their This tax change is now slated to be part rental income. (In the past CFAA of Budget 2018. has recommended that the test be expanded to 3 or more full-time equivalents, and that continues to be our position.)

The small business tax rate

In the 2016 Budget the small business tax reduction had been cancelled.

The government is now to move forward with the reduction of the federal small business tax rate from 10.5% to 10% in 2018 and 9% in 2019. The government will also reduce the dividend tax credits on such income in keeping with the tax rate reductions.

CFAA’s planned actions CFAA will continue to monitor the proposed changes and make submissions to address the issues relevant to landlords. We are working closely with CFIB, the Canadian Home Builders’ Association and the Coalition for Small Business Tax Fairness. The CFAA Board will evaluate whether more action is needed for landlords specifically, and take such action as is practicable.

This is not a reform CFAA sought because it increases the difference between the treatment of landlords who can access the small business tax rate and the bulk of owners, who cannot. In addition, the reduction in the dividend tax credits raises slightly the effective total tax rate on past income when it is paid out as dividends.

Submissions or letters can still be sent to the government addressed to Finance Minister Morneau at Bill.Morneau@parl.gc.ca and Prime Minister Trudeau at Justin.Trudeau@parl.gc.ca. Sending a copy to your MP, and a blind copy to CFAA, would also be valuable. CFAA welcomes your input on the tax reform issues at president@ cfaa-fcapi.org. For updates, see the Tax reform section at www.cfaa-fcapi.org.

Are you meeting the right people to grow your business? One of the greatest challenges in growing your business, and your brand, is connecting with the right people. Every year the CFAA Rental Housing Conference attracts the right people, namely key decision makers and leaders in Canada’s rental housing industry. Sponsors and attendees of CFAA-RHC have a rare

rentalhousingbusiness.ca | 39

NOV 2017

CFAA Suppliers Council




CFAA would like to thank all of its Supplier Council members for their continued support.

If you would like to join CFAA’s Supplier Council, email admin@cfaa-fcapi.org for more information.

40 | nov 2017

40 | july/aug 2017

NATIONAL OUTLOOK opportunity to connect with the “Who’s who” from Canada’s top apartment owners, managers and REITs. CFAA-RHC’s attendees are top senior executives, presidents, VPs, owners, investors, directors and managers, who are looking for the highest quality education, products and services to keep their vision on-track and their operations running smoothly and efficiently.

Conference topic areas

Besides learning about products and services that can help landlords attain their goals at the 2018 Suppliers Council Showcase, rental executives and all delegates will hear from Benjamin Tal, from the top executives of leading REITS, owner-managers and third party managers, in the Executive Roundtable, the Operations Roundtable and a Technology Roundtable. CFAA-RHC 2018 will also address the new marijuana regime, virtual and augmented reality, and key marketing, operational,

technology and building science issues, as well as key development issues such as planning approvals, interest rates and lending conditions, social housing development and government assistance to, and impositions on, the for-profit development sector.

Learn more

Distinguish and build your brand, your products and services by attending or sponsoring and participating in CFAA Rental Housing Conference 2018, taking place from May 14 to 16, at the Coast Coal Harbour Hotel in Vancouver, British Columbia. Please visit www.CFAA-RHC.ca for more details, or to register to attend. CFAA has sponsorship opportunities to fit your sponsorship needs and budget. Email CFAA at events@cfaa-fcapi.org if you would like to sponsor, or let us know what you are looking for, and we would be happy to work with you to find the sponsorship that fits your company’s needs.


