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Access to Rental Accommodation

Restricted by Income Criteria:

The Effect of Permitting the Use of "Income Information" in Tenant Selection


Submissions to the Standing Committee on General Government

With Respect to Bill 96, Sections 36 and 200




Michael Ornstein


Institute for Social Research
& Department of Sociology
York University


June 1997



Introduction


This report examines the effect of the proposal in Bill 96 to amend the Ontario Human Rights Code to permit landlords to discriminate against prospective tenants on the basis of "income information."

Over the last several years I was retained by the Ontario Human Rights Commission to review statistical data on the effect of commonly used income criteria on various groups protected from discrimination under Ontario's Human Rights Code. I prepared and presented extensive evidence on the effect of income criteria on groups protected by the Human Rights Code to a three person Human Rights Board of Inquiry which was appointed by the Minister of Citizenship to consider the issue of income discrimination in housing and to rule on whether excluding members of disadvantaged groups because of their low income violates the Human Rights Code. In addition, I reviewed survey data prepared for the Fair Rental Policy Organization by a statistician, Stephen Earwaker, and chartered accountants, Marmer-Penner, comparing the rent-to-income ratios of tenants who defaulted and tenants who had paid their rent on time every month at two large rental complexes owned by Bramalea Limited and Shelter Corporation.

The present submissions, however, are not made on behalf of the Human Rights Commission but rather on my own behalf, out of concern with the tragic consequences should sections 36 and 200 of Bill 96 be allowed to pass without amendment, for social assistance recipients, single mothers, young people, people with disabilities and a number of other groups currently protected by the Human Rights Code from discrimination in housing. The Chief Commissioner of the Human Rights Commission, Keith Norton, has written to the Premier and will be appearing before this Committee to urge that "income information" be deleted from sections 36 and 200 of Bill 96, and I support his recommendation.

My main purpose as a researcher is not to lobby the legislature but rather to ensure that in considering this amendment to the Human Rights Code, legislators are clearly aware of its implications. I believe that the legislature should have waited for the decision of the Human Rights Tribunal which had the benefit of many days of hearings into this issue and a wealth of evidence which is too complex to feed into the legislative process. Since Bill 96 puts the issue before the Legislature at this time, however, it is critical that the legislature is aware of the far-reaching and tragic consequences of the proposed change to the Human Rights Code.

The issue is whether landlords should be able to refuse to rent to disadvantaged groups such as social assistance recipients, single mothers or young families for the sole reason that they are low income. It should be clear that I am in no way addressing the issue of credit checks, references or rental history. The Human Rights Commission has stated that in cases where such information is available, landlords are entitled to do credit checks, check references and rental history and if warranted, require co-signors or guarantors on the basis of this information. The issue is not landlords' ability to screen for credit-worthiness, which is well taken care of in the other practices listed in section 200. I am dealing only with the inclusion of "income information" as a permitted basis on which to disqualify a prospective tenant. Sections 36 and 200 would permit landlords to disqualify applicants with a good credit rating, good references and a good rental history on the sole basis of income information. If the legislature simply intends to ensure that landlords retain the ability to refuse to rent to prospective tenants when there is evidence that they are a bad risk, then it should follow the advice of the Chief Commissioner and delete "income information" from the list of permissible practices.

Leaving "income information" in the list will effectively eliminate the guarantee of "equal opportunity" in housing from the Human Rights Code for people on social assistance and for the majority of other protected groups such as youth, single mothers, seniors and persons with disabilities. Rather than identifying a group of prospective tenants who pose a higher risk of default, my research shows that income criteria simply identify the most disadvantaged groups in society and disqualify from the most affordable housing they can find. This amendment would mean that hundreds of thousands of good tenants who are currently paying their rent every month, have never defaulted on any payment in their lives, and are seeking the most affordable housing on the market could be refused tenancy merely on the basis of their income.

The most common income criterion used by those landlords who utilize income information is 25% or 30% of income toward rent: any applicant whose income is below this cut-off is disqualified or at least considered a less desirable applicant, and likely to be passed over for someone with a higher income. Should the use of income information be included as a permissible practice, this practice will no doubt increase dramatically.

The Chief Commissioner, Mr. Norton, has written to the Premier explaining that permitting landlords to disqualify prospective tenants on the basis of "income information" will essentially wipe out the protection in the Human Rights Code from discrimination against people on social assistance. This is correct, and I will be explaining why no one on social assistance is able to qualify under a 25% or 30% rent-to-income rule in unsubsidized apartments. About a third of private market tenants in Ontario rely on social assistance, so the effect of permitting practices which automatically disqualify members of this group is obviously catastrophic, not only for recipients themselves but also for municipal and provincial budgets. Legalizing discrimination against social assistance recipients will dramatically reduce access to affordable units, increasing recipients' rental payments and so raising shelter allowance costs dramatically, as well as raising the economic and social costs of related to homelessness and emergency shelter.

Social assistance recipients are not the only group that would be affected by use of income criteria, however. Many other groups protected under the Human Rights Code would be disproportionately disqualified by income criteria such practices became more common. They too would be pushed out of affordable housing into higher-cost units. My report provides a summary of some of the data I have analysed to determine the effect of income criteria on a number of the groups protected under the Code. Once you have considered these data, I am confident that you will agree that permitting landlords to exclude such large numbers of the most vulnerable tenants from the most affordable rental units on the market is both immoral, from a human rights standpoint, and catastrophic from the standpoint of public policy.

