Tenant advocate questions the accuracy of CMHC, Rental Market Survey, rent statistics
Release: December 12, 2008
Tenant activist, Robert Levitt, who runs the Ontario Tenants' Rights web site www.ontariotenants.ca questions the accuracy of Canada Mortgage and Housing Corporation's, twice yearly, Rental Market Survey, that follows rents and vacancy rates, which are used in setting government housing policies, specifically for their Ontario rental housing market statistics.
Over the past decade the rent statistics may be showing rents as much as 5% lower than the basis for the 1997 statistics (due to the severing of parking from rents,) and rents statistics may eventually be depressed an addition of as much as another 10% when compared to 1997 (due to the severing of electricity costs from rents paid). This moderates, possibly greatly, the year to year comparisons CMHC makes in its' reports as to changes in the market, and affects CMHC's conclusions as to their impacts. Robert Levitt says, "recent figures from CMHC undervalues actual rents, in comparison to those previously used by CMHC before 1998".
As the survey results do not include the services included or not included in the rents, and CMHC does not gather data on the costs of those services, the result of this in Ontario has been to artificially reduce the rate rents have been increasing as landlords have been severing hydro costs from rents since Ontario's Residential Tenancies Act, (RTA,) came into effect on January 31, 2007.
In an October 1, 2008, response from CMHC's National Manager, Housing Market Surveys, Pierre A. Lanciault, confirms that the published statistics do not take into account what services are or are not included in the rent statistics and that they have never compiled the costs of these services.
In effect, when CMHC compares rent figures from one year to the next, they are trying to compare apples to oranges because what services tenants are paying as part of their rents used in these "statistics" vary from year to year.
Hydro costs are being severed from rents that historically, overwhelmingly, (estimated as over 90% by Robert Levitt,) included it, at the behest of the Ontario government of Dalton McGuinty, the Ontario Power Authority, Local electricity Distribution Companies (LDC's,) and landlords. The government's and hydro companies' motivation is to encourage the use of "smart meters" as is demanded in Sections 137 and 138 of the RTA, and though these sections of the Act are the only ones not yet proclaimed into law, some landlords have been unilaterally, or by agreement with the tenants, severing hydro costs from tenants' existing leases to jump the gun before regulations are set in place as to how to fairly calculate the amounts the rent should be decreased for severing of these costs.
When electricity costs are severed from rents, landlords have no way to know what of the total building hydro costs are due to common costs such as for elevators, hallway lighting and fans, and that which is for the individual use of tenants. So even good landlords will tend to underestimate the hydro costs of tenants so as to protect themselves and reduce rents by a minimal amount. Whereas unscrupulous landlords have been unilaterally severing hydro costs and leaving it to the Landlord and Tenant Board to settle the amount of rent decrease, or "negotiating" with tenants the reduction while telling tenants that the cost of hydro is $30 or $40 a month and agreeing to reduce the rents by that much, only for the tenants to find that their hydro cost are substantially higher, a backdoor way of getting huge rent increases that will never be reflected in the CMHC rent statistics.
Similarly, historically most rents used to include parking, but since Vacancy Decontrol, where landlords may increase rents or change lease terms in an unregulated manner when rental units become vacant, came into effect under the old Tenant Protection Act on or after June 17, 1998, and this now continues under the present government's Residential Tenancies Act, parking is now in most leases a separate charge in addition to rents that in the Toronto market typically add 5% on top of the rent.
Robert Levitt say, "Due to these inadequacies I believe these statistics are unreliable and I urge CMHC and the federal government to spend the extra money to survey the costs of services included or not included in rents, and to make this an integral part of the Rental Market Survey."
Additionally Robert Levitt says, "The government of the Province of Ontario is urged to stop the severing of hydro costs from tenants' rents and the installation of smart meters until the matter of a fair method of calculation of individual hydro costs of rents that include hydro can be ascertained if the severing of these costs are to be permitted at all."
MY LETTER TO CMHC
Pierre A. Lanciault,
August 29, 2008
Dear Pierre Lanciault:
I have some concerns regarding Canada Mortgage and Housing Corporation's annual Rental Housing Market Survey.
I question the accuracy of the information in Ontario, because since June 17, 1998, vacancy decontrol has existed in this province. As vacant units no longer have any regulatory limits to their rents or the terms of the lease, most Ontario landlords have now severed parking from the leases. Since older statistics compiled by CMHC were at a time when most landlords included parking, the newer figures are lower than they should be based upon what was included in the older statistics.
