Fight begins to change tax policy for tenants

The Kingston Whig-Standard - September 30, 2002
By Annette Phillips

An unlikely coalition of landlords, tenants and anti-poverty activists are calling on city council to do away with a tax policy that they say has Kingston’s poorest families subsidizing homeowners.

The Kingston Multi-residential Landlord and Tenant Association will launch today a citywide campaign to have the rate tenants pay in taxes reduced. More than 13,000 Kingston tenants will receive an information package from their landlord this week explaining the inequity and asking for help in lobbying city council to reduce taxes on apartment buildings and row houses.

Row houses and apartment buildings with more than six units are charged property taxes at a rate 2.65 times that applied to single family houses.

Next week, city council will consider reducing the so-called multi-residential tax rate at the same time that it considers a move to defer development of an affordable housing strategy for the city’s poor and homeless.

Kingston’s landlords say they already have a strategy for easing what social agencies say is a crisis in affordable housing: Reduce the multi-residential tax rate so they can reduce the rent.

The higher tax rate is stifling affordable housing construction and driving up rent for those who can least afford it, says a report commissioned by Homestead Land Holdings, Ontario’s biggest builder of apartments.

Since 1999, apartment taxes in Kingston have gone up 15.3 per cent. Utility costs have jumped 31.9 per cent. Landlords have been permitted to increase rent by nine per cent over the same period, says Alf Hendry, chief executive officer of Kingston-based Homestead.

The long-term strategy for alleviating the affordable housing crunch is to build more apartments, but in the short term council can do a lot for low-income families by bringing fairness to the tax system and helping landlords reduce rent, Hendry says.

"The affordability of housing and homelessness in Kingston is a huge issue," he said. "There’s no increase in supply. The demand is very high and where there is an inequity, as in taxes, equalizing it is something the city can do to help."

According to 1996 census figures quoted in Homestead’s report, 15,665 households lived in rental accommodation. Of those, 13,180 households rented row houses or apartments, with senior citizens accounting for 2,615, or 20 per cent, of those households.

"In Kingston, seniors are likely to be major beneficiaries of a reduction in multi-residential taxes," says the report prepared by Clayton Research.

Kingston has among the lowest vacancy rates in the province, while rent increases in the last two years have outpaced increases in both Ottawa and Toronto, the report says.

It’s a situation James Chapeskie knows all too well. When he moved into his Frontenac Street apartment 28 years ago, the rent was $200 a month. Today the monthly payment, including utilities, has risen to $710.

He says he was surprised when he recently learned how much of that was going toward taxes.

"We didn’t know that we were being unfairly taxed," he said. "We never saw the tax bill. We just paid the rent."

Tenants are just now realizing that the municipal tax structure is one reason rents are spiralling out of control, Chapeskie says. "Tenants didn’t know. They were not aware of the tax situation."

Other municipalities are moving toward a more equitable tax system in efforts to make housing more affordable. The Region of Durham is reducing its tax rate from 2.71 per cent to 1.45 over a number of years. Niagara Region has likewise adopted a phased-in approach. York Region will eliminate the tax difference completely by next year.

The main problem with eliminating higher multi-residential taxes is that another tax class, in this case homeowners, would have to make up the difference.

A city staff report, presented to council last February, shows that eliminating the tax discrepancy all at once would hike taxes on a $150,000 house by 8.93 per cent, or about $140. For an apartment-dweller, that same increase would result in a 58.93 per cent tax reduction, amounting to $523 a year.

Phased in over 10 years, the same tax reduction would increase house taxes by $13 annually, while tenants would see a reduction of about $48.

Since provincial downloading gave the city responsibility for social housing and transferred a tax-paying portfolio of low-rent units, the city would also benefit from lower taxes, the staff report says.

Council will be faced with the ultimate public policy question when it deals with the issue next week, says Bert Meunier, the city’s chief administrator.

"It’s a question of balancing the political reality of the tax impact against the social impact of the request," Meunier said. "The core issue is the fact that when you lower the multi-residential tax class, all the other classes go up. The biggest challenge for us is how fast do we move and how do we do it."

The issue of reducing apartment taxes was first raised in February by the Multi-residential Landlords and Tenants Association. At the time, city staff recommended a 10-per-cent reduction in taxes this year and proposed a phase-in of further tax reductions. Council refused to lower taxes for 2002 and sent the issue back to staff for a study, which comes back to council next week. Council will be looking at comparables, like whether or not a concentration of people in one apartment building is a bigger drain on city services than the same number of people in single family houses, Meunier said.

Councillors will also want assurances that if they lower apartment taxes, the savings will be passed on to residents.

"We have some guarantees from the landlords, but they are not absolute," Meunier said.

The city is required to notify tenants of a tax decrease, but only if it amounts to more than 2.5 per cent. But the landlords, from Lory Kaufman who speaks for the Multi-residential Landlords and Tenants Association, to big owners like Homestead, say the sole purpose of their lobby effort is to achieve fairness for the tenants.

Tax breaks will be passed on, regardless of the amount, landlords say.

"We’re not trying to find some loophole here, it was the association that pointed this out to the city in the first place," Kaufman said. "We also urged city staff to make sure the reduction was big enough to mean a mandatory letter."

The landlords argue that the benefit to them is a stable industry.

Ontario’s affordable housing crunch is hitting building owners as hard as it is hitting low-income tenants, they say. Evictions are on the rise and for every dollar in unpaid rent, banks are devaluing rental properties tenfold, landlords say. That is making it increasingly difficult to get mortgage money and maintain buildings.

"What the landlords are trying to do is strengthen our industry," Kaufman said.

There are tax inequities among apartment buildings. Condominiums are charged the same taxes as houses. City council has also given a break to new apartment buildings in the form of an eight-year period of paying taxes at the residential rate. At the end of eight years, however, the taxes jump, in one leap, to the multi-residential rate.

An immediate tax cut for apartments would also reduce pressure on councillors to come up with an affordable housing strategy, says Jay Abramsky, president of Keystone Property Management. "If they don’t help us, then they’re going to have to deliver themselves."

Evelyn King, of Kingston’s Low Income Needs Coalition, says the current tax structure puts the city’s poorest families in the position of subsidizing homeowners.

"I think most people have that general idea," King said. "But once the landlords start this, then the residential people will get ticked off because it means they’ll have to pay more."

The Low Income Needs Coalition and the Social Planning Council have been trying to get the city moving on an affordable housing strategy for a very long time, King said, adding that a rent reduction, the result of a tax reduction to building owners, would provide some much-needed relief.

"There are many tenants in this city that are in dire straits and really suffering because money can only stretch so far," King said, citing increased utility costs, insurance costs and rent increases.

"The elastic has gone out of peoples’ incomes." With more people homeless, increasing numbers close to eviction because tenants can’t meet their rent and utility payments and winter coming, city council must provide immediate affordable housing relief in some form, King said.

"An affordable housing strategy can’t wait. We’ve been deferring it for years and it can’t be put off any longer."

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