The data I am presenting here are largely from the 1991 Census of Canada. It presents a dismal picture, but it is fact a more optimistic income profile of tenants than would be the case if I were able to use current data. Between 1990 and 1993, we know that the number of private market tenants relying on social assistance doubled, and that many other tenants faced reductions in their incomes. The discriminatory effects of income criteria which are evident from the 1991 Census would be even more severe in 1997.(1)

Using the Census I have examined the impact of income criteria on groups defined on the basis of age, sex, family status, marital status, race, ethnic origin, place of origin and citizenship. Supplementing the Census is a large-scale annual household survey, also conducted by Statistics Canada, called the survey of Household Incomes, Facilities and Equipment, or hife survey. Most of the analysis employs data for what Statistics Canada calls the "Census Metropolitan Area" (or CMA) of Toronto.


Analysis of the Census and Related Data

Steps in the Analysis

The impact of income criteria on housing choice reflects both the distribution of household income and the cost of rental accommodation. In order to capture the full impact of income criteria in rental housing, I have combined information on the incomes of groups now protected from discrimination in housing with information on the cost of housing.

One argument sometimes advanced in favour of income criteria is that it prevents poor households from renting accommodation that is too spacious or too luxurious for their needs. It was therefore necessary to obtain information on the cost of units available for rent and to examine housing that is appropriate to the size of each household. This determination of the cost of rental accommodation that is to be compared with the incomes of groups protected in the Human Rights Code is based on the distribution of rents for apartments which turned over during the course of a year, measured from Statistics Canada's Public Use Microdata File (or pumf), which is a sample from the 1991 Census.

I identified as a low rent scenario an apartment which rented at the 30th percentile - that is 70% of apartments of the same size which were rented during the course of the year were more expensive than this rent.

Because rents are strongly related to the size of rental units, it was necessary to decide what size accommodation should be considered for a given type and size of a household. This was done by using the pumf to analyze the relationship between the housing size and household composition. The decisions about the appropriate size of accommodation for households of different types and sizes were combined with the estimates of rents from the pumf survey to give figures for the income required to rent accommodation. For example, a four-room apartment was considered adequate for three person households, and such an apartment would rent for $607/month in the Toronto CMA according to the "low rent," scenario. In order to meet a 30 percent income criterion (taking the rent for 12 months and dividing by 30 percent), the household requires a household income of $24,000. The choices of the size and rents of accommodation for different households to be used in calculating the exclusionary effect of income criteria are conservative, so as to focus on minimally acceptable accommodation.

In the real housing market, it is likely that many members of disadvantaged groups would be in a worse position than our figures indicate, because they have difficulty finding good housing at reasonable cost. For example, because apartments offering high value for money are likely to turn over less frequently and tend to be passed around in kin and friendship networks, the ability to wait for a good apartment to become available is an asset. Experience in the housing market is also important asset, because it involves information on the range of alternatives and provides skills in assessing the quality of accommodation, on the basis of a quick inspection. On these grounds, members of groups such as refugees or young people are disadvantaged and people in shelters and temporary accommodation are likely to have an urgent need for housing and little experience in searching for an apartment in the Toronto market. Lone parents may have difficulty finding the time and obtaining the transportation needed to visit vacant apartments. People with limited English will have more difficulty searching. Thus, even without the additional barrier of income discrimination, members of these groups are not in a good position to find high quality housing at low rents.


Issues for Analysis

Once the average cost of rental accommodation is determined, it is possible to calculate the proportion of households in the different groups that have sufficient income to qualify as renters, given a 30 percent (or any other) income criterion. The first question is whether members of these groups would have significantly less choice in securing affordable apartments of the appropriate size, if income information were used to disqualify low income applicants.

I also examined the actual situations of renters, specifically the actual proportions of household income devoted to rent. The proportion of households living in accommodation costing more than 30 percent of their income is a direct indicator of the relative vulnerability of a group to the exclusionary effects of income criteria.

The extensive analysis of incomes and the effect of income criteria employed data from the Toronto CMA but I also used the hife survey to examine the situation of the various groups throughout Ontario to see if the same patterns were evident province wide.

As a practical matter, low income households must choose between homelessness and paying relatively high proportions of their income in rent. A critical question is whether income criteria exacerbate this difficulty by forcing low income households to pay more for their housing, because their choices are more restricted. The question is whether there is a sufficient supply of lower rent housing to justify a requirement that low income households find housing in which they would pay less than 30% of income toward rent. This is actually a question about the distributions of household income and rent. Using the 1991 Census I examined whether, if we were ever able to ensure that the lowest income households rented the least expensive apartments, these households would successfully qualify under the common income criterion of 30%.