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rentalhousingbusiness.ca | 41


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44 | nov 2017

President’s message - LPMA provides input on proposed standard lease The proposed standard lease has been a hot topic in the rental housing industry during the last few months. All residential landlords in Ontario will be required to use the new standard lease. We have had meetings with landlord representatives in London to discuss what we would like the lease to comprise. The Ministry of Housing was open to discussions from landlords and tenants, and LPMA met the deadline of October 13 for written comments. We are anticipating that the lease will be implemented at the end of 2018. One of its objectives is to reduce disputes. On a lighter note, the annual LPMA holiday gathering will take place on December 12 at RiverBend Golf Club in London. It is an outstanding evening of socializing and networking that includes a substantial contribution to the Salvation Army’s toy drive, thanks to the generosity of our members. We are looking forward to seeing everyone! – Lisa Smith, President

Good record-keeping is the key to avoiding Fire Code infractions Benjamin Franklin’s observation that “an ounce of prevention is worth a pound of cure” still holds true when it comes to fire safety. Landlords and tenants share responsibilities that help to prevent fires and even avoid jail time. Jack Burt, Assistant Deputy Fire Chief with the London Fire Department, says that it’s critical that landlords and tenants keep smoke alarms in individual units in good working order. Disabling a smoke alarm is at the top of the most common chargeable infractions. The fire department gives out a few hundred tickets a year, typically to tenants, at a cost of $360 each. Burt says that tenants also habitually wedge open

the doors to stairwells when they’re bringing in heavy objects. That’s problematic because the stairwells can quickly fill with smoke. On a daily walk-through, he says that property managers should ensure that exit doors are closed. “We don’t want smoke getting into that stairwell,” Burt says. “If it does, people likely aren’t going to get out safely.” Landlords should also check that unit doors have intact door closers because it’s common for tenants to disable them when their apartments are hot. If tenants close their doors behind them during a fire, “it protects everybody else in the building,” he says. London lawyer Joe Hoffer says that the LPMA lease states that tenants must not disable their smoke alarms or door closers. When tenants interfere with their function, landlords are often saddled with an inspection order or a fine, even though the laws state that tenants could be charged. The same is true of exit doors when tenants prop them open. “It means that landlords have to be very rigorous about identifying and correcting any deficiencies or any non-compliant situation in their buildings,” Hoffer says. Although it’s fairly easy for large landlords with on-site staff to meet those requirements by walking through their buildings daily, it’s more challenging for small landlords who aren’t able to visit their properties daily and gain access to the units. “They rely much more heavily on tenants to report any problems,” Hoffer says. Good record-keeping can help exonerate landlords for infractions caused by tenants, Burt says. Landlords need to note when they checked smoke alarms and in which units. They also need to change the batteries annually in smoke alarms. “It (record-keeping) also lets you know if the tenant is disabling one,” Burt says. “The cause is obvious when the smoke alarm is lying on top of the refrigerator, for example.” When fire inspectors investigate an infraction for a disabled smoke alarm, they interview the property manager and the tenant, and they ask for records,

rentalhousingbusiness.ca | 45

Burt says. A landlord’s records can show that the landlord had changed the batteries in the smoke alarm in the last year. “And the fact there’s no battery in it means the tenant has taken it out,” Burt says. If the inspector can’t prove the tenant disabled the smoke alarm, he or she can still charge the tenant with failing to notify the landlord that the smoke alarm wasn’t working. Tenants are required by law to notify their landlord if their smoke or carbon monoxide (CO) alarm isn’t functioning. Conversely, if a fire inspector asks for records and the landlord can’t produce them, there is no proof that the landlord ever changed the batteries. Records are required by law and landlords need to keep them for two years on site, Burt says. Landlords are also required to check the fire extinguishers and hose cabinets monthly. The fire alarm systems must be tested monthly and annual inspections must be conducted by a certified third-party company. Other landlord responsibilities include ensuring that smoke alarms are located in each unit outside sleeping areas and that units that touch a wall with a gas-fired appliance have a CO alarm. Any building with more than 10 residents also requires a fire safety plan that is reviewed annually, Burt says. Depending on the size of the building, dedicated elevators are required for use by firefighters. Landlords can be charged for Ontario Fire Code offences, including failing to maintain a fire alarm or sprinkler system. “In the City of London, we are getting jail time for Fire Code violations,” Burt says.

High-rise security: Technology and community a winning combination Empty nesters and students living away from home are often attracted to the low-maintenance advantages and security of apartment living.

