1974 Legislative Session: 4th Session, 30th Parliament

HANSARD

The following electronic version is for informational purposes

only.

The printed version remains the official version.

Official Report of

DEBATES OF THE LEGISLATIVE ASSEMBLY

(Hansard)

FRIDAY, NOVEMBER 8, 1974

Morning Sitting

[ Page

4577 ]

CONTENTS

Routine proceedings

Landlord and Tenant Amendment Act , 1974 (No. 2) (Bill

169)

Second reading.

Mr. Gibson — 4577

Hon. Mr. Nicolson — 4586

Mr. Wallace — 4588

Mr. Schroede — 4596

Mr. McGeer — 4600

Mr. Smith — 4600

FRIDAY, NOVEMBER 8, 1974

The House met at 10 a.m.

Prayers.

MR. SPEAKER: Hon. Members, there will be a public

service war memorial ceremony on the rotunda of the legislative

building at 4 o'clock this afternoon for those who are able to

attend.

HON. G.R. LEA (Minister Of Highways): Mr. Speaker, it gives me a great deal of pleasure today because I don't get

this pleasure too often — the schools within my district being

so far away from the capital — to introduce to you a group of

students from Booth Memorial school in Prince Rupert,

accompanied by their teacher, David Hobson, who I am sure is

familiar to a great many of us in this House as a defeated NDP

candidate in the last election. So I'd ask the House to welcome

both the students and Mr. Hobson.

MRS. D. WEBSTER (Vancouver South): Mr. Speaker, this

morning in a brief ceremony I became an honorary member of the

St. Mathias scout troop. I was presented with this neckerchief

which contains the St. Mathias crest, the troop crest and a

centennial badge on it. I would like this assembly to welcome

my fellow troopers and their sponsor, Mr. Sharon and Scout

Master, Mr. Hayward.

I would also like to say that they wanted me to pass on a

message to our Premier to thank him heartily for the fine

cooperation he showed in making their scout jamboree last

summer a huge success.

HON. D. BARRETT (Premier): Mr. Speaker, while I

accept the very kind words of the Hon. Member for Vancouver

South, the real credit for assisting in that jamboree with the

scouts administration was our Provincial Secretary. I ask the

House to recognize that.

MR. SPEAKER: We always knew the Hon. Member for

Vancouver South was a good scout, but now we find out she's a

good trooper.

MR. H.A. CURTIS (Saanich And The Islands): Mr.

Speaker, with us today in the gallery are students from

Claremont Senior Secondary School, accompanied by their

teacher, Mr. McCue. I would ask the House to welcome them.

Orders of the day.

HON. E.E. DAILLY (Minister Of Education): Public bills and orders, Mr.

Speaker, Adjourned debate on Bill 169.

LANDLORD AND TENANT AMENDMENT

ACT, 1974 (No. 2)

(continued)

Mr. Speaker: The Hon. Member for North

Vancouver–Capilano adjourned the debate. I must ask this: is he

speaking as a delegated speaker or as only one of the

group?

Mr. G.F. Gibson (North Vancouver–Capilano): Mr.

Speaker, I think that perhaps that decision should be made at

the 4ist minute.

Mr. Speaker: Well, we may not know when the 4ist

minute is if we pursue that line. I think the idea of

designation is so that we do know in advance.

Mr. Gibson: On a point of order, Mr. Speaker, it

seems to me that's quite an important question to attempt to

settle in this particular case.

Mr. Speaker: Well, then, I'll go on the assumption

that it's going to be a 40-minute speech of which you have some

time left.

Mr. Gibson: Thank you, Mr. Speaker.

Interjection.

Mr. Speaker: Would you like a time clock? I thought

that would be rather inconvenient for you.

Interjection.

Mr. Gibson: And should it be, Mr. Speaker, I would

suggest that, if my remarks do take longer than the allocated

time, then at that stage I would become the designated

speaker.

Mr. Speaker: As I have from my notes, you started at

10:40 last evening and you concluded at 10:53. I think we can

calculate where 40 minutes ends from that if we start the clock

now.

Mr. Gibson: I'd like to commence today, Mr. Speaker,

by paying tribute to the brilliant red vest of the Minister of

Mines and Petroleum Resources (Hon. Mr. Nimsick). It's a

pleasure to see that he's transferred his Robin Hood tendencies

from his philosophy to his sartorial splendour. It's a lovely

thing to see.

Hon. D. Barrett (Premier): Please explain to us what

that means.

Mr. Gibson: The Minister understood, Mr.

[ Page 4578 ]

Premier.

Last night, Mr. Speaker, at the hour of adjournment, I had

been speaking of the severe difficulty in the supply situation

and, in particular, the fact that new housing is simply not

being constructed. At that time I was quoting from quite a

comprehensive report on the subject in the Vancouver Sun

by Mr. Neale Adams. He had quoted Mr. Robin Burns, the

statistician of the CMHC in Vancouver who said there's

virtually no new rental accommodation being started by private

developers. Then he had gone on to cite a survey done by city

planners of 3,400 apartment units being built or just completed

as of July I of this year.

Things have slowed down in my view since July I and in the

view of the housing-starts statistics. But even at that time,

of those 3,400 units, 1,400 were condominiums, 1,300 were for

senior citizens, 270 were what might be called luxury units and

out of the purview of the rent-control legislation, another 270

were hotels and motels and not really helpful to people seeking

rental accommodation — leaving only 142 so-called normal units

for rental accommodation being constructed at that time. This

has led to the fact that the vacancy rate, bad as it was at the

time of the passage of this Act, has become even worse, if

that's possible, in the meantime.