The Impact Of Income Criteria On Groups Protected in the Human Rights Code

In the Census Metropolitan Area (CMA) of Toronto, I examined the income of members of protected groups who rent accommodation and have found that they have disproportionately low incomes. Specifically, gender and marital status have a profound effect on economic well being, with single parent mothers being dramatically worse off than single parent fathers and opposite- sex couples with children, and unattached women being severely economically disadvantaged in relation to opposite-sex couples without children. Youth also has an extreme effect on economic well being: those under 20 are profoundly economically disadvantaged. Refugees, non-citizens, those born outside of Canada and visible minorities also have a higher incidence of low income than their non minority counterparts. I did not examine the position of people with disabilities as this was not part of the case before the human rights tribunal, but statistics regarding disability and income show a profound effect and I am confident in stating that the vast majority of persons with disabilities will also be excluded from private market accommodation if income criteria are permitted. The position of the elderly was not examined either, but data on their income suggest that they will be disproportionally affected, relative to the working-age population, and that this burden will be heaviest for elderly women, who far outnumber their male counterparts.


A. Receipt of Public Assistance

The Human Rights Code prohibits discrimination on the basis of "receipt of public assistance." As the Chief Commissioner Keith Norton has commented, permitting landlords to select tenants based on "income information" would essentially wipe out the protection for this group in the Code. Social assistance is the income of last resort, and any tenant selection process which disqualifies or disadvantages social assistance recipients are not identified precisely in census data. We know exactly the income profile of social assistance recipients from the benefit structure, and it is also the benefit structure which determines the relationship of rent to total income.

Even if social assistance recipients are able to secure the most affordable apartments on the market, they cannot qualify under a rent-to-income qualification. This is because recipients who pay less for shelter receive a lower benefit. Unless the rent is subsidized, the amount paid for shelter is invariably greater than 30% of total income. A 30% rent-to-income rule will exclude all social assistance recipients from the most affordable housing on the market.

The following chart compares the benefit levels for several household types in 1990 with the census data on low rent apartments which were rented during that year. It is evident that social assistance recipients would be disqualified from all such apartments. Even if recipients secure part-time employment and supplement their benefits with the maximum allowable earnings, they would fail to qualify for apartments renting at the low rent level, as shown in the following chart.



1990 SOCIAL ASSISTANCE RATES AS PERCENTAGE OF "LOW RENT" OF APPROPRIATE-SIZED APARTMENT

Case Type Basic needs
(employable)


$
Shelter
allowance


$
Total
Benefit


$
Low Rent of Suitable Apartment

$
% of Income Toward Rent % Disqualified from low rent apartment using 30% income criterion
Single parent + 1 child under 9 (FBA) 486 550 1,036 607 59% 100%
Single parent + 1 child under 9 (GWA) 422 550 972 607 62% 100%
Single parent + 2 children under 9 (FBA) 578 600 1,178 607 52% 100%
Single parent + 2 children under 9 (GWA) 514 600 1,114 607 54% 100%
Couple + 1 child under 9 (FBA) 595 600 1,195 607 51% 100%
Couple + 2 children under 9 (FBA) 702 650 1,352 745 55% 100%



1990 SOCIAL ASSISTANCE RATES PLUS MAXIMUM "STEP" EARNINGS AS PERCENTAGE OF "LOW RENT" OF APPROPRIATE-SIZED APARTMENT

Case Type Total Benefit

$
Maximum STEP Earnings
$
Total Income


$
Low Rent of Suitable Apartment
$
% of Income Toward Rent % disqualified from low rent accommodation using 30% income ratio
Single parent + 1 child under 9 (FBA) 1,036 207 1,243 607 49% 100%
Single parent + 1 child under 9 (GWA) 972 194 1,166 607 52% 100%
Single parent + 2 children under 9 (FBA) 1,178 236 1,414 607 43% 100%
Single parent + 2 children under 9 (GWA) 1,114 223 1,337 607 45% 100%
Couple + 1 child under 9 (FBA) 1,195 239 1,434 607 42% 100%
Couple + 1 child under 9 (GWA) 1,131 226 1,357 607 45% 100%
Couple + 2 children under 9 (FBA) 1,352 270 1,622 745 45% 100%

The situation for people on social assistance has deteriorated dramatically since 1990. Income was cut by 21.6% in October 1995, while rent levels have risen steadily since 1990. I have estimated that approximately 120,000 households on social assistance recipients in Ontario are in a position because of the cuts that they simply must find more affordable accommodation. One can only imagine how difficult that task is. Excluding such households from apartments in which they would be paying more than 30% of income toward rent would simply mean that they would be forced into homelessness. It is unimaginable to me how a government which is requiring such households to look for more affordable accommodation and trying to reduce social assistance costs, the largest portion of which are shelter allowance costs, could at the same time move to remove human rights protections for this group. Removing the protections in the Human Rights Code can only further exacerbate a situation in which restricted choice means that the households most in need of affordable apartments are the least likely to secure them.


B. Sex, Marital Status and Family Status

The Human Rights Code provides protection to individuals from discrimination on the grounds of sex, marital status and family status, but in dealing with the need for accommodation the size and composition of households must be taken into account, since both affect the capacity to earn. Single parents have to find accommodation large enough their children, almost always with only a single income. A couple without children, on the other hand, can call on the income of both partners and is likely to be able to rent or purchase housing for less than the cost of separate accommodation. In order to account for sex, marital status and family status I compared the income and housing costs of six groups: 1. unattached women; 2. unattached men; 3. female lone parents; 4. male lone parents; 5. couples in two-person households; 6. couples in households with three or more persons. The following charts show that dramatic differences in income between men and women, combined with differences between couples and singles, mean that a large proportion of single mothers and singles would be disqualified from affordable housing by income criteria.