46 | nov 2017

Whether they are snowbirds travelling south for the winter or Millennials spending weekends with family, tenants appreciate knowing that their homes will be safe while they are away. London landlords agree that ensuring tenant safety is a priority for property owners, too. “Security is one of the primary things people look for,” notes Tom Gabriel, Assistant Vice President, London Operations, Homestead Land Holdings. Making tenants feel safe begins with ensuring that a building is properly illuminated. “People feel much more comfortable when a property is well lit,” Gabriel says. “It deters vandalism and any form of illegal activity.” Main entrances and parking garages are obvious locations for plenty of lighting. But landlords should also pay attention to secondary entrances and exits, parking lots, and stairwells. “You want to make sure to correct areas that are poorly lit,” Gabriel says. Homestead is actively upgrading the interior and exterior lighting with LEDs throughout the company’s residential portfolio. “Landlords can take advantage of all the energy management rebates currently available to upgrade the lighting around their properties,” Gabriel says. LED lights rarely burn out, he adds, so landlords can be confident that when they are installed they will last for a long time. Secured entrances are a given in most multi-unit buildings, whether it’s a simple buzzer and intercom system or a high-tech touch screen entrance panel that enables tenants to see who is at the door before letting them into the building. “Tenants should be reminded not to hold the front door open for strangers,” says Lisa Smith, Senior

London Property Management Association (LPMA) is a non-profit organization, located in London, Ontario, Canada, that provides information and education to landlords.

Membership is open to landlords and property management professionals who own or manage one or more residential rental units.

LPMA represents the interests of both large and small property owners. The association has more than 400 landlord members representing approximately 35,000 rental units.

Sign up online www.LPMA.ca, or call Brenda Davidson at 519-672-6999 for more information.

Residential Property Manager, Sterling Karamar Property Management. “You can always explain that you have to close the door behind you for security.” Sterling Karamar provides tenants with an annual list of security tips, including advice on how to stay safe when using underground parking. “When tenants drive in, they should stop until the garage door has closed completely behind them to ensure that nobody comes in behind them,” Smith says.

make arrangements to have someone check their unit regularly and to collect any mail. Sterling Karamar reminds tenants to keep their emergency contact information current. “If people go away and something happens to their property, we need to contact them right away,” Smith says.

Smith, Criger and Gabriel agree that buildings are safe and problems are rare. “It really comes down to the individuals and everybody working together,” says Gabriel. “Creating a sense of community with the residents in the building is what gives people that sense of security.”

Tenants should never keep valuables in their car, including spare change. “People also break into cars for the garage door openers that are often kept on the visor, so it’s important to take them inside as well,” Smith says. Homestead uses key fobs to prevent strangers from accessing common areas like party rooms, fitness rooms and laundry rooms, and often monitors high-traffic areas with security cameras. Technology has made it easier for landlords to improve security inside their buildings, Gabriel says, but people are still the best deterrent. Homestead is known for having live-in superintendents and building managers at every property. “They are not security guards, but we train them to look out for resident safety,” Gabriel notes. “Tenants appreciate knowing that our staff are on site and can come at a moment’s notice if something suspicious is going on.” When tenants go away for an extended period, Shirley Criger of Gateway Property Management Corporation says that it’s important for them to advise their building manager. Tenants should also

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We have fun social & networking events: Trade Show and VIP Reception – Another excellent event by HDAA to showcase the suppliers and acknowledge our larger landlords. What to expect in 2018: HDAA is planning on moving the date and the time. We are also planning some keynote speakers. Night at the Races – Big wins, great food and a photo finish with the winning horse! Golf Tournament – This is a member-favourite event, always a great day on the green with suppliers and their landlord customers. What to expect in 2018: We are planning to do it again next year, with one change – NO MORE MULLIGANS! Let’s see who will win with no help! Boat Cruise – This was such a great night viewing Hamilton from the water. What to expect in 2018: Next year we will be doing it in June so we can see the City longer before it gets too dark. We have excellent dinner speakers: HDAA has had five dinner meetings in 2017. We work hard to bring relevant and interesting speakers for the dinners. Here is a review of the topics and presentations:

