The Ontario government proposed new legislation last week to freeze rents in 2021 for residential tenants. Bill 204, Helping Tenants and Small Businesses Act, 2020 makes an amendment to the Residential Tenancies Act (RTA) to temporarily freeze rent increases between January 1, 2021 and December 31, 2021, with some major exceptions that will continue to allow landlords to raise rents next year. Bill 204 makes void any notice of rent increase that takes effect in 2021 – including those issued in 2020. Landlords are permitted to give a notice of rent increase in 2021, as long as the increased rent will start in 2022, although some rent increases in 2021 are permitted under the Bill.
After months of pressuring the province to introduce policies that will support tenants during the pandemic crisis, this Bill is a minor step forward. But, Bill 204 does not nearly go far enough in protecting tenants with the immediate issues they are facing and to keep them housed.
The Good: Freeze on Rent Guideline, 2018 Rent Exemption Inclusion and Cap on Social Housing Rents
Currently, the RTA allows private landlords in Ontario to increase the rent for most sitting tenants, once a year, by an annual rent guideline that the government announces every August based on the Consumer Price Index. At the end of August, the government was obliged by law to announce the rent guideline increase, which was set to 1.5%. This would have meant that if you pay $1,000 in rent for your apartment, your rent for 2021 would increase to $1,015. The proposed legislation will not allow the landlord to raise your rent by $15 a month in 2021.
Bill 204 will also temporarily freeze rents for units first occupied after November 15, 2018. Not all sitting tenants in Ontario are protected by the annual rent increase guideline after the Ford government, as one of its first acts, removed rent increase protection for tenants who moved into a rental housing unit that was first occupied as a residential unit after November 15, 2018. This means the landlord could raise the rent annually for this tenant by as much as they wanted. For instance, if you pay $1000 in rent for a new affordable basement apartment, your rent could be raised by $300 (instead of $15 if it was rent controlled), and instantly become unaffordable. Many tenants facing these unlimited rent increases are forced to move – what is called an “economic eviction”.
The other group of tenants that will benefit from this Bill are those living in social and non-profit housing, including tenants who pay a Rent-Geared-to-Income (RGI) rent. Their RGI rent will be capped for 2021, even if their income increases.
By law, the landlord must wait 12 months between rent increases. Since an annual rent increase can happen throughout the year, the rent freeze will benefit tenants whose annual rent increase happens at the beginning of the year. But if your rent increase happens at the end of the year, this will hardly be a benefit. We urge the government to amend Bill 204 to have the rent freeze become effective one year after the tenant’s last annual increase and to extend the freeze for 24 months.
The Bad: Above-Guideline Rent Increases are allowed
One of the major shortcomings of Bill 204 is it allows landlords to apply and collect above-guideline increases (AGIs). An AGI is a rent increase that is more than the permitted annual guideline increase, which the landlord must apply for at the Landlord and Tenant Board (LTB). AGIs are to pay for capital expenses like major repairs, renovations, replacements or additions that are not part of normal ongoing maintenance. Other reasons why AGIs may be permitted is to pay for an unusually high increase in municipal taxes and charges, or for the cost of security services. This means that if you pay $1000 in rent for your apartment and the LTB grants a 9% AGI to your landlord (applied over 3 years), your rent will increase by $30 each year, which is in addition to the annual rent increase guideline. The proposed legislation will allow for most AGIs during the rent freeze period, except for those based on increases in municipal taxes and charges. Low-income tenants living in apartment towers are disproportionately impacted by AGI rent increases, like seniors living on fixed pension incomes.
Not only does the Bill allow for a rent increase, but it also overlooks one of the main problems with AGIs: in practice, many landlords neglect their buildings and allow tenants’ homes to fall into a state of disrepair (while collecting full rent), and then apply for an AGI as a capital expense to off-load the now over-due maintenance and repair expenses onto their tenants.
This significant exemption to the proposed rent freeze overwhelmingly benefits large corporate landlords with financial resources to weather the storm. Some of these corporate landlords already have received approvals for their AGI rent increases from the LTB and will be allowed to apply for more AGI rent increases in 2021. We urge the government to revise Bill 204 to include a freeze on all rent increases including those permitted through AGIs.
The proposed legislation also permits a rent increase where a landlord and tenant mutually agree upon an increase in rent in exchange for an extra service such as parking space, storage space or on a specific renovation outside the landlord’s obligation to repair.
The Missing: Protecting Tenants from Evictions and Rent Gouging
The major flaw and short-sightedness of Bill 204 is its inability to help tenants through an adequate response to the root cause of tenants’ rental housing issues: allowing for vacancy decontrol to continue where landlords rent gouge on tenant turnover. Ontario landlords are incentivized to kick out their sitting tenants to reap increased profits from a new tenant. We urge the government to revise the Bill to eliminate rent gouging laws and to provide meaningful support to tenants in these unprecedented times. Tenants experiencing financial difficulties during the pandemic crisis should not be forced out of their homes.
We also call on the Ontario government to reinstate the eviction moratorium. While Bill 204 prohibits evictions for commercial properties, it continues to allow the LTB to churn out eviction orders and for the Sheriff’s Office to continue kicking people out of their homes. The pandemic is far from over, and tenants need to know that they have a stable home as we move into the colder months.