Single Parents

The profound effect of gender on economic status is illustrated by considering the economic status of single parent women as compared to single parent men: 41% of female lone parents had 1990 incomes under $20,000, but only 19% of male lone parents did. Not only are female lone parents much worse off economically than male lone parents, there are also many more female lone parents. In 1990 there were 65,000 female lone parents in the CMA but only 10,000 male lone parents.

The profound effect of gender as a determinant of the exclusionary effect of income criteria is illustrated by comparing the exclusionary effect of income criteria on single parent women as compared to single parent men. The following chart demonstrates that the use of a 30% rent to income ratio would result in the exclusion of 51% of single female parents, from appropriately sized(2) low rent accommodation, as compared to only 27% of male lone parents. Female lone parents thus face rates of exclusion from income restricted accommodation that are 89% greater than those faced by male lone parents.

Income Criterion Men Women Increased rate of disqualification
% disqualified from low rent accom- modation by 30% income criterion 27% 51% 89%(3)


Unattached men and women

Relative to couples, unattached people are disadvantaged and unattached women are economically disadvantaged relative to unattached men: 47% of unattached women in the Census Metropolitan Area of Toronto (CMA) had 1990 incomes below $20,000, compared to 39% of unattached men. All unattached individuals are very much disadvantaged by income criteria. However, unattached women face higher rates of exclusion from income restricted accommodation than unattached men, as the following chart shows.

Income Criterion Men Women Increased rate of disqualification
% disqualified from low rent accom-modation by 30% income criterion 41% 50% 22%


Couples in two-person households and unattached women

Unattached women are dramatically disadvantaged in comparison to couples without children: in 1990 47% of unattached women had annual incomes below $20,000 while only 14% of couples in two-person households did.

As a result, as the following chart shows, unattached women face substantially higher rates of disqualification from appropriately sized low rent accommodation using a 30% rent to income criteria than the exclusion rate that couples in two person households face from appropriately sized(4) low rent accommodation. While 50% of unattached women would be excluded from appropriately sized low rent accommodation using a 30% income criteria, only 23% of couples in two person households would be so excluded. Unattached women thus face rates of exclusion that are 117% greater than those faced by couples.

Income Criterion Couples Unattached women Increased rate of disqualification
% disqualified from low rent accom-modation by 30% income criterion 23% 50% 117%


Couples in three or more person households and female lone parents

The dramatic economic disadvantage of female lone parents relative to couples in three person households is evident from the following chart. In 1991 41% of female lone parents had incomes below $20,000 but only 12% of couples in three person households did.

The following chart reveals the dramatically increased rates of disqualification of female lone parents from appropriately sized low rent accommodation employing income criteria, as compared to the disqualification rates for couples in three or more person households, from appropriately sized, low rent accommodation. 51% of female lone parents would be disqualified from low rent income restricted accommodation, as compared to only 16% of couples in three or more person households. Female lone parents thus face rates of exclusion that are 219% greater than those faced by couples.


Income Criterion Couples Female Lone Parents Increased rate of disqualification
% disqualified from low rent accom-modation by 30% income criterion 16% 51% 219%

It is clear from the above statistics that permitting the use of income criteria would be a direct assault on the women of Ontario, creating very tragic consequences for many women in need of housing. Most severely effected by income criteria are lone female parents and unattached individuals, particularly women. Least severely effected are opposite sex couples and male lone parents.


C. Youth

The following chart demonstrates the dramatic impact of age on the incidence of low income. The youngest groups and in particular, those under 20 years of age, have incomes which are very substantially lower than those over 25 years of age, although the degree of economic disadvantage varies with household type.


Household Type Age 25 and older % with annual income under $20,000 Age 20-24 % with annual income under $20,000 Under 20 % with annual income under $20,000
Unattached women 45% 61% 90%
Unattached men 36% 57% 88%
Female single parents 39% 75% 83%
Couples in 2 person households(5) (6) 14% 13% 50%(7)
Couples in 3 person households 12% 17% 33%(8)

As we would expect, the dramatic economic disadvantage of young people means that income criteria have a particularly severe impact on youth. The following chart shows that young adults under 20 face dramatically increased rates of exclusion from appropriately sized low rent accommodation, than do those aged 25 or over.