Topic: Canadian Mortgage and Housing Corporation (CMHC) Rental Market Report Guest Speaker: Arun Pathak, Smar Holdings & HDAA President Arun updated the members on the CMHC Rental Market report and outlined how Hamilton’s primary rental apartment was up slightly in 2016 compared to the previous year. Rentals increased among all bedroom types, with bachelor units registering the strongest growth in supply. Despite high average vacancy rate, the growth rate in the fixed sample average rent for two-bedroom units increased by 4.9 per cent in 2016 compared to 3.8 per cent in 2015. February Topic: Key trends & insights on sales transactions in the Hamilton market Guest Speaker: Danny Iannuzziello, Skyview Realty Danny spoke about the evolution of the business with a comparison of Toronto and Hamilton. He also reviewed all transactions in Hamilton over the past year and spoke about some indicators of opportunities in Hamilton.


Topic: Licencing update in Hamilton

Topic: Municipal Property Assessment Corporation (MPAC) re-assessment & how it affects landlords

Guest Speaker: Arun Pathak, Smar Holdings & HDAA President

Guest Speaker: David P. Gibson, Yeoman & Company David updated the members about how the 2017 re-assessment is based on an assessment valuation date of January 1, 2016. This four-year phase-in will not have a full impact until 2020 but he updated the members on the specifics of deadlines for filing, reconsideration and appeals. He also updated the members on the increase in filing fees and how the GIM approach is being replaced with the NOI approach to valuation.

The Rental Housing subcommittee was struggling to find its footing and a motion had been put forward by Councillor Johnson to approve a working group to look at the feasibility of a voluntary licensing registry. It was evident that the possibility of having licensing come back to Hamilton was growing. Arun updated the members on what the Political Action committee would be doing to fight back. Topic: What to expect in 2017 Guest Speaker: Mary Ongaro, Absolute Ventilation & Tina Novak, Valery Properties

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Mary and Tina updated the members on what the Events, Membership and Education committee had planned for 2017.

government released in the spring. He covered the new exemption from RTA, the prescribed universal lease, the new rules on landlords’ own use, the N5 amendment, tenant “voiding” eviction and AGI changes.

May: Topic: Tax Considerations for Rental Property Investors Guest Speaker: Nick Scaglione and James Buckley, DJB Accountants Nick talked about new rental real estate investors and explained the pros and cons of acquiring properties personally or through a corporation. He talked about growing and had the members consider incorporation and/or family trusts. James updated the members on succession and estate planning with details on transition and tax minimization of estate, allocating growth to the next generation through a family trust and probate planning (dual wills). Topic: Political Action for 2017 Guest Speaker: Arun Pathak, Smar Holdings & HDAA President Arun updated the members on what the Public Relations committee was working on for 2017. He updated the members on what FRPO and CFAA are working on and how tenant groups like Association of Community Organizations for Reform Now (ACORN) are impacting our industry. October

Topic: Hamilton Rental Housing Round Table Guest Speaker: Brad Clark from Maple Leaf Strategies HDAA hired MLS to help find an alternate solution to licensing while ensuring code compliant rental housing with safe, clean and healthy dwelling units. Brad updated the members on the recent round table meeting and the steps going forward to bring the vision to life. November Topic: Stump the Board Guest Speakers: The 2017 HDAA Board members The board took questions from members on: AODA requirements, pest control, return on investment, above guideline increases, cap rates, Airbnb, mortgage stress test & rates, software trends and many more.

What to expect in 2018: We have five dinners planned with various topics like: Real estate market review, CMHC Report, political debates, buying outside of Canada, Stump the Board and more…. We have informative education seminars:

Topic: Fair Housing Plan Guest Speaker: Joe Hoffer, Cohen Highley Joe covered the Fair Housing plan that the

Tenanted Properties - Lucie Brusse did a knowledge POD presentation at the REALTOR® CONNECTIONS Conference & Trade Show in

Hamilton and District Landlords Since 1960, the Hamilton and District Apartment Association has grown significantly. Our member landlords and property managers manage in excess of 30,000 units throughout Hamilton, Burlington, Brantford, Guelph, Mississauga, Oakville, St. Catharines and into the Niagara Peninsula. The association is a highly respected organization, sought out regularly by government, industry, media and the public. To join, submit the application form available at www.hamiltonapartmentassociation.ca, or contact HDAA at 289-208-5445.