Now, Bill 105, which this Legislature passed earlier this

year, held out a promise to landlords that at least they would

have a chance under the old

part IV of that Act to justify

rental increases in excess of the government guideline if they

could prove that the costs were there and that they were

literally losing money. This was a promise; a promise in

legislation, a promise in the words of the Attorney-General

who, at page 4122 of Hansard , said this in reply to the

Hon. Member for South Peace River (Mr. Phillips):

I can assure the Hon. Member that the rentalsman will have the power to look at factors such as fair return

to the investor. In fact, under

section 28(l)(c), even in

housing which does not exist as rental housing at the present

time, somebody can come to the rentalsman and say: "Why should

I go into that field unless I have some assurance of a fair

return on my capital?" I would assume that would be something

better than first mortgage money because why put up a building

if all you're getting is the first mortgage rate? Put it out in

first mortgage. So he does have that flexibility.

If it is a case of existing buildings, the landlord can go

to the rentalsman and say: "I'm not receiving a fair return on

capital; I am justified to a rent increase which is more than

the percentage fixed for this particular year." He produces his

books. He would have some assistance from that office, I would

think.

Mr. Speaker, that constitutes a promise of this government, and the legislation

constitutes a promise of this Legislature, that it would be possible to have

justifiable cost increases considered. This bill breaks that promise.

This bill proposes something called a rental review agency,

and at the same time takes away the power to review rents. It

removes a power to review rents that are in the existing Act.

It breaks a promise of the government that there would be a

chance to justify cost increases.

We have to consider that broken promise as important because

once a promise is broken in a field once, people who have to

deal with the government in that field remember it. We have to

come back to that when we talk about the so-called 5-year rent

control holiday that this bill also provides, because who can

trust that promise either?

This Act establishes rent control; it doesn't establish

rental review. It is poorly named. It establishes rent control,

pure and simple. It says that you cannot go over a certain

figure of 10.6 per cent, plus renovations.

As far as I can see, the 10.6 per cent figure came right out

of the air. And as the Attorney-General knows, because the

anniversary dates stretch over a full year, in fact, the

average increase over the period of 1975 will be 5.3 per cent.

That is, perhaps, a technicality, but it's an important

technicality.

The proposal for a five-year rent-control-free period for

new rental housing, to the extent it works, will create a

two-price system in the housing field which will lead to very

serious effects that I'll get into later.

This bill ignores the consultant's report almost totally — to the point where I wonder if the Attorney-General, Members of

the government and backbench NDP Members can have, in fact,

read it. Make no mistake, Mr. Speaker, this bill injures

tenants.

I want to quote a few matters from the Cragg report bearing

directly on the subject we are debating today.

Dr. Cragg says: "Rent controls deservedly has a poor

reputation. There are a number of areas" — we have examples — "where it has proved to be a disaster." But he offers some hope

- he says: "But it is not clear that this need be the case." I

want to be fair in that quotation. He goes on, and I will

detail the ways in which he goes on to suggest ways in which

this need not be the case.

A rental review, which is not provided by this bill, is an

essential concomitant of that. In particular he states that

rent control won't work in one particular area, which is the

area the Attorney-General's trying to serve. He notes these

three objectives; objectives that rent control might pursue can

be categorized under three broad headings:

(1) Maintaining on a broad general scale, rents that are

lower than they would be otherwise.

(2) Prevention of gouging.

(3) Provision of a more orderly market for rental

[ Page 4579 ]

accommodation.

He says that whatever the merits of the desire to provide

housing at a lower cost to the tenant, it is highly unlikely

that rent control is a suitable vehicle for doing so. The

attempt to use rent control for this objective is probably the

main reason for its More spectacular failures.

He goes on later to deal with supply questions, and says

this:

"It will be noted that these undesirable features, namely

low vacancy rates and so on, arise only if landlords are not

making an adequate return on their capital under rent

control.

"If it is true that landlords in general are reaping and can

expect to reap profits in excess of those needed to induce them

to provide housing, then rent control might be used to remove

this excess amount safely."

That, Mr. Attorney-General, is one of the very strict

conditions which Dr. Cragg puts on the useful application of

rent control. He notes that there can be little presumption of

excess profits being earned generally in rental housing at the

moment.

He has something to say specifically about the aspect of the

bill exempting new construction:

"The approach of exempting new construction, while it might

be effective, is likely to have other effects that are

undesirable. Rent control premises would be less expensive and

more difficult to obtain than new ones, and the payment of key

money would be likely.

"New migrants and persons setting up homes would likely be

forced into the new construction whose rents would tend to be

higher than if there were no rent controls. Tenants whose

housing needs have changed would be reluctant to move because

of the difficulty of finding suitable controlled premises, so

that those for whom those premises were suitable also could not

obtain them."

Mr. Speaker, that is one of the most succinct statements I

have heard of the difficulties of a two-price system. To the

extent that the five-year control holiday on new construction

did produce it, what would we have?

First of all, we would have people going into that market

who could look down the road only five years. So in all

probability they would have an incentive to get their money out

as quickly as possible, even if they could really trust that

five years, which is another question. Therefore, rents would

be high.

Interjection.

Mr. Gibson: Mr. Speaker, the Attorney-General is suggesting that there

would be more competition at that higher level of rent. That might well be the

case, sir, but the rents would still be higher — that's the point I'm making.

That's the only point I'm trying to make.

HON. D.G. COCKE (Minister of Health): The point you're making is that you want it right across

the board.

Mr. Gibson: I'll come to that later, Mr.

Minister.

People would try to get their money out in five years, so

the rents would be high, and with today's vacancy rates, that

is all that new entrants into the housing market could hope

for.

Who are new entrants into the housing market? They are young

people just forming a family, often with limited income,

although sometimes both parties are working, in which case they

can afford more. But then children come along and costs rise

again. Often one of the partners ceases to work and they still

need rental accommodation. They are also old people who have

chosen to move out of their homes and into an apartment. They

now find they can't do so because the costs of new apartments

are so high.