Household Type Age 25 and over
% disqualified from low rent housing using a 30% income ratio
Age 20-24
% disqualified from low rent housing using a 30% income ratio
Age under 20
% disqualified from low rent housing using a 30% income ratio
Increased rate of Exclusion
Unattached women 47%
47%
65%  
92%
43%
96%
Unattached men 39%
39%
60%  
89%
54%
128%
Female Single Parents 48%
48%
83%  
86%
73%
79%
Couples in 2 person households 23%
23%
25%  
77%
9%
235%
Couples in 3 person households 16%
16%
24%  
43%
50%
169%

D. Race, Ethnic Origin, Place of Origin and Citizenship

The Human Rights Code presently provides for equal treatment in accommodation without discrimination on the basis of race, ancestry, place of origin, colour, ethnic origin and citizenship. The Human Rights Code also prohibits discrimination on the basis of citizenship. It is thus important to know how many of those who would otherwise enjoy the protection of the Human Rights Code from discrimination could be denied access to affordable accommodation because of their income. Essentially, these households will lose any effective protection from discrimination if section 200 of Bill 96 is not amended, since landlords will be permitted to disqualify them on the basis of their income. There is considerable, but not complete, overlap among these six different characteristics and, also, the Census does not allow the fine differentiation required to distinguish groups according to these six separate criteria. The Census provides information on "ethnic or cultural group," citizenship, immigration status, and place of birth, all of which are related to the grounds of discrimination under the Human Rights Code.

Citizenship

Across all household types, non citizens face higher rates of disqualification from accommodation using income criteria than do citizens. Most severely affected by income criteria would be unattached non-citizen women, 64% of whom would be disqualified from low rent accommodation using a 30% rent-to-income criterion. For unattached women whose are citizens, the percent disqualified, though still high, drops to 48%. Female single parent non citizen women are also severely impacted by the use of income criteria. 59% would be excluded from low rent accommodation using a 30% income criterion.

Household Type Citizens

% disqualified from low rent accommodation using a 30% income ratio
Non citizens

% disqualified from low rent accommodation using a 30% income ratio
Increased rate of Disqualification
Unattached women 48% 64% 33%
Unattached men 37% 60% 62%
Female Single parents 49% 59% 20%
Couples in two person households 20% 35% 75%
Couples in three or more person households 10% 26% 160%


The following chart compares people born in Canada to non-permanent residents, the most vulnerable of non-citizens in that they are not "landed". In the most difficult circumstances are non permanent resident female single parents, 71% of whom have annual incomes of under $20,000. Female single parents born in Canada are also low income, but only 41% have annual incomes under $20,000 compared to the 71% of non permanent resident female single parents who do. The lower income of non-permanent residents would translate into a significant exclusion of members of this group from low rent accommodation.

Household Type Born in Canada


% disqualified from low rent accom-modation using a 30% income ratio
Non-Permanent Residents

% disqualified from low rent accom-modation using a 30% income ratio
Increased rate of Disqualification
Unattached women 43% 74% 72%
Unattached men 35% 64% 83%
Female Single parents 49% 66% 135%
Couples in two person households 16% 36% 125%
Couples in three or more person households 9% 30% 233%


Place of Origin

A comparison of income profiles on the basis of place of birth, shows that people born outside of Canada are significantly economically disadvantaged compared to those born in Canada. The following chart demonstrates this, by comparing the income profiles of those born in Africa, with those born in Canada.

Household Type Born in Canada

% disqualified from low rent accom-modation using a 30% income ratio
Born in Africa

% disqualified from low rent accom-modation using a 30% income ratio
Increased rate of Disqualification
Unattached women 43% 61% 42%
Unattached men 35% 60% 71%
Female Single parents 49% 60% 22%
Couples in two person households 16% 36% 125%
Couples in three or more person households 8% 22% 175%


Race

Race affects the likelihood that one will qualify to rent an apartment restricted by income qualifications. The calculation of the effect of a 30% rent-to-income qualification for low rent apartments shows persistent differences between qualification rates for whites and blacks across all household types, although the differentials are smaller than differentials for other groups protected under the Human Rights Code.

Household Type

White

% disqualified from low rent accommodation using a 30% income ratio

Black

% disqualified from low rent accommodation using a 30% income ratio

Increased rate of disqualification
Unattached women 48% 60% 25%
Unattached men 38% 51% 34%
Female Single parents 49% 61% 24%
Couples in two person households 21% 27% 29%
Couples in three or more person households 13% 17% 31%



The Actual Rent-to-Income Ratios of Groups Protected Under the Human Rights Code

From the analysis of income distributions and their relationship to rent levels it is apparent that many tenants, and disproportionately tenants from groups protected under the Human Rights Code, do not have sufficient income to rent accommodation restricted by income criteria. Large numbers of tenants must be paying more than 30 percent of their income in rent.

In 1990, between around one quarter and a third of all tenants actually paid 30 percent or more of their income in rent, including 37 percent of all unattached women, 30 percent of unattached men, 22 percent of couples in two-person households and 26 percent of couples in three or more-person households, 47 percent of female lone parents, and 35 percent of male lone parents.


Actual Rent-to-Income Ratios for Households of Different Types

Unattached Women Unattached Men Female Single Parents Couples in 2 person households Couples in 3 or more person households
Actual Rent-to-Income Ratio 37% 30% 47% 22% 26%


Not surprisingly, the lowest income groups devote dramatically more of their resources to rent. For example, only 30 percent of unattached women with less than $10,000 of income pay less than 30 percent of their income in rent, 16 percent pay between 30 and 49.99 percent, and 54 percent pay half or more of their income in rent.