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March. She outlined what to remember when buying or selling a tenanted property. Basic Landlord Forms - Tina Novak did a morning education seminar on basic landlord forms in March. She covered everything from when a potential tenant walks in to right before you must go to the Landlord Tenant Board. Look for part 2 in 2018! Bed Bugs & Landlords – Terry Quinn did an education seminar on providing practical information and useful tools to help you with your bed bug problem. Human Rights & Landlords – Ronny Mackenzie made sure that landlords are following the Human Rights Code when communicating with their tenants. Superintendents & Landlords – Ronny Mackenzie will help your staff be the best they can be with this important seminar on how they should handle difficult tenants. (Nov. 23) What to expect in 2018: We have five education seminars planned with various topics, like WHMIS training, basic landlording 101 part 2, financing your 4th or 5th house, moving to the next level of landlord, how to handle the “one offs” and more….

Our association loves to give back: Spring Hope Food Drive - We had over 140 buildings participate throughout Hamilton, Burlington & Oakville. Over 13,759 pounds of food were collected; it is the largest amount collected EVER in this region! Walk so Kids can Talk – HDAA has created a volunteer team to start attending local charity events to help raise awareness and help local charities. The first event by our HDAA Charity Team surpassed our goal with $550 collected and we had fun raising money for a worthy cause! We have five Charity events planned: Big Brother & Sister bowling, Spring Hope Food Drive, Walk so Kids can Talk, November toy drive and more….

We are politically active and provide a voice for landlords: One of the most important things a landlord association can do is help provide a voice and make a positive change for landlords. Our President was busy in 2017, writing articles and providing interviews to various radio & TV stations and newspapers. He was also a delegate at council and planning committee meetings in various cities to help stop licensing. HDAA has submitted feedback and participated in the creation of the National Housing Strategy, sent in feedback on the Fair Housing plan, and presented at the Legislative Assembly of Ontario.

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Housing First is much in the news as the preferred way to reduce or eliminate homelessness. It has much to be said for it, and some things to be said against it. This article will describe the Housing First approach, how it serves formerly homeless clients and how it serves landlords. The article will then turn to what can go wrong, and how landlords can best avoid the possible problems. The Housing First approach Housing First principles include: Immediate access to housing with no readiness conditions

Recovery orientation

Individualized and person-driven supports

Social community integration

Consumer choice and self-determination

Many homeless people are suffering from mental illnesses or drug or alcohol addictions. In the traditional approach they were supposed to take part in programs to recover from their illness or

addiction, and then when they had recovered they would be ready to move to permanent housing. The difficulty with that approach is that living on the street or in a homeless shelter is not a lifestyle conducive to recovery. Housing First takes its name from the idea that people are more likely to recover if they are rehoused quickly without living in a shelter for months or years. Housing First is supposed to be housing first, but not housing only. The goal is recovery, but the path to it starts with permanent housing rather than ending there. To achieve stable housing and recovery, social service agencies provide individualized and person-driven supports. The support is usually provided by home visits from a case manager, who supports the client in accessing other services and training programs. The home visits also allow the support worker to observe the conditions in the client’s home (usually a rental unit) so that the worker can intervene if conditions are slipping, before they slip too far. Peer support can also be used to encourage clients to maintain good conditions.