This has the following effect: it ties up existing

accommodation suitable for families, for persons whose children

have grown up and would like to leave, can't afford to leave

because they can't get a reasonably priced apartment. It ties

up that kind of accommodation.

Let's look a little further down the road. Let's imagine we

have two kinds of buildings in existence: a controlled and an

uncontrolled; a high-rent situation, you wouldn't want to move

because you would know you couldn't find one of those again. If

you could, it might well cost you some key money, whether that

were illegal or not, because these things happen in other

countries with rent controls.

So you have a very strong incentive to stay where you are.

That means that if you are currently living in the West End and

working in downtown Vancouver and you get a job out in Surrey,

you have to stay in the West End because you can't find

anything to rent out in Surrey at a reasonable price. Then

somebody in Surrey who used to work out there and was renting

an apartment, gets a job downtown, can't get an apartment in

the West End because you aren't ready to move. You have

identical problems and there is no way of matching them up, as

can be done in a free-market situation. It leads to very

pernicious results.

So much for the objective of trying to provide rental

housing at a lower cost than would otherwise be the case. Dr.

Cragg said that is not a feasible objective of rent

controls.

He goes on to say that prevention of gouging is a more

feasible objective of rent control, and says just

[ Page 4580 ]

how this should be done. It should be done by the provisions

of the existing Act, which this bill asks us to repeal — throw

out the window.

"The provisions of

section 28" — that is the existing Act — "appear to make it very suitable for controlling new or

increased gouging. The allowable rent increase can be used as

an indication of general market increases within which there

would be no presumption of additional gouging. Further

increases justified by landlords' costs might also not be

considered gouging.

"The feature that tenants have to initiate review

proceedings can be justified on the grounds that gouging may

not be considered serious if the occupant is not sufficiently

concerned to protest, or if he is willing to pay the rent

before he is moved in."

In other words, the existing legislation, the legislation we

are being asked to, in effect, destroy by this bill, has the

capacity to prevent gouging, which I know that the

Attorney-General is very properly concerned with.

Professor Cragg goes to discuss ways of evaluating

individual rent increases. He goes into some detail as to how

the expenses of the landlord should be considered in

legitimately setting those justifiable increases.

He is not awfully sympathetic to the landlord, I should add,

Mr. Speaker. For example, he excludes from current expenses

some things that many of us would say should be in current

expenses. He speaks specifically of mortgage or other

interests, amortization expenses, depreciation allowances,

contingency reserve fund increases — even capital-use taxes.

That is not a particularly sympathetic item for the landlord,

nor is his proposed treatment of inflation.

He suggests, in fact, that projected inflation should be

ignored and that the landlord should bear that cost. He sees

that as a way of cushioning the shock of inflation on the

tenants. So that's how he treats current expenses, quite

strictly.

Now we come to what is really the core of the problem: the

treatment of capital expenses, and the one that the

Attorney-General has zeroed in on as a vexing problem. Let's

talk a bit about the solution he proposes.

First of all, to set the stage with Dr. Cragg — and I might

say that there are two ways you can approach this capital

question. There's a historic-cost approach. In other words, how

much did the structure cost? Or there's a market-value approach — a present-worth approach.

Dr. Cragg:

"The problem with a historic-cost approach to capital expenses

is that very wide variations in rent would arise from historical accidents in

the acquisition and finance of buildings which have no relation to the housing

and services being provided to tenants.

"There can be little to be said for an approach that would

produce radically different rents for the same premises,

depending on whether the owner actually purchased in one year

or another, or whether at that time he decided on a large or

small mortgage, or whether he was able to secure favourable or

unfavourable mortgage terms.

"Furthermore, adoption of such an approach would encourage

selling or transfer of buildings among owners to then justify

higher rents. Any attempt to block such efforts would almost

certainly produce difficulties for the legitimate sale of

rental premises.

"Even legitimate sales would produce a totally anomalous

increase in rent. Such an approach would then have in it either

the possibility of justifying totally outrageous rent

increases, or of locking capital firmly into rental

accommodation, an outcome hardly likely to attract new capital

even if it were to be initially exempt from the controls.

"A quite different approach is to evaluate the capital in

housing on the basis of its present worth."

Dr. Cragg recommends that present worth.

Let's go back to that historic-cost situation, which the

Attorney-General likes, and look again at that conclusion that

there are just two possible effects. The approach would either

justify outrageous rent increases when premises were properly

sold, or it would lock capital in, which, as Dr. Cragg points

out, would certainly not attract new capital into the rental

housing field, and that's what we need. The historic-cost

approach has to be rejected. We have to take the market

approach and we have to find ways to cushion the impact of that

market approach.

Dr. Cragg has something to say about rate of return:

"Having established the capital figure to be used, the next

problem is what rate of return on the capital can be considered

reasonable. There's no social consensus on what a fair rate of

return is.

"Furthermore, with the programme applying to only use of

capital, and that in only a small part of the capital market,

it would be odd to use such a figure. Instead one can base the

rate on what is, or should be, required to induce capital into

rental housing. That is, a reasonable cost for capital can be

based on the returns the capital would be expected to earn in

other uses."

The figure Dr. Cragg comes up with after that analysis is

about 14 per cent. That coincides quite

[ Page 4581 ]

well with the Attorney-General's analysis of something over

first mortgage interest rates as a fair rate of return, in his

remarks on Bill 105 earlier on this year.

Dr. Cragg's proposed treatment of capital costs and capital

gains is interesting because it's of benefit to the tenants in

the form of computation. He says:

'The alternative and recommended procedure is to include

capital gains among the returns to capital being considered to

offset the reasonable capital expenses based on use of the

current mortgage interest rate."

