Construct more cheap housing, builders told

Clement says they should stop making excuses

Toronto Star - April 17, 2000
by Richard Brennan — Queen's Park Bureau

Ontario developers should stop looking for excuses and start building affordable housing, Housing Minister Tony Clement says.

Conditions to build new units are ideal, he says, because the provincial government has relaxed rent controls and federal and provincial financial incentives are in place.

But developers contend the Ontario government has failed badly in providing enough incentives for them to start building lower-cost housing units.

Landlords and developers complained for years that rent controls stifled rental unit growth, yet, even though it's the second year of relaxed controls, they still haven't lived up to their end of the bargain, Clement said in an interview.

"They are running out of excuses. I am now calling upon the industry to put their money where their mouth is. We've removed the impediments and we've got to see activity in this sector. It's time to fish or cut bait."

Clement's is the harshest criticism of the development industry by a Tory cabinet minister since the Mike Harris government was first elected in 1995.

In June of 1998, the Tories' Tenant Protection Act took effect. It leaves rent control in place for occupied apartments but, when a tenant leaves, the landlord is allowed to raise the rent to whatever the market will bear. The act also streamlines the eviction process.

In introducing the act, former housing minister Al Leach promised it would spur developers to begin building 10,000 new rental units in Toronto in two years.

That hasn't happened and the vacancy rate is still a fraction of 1 per cent in Toronto, Ottawa and Kitchener. More than 100,000 people are on the waiting list for affordable housing in Toronto alone.

In 1999, only 344 new rental units were built in the city and just 1,313 across Ontario, which needs 20,000 units immediately to meet current demand.

To sweeten the pot, the province waived the sales tax on building supplies, which works out to about $2,000 on each rental unit built. And the federal government offers builders of new residential rental units a 2.5 percentage point rebate on the 7 per cent GST charged on fair market value for lands and buildings.

Stephen Kaiser, president of the Urban Development Institute, a major lobby group for Ontario developers, said Clement's comment shows "he doesn't understand the industry and that's shocking."

What was done to encourage construction of rental units in Ontario is not nearly enough, Kaiser said. Even if it was, the industry has no intention of building affordable units anyway, but rather high-end rental units, he added.

The industry has a wish list of tax deductions, tax relief and forgiveness, including property taxes, as well as breaks on development charges.

"Their program in terms of a PST (provincial sales tax) is virtually just smoke and mirrors. The industry is calling for total PST relief in terms of rental housing," Kaiser said.

Officials at Canada Mortgage and Housing Corporation (CMHC), a federal agency that helps Canadians gain access to housing, says Ontario's Tenant Protection Act is driving up the cost of rent and contributing to the severe shortage of rental accommodation in Toronto and elsewhere. "It has definitely had an impact," CMHC spokesperson Rob Genier said.

The average rent for a two-bedroom apartment in Toronto jumped 7.4 per cent last year to $882 a month. The CMHC projects it will jump again this year to $930 a month.

In a recent report, CMHC notes landlords are using the new act to raise rent - in some cases doubling it - once a unit is vacated, while tenant advocates accuse landlords of using any excuse to evict tenants so they can hike rents.

"We have noted that the average rent has increased above and beyond the rent review guidelines for the last two years and we attribute that to (the act)," Genier said.

Genier said last year's guideline was 3 per cent, yet over-all rents in Toronto increased by 5.1 per cent.

This year's guideline is 2.6 per cent but rents are expected to surpass that.

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