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Homelessness in Ottawa by the numbers Persons using shelters in 2016 Average Length of stay

7170 Single Men

61 nights

For families

93 nights

For people aged 50+

86 nights

Social assistance maximum for singles Income and Rent in 2017

For employable people: $721 (Ontario Works) For disabled people (ODSP): $1128

Average rent for a bachelor apartment


Average rent in cheapest neighbourhood


Housing First programs seek to integrate their clients into the community, rather than setting them apart, in supportive housing for example. Finally, Housing First programs leave clients with choice as to the housing they want. Clients can choose to live in their familiar neighbourhood, or move to a different neighbourhood. They can seek to rent a low-rise rental unit or a high-rise one. Just like ordinary tenants, the clients can move if they think they will prefer or do better in a different location. That adds significantly to their satisfaction with their housing and environment. Features for landlords For Housing First to succeed, there must be landlords willing to rent units to the homeless “clients.” That is what enables consumer choice and social integration. In Canada, Housing First programs usually bring these features to

landlords: rent assistance, which can sometimes be paid directly to the landlord along with a social assistance shelter allowance, and social worker visits to encourage tenant compliance with unit cleaning and responsible behaviour. Some programs will pay for cleaning or unit damage if they occur. Some programs create a three-way relationship so that the agency supports both tenant and landlord to maintain the tenancy. (Other agencies see their role as supporting only the tenant, and take on confidentiality requirements so that they cannot communicate with the landlord themselves.) If the relationship deteriorates so that the tenancy needs to be ended, some agencies will persuade the tenant to agree to vacate so that the landlord does not face the delays and expense of an application to the Landlord and Tenant Board.

BECOME AN EOLO MEMBER NOW! EOLO invites Ottawa area landlords to join the organization. Have your interests and concerns heard, and benefit from EOLO’s support. As an EOLO member, you will: • Receive prompt email notification of relevant City rule changes • Be able to attend two networking receptions each year • Be able to attend two free education events each year

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•R eceive EOLO’s newsletter with more information about new issues Banner Ad at the City and and developments in provincial funding programs and landlord-tenant laws. To apply for membership, go to www.eolo.ca, download the membership application form and send it to us at the contact info on that website.

How things can go right EOLO wants the programs to support both tenant and landlord so that if a problem is arising the agency can inform the landlord. On their part, landlords need to perform frequent unit inspections, either as part of a meeting with the agency worker or on their own. In the wake of the CBC report on the Ottawa problem described above, Kandice Baron shared her story about how a Housing First program took her off the streets and dramatically changed her life. How things can go wrong In the example from Waterloo described at page 58 the landlord seemed not to have realized that the tenant might be injecting illegal drugs. However, the point of Housing First is that addicts are not required to be “clean” before they are offered housing. In a recent case in Ottawa the landlord got the impression that the agency was making sure the tenant was keeping the unit clean, and did not check the unit for five or six months. The agency dropped the ball since the worker admitted to the media that he had not visited the unit. He alleged that he was overworked, and did not have the time. (That position is totally unacceptable to the City, to the landlord community and to the public. One hopes it is unacceptable to the agency the worker worked for too.) Compounding that problem, the particular agency takes a very hard line that they are working for the tenant only, and cannot disclose any information to the landlord. As a result of those two failures, and a failure by the tenant, the unit became an ugly mess with floors covered one or two feet deep in pizza boxes, dirty dishes, rotting food and personal belongings. Maggots began to grow in the unit, and the necessary clean-up was extensive. Notice that all three of the tenant, the agency and the landlord fell down on their jobs. The City of Ottawa is investigating because the landlord is blaming the City for the support agency failure, and perhaps the housing agency overselling of the support and back–up the landlord would receive. The City may pay for the clean-up. Based on the facts recited above, EOLO considers that after the tenant himself, the bulk of the blame fails on the support worker and the agency, but the landlord contributed in part to his own loss.