"It has the feature that where the market values are rising

faster than usual because of speculation, that in the future a

profitable alternative use of the property will be available,

lower rents would be justified relative to a scheme that based

them only the rate of return being earned from rents."

In other words, if the person setting the justifiable rent

increase could look down the road and say: "The value of this

building or this property is increasing very quickly" then they

would say to the landlord: "You can only justify a much lesser

rent than would otherwise be the case." That is one solution of

the present-worth problem in this question.

Dr. Cragg then goes through a large amount of detailed

calculation about allowable rent increases — which I won't get

into.

Interjection.

Mr. Gibson: Mr. Minister, I'd be very glad to

describe it to you in detail, if you wish.

Hon. A.B MacDonald (Attorney-General): Would you explain the

formula on page 43 (Laughter) and tell me whether you agree

with it?

Mr. Gibson: There is no formula on page 43, as it

happens, but there are some others.

As a kind of a

summary of the approach, though what he did

was as follows:

"The basic approach taken was to assume that, on average,

the rent and cost structure in a particular base year were

appropriate. The year chosen was 1972, at a time when

inflationary movements were considerably less than at present

and the vacancy rate was at levels more nearly likely to be

indicative of balance between supply and demand."

Incidentally, Mr. Speaker, I don't know if the

Attorney-General has separate data on the adequacy or propriety

of rates of return in 1972. I can't find them in the report,

but we'll just for the moment have to take it at face value.

Dr. Cragg goes on to say:

"The pattern of current expenses for that year was then

used in conjunction with valuation of changes that have since occurred to estimate

an average increase in cost. Similarly the increase in the cost of the real

capital was assessed. Assuming that returns in 1972 were appropriate, the calculation

then gives an estimate of general rent increases that would give this same rate

of return."

That's the approach he took to develop the numbers that were

given such publicity, properly, in the description of his

report.

Mr. Speaker: Excuse me, Hon. Member. If you are not

the designated speaker, then you have two minutes left.

Mr. Gibson: Thank you, Mr. Speaker. I think at this

point I become the designated speaker. (Laughter.) I wasn't

sure how long this was going to take.

Hon. L. Nicolson (Minister of Housing): Mr. Speaker,

on a point of order. I think we are setting a precedent here. I

think this should be given very careful consideration before we

embark upon such a procedure.

An Hon. Member: Right on.

Hon. Mr. Nicolson: I think that such a thing should

be declared at the outset. I would wish, if you allow this to

go on, that it not be considered precedent, but that you give

it your usual careful consideration and give us some

ruling.

Mr. Speaker: May I interrupt just to say that it

occurs to me that one would expect the concurrence of the

leader of the caucus groups to be known, if such is the case.

In other words, I wouldn't want to see a conflict develop, and

I would assume that when a Hon. Member states that he is the

designated Member, he is doing so with the full cooperation of

his leader. I assume that to be the case.

But I do feel that it would be more appropriate if each

person who was the designated person, rather than the leader,

states so at the commencement of his address so that we know

what we are timing, or if we're timing at all in that case.

Hon. Mr. Cocke: It's been a precedent in the House,

whether it's been law….it's been precedence that the first

speaker of any party is normally the designated speaker.

Mr. D.A. Anderson (Victoria): We've never had

designated time before.

Hon. Mr. Cocke: I would suggest that if not otherwise

identified, that should be the designated

[ Page 4582 ]

speaker. He takes his chances unless there is….

Mr. Speaker: Perhaps a simpler way out would be to

ask the party leaders to consult, either with each other or

with their respective groups, and indicate to me what procedure

they would think would be applicable, because I think it should

be done in a way that is agreeable to the House.

Mr. D.A. Anderson: Mr. Speaker, I would be delighted

to consult with you and the other party leaders on this

point.

Mr. Speaker: Thank you. In the meantime, without

prejudice, shall we say, the Hon. Member stated that he is the

designated speaker.

Interjections.

Mr. Speaker: Order, please!

Mr. Gibson: It took so long to prepare and to have

access to the Cragg report that it was a little difficult to

predict how long any individual talk was going to be.

Carrying on with Dr. Cragg's analysis of expenses and

revenues, he comes to the interesting conclusion that only a

bit over one-third of revenues goes to meet current expenses — that net of capital maintenance expenditures. When you add

those in it comes up to something like 42 or 44 per cent, and I

think that's a useful benchmark or rule of thumb to keep in

mind when looking at apartment costs. The rest of the revenue

goes to capital items — capital costs or returns to

capital.

He considers the returns to capital in the apartment

industry, again based on replacement or market value, and finds

them to have ranged between 4 and 5 per cent — a little over 5

per cent in some cases — in 1973 and 1974. That figure, I

believe, needs more analysis, but is an interesting one.

He looks at the capital-cost indexes — the way in which the

cost of construction in the rental housing field has gone up

since 1972. These — figures are literally terrifying. The cost

of land has been bad enough. It went up from an index number of

100 in 1972, to 117 in 1973, and 128 in 1974.

But it is the cost of construction, namely materials and

labour, which is the incredible one, which went from an index

number of 100 in 1972 to 118 in 1973, and 160, Mr. Speaker, in

1974. That's a jump of 60 per cent over two years, or 36 per

cent in the last year alone. It is this kind of figure which is

producing the capital cost trends that so concern the

Attorney-General.

Clearly one of the things we have to look at is how to, if not get the cost

of apartment construction down, at least in some way control them. Dr. Cragg

gives at page 71 a good assessment of how current operating expenditures — which,

you may recall, relate to in this case some 44 per cent, because he includes

repairs and maintenance — how current operating expenditures have gone up over

the last year. They have gone up from an index number of 108.6 in 1973 to 126.3

in 1974 overall. So that would be something, I suppose, like 15 per cent on

that portion of the expenses of apartments that relates to current operating

expenses — as I say, some 44 per cent.

