Saturday 6 March 2021

CAPREIT's Extra Hikes Hurting Tenants

Toronto Star: The big business behind the affordable rental housing crunch

Posted on March 6, 2021

Francisco Aguilar is freezing. His apartment is so cold he leaves blankets everywhere, dresses in heavy layers and stuffs clothing around his windows as insulation. The packing tape and silicone he used to seal drafty spots have done little to help, and a space heater spikes his electricity bill by about $100 per month.

Aguilar, 42, has been waiting three years for his landlord to upgrade the windows in the East York building where he lives. 

When the landlord, CAPREIT, said in September that rent was going up above the yearly amount permitted under provincial rent-control guidelines, Aguilar had reached his limit. 

“I’ve been refusing. I said, ‘No, we’re in a pandemic. I’m paying the regular rent”.

It was the second time in five years that CAPREIT, one of Canada’s largest owners of rental housing with almost 58,000 units, had applied to the Ontario Landlord and Tenant Board for an above-guideline increase (AGI) on 2 Park Vista.

An AGI allows landlords to raise the rent above guidelines and pass along the cost of certain capital repairs to tenants. In the case of Aguilar’s building, the landlord wants to recover the cost of a lighting retrofit, asphalt work and a new boiler. 

“So I’m thinking, I’m paying for your expenses — everyone in the building is — and on top of that, I’m still freezing,” Aguilar said. 

He decided to keep paying his monthly rent, around $1,400, but withhold the extra amount of the AGI. He now owes about $190 that he is refusing to pay until his windows are fixed.

Rent control guidelines in Ontario are tied to the rate of inflation and between 2015 and 2020, the maximum permitted increase each year ranged between 1.5 and 2.2 per cent. The government announced a rent freeze for 2021, but that doesn’t apply to AGIs, which can permit additional increases of up to three per cent per year over three years, up to nine per cent in total. 

Even before the latest AGI, Aguilar’s rent had gone up 15 per cent since 2015. 

According to copies of rent rolls for his building obtained by the Star, average rents in the 121-unit building went up 28 per cent between 2015 and 2020. Most of the increases have been in the range of 14 to 22 per cent, but for more than 20 units, rent went up by more than 50 per cent in five years.

Danny Roth, a spokesperson for CAPREIT, declined to comment specifically on Aguilar’s situation, citing tenant privacy. “Rest assured that we are looking into the claims you have brought forward and will ensure that these issues are discussed directly with the resident by our professional management team.”

Over the past two decades, large corporate landlords with pools of capital to invest have bought up swaths of Canada’s modest-rent housing stock and Aguilar’s apartment building stands as one example of the result. 

Affordable housing advocates are concerned that these landlords, which are driven by the imperative of high returns for their investors, methodically seek higher revenue and lower costs. That means hiking rents within rent control guidelines and beyond using AGIs — which might authorize increases for new carpets in the hallways, replacing numbers on doors or upgrading the lobby — while slowly attending to basic repairs on tenants’ units.

As rental housing has become a new and lucrative financial asset class, it has helped push existing affordable units into unaffordable territory. And while all of this comes as the government commits billions of dollars to housing, critics say favourable tax treatment and the financial support of a Crown corporation, the Canada Mortgage and Housing Corp. (CMHC), play a major role in propping up a sector that is increasingly pricing low- and moderate-income people out of the rental market.

Maryanna Lewyckyj is president of the Park Vista Tenants’ Association, which represents Aguilar’s building along with three others. She said the landlord’s priority is to take care of its shareholders. “It’s harder to get work done, because every dime that goes into repairs is not a dime that’s going to investors.

One unit in Aguilar’s building saw the rent go up to $1,950 from $1,002.96, an increase of 94 per cent between 2015 and 2020. That apartment, like others that saw the largest increases, was occupied by a different resident in 2020, confirming that the fastest path to higher rents is new tenancies. Landlords can charge new tenants whatever they’re willing to pay — rent control guidelines do not apply.

That’s also why Aguilar, who earns about $43,000 per year, won’t leave — despite his problems with CAPREIT.

“I’m afraid if I move from here, I’m just going somewhere that will be even higher. That’s what these people do. They want you to leave, so they can raise the price higher for another tenant.”