For lone parents, the relationship between household income and rent-to-income ratios is even stronger, partly because they require more living space than unattached individuals. It is not surprising that female lone parents with less than $10,000 income pay an average of 89 percent of their income in rent, but even lone parents who are somewhat better off still pay large proportions of their income in rent. Sixty-one percent of female lone parents with incomes of $10,000 to $14,999 devote 30 percent or more their income to rent, as do 54 percent of those with $15,000 to $24,999 income, 43 percent of those with $25,000 to 29,999 income, and 35 percent with $30,000 to $34,999 in income.

That poor people devote so much of their income to rent is neither voluntary, nor the result of poor apartment-hunting; rather it reflects the price of housing, which is a necessity.



Ontario-wide Patterns

The hife survey can be used to determine whether the patterns observed in the Toronto CMA prevail across Ontario, though these data are limited compared by the small sample size. The fundamental question is whether the income and rent differentials between types of households, age groups, races, people born in Canada and immigrants, and so on, prevail across the province. For this analysis, the province is divided into six geographic categories. The three largest Census Metropolitan Areas in Ontario, Toronto, Hamilton and Ottawa are treated separately, and the remainder of the province is divided into three categories: rural areas and urban areas with less than 100,000 population; urban areas with 100,000 or more population, excluding CMAs; and the combination of the four smaller CMAs, Kitchener-Waterloo, London, St. Catharine, and Windsor.

As might be expected, average household income varies by community, though once differences in household composition are taken into account, the differences are rather small. The highest average income is in Ottawa, about $2000 above the Toronto average; smaller urban areas and the small CMAs are about $2000 lower than Toronto; and Hamilton and the rural and small urban areas are about $3000 per year lower than Toronto. In all six geographical areas, households can be divided into two broad groups. On average, couples in either two or three- or more-person households, and households with two or more unattached persons have much higher incomes than single unattached people, of either gender, and lone parents. The income gap is very large, with households in the first group having average incomes of around $45,000 per year, and in the second group about half that much.

One can predict how these income differences will affect actual rent-to-income ratios and the access to housing limited by income criteria. Families and groups of two or more unattached people have twice the income of unattached persons, on average, but do not need to pay twice the rent, since the average increase in rent for additional rooms is not nearly as large as the initial cost of a separate unit. Also, while female lone parents have about the same average income as unattached persons, they require more space for adequate accommodation and so have fewer resources, relative to the cost of housing.

In all six areas of Ontario, female lone parents are the most likely to be paying 30 percent or more of their income in rent. The proportion of female lone parents paying more than 30 percent ranges from 52 percent of female lone parents in rural and smallest urban areas to 91 percent in the larger, non-CMA urban areas. About 40 percent of unattached women and men pay 30 percent or more of their income in rent, with the percentage varying from about 30 percent for Ottawa to 50 percent or more in larger, non-CMA urban areas. The proportion of income paid for rent reflects the distribution of household income and the choice of rental accommodation in the local housing market.

Taking "low rent" accommodation there are strong and very consistent differences among the types of households and fairly consistent differences among the locations. Depending on the location, between 84 and 97 percent of couples are able to meet a thirty percent income criterion, while the range is from 39 to 64 percent for unattached women living in one-person households and from 0 to 56 percent for female-headed lone parent families. Renters are in the worst situation in Hamilton and Toronto, where just over 60 percent of tenants qualify for "low rent" accommodation; in Ottawa, cities of 100,000 or more population and the combination of the four small CMAs (Kitchener-Waterloo, London, St. Catharines and Windsor) about 70 percent qualify; and in rural areas and urban areas of less than 100,000 population about 80 percent qualify.

There is regional variation in Ontario, reflecting segmentation in the labour and housing markets and demographic differences between regions. but the general patterns, such as the disadvantaged position of female-headed lone parent families, young people and recent immigrants, are the same.


The Exclusionary Effect Of Income Criteria On Unattached People And Single Female Parents, Compared To Couples Throughout Ontario


Unattached Women Unattached Men Female Single Parents Couples in 2 person households Couples in 3 or more person households
% excluded from low rent housing using a 30% income ratio 48% 44% 67% 12% 11%

Comparing the Distributions of Income and Rent

Nearly one third of all tenants in Ontario and even larger proportions of the tenants in equality seeking groups actually pay more than 30 percent of their income for accommodation. Were all landlords to apply income criteria, about one third of all the tenants in Ontario would have to move to other housing. Since it is not conceivable that new, affordable housing would be built for them, they would have to settle for less preferred choices available in the market segment where the criteria are not applied, move into higher-priced housing not subject to income criteria, or be homeless. More restricted housing markets provide the fewer choices to low income tenants, with the result that they will have to pay more rent or rent less adequate accommodation.

Rather than there being insufficient affordable housing, the argument could be made that low income households are renting apartments that are too expensive, and that income criteria would direct them to more appropriately priced accommodation. Alternatively, it might be suggested that without rent controls, higher income households will no longer tend to occupy the more affordable units.