Some landlords are now also severing visitor parking from the rents and charging for this.
Similarly, in the past, the majority of Ontario tenants had electricity costs included in their rents. Now under the Rental Tenancies Act of 2006, it is mandatory that eventually all hydro bills are to be removed from leases, now to be paid directly by tenants to the local hydro distribution company. This too artificially reduces the rent statistics in comparison to earlier years.
I am also very concerned about the methodology used by CMHC, where it is my understanding your enumerators identify themselves as representatives of your federal agency, and ask landlords or building superintendents to volunteer the rents and vacancy rates.
Are there any spot checks to verify the information being given is usually correct?
I am concerned that some landlords may tend to understate the rents or overstate the vacancy rates. They may do that out of concern that the information provided may be used by other government bodies such as the Canada Customs and Revenue Agency, even if CMHC staff inform them it is only used for statistical purposes. It is also possible that some landlords could be trying to influence the numbers at the behest of their lobby organizations.
CMHC press releases about the annual survey only provide the average rents and vacancy rates, while not providing the average rents of vacant units. I believe the average rents for vacant units have become necessary, because Vacancy Decontrol, where landlords may charge any amount they want with no regulatory limits, creates anomalies in the figures. It causes rents on vacant units to be above the average rents for all apartments. By at least providing the average rents for the vacant units, it would give everybody an idea of the affordability of those units.
A more in-depth alternative to providing the average rents for vacant units would be a full breakdown in the percentages of vacant units both by price ranges and by unit size.
I believe these issues must be examined to verify the accuracy of the survey, since the surveys are instrumental in setting government policies at all level of government.
Thank you for your time and consideration.
Mr. Lanciault was kind enough to respond to my concerns, and here is a copy of his reply:
Oct 1, 2008
Mr. Robert Levitt
Dear Mr. Levitt:
Thak you for your letter of August 29, 2008, in which you sumarize your concerns about Canada Mortgage and Housing Corporation's (CMHC) Rental Market Survey (RMA). I appreciate your interest, remarks and suggestions, and would like to take this opportunity to clarify the way the survey is conducted, quality controlled, analysed and disseminated.
First, I would like to reasure you that CMHC is fully aware of the issues that you raised in yoru letter, and we continually monitor the evolving rental market in Canada. Indeed, the RMS is revisited and adjusted on a regular basis by a team of survey specialists, analysts and economists.
The methodology used by CMHC in conduct of the RMS is comparable to those used by Statistics Canada and other reputable organizations that do surveys. Because CMHC has conducted and released rental market survey statistics over may years, CMHC enumerators have established their credibility and trustworthiness when interviewing apartment managers.
The conduct of the RMS has many quality control safeguards that ensure reliable results. One of hte keys to reliable results is to select an appropriate sample and ensure that the response rate is high. Both of these factors are in place for the RMS. Secondly, procedures are in place to ensure that the questions are asked accurately, and responses correctly entered ito systems for compilation and analysis. Some of the quality processes in palce include:
When CMHC collects rent data through its RMS, it also collects information on any service (ie., heating, electricity, parking, etc.) that wold be included in the rent or excluded from it. There is no collection, however, on the dollar amount for each of these services. Such collection would be very time consuming, costly, likely lacking accuracy, and put response rates at risk. At this point in time, the average rents published by CMHC reflect the rent to be paid, regardless of inclusion of services. Separation of the costs associatied with services from actual rent is quite cumbersome and results may not be reliable statistically, although CMHC is continuing to examine what can be done to provide information in this area.
As you know, rent data released by CMHC includes rents from both occupied and vacant units. We do not release separate results for rents of vacant units partly because of the limited number of such units in the overall sample (less that 3 per cent across the country based on our last RMS). We will nevertheless investigate the reliability of results for vacant units at various levels of geography, a key criteria for releasing such information in the public domain.
We thank you for your suggetions and we hope that our response lessens some of your concerns with the RMS. We share your interest in improving the usefulness of the survey, but also need to be cost effective. Rest assured that CMHC conducts its surveys with the goal of better serving the needs of the housing industry, as well as those of all Canadian in genera.
Pierre A. Lanciault Nationa Mananger, Housng Market Surveys