Some of the individual items are incredible. There has been,

for example, an increase of over 25 per cent in the cost of

heating apartments. Summarizing that point, Dr. Cragg says as

follows:

"It will be noticed that with the important exception of

property taxes and replacement estimated on the basis of

indexes, the increases estimated over the two-year period from

1972 are higher than the increase in the consumer price index.

This pattern of larger increases is concentrated in the most

recent year, while 1973 saw a pattern of increases more

balanced around the overall rate of inflation.

"The most dramatic increases apart from those stemming from

the construction cost calculations are in heating and in

caretaker services. The first reflects the very large increase

in energy costs that have occurred."

Those are costs directly, in some cases, under the control of the government, I might add, Mr. Speaker.

The second is a reflection of the estimated effects of changes in

minimum wage provisions affecting apartment building caretakers. It

notes that:

"The combined effect of all these changes is shown in the

last line on table 10. It is estimated that the increase in

1973 was 8.6 per cent, with a further increase of 16.3 per cent

for 1974. The latter is more than five percentage points above

the increase in the general price level."

Dr. Cragg then goes on to speak of what he believes should

be the allowable rent increase, and he develops a number of

figures which Hon. Members may or may not be familiar with. I

would just like to cite some of them.

"The implications of the capital cost and current cost

investigations for rent increases are dramatic and extremely

disturbing. If one assumes that cost changes in one year will

be reflected in the coming year's rents, and that the returns

on capital in 1972 were appropriate, the cost changes in the

last two years would lead to the rent increases shown in the

first panel of table 1."

There the first line recorded a total cost index as calculated; the second,

the percentage rent increase implied. For 1975 the figure would be 23.4 per

cent.

[ Page

4583 ]

"This figure, however, presupposes that rents in 1974 are

rising by 13.8 per cent, when in fact they were restricted to

being not more than 8 per cent by the legislation. Taking this

into account leads to a 30 per cent rent increase."

This is how the famous 30 per cent figure has been arrived

at. Dr. Cragg comments on it:

"There is no doubt that this is an enormous increase. It

cannot be taken as meaning that allowable rent increases should

be 30 per cent or that without a rent control programme rents

would rise 30 per cent. What it does indicate is that the

changes in costs which have been occurring in the last two

years imply that rents will have to rise by roughly 30 per cent

to restore the apartment-renting industry to the same position

as found in 1972 before any account is taken of any further

cost increases that may occur."

So that is the dilemma that the Attorney-General faces, that

this government faces, that this House faces. Dr. Cragg's

figures, as he is at great pains to point out all through this

report, may be high or they may be low, but the general pattern

is there. Dr. Cragg has looked for various ways of spreading

these increases, whether over two years or whether over three

years. He comes out with various figures. The lowest one that

he thinks would have any effectiveness is 16 per cent, and he

comes up with much higher ones, depending on what objective

this House wishes to reach.

Then he comes to his

summary and conclusions. "The main

findings of this study are easily summarized. Very large cost

increases have occurred in the last two years in rental

housing."

That's cost increases.

"Various changes in the circumstances in this period have

produced an estimated increase of 44.4 per cent in the economic

cost of providing rental accommodation. This increase has

doubled the rate of inflation over the period. The increase in

rents needed to compensate fully for the cost changes is

estimated to be 30 per cent, given the 8 per cent increase in

"Such a large rent increase for most rental accommodation

without specific justification might well appear unreasonable,

indeed outrageous. It is not suggested that the allowable rent

increase be 30 per cent. Instead it is suggested that the

effects of dramatic changes should be spread over time."

He notes that doing so on a moderate basis would still give

an allowable rent increase of 21.2 per cent, and a more extreme

form of distribution over time would produce a figure of 16 per

cent.

Mr. Speaker, what is the impact of this figure: "an allowable rent increase?"

It is the trigger point, if you like. It is the point below which an increase

under the existing legislation couldn't be challenged, and above which it would

have to be justified.

Dr. Cragg describes clearly the trade-offs involved in

administrative terms. If you have a low trigger point, a low

allowable rent increase, you have an enormous amount of

applications to go through the justification procedure,

because, in fact, there would be a good deal of justification

in many cases for going above that limit. Presumably this is

what has scared the Attorney-General off the rental review

mechanism.

He feels that they just wouldn't have been able to do it if

they set allowable rent increases at the rate he wanted it,

10.6 per cent. The Attorney-General suggests there might have

been 3,000 per month. But I suggest to the Attorney-General

that in the courts of law, if there are 3,000 appeals per month

and they are justifiable appeals, you simply have to set up the

machinery to do it if you want to have a just system. Indeed,

Mr. Attorney-General, through you, Mr. Speaker, you did set up

that machinery, to your credit — in

section 4 of the existing

Landlord and Tenant Act. Now you are destroying it. That is one

of the things I find unpardonable about this legislation. As

the Hon. Member for West Vancouver–Howe Sound (Mr. L.A.

Williams) says, you can't support that kind of thing.

The Attorney-General, and I don't want to misquote him, Mr.

Speaker, just said that we have lots of time, I think he meant,

to get to a better solution. I think the problem is more urgent

than that. I think the problem is right now, and I think the

government has defaulted in its duty in bringing in this piece

of legislation and not making the legislation they passed in

the spring work.

Hon. Mr. MacDonald: You're too impetuous.

Mr. Gibson: Continuing with Dr. Cragg:

"Another aspect of the background to the recommendation is

the shortage of rental accommodation that exists and the very

small amount of rental construction that is occurring. There is

an urgent need for more rental accommodation to be provided.