Using the hife survey, it is possible to simulate the effect of redistributing rental units by bringing household income and rent into the closest possible alignment, then examine the change in the distribution of the rent-to-income ratios. The survey provides information on the distributions of both income and rent, as they are related in the population; that is the survey gives the combinations of household incomes and rent as they occur in the population. To determine whether a redistribution of housing would produce a much better fit between the cost of rental housing and the economic capacities of households it is only necessary is to rearrange rents and household incomes to correspond more closely. This rearrangement, however, must take place within constraints, both geographical and involving the size of units. Even if units in rural areas have lower rents, it does not make sense to think of moving low income people from cities to the countryside, while higher income people are moved to cities to compensate. The hypothetical moves should take place within communities.(9)

It is also makes sense to leave households in the same size units. While some households are "underhoused" and some have more space than they need, re-allocating households so that they live in appropriate sized units would likely raise the rent paid by poor families constrained by their income to live in smaller, cheaper dwellings.

This question about the relationship between housing units and households only makes sense as it pertains to the private rental market, not to subsidized units so they are left out of the simulation. Also, a technical problem is that all rents over $1200/month are reported as exactly $1200, presumably to guard the confidentiality of respondents. The result is a minor underestimate of rent-to-income ratios, since a small proportion of rents is understated. Finally, because the hife survey covers a representative cross-section of households, the figures obtained for unattached persons will not be the same as in the discussion of affordability above, in which the income of each unattached person is considered separately. Thus, in the simulation, unattached people are allowed to take advantage of sharing to lower the cost of housing.

The results of the simulation are straightforward. By allocating rental units according to household income, without altering the distribution among communities or changing the size of units which households occupy, the proportion of households paying more than 30 percent of their income in rent drops from 29 percent to 22 percent.

The relatively small magnitude of the overall change in the distribution of rent to income ratios produced by reallocating housing optimally demonstrates that there is actually a very strong relationship, in the existing housing market, between household income and expenditure on rent. An optimal re-allocation, which it is hard to imagine in the context of the strong and legally protected right to remain in a rented unit, would leave seven-eights of the households presently paying more than thirty percent of their income in rent in the same situation. It is striking that the change would be so small, since year-to-year fluctuation in household incomes, brought about by changing jobs, retirements, etc., would make it very difficult to maintain an exact alignment of income and rents for long, even starting with such an improbable pattern.

What this simulation tells us is that the main reason why people pay more than thirty percent of their income in rent, given the strong tendency for households to choose housing closely in line with their incomes, is that the distributions of the rents and household income compel a significant proportion of households to pay more than 30 percent of their income in rent. The term "compel" is appropriate, because shelter is a necessity and because there is not sufficient subsidized accommodation for the large numbers of people who are paying more than thirty percent of their income for accommodation. Whether this is constructed in terms of a lack of affordable housing or the inadequate incomes of the poor, the discrepancy reflects the economic structure to a much greater extent than household habits in choosing rental accommodation. To the extent that the distribution reflects household choices of rental accommodation, it is likely to disproportionately reflect the choices of higher income households, who have more choices, rather than of lower income households which face more barriers and have fewer choices.

Three in ten households are unable to living in housing to which access is governed by a thirty percent income criterion because there are simply not enough low-cost housing units to allow every household to spend no more than 30 percent of its income on rent. The burden of living in housing that is expensive relative to a household's resources, then, falls disproportionably on low-income households, and these are disproportionately the households of groups currently protected under the Human Rights Code. If the legislature permits landlords to disqualify members of these groups merely on the basis of their income, as would be the case if sections 36 and 200 are not amended, the protections under the Human Rights Code in housing become largely meaningless for most households which rely on them.


Evidence From Surveys Correlating Rent-To-Income Ratios with Risk of Default

During the course of the human rights tribunal's hearings into the effect of income criteria, the Fair Rental Policy Organization retained a statistician, Stephen Earwaker, and a Chartered Accountant firm, Marmer-Penner, to conduct surveys in the apartments owned by Bramalea Limited and by Shelter Corporation in order to compare the average rent-to-income ratios of tenants who defaulted and tenants who paid their rent on time each month.

Because of a technical sampling problem, the results of this extensive survey are of limited value. However, having corrected for some of the major sampling errors where possible, these surveys showed no statistically significant correlation between a higher rent-to-income ratio and default. Because of the limitations in the data, I was only able to provide a correct estimate of average rent-to-income ratios (at the commencement of the tenancy) of the two populations in Bramalea Limited. What I found was that in the two years surveyed, the average rent to income ratios of defaulters was, in the first year, 2 per cent lower than that of tenants who paid their rent on time each month. In 1993, the average rent-to-income ratio of defaulting tenants was approximately 2 percentage points higher than the comparison group. Neither result was statistically significant.

There is no evidence I have seen in this or any other survey that rent to income ratio at the commencement of a tenancy is correlated in any meaningful way with a likelihood that the tenant will default on rent. The catastrophic results which the data shows would occur if most or all landlords began to use income information to select tenants must therefore be considered against the absence of any business justification for their use.

Landlords have available to them far more reasonable bases for assessing risk of default, such as landlord references and checking credit and rental history. Permitting the use of income information on top of this would simply disqualify the majority of those protected under the Human Rights Code from the most affordable housing on the market.