***

CAPREIT’s full name is Canadian Apartment Properties Real Estate Investment Trust. Real estate investment trusts (REITs) get special tax treatment: as long as they earn a certain portion of revenue from rental income and pass along their annual income to their investors, they pay no Canadian income tax. REITs and other large financial players such as private equity and pension funds, have recently become some of Canada’s biggest landlords.

Martine August, assistant professor at the University of Waterloo’s School of Planning, documented the rise of what she calls “financialized” rental owners in a 2020 paper. Her research showed that REITs alone went from owning zero units in 1996 to almost 165,000 suites in 2017, about 10 per cent of the country’s multi-family housing stock at the time. 

Roth said in a statement that CAPREIT and its “colleagues in the rental sector, particularly those that operate as a (REIT), know that the welfare of tenants and the welfare of shareholders are inherently aligned.”

He added that while REITs own only a “modest fraction” of Canadian rental housing units (he estimated that the seven largest REITs together own five per cent of rental stock), CAPREIT and other players create value by investing in the apartment sector and recognizing the need to “both improve aging rental stock and add new inventory to an undersupplied market.” 

Roth said CAPREIT’s commitment to “reinvest in the apartment sector” benefits tenants, the company and its investors. 

August found that the rise of financialization in multi-family buildings was primarily driven by homegrown firms that consolidated existing rental housing stock, typically constructed in the 1960s and 1970s. While those units rent for more reasonable rates than newer condos, the business model is built on boosting rents, August said. “That’s the biggest way that these firms can generate greater returns for their shareholders.”

Over time, the profile of those shareholders has also shifted. As she noted in her research, when Minto REIT launched in 2018, it found that 80 per cent of its investors were large institutions, a reversal of the situation in the early days of REITs, when individual or “retail” investors held most of the stock.

Large, financialized landlords are also major users of AGIs: in a report published last month, August and co-author Philip Zigman found financialized landlords were responsible for 46 per cent of AGIs filed in Toronto from 2012 to 2019. CAPREIT led the way, filing 115 AGIs that affected 22,600 units.

In a 2017 report, CAPREIT told investors it pursues above-guideline rent increases “in line with its focus to maximize average monthly rents.” That practice appears to continue to this day.

In late February, CAPREIT said in its annual report that, despite the pandemic, operating revenue increased 13 per cent in 2020, due in part to “a solid increase in average monthly rents.” It attributed growth in rents in part to “significant rental increases on turnover” in the Ontario market as well as increases in rent renewals “due to AGIs achieved in Ontario.”

Financialized ownership of rental properties is a good investment, August said. “It’s proven to be very good in COVID as well. But just because it’s generating good returns, doesn’t mean it’s achieving the social objectives we might think governments should have.

“I think most people believe housing should be treated as a home and not as a financial asset.”

About 30 per cent of Canadians rely on rental housing and the rise in financialized ownership of rental stock has now collided with the effects of the COVID-19 pandemic. In Toronto, which is home to a disproportionate number of low-paid workers in the hospitality and service industries, 11 per cent of renters were in arrears last fall, according to CMHC, the highest rate in the country.

“The homelessness, encampments, discrimination against people based on their housing status, affordability issues, evictions…We are in a housing crisis, there is no doubt about that,” said Leilani Farha, a Canadian lawyer, global director of housing rights group The Shift, and former UN Special Rapporteur on the Right to Housing.

Now, anti-poverty group ACORN Canada is calling on the federal government to end the tax treatment REITs enjoy. (Lewyckyj and Aguilar are both ACORN members.) The group also wants the CMHC to create a fund to help support the acquisition of modest-rent properties by non-profits, co-ops and land trust organizations. 

“In the middle of a pandemic, they have the audacity to put through more AGIs. How come?” said ACORN leader Alejandra Ruiz Vargas. “REITs are good for (their investors). They’re not good for low-income people.”

***

The federal government knows affordable housing is an urgent issue and in 2017 it launched a major national housing strategy. By last fall, it said the 10-year project would invest more than $70 billion and result in 125,000 new affordable housing units.