She said, “I was homeless and this program saved my life. I’m a few years clean and I know other people that are working now that would never ever be able to hold a job.” Baron wants the public to know that when Housing First is done right, it can make all the difference. “I had an amazing case worker. We hit it off the first day. Like, we really get along and [she] addressed my concerns and my goals, what I want to do in my life and encouraging me [to] get clean. And I am,” she said. A rough childhood led Baron down a path of addiction— crystal meth and opioids were her drugs of choice — as early as 13 years old, she said. She bounced from shelter to shelter until a shelter worker recommended she try the Housing First program. She saw it as an opportunity, since no landlord would rent to someone like her, struggling with addiction and the law, she said. After getting a place to stay, her case worker visited her twice a week to check on her and the apartment. The worker provided support and helped with her recovery. Baron said having her own place was critical in helping her to recover from her addiction. She has been clean for over two years. She is set to graduate from the housing program this winter and plans to attend community college. “I know [the program’s] a success. I’ve seen it with my own eyes,” she said. “I’ve seen people graduate, get full-time jobs, and they’re doing really good.” In Ottawa, over the last three years, more than 450 people have been moved out of homeless shelters, many of whom had been homeless for five years or more. This provides savings to taxpayers and a much better life for the unfortunate people who need access to the programs.

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WRAMA meeting The election results from November 8 are in! Congratulations to the new executive and best wishes on the work ahead in fulfilling the WRAMA mission, which is to “...actively and positively develop and sustain the integrity of its members’ business – the provision of private residential rental accommodation – in the Golden Triangle.” The incoming executive includes: • • • • •

Treasurer - Veronika Mitchell Secretary - Alex Oda Past President - Lars Sterne Vice President - James Craig President - Andrew Macallum

To become a WRAMA member, contact us through www.wrama.com or Twitter @WRAMAprez.

Rent collection strategies At its meeting on November 8, WRAMA welcomed Greg Maitinsky, CEO of Go Beyond Collection Agency, who spoke about landlord collection strategies to avoid rent delinquencies. Some controls he advocated be put in place included better site-staff training, higher

superintendent remuneration and various tenant screening procedures involving third party vendors, such as Naborly and RentCheck. He also noted that tenant payment platforms like TenantPay reduce delinquencies among tenants and lessen the need for collections. The audience was informed of best practices in the landlord/collection agency space including the importance of on-site data collection from prospective tenants, the possibilities of in-house/late tenant calls, and creative & formal techniques of addressing tenants who do not pay rent, a sore spot with the onset of new legislation, which eliminates the ability to collect for time after a tenant vacates pursuant to an N4 notice. The nature of actual collection activity was discussed, including listing tenant files, the various possible legal actions based on LTB orders and an inside view of what collection agents do. Mr. Maitinsky provoked discussion and fielded questions from the audience. Andrew Macallum, WRAMA President & Greg Maitinsky, CEO Go Beyond Collection Agency

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A Housing First failure and lessons learned Also at the meeting on November 8, the owners of a triplex shared their unfortunate experience with Housing First, and what seems to have been a home take-over. Housing First programs place homeless candidates in private rental housing, with support services and rent payments through the social service agency. “Housing First” takes its name from the idea that people are more likely to recover if they are rehoused quickly without living in a shelter for months or years, while trying to recover from mental illness or drug or alcohol addiction, to be ready to be housed. Housing First is supposed to be housing first, but not housing only. The couple researched the program and felt that participating was a good thing to do. The agency provided assurances that the tenant would be monitored, workers would be available to assist if issues came up and there would be no risk to other tenants. All of that made the program appealing. The purpose-built triplex was located in a busy but nice part of town. The upper unit tenant was a single mother with two girls. The middle unit tenant was a single pensioner who accessed her apartment through the back of the building. The lower unit was rented to the tenant placed by the agency. The tenant was a single man of 30 years of age, who moved into the unit in January, 2017. In February, the community agency called the owners to report that the tenant had been hospitalized and another couple was residing in the unit. The worker asked the owners to call police to evict the couple. However the police refused to intervene, saying this was a civil matter, which is their usual response in landlord-tenant cases. With the worker’s

assistance, the locks were changed on the unit. The couple returned while locks were being changed and were told (by the agency worker) to leave. The couple retrieved some belongings and left. The owners cleaned the unit, as food waste would have attracted pests. During the clean-up, the owners found: Used needles and drug paraphernalia • A note from the couple warning the tenant not to enter their room • Cigarette burns in the carpet • Writing on the walls •