Conclusion

From this extensive analysis of the Census and other surveys, there is clear evidence that income criteria differentially affect most of the groups currently protected under the Human Rights Code, defined on the basis of sex, marital and family status, age, citizenship, race, immigration status, place of origin and being in receipt of social assistance. The result is to significantly restrict the housing choice of members of these groups and to either drive them to live in higher priced accommodation or into homelessness. Neither result, in my submission, can be acceptable to a responsible government.

Around one-third of all tenants in Ontario currently live in accommodation to which they could be denied access under the income criteria commonly employed by apartment owners. They do so because of the "fit" between cost of rental accommodation and household incomes and there is no reason to believe this will change soon. Household incomes have risen slowly or not at all in recent years and, if anything, rents in Ontario can be expected to rise and so increase the proportion of renters paying more than 30 percent of their income for accommodation. Because, there is already a very strong relationship between household income and rent naturally enough, people with more income are prepared to spend more and those with less income look for lower-priced accommodation efforts to produce a "fairer" distribution of accommodation will do almost nothing to decrease the proportion of tenants paying large proportions of their total income for rent.

Not surprisingly, there is some variation in the particular conditions of renters across the province, but my analysis shows that the basic patterns are the same everywhere and are not, say, a peculiarity of Metro Toronto or even of the large municipalities taken as a group. In the areas of the province where rental accommodation is less expensive, the household incomes are also lower.

Giving the owners of rental accommodation the right to use income criteria to exclude prospective tenants will increase the hardship of all poorer renters and effectively permit discrimination against many underprivileged groups heretofore protected from discrimination by the Human Rights Code, while doing nothing for landlords.





Notes

  1. In order to examine the broad impact of the use of income criteria requires an analysis of the distribution of income and cost of rental housing in the population or, more realistically, in a representative sample of the population. Since the collection of sufficient data is both expensive and time-consuming, it is fortunate that existing surveys from Statistics Canada can fill the need. The 1991 Census included detailed questions about 1990 income, a question about rent, and a series of questions which can be used to identify various groups protected in the Ontario Human Rights Code. The question about rent in the Census refers to the previous month, and this rent figure is combined with the income measures described above to obtain the rent-to-income ratios, which are used in this analysis. This ratio is the standard measure of the impact of housing costs on households and of affordability of housing. There is a discrepancy in the timing of the two factors that go into the ratio, with rents measured in June 1991, when the Census was held, being divided by annual income for the 1990 calendar year. This accounts for households' common practice of averaging expenditures over time, so that savings from higher income months are used to make up for shortfalls in low-income months. Of course, this averaging has no impact on analysis of income distribution alone or on comparisons between the distribution of household income and general levels of rent.
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  2. A two bedroom apartment is assumed to be appropriate for lone parents with one or two children, and a three bedroom apartment is assumed to be appropriate for lone parents with three or four children. These are conservative assumptions: more that 60% of single parent households with two children live in larger accommodation that that assigned to them in this analysis. Likewise 82% of female lone parents with 3 children live in three bedroom or larger apartments. (Id. at 39-40 and Table 8)
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  3. This increased rate of disqualification is derived as follows: 51 (percentage of women excluded from low rent accommodation using a 30% rent to income ratio) - 27 (percentage of men excluded from low rent accomodation using a 30% rent to income ratio) = 24. 24 divided by 27 = 89%. Women therefore face an 89% increased rate of disqulification.
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  4. A one bedroom apartment is considered appropriate for couples in two person households, two bedroom apartments are considered appropriate for couples with one child, and three bedroom apartments are considered appropriate for couples with two or three children. Again, these apartment sizes are below average for households of this nature.
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  5. Distinguishing couples in two-person households from couples in three or more person households largely differentiates couples with and without children. However, it does not do so exactly because some couples in three or more person households will be living with extended family members rather than with their children.
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  6. Throughout this analysis couples are defined on the basis of the male partner's characteristics. For some equality seeking groups using the male's characteristics ensures that the data more accurately reflects the equality seeking status of both parties, than would be the case if the female partner's characteristics were used. For example, by defining a couple under 20 by the characteristics of the male partner, one is more likely to identify a couple in which both parties are under 20, than if one defines a couple under 20 by the characteristics of the female partner. This is because men tend to be somewhat older than their female partners. For other equality seeking groups defining the couple on the basis of the male or female partner's characteristics makes no difference to the accuracy of both individuals' identity. For example, with respect to race, there is a strong tendency for partners to be of the same race. Despite these differences, for the sake of consistency, couples are always defined on the basis of the male partner's characteristics.
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  7. There were only 150 of such couples in Toronto in 1991. Due to the correspondingly small sample size, the estimates of their characcteristics are not accurate.
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  8. There is also inaccuracy in these figures, due again to the small sample size.
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  9. With the HIFE dataset this constraint must be approximated. For the approximately 60 percent of the Ontario population living in CMAs, there is no difficulty, but in order to preserve confidentiality, in the publicly-released HIFE data, the remaining part of the population is divided into three categories on the basis of size of community. Since, for example, all rural areas are combined in a single category, so that the simulation could reallocate from one rural area of Ontario to an area far away. On the other hand, many households in rural areas could actually move to small communities in the next size category, which includes urban areas with a pupulation under 2500. Given the relatively uniform effects observed in the simulation, these limitations cannot have had much impact on the results.
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