But Steve Pomeroy, a housing policy researcher and senior research fellow for the Centre for Urban Research and Education at Carleton University, says the country is losing affordable units at a much faster pace.

He points to census data showing that units that rent for less than $750 per month, which is 30 per cent of gross income for someone earning $30,000, declined by 322,000 between 2011 and 2016.

Pomeroy credits that loss to the rise of financialized landlords as well as city planning policies that have encouraged density in urban areas, leading to older housing stock being razed to make way for tall condo towers.

While landlords have always been driven by profit, Pomeroy said smaller players in the past generally made a modest profit and “in most cases ran a fair business.”

“With the excess amount of capital floating around and finding a place to park itself, it’s created this new phenomenon of commodifying housing and trying to generate as much yield as they can off the rents,” he said. “What we would define as affordable property, they identify as an underperforming asset.”

Meanwhile, access to cheap credit, facilitated in part by mortgages insured by CMHC, has helped financial players borrow huge amounts to acquire thousands of rental units with less of their own money.

CAPREIT said in its annual report that, as a “strategy,” it “leverages CMHC insurance to get access to stable financing at lower interest rates than would be available with conventional mortgage financing or other forms of debt.” It said 98.7 per cent of its mortgages are CMHC-insured.

Pomeroy said this has created a “weird and perverse situation” where the government is touting its long-term investment in affordable units through the national housing strategy, and yet, “on the commercial side, they are aiding and abetting the purchase of these assets by providing low-rate financing.”

ACORN wants the government to stop CMHC from providing mortgage insurance to large landlords. “It’s shameful that the CMHC is working with them to approve mortgages when we’re in the worst crisis that Canada has seen,” said Ruiz Vargas.

For its part, CAPREIT said it supports individuals and organizations that advocate on behalf of Canadian renters, but added, “those who continue to perpetuate the false and anachronistic view that the interests of the nation’s professional landlords and its tenants are at cross purposes badly misrepresents the state of the industry.”

Based on an analysis by D.T. Cochrane, a researcher for Canadians for Tax Fairness, ACORN has argued that if CAPREIT was taxed like a normal corporation, it would have paid $425 million in additional taxes since 2010. Cochrane said he based that number on the average effective tax rate Canadian publicly traded companies paid as a percentage of their operating profits, which he found was 8.8 per cent.

“ACORN’s analysis and the suggested characterization of the tax implications of our REIT status, as provided, is inaccurate. The actual tax paid would have been a fraction of ACORN’s estimate if there was a change in tax status,” said Roth.

He said CAPREIT’s investors pay tax on any gains or income they receive (such as dividends known as distributions) and that the corporate structure allows the company to invest in its properties. “This structure allows us to offer strong returns to our investors, facilitates significant contributions to the federal tax base, and allows us to make capital improvements to our communities.” Since 2010, he said, CAPREIT has “invested $1.78 billion in capital improvements across its portfolio, and committed an additional $429 million in repairs and building maintenance.”

The Canada Revenue Agency, and Employment and Social Development Canada, which is the department responsible for the national housing strategy, referred questions for this story to CMHC. The CMHC did not respond to specific questions about ACORN’s demands regarding the tax treatment of REITs, CMHC financing for large landlords, or supporting the purchase of modest-rent properties by non-profit groups.

“As a federal Crown, CMHC consults with and advises the federal government on housing policy. Tax policy is the purview of the Department of Finance. That being said, every person in Canada should have access to safe and affordable housing,” said CMHC spokesperson Angelina Ritacco. She also provided background information on various initiatives, including one aimed at the construction of new rental stock, that are part of the national housing strategy.

The Department of Finance did not comment.

***

“The starting point is to recognize that this will not be solved by bricks and mortar housing policy alone,” said Farha.

Ottawa has recognized that housing is a fundamental human right — that declaration is in legislation the government passed in 2019 — but that’s not reflected in reality, she said. “They have in place a tax scheme, a finance scheme, a housing scheme that absolutely allows for the financialization of housing, which is undermining affordability, which can then lead to evictions and homelessness, all of which are violations of the right to housing.”

Taking human rights seriously could include changes such as allowing for longer tenancies or freezing rent for five years (something tenants have fought for in places like Barcelona and Berlin), Farha said. “It’s a big shift if you see a primacy on affordability, security and adequacy of housing, versus a primacy on building an asset class or supporting the promotion of an asset class.” 