Failure to do so will impose major costs and hardships on many

actual and would-be tenants.

"Present conditions in the capital market and other

obstacles appear to be hindering new construction, quite apart

from rent control. However, one cannot expect the private

sector to provide housing if it cannot expect to earn an

adequate rate of return.

"At the heart of the rent increase dilemma is capital cost.

The capital cost concept

[ Page 4584 ]

underlying this study is opportunity cost, which is based on

rates of return that can be expected from other uses of capital.

"The increased costs of providing accommodation" — and this

is the

section the Attorney-General read last night — "imply

that large windfall capital gains can be expected to accrue to

the present owners of rental accommodation. Whether the present

taxation of such gains is adequate goes far beyond any

questions dealing with rental accommodation. However, attempts

to prevent such gains by rent control are likely to have very

serious consequences to the provision of housing and the

structure of rents."

Hon. Mr. MacDonald: I didn't read that.

Mr. Gibson: No, the Attorney-General didn't read that

last sentence yesterday.

"However, attempts to prevent such gains by rent control are

likely to have very serious consequences to the provision of

housing and the structure of rents."

No, but I wish you had read it, Mr. Attorney-General,

because it undercuts your whole case.

I suggest to you that in your concern about windfall capital

gains — incidentally, you gave no estimate of their magnitude

and neither, unfortunately, did Dr. Cragg — you are going to do

the most serious damage and hardship to actual and would-be

tenants in this province.

You have every right, if you wish, to look at the current

taxation of capital gains, as Dr. Cragg mentioned. Indeed, I

would suggest to you that the current taxation of capital gains

does a good deal to restore the equity with which you are

concerned. The current taxation on capital gains provides for something like a 25 per cent rate.

I would suggest to the Attorney-General that that rate in

inflationary times, and dealing with property, in fact works

out to a good deal more than 25 per cent on the

original investment. Much of the so-called capital gain on

which the tax is assessed occurs in inflated dollars.

Therefore, the marginal rate of tax on the original investment

is in fact much higher.

I think the Attorney-General should study that proposition

before getting so concerned about this particular point that he

allows it to cloud his vision to the point where he does damage

to the interests of tenants. Unquestionably, this is the

critical, central question in what we are talking about

here.

Mr. Speaker, I suggest to the Attorney-General that if he doesn't go the present-market

route for capital valuation, then he has three different things that might happen.

First of all, no new construction is one of the

alternatives, and that's what's happening now.

The second possibility is a two-price system to the extent

that the plan for a five-year tax rental period works, that it

is believed by the industry which would build these buildings,

and that there are people prepared to come in and say, "I can

get my money out in five years if I charge high enough rates."

That alternative's is not very pleasant either.

The third alternative is massive subsidies to

government-built housing, or the possibility of per-unit

capital grants. I want to come back to that in a bit.

I don't believe government-built housing to be the answer.

Apparently the government believes it to be the answer.

But I want to suggest to you, Mr. Attorney-General, that as

you are finding and as you well know, landlords are not popular

- not popular politically. That applies equally well to a

landlord that is a government as any other kind of landlord. If

you want to get into the business of having thousands and

thousands of tenants annoyed at you because of the latest

increase you have had to make or because of the inadequate

services you are providing, then I suggest you are doing

something that is not only improper economically but pretty

silly politically, too.

Interjections.

Mr. Gibson: What's needed, Mr. Minister of housing

(Hon. Mr. Nicolson), is to get some housing built, not for you

to build it.

Interjections.

Mr. Gibson: There's that Minister of Housing, Mr.

Speaker, making snippets of interjection into this debate, not

standing up and saying anything useful, in a year when we are

told that housing starts are down from 38,000 in

1973 to 28,000 in 1974.

That's talent. It's a talent for a brand new Minister of

Housing to be able to knock back housing starts in this

province by one-third in just one year in office.

Interjections.

Mr. Gibson: You just stand up later on and tell us

all about it, Mr. Minister. You just stand up and tell us all

about it.

Interjections.

Mr. Gibson: So, Mr. Attorney-General, I'm suggesting

that if you proceed with this legislation, tenants are going to

be faced with the following

[ Page 4585 ]

problems.

They are going to be faced with deterioration in buildings,

the absence of which is going to be difficult to enforce.

They're going to be faced with service cutbacks. I've received

many letters and I'm sure you've received many more from

tenants who say this service has been cut back and that is

being cut back.

In spite of any provisions in law you might put in, there's

going to be virtual imprisonment of people in their controlled

rental units if you move to a two-price system. They just won't

be able to afford to move anywhere else; they're going to be

stuck in that apartment.

The cost and assessments that are imposed on owner-occupied

dwelling are going to go up. This is one of the things that's

not widely understood yet. To the extent that apartments lose

their value because of rent control, the taxes effectively paid

by tenants to municipalities for the provision of services go

down, Those taxes must be found somewhere. They will be found

by an increasing in taxes on single-family dwellings and

condominiums. There's just no way around that.

And that's not the only impact. Unfortunately, the scarcer

that rental housing becomes, the more pressure is put on the

owner-occupied market. The more people who would have rented a

home and or apartment are forced into the purchase of a

condominium or the purchase of a house at high interest rates

in today's market, pushing up the prices there.

And all of this is a place British Columbia — that's growing

at 3.5 per cent a year. Lord knows, we have difficult enough

housing pressures to deal with without this kind of artificial

restraint on the market.

I'm suggesting that we need to get some rental housing

built, not this Act which will continue the virtual cessation

of rental housing construction which we've seen in this

province for the last few months. Mr. Attorney-General, if you

think you've got problems now, you just wait until the spring.