The owners met with agency workers to express concerns. It blamed the damage and mess on unwanted guests and assured that the couple had moved to another city. They promised they would visit the male tenant regularly (3 to 4 times a week) when he returned from hospital. They also promised the owners could have monthly visits as well. (With 24 hours written notice, entry to inspect the state of repair and cleanliness is the landlord’s right, which can be exercised monthly or more often, if the circumstances justify that.) On inspection day, two social workers attended. The apartment was filthy and smelly. The day after inspection, a homeowner next to the triplex phoned and said he saw people coming and going from the unit at all hours. The neighbour also saw the Sanguen Health Centre van arrive every week. (Among other services the Sanguen Health Centre distributes supplies to address drug overdoses.) The owner delivered an N5 Notice to end the tenancy for interference and damage two days after inspection. During the delivery, he saw six people in the unit. The following week, a social worker phoned the owners asking them to call the police. The tenant had left the unit and wanted his “friends” removed. Within a few days the

Discover the benefits of being a member of our association The mission of the Waterloo Regional Apartment Association is to actively and positively develop and sustain the integrity of its members’ business – the provision of private residential rental accommodation – in Waterloo , Kitchener, Cambridge, Guelph and surrounding areas. To view the full range of valuable property managment resources we offer to our members, or to apply online go to http://wrama.com/, or contact WRAMA at 519-748-0703.

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Greg Maitinsky speaks to WRAMA members

“friends” left the unit. After talking with his social workers, the tenant signed an N11 agreement to end the tenancy. (That meant the landlord did not have to incur the work, expense and time delay involved in evicting a tenant through the Landlord and Tenant Board.) The community agency manager advised the owner not to enter the unit because it was too dangerous. Debris, rotting food and needles were everywhere. Because of the needles, the owner needed to engage a company that cleans crime scenes. The agency paid for the clean-up.

to “up their game”, and assign clients to the right facilities. After the November 8 meeting, WRAMA learned that a similar situation recently occurred in Ottawa under its Housing First program. See page 53. In Ottawa, that CBC report was followed by another report from a woman whose placement had worked well, who is convinced that the program saved her life.

Lessons learned

Taking the three cases together, here are some comments. The agency in Kitchener-Waterloo did at least communicate with the landlord, help get the tenant out quickly, and pay for the clean-up. Landlords need to remember that home take-overs take place among vulnerable people, and without the agency the landlord holds the bag alone. Landlords also need to inspect units provided for Housing First at frequent intervals, and not rely on the agency.

From the owner’s point of view, the failure was an attempt to provide housing to someone who needed greater supports than social worker contacts. Put another way, the support level was not high enough to meet the person’s needs, which may have required supportive housing with 24/7 staffing. It is absolutely true that in many cases the support agencies need

Finally, many Housing First placements succeed. Working in this area is a powerful way for landlords to give back to the community. Housing First can work well if the landlord pays some extra attention, and the social service agency assesses the prospective tenant’s needs correctly, and provides the right support level in a diligent manner.

A few months later the owners learned the tenant had died. As stated at the beginning of the article, he was 30 years old. In this sad case, Housing First failed the tenant more severely than it failed the rental owners.

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Brand management is a key component of attracting tenants, talent and repeat business. Market research shows that 72 per cent of consumers say that reputation influences their buying decisions; 80 per cent of employees will accept less pay to work for a company with an excellent reputation; while another 89 per cent say that reputation is a tiebreaker between equal products. Whether you’re trying to influence prospective tenants or attract and retain top talent, you’ll want to consider the following tips on managing your company’s brand.

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1. Make sure that your business and/or property names resonate with your audience. 2. Build relationships with authoritative sources that provide brand reviews. 3. Create consistent social media profiles with proper post frequency. 4. Contribute regularly to relevant blogs, magazines and industry resources. 5. Make sure that your customer experience is exceptional.

Your company brand is your mark of distinction; it’s what sets you apart from your competitors. When you establish and adhere to a brand management strategy, your level of commitment reassures tenants, suppliers and anyone else that your company does business with that they can trust you.