Others, such as Pomeroy, say the government should think carefully about the moral implications of allowing CMHC to continue supporting low-cost financing for large landlords. If that was cut off, he said, “it wouldn’t necessarily stop them, but it would slow them down.”

Meanwhile, he said, if you can’t beat them, join them. Like ACORN, Pomeroy says the federal government needs to do more to help non-profits acquire affordable housing stock and keep it that way. 

ACORN’s call to change the tax treatment of rental-housing-focused REITs may seem far-fetched. “The problem is the Department of Finance is extremely reluctant to change the tax code for anything,” said Pomeroy.

But stranger things have happened. After all, former finance minister Jim Flaherty famously shocked markets in 2006 when he banned other income trusts apart from REITS from such tax treatment.

In her recent report on above-guideline rent increases, August and her co-author urged the Ontario government to put more restrictions on the practice and at least force landlords who apply for AGIs to show financial need for the hikes. This would address both REITs and other large corporate landlords.

And it’s at the provincial level that much can be done, she said. “Strengthening rent control is a huge piece of the solution. The business model of these firms is based on pushing people out of their homes and driving up rents. If that’s not allowed, it eliminates profitability for these firms.”

***

Article by Christine Dobby for Toronto Star

Sunday 18 October 2020

Oct. 22 Tenant Info Session on Extra Rent Increases

ACORN Toronto is hosting a workshop on above-guideline rent increases on Thu. Oct. 22, from 6 p.m. to 8 p.m. You can participate by phone or online (see below for details). 

CAPREIT has applied for an above-guideline rent increase covering 113 of the 121 units at 2 Park Vista. This is the second above-guideline rent increase CAPREIT has applied for at 2 Park Vista since 2015.

Some tenants at 2 Park Vista have received a notice of a 4.7% rent increase (a 2.5% above-guideline rent increase plus the 2.2% guideline increase for 2020). 

The Park Vista Tenants' Association encourages tenants to take part in the Oct. 22 ACORN workshop to better understand the rules around these extra rent increases. 

ACORN will cover details related to above the guideline rent increases, what they mean and how to fight back. There will be time to ask questions and learn about the tenant organizing already happening in the city and how you can get involved!
Two easy ways to join -
1.) By dialing 647 374 4685, and then enter meeting ID 217 763 0191, press # and then press # again.
2.) Click this link to join on your computer: https://bit.ly/2V35FJi


Sunday 13 September 2020

Virtual Tenants' Rights Info Session - Tues. Sept. 15 @ 7 p.m.

Councillor Paula Fletcher and MPP Peter Tabuns are hosting a tenants’ workshop with Don Valley Community Legal Services on Tuesday, September 15th from 7:00 pm to 8:30 p.m.

Learn about your rights and how Bill 184 will impact tenants. There will be a presentation by Stewart Cruikshank, lawyer from Don Valley Community Legal Services, followed by a Q & A.

This virtual workshop will be taking place via zoom. Please register in advance at:
https://us02web.zoom.us/webinar/register/WN_oa9KgQ_VTWWnakzyTDt8TQ

If you do not have access to a computer or Zoom for the workshop, you can also call in with a phone. Once you register you will receive the details. 

A recording of the workshop will be made available after for those who cannot attend.



Saturday 24 November 2018

Tenant Meeting - Nov. 26 - 7 p.m. @ 8 Park Vista


Park Vista Tenants’ Association
Annual General Meeting
Monday, November 26
8 Park Vista – Lobby
7 p.m. to 8:30 p.m.

Guest Speaker:

Bhavin Bilimoria, Staff Lawyer
Flemingdon Community Legal Services

This meeting is a good opportunity to:
Ø  Learn more about tenants’ rights and how to enforce them
Ø  Find out about the activities of the Park Vista Tenants’ Association
Ø  Get to know your neighbours
Ø  Try your luck at the 50/50 draw
As seating is limited, you may wish to bring a chair




Sunday 31 December 2017

Many tenants' rights victories in 2017

As the year draws to a close, 2017 marks a milestone year for advances in tenants’ rights, as well as some key accomplishments for Park Vista tenants.