Things are going to get awfully hot for you when people find

that there's just no way they can get a place to rent. And if

you can't get a place to rent, it doesn't matter what the price

is that you can't rent it at.

I want to suggest to you that you should reorganize the

renters grant on a humane basis related to needs to help

cushion rental increases. Increase the amount available for it;

reorganize it and relate it to needs.

I want to suggest to you, secondly, that rent controls per

se are pernicious and that the whole system should be phased

out in between three and five years.

I want to suggest to you that the rental review system should be maintained

in the interim and the existing

part IV of the Act should stand. The rentalsman,

in his letter to you suggesting the setup of a different commission, made it

quite clear to me, at least, by implication that a rental review system is needed.

There's no rental review system in this legislation. There's just a rental review

system that's destroyed and taken out. What can be the possible sense of that?

Interjection.

Mr. Gibson: The Attorney-General says that's wrong.

Show me the

section here that provides for rental review. What

it provides for is the taking away of rental review that exists

right now.

Dr. Cragg has given you the data for it; you've had several

months to prepare. You could have had another two or three

months if you needed it. You didn't have to destroy it. We

should retain the rental review system in the interim of this

three-to-five-year phase out period of rent control.

Interjection.

Mr. Gibson: Mr. Attorney-General, now that you've dug

a hole that's put the Legislature very, very deep in this

situation, you have to use some of the ladders that are

provided to climb out. And you're chopping down one of those

ladders right now.

I beg you, Mr. Attorney-General, please don't start the

horror show of a two-price system in the rental accommodation

market. It's insanity. It won't work and it's bad to the extent

it does.

I don't think that people who would build apartment

buildings are going to trust you enough to invest in new

construction. I don't think they'll trust this five-year

rent-control holiday guarantee because they've just had one

guarantee pulled out from underneath them in just less than six

months. Why should they take a five-year guarantee when you can

change your mind every six months, and do?

But to the extent that construction does occur there, those

who build those buildings are going to say, "How can I get my

money out in five years?" That means very high rents for this

new construction.

Instead, Mr. Attorney-General, why don't you look at the

possibility of encouraging construction in other ways? Why

don't you look at the possibility of making capital

construction grants to those who would build apartments in

return for a negotiated scale of rents which would be

reasonable? Why don't you look at that?

Interjection.

Mr. Gibson: Why aren't you doing it? Why aren't you

doing it right now? That's the answer, instead of going through

this song and dance. In the end, Mr. Speaker, what has to be

done is to build more apartments. It's just that simple. This

should be called

[ Page 4586 ]

"An Act to Provide for the Non-building of Apartments in

British Columbia," because that's what it is.

We're in a critical situation. Mr. Speaker, this Act is

stupidity of the highest order. If it was stupidity that was

understood, it would be criminal stupidity. Why can't that

party learn from the real world sometimes, and abandon its

dogma sometimes, and work for the benefit of the people it says

it's concerned about — the tenants who need the apartments that

aren't being built?

Mr. Speaker, this is more than depressing legislation; it's

legislation that's working against the interests of every

tenant and would-be tenant in British Columbia over the long

run. I very strongly oppose it, and I ask this House to do so

as well.

Mr. Speaker: The Hon. Minister of Housing.

Hon. L. Nicolson (Minister of Housing): Mr. Speaker,

we've listened to a lot of rather shallow debate, erroneous

debate, half-truths. I think that one of the things we should

do, first of all, is look at how the present housing crisis

perhaps came about, particularly in the rental sector.

It was federal government policy, Liberal government policy,

with whom that previous speaker was closely associated, that

had income tax loopholes which encouraged professionals, people

with a little bit of surplus cash to invest in apartment

dwellings, to postpone income taxes to the later years and, in

effect, funneled subsidies to rental housing through the hands

of doctors, lawyers, dentists, and maybe schoolteachers.

Mr. G.S. Wallace (Oak Bay): The Premier supported that in

this House.

Hon. Mr. Nicolson: That's right. And what was the

effect of that policy?

Interjections.

Hon. Mr. Nicolson: Well, let's talk about why we

supported it later, the continuance of that…. The Liberals,

having gotten us into this mess….

Interjections.

Hon. Mr. Nicolson: I'll explain it. Having created this, where this

type of investment became 20 per cent, 40 per cent and then perhaps about 80

per cent of the rental accommodation, having done that, and then having completely

discouraged the corporate sector, which could no longer compete with these subsidies,

they then withdrew the subsidy and left 80 per cent, approximately, and that's

very rough — that's open to debate — but they left this very large sector, this

very important sector of the rental housing market completely unsubstantiated,

because these people had no incentive to try to collect a fair return on their

investment; they we subsidized to such an extent.

At the same time, the corporate sector had been discouraged.

Now what has been the history? We heard talk by other previous

speakers that the corporate sector has been discouraged by our

policies. Is that why the president of Abbey Glen, formerly

Western Realty, which is a British interest, has moved from

Calgary to Vancouver? Is he that discouraged about the prospect

here?

In fact, Mr. Speaker, there are vacancies there because of

shutdowns in the oil industry. I know that executive homes

there can't be sold. There's a tremendous surplus there.

Interjections.

Hon. Mr. Nicolson: These are some of the facts. They

say that housing starts have slowed down here in British

Columbia. Well, of course they've slowed down. The federal

government has used housing in the fight against inflation.

They've increased mortgage interest rates, not just

selectively. They've just cut down on housing and rental

accommodation as much as they have on anything else. The fact

is that right now we have 15,000 dwelling units in planning or

construction, the majority of them in planning, but significant

numbers under construction.

Through our initiative I can say that our record is not as

bad as the Canadian average. While housing starts in Canada for

the first nine months of 1974 were off 13 per cent, ours were

only off 8.5 per cent; and I don't take too much consolation in

that. Housing starts in September, 1974, compared with 1973

were off 31.5 per cent for the whole of Canada, and off 8.5 per

cent in British Columbia.