Here are some of the reasons why 2017 was a memorable year for tenants:

City of Toronto Changes

In March 2017, Toronto City Council approved new rules for landlords to help better inform and protect tenants, effective July 1, 2017.

Landlords have to comply with a number of new requirements including:

·         Posting emergency contact information for tenants
·         Developing a system for tracking tenant requests for repairs
·         Responding to urgent tenant requests within 24 hours and non-urgent requests within 7 days
·         Providing information to tenants regarding major capital projects (including nature of project, duration of project, units affected)
·         Using a licensed or certified contractor where required by law for activities including servicing heat, ventilation, air conditioning and plumbing systems
·         Pest complaints must be inspected in 72 hours and handled by licensed exterminators and tenants informed by a posted notice. 

You can get more info at the following link:

Provincial Changes

On May 18, 2017, Ontario passed new legislation that:

·         Broadens rent control rules to cover units built after 1991 (giving 250,000 more tenants protection against unlimited rent increases)
·         Prevents landlords from charging above-guideline rent increases for rising utility bills
·         Toughens the requirements for evictions from units for personal use by landlords. 
·         Prohibits above-guideline rent increases in buildings where elevator maintenance orders haven’t been addressed.
·         Ensures landlords can't pursue former tenants for unauthorized charges
The Advocacy Centre for Tenants Ontario praised the suite of new rules as the biggest positive change to tenants’ rights in over a decade.
The legislation also enabled some measures which have not yet been implemented:
·         Regulations to specify circumstances where capital expenditures would NOT be eligible for an above-guideline rent increase.
·         A standard lease to help both tenants and landlords know their rights and responsibilities.

The Park Vista Tenants’ Association will be keeping a close eye on these proposed measures in 2018.

Federal Changes

On November 24, 2017 the federal government announced a 10-year, $40 billion National Housing Strategy, including a $4 billion Canada Housing Benefit, to be launched in 2020. The benefit is delivered directly to individuals as a portable benefit they can use to help with the costs of housing.

Park Vista Tenants’ Association

We welcomed more than two dozen new members in 2017 and our achievements included:

·         Convincing CAPREIT to withdraw plans to impose plans to impose a seasonal fee of $125 per air conditioner unit on tenants, with long-time tenant Patricia Steward speaking out against the fee in the media.
·         Holding a tenants’ rights session with a lawyer from Flemingdon Community Legal Services.
·         Working with CAPREIT on our most successful holiday toy drive with more than 100 toys donated and $110 in cash.
·         Hosting a fire safety information session.

Thank you for your support in 2017. We look forward to continuing to help build a vibrant community on Park Vista. We encourage tenants to keep this email for future reference.

Best wishes to you and your family for a happy 2018 from the Board of the Park Vista Tenants’ Association.


Sunday 22 October 2017

Save the Date - Tenant Meeting Wed. Oct. 25

Park Vista Tenants’ Association
Annual General Meeting
Wednesday, October 25
8 Park Vista – Lobby

7 p.m. to 8:00 p.m.

Guest Speaker Councillor Janet Davis
Will discuss new rules for Toronto landlords

This meeting is a good opportunity to:
Ø  Learn more about tenants’ rights and how to enforce them
Ø  Find out about the activities of the Park Vista Tenants’ Association
Ø  Get to know your neighbours
Ø  Try your luck at the 50/50 draw
As seating is limited, you may wish to bring a chair


Monday 14 August 2017

Parkdale Rent Strike Ends in Victory!

An amazing example of tenant courage, pressure tactic actions and persistence has concluded with the gutsy Parkdale rent strikers declaring victory against a huge corporate landlord. 

For six months the tenants took on a system stacked against them, using a variety of innovative actions including withholding rent, protests in front of their apartment buildings and in the lobby of the landlord's head office, a "sit in" protest at the Landlord and Tenant Board office, online petitions and pressure on a pension fund with a stake in the property management company. 

The Parkdale tenants won the following concessions from their landlord:
  • A substantial reduction in the above-guideline rent increases at each building 
  • A program of additional rent relief for tenants in financial hardship
  • A program of maintenance and repair work in each building