How do the federal Liberals go about solving housing policy?

They offer a $500 grant, homeowner's grant, with no strings

attached. Our provincial government $1,000 homeowner grant

requires that it be repaid if somebody sells that home within

five years. But that is a straight giveaway.

They're offering to lower interest rates to the private

sector, and at the same time they have raised interest rates to

the public sector — for provinces in this country — from 8 per

cent to 10.6 per cent in less than one year. That's how the

federal Liberals, with whom that Member was very recently

associated, have been helping to solve the housing crisis.

We're trying to provide decent housing. I've looked at the

recent press coverage and people have been interviewed; Mr.

Doman has been interviewed at great length. But I ask the

press: have you phoned

[ Page 4587 ]

Henry Block? Have you phoned Jack Poole from Daon

Development? Have you phoned Walter Bethune from Abbey Glen?

Have you phoned Frank Stanzl from Stanzl Development? You phone

these people and you ask them what they think of this

legislation, not the doctors and the lawyers who have this

subsidy and went into this as a tax dodge.

You talk to the people who day in and day out in the private

sector are concerned with the provision of residential

accommodation. You get their opinion as to whether or not this

will stimulate the construction of housing units. Daon

Development alone is now renting 88 units in New Westminster,

60 units in White Rock, a 532-unit apartment complex in North

Vancouver; and a 281-suite complex is being currently let by a

firm here in Victoria.

Interjection.

Hon. Mr. Nicolson: Well, I heard that not one rental

unit had been built, and this is simply not true.

Mr. R. H. McClelland: (Langley): How many are under

construction in Victoria right now?

Hon. Mr. Nicolson: Well, as I say, there are 281 in

one project. It's going on the market about now.

Interjections.

Hon. Mr. Nicolson: Now I'm not surprised that some of

the people don't know that any housing is being built. You

know, I've been up in Boundary-Similkameen, and it's getting

embarrassing. I've been up there several times recently, and

Frank's uncle Paul said to say hello to him. I hope he's

listening, wherever he may be. But I'm sure he's not up in

Boundary-Similkameen.

Interjections.

Hon. Mr. Nicolson: Well, Mr. Speaker, they want to

know what this has to do with these things. I was up there to

open a housing development where his uncle Paul is living, and

it would have been nice if Frank could have been up there, you

know; it would have been nice. He was invited. He did send a

telegram, I believe. I was also up there to open about 80 units

of family housing in Penticton, and then I had to…. It's

getting to the point where we've got to have a designated

ribbon-cutter, because a couple of weeks later, we were up…

Interjections.

Hon. Mr. Nicolson: …to open several hundred units of senior citizen

housing in Penticton and also a recreational complex, with a one-third capital

grant provided by the Department of Recreation and Conservation.

Mr. J.R. Chabot (Columbia River): Get the Hon. Graham Lea

(Minister of Highways).

Hon. Mr. Nicolson: The list goes on to Grand Forks

with Mayor Robertson, and in other places like Fort St, John,

where there are 40 units of public family rental housing, or

places like Fort Nelson, where we're building mobile home parks

and we're servicing land, and we're building house for families

for BCANSI — and Chetwynd. There are homes being constructed in

Chetwynd, my friends, and I've just been talking with your

mayor this morning.

Interjections.

Hon. Mr. Nicolson: Oh, Mr. Speaker, 127 family rental

units out in Surrey, 176 on land leased out in Coquitlam, and….

Interjections, Hon. Mr. Nicolson: What about where? You know,

there's one way in which we can solve this, and it's something

that would be said if you listened to the Urban Development

Institute" there's one thing that will solve this if you were

to talk to the HUDAC — there's one major thing — and where the

major problem is…. It certainly is not in Penticton where we

have aggressive councils that are interested and stand

full-fledged behind housing. Where is the real trouble?

An Hon. Member: Oh, you hit it right there.

(Laughter.)

Hon. Mr. Nicolson: You know, there's been a lot of

walking around and changing parties within the free enterprise

sector, but here's a recent person who saw the light, Mr.

Speaker: " Vander Zalm admits Surrey dragging heels on

housing." I wonder, Mr. Speaker, if that self-ordained group

were to come back to power, would he be the new Minister of

Housing? Would he be put in there to drag, his heels as the

previous administration did for years and years? The best they

ever committed of Central Mortgage and Housing funds in any one

year was $23 million, and in one year we committed $73 million,

three times as much as that and almost as much as that outfit

dedicated in one decade.

Interjection.

Hon. Mr. Nicolson: Well, that could be, or would it

be that other Liberal turned Socred, perhaps

[ Page 4588 ]

mayor of the District of North Vancouver — and I wouldn't

want him to be confused with the mayor of the City of North

Vancouver, who sometimes takes a very aggressive stance — but

another of those people who have seen the light and know how to

drag their heels vis-à-vis housing?

So what are you people saying over there? Are you telling me

to go in and tell those municipalities, tell them that when

they demand, perhaps 200 square feet per unit more than what's

asked for in CMHC regulations — something that can cost an

extra $10,000 for a family housing unit that is supposed to be

aimed towards low income families; $10,000 because they feel

that an extra 200 square feet is the minimum that can be had in

that particular municipality — are you saying that I should go

in and impose CMHC standards as a maximum standard or maximum

standard in a designated area?

Are you giving your confidence to me to go in and do that

sort of a thing? Are you saying that standards which demand two

parking spaces per unit, when the car is choking us here in

North America — two parking spaces of underground parking which

can run $7,000 per unit — are you saying that we should go in

and tell municipalities that they should reduce that standard,

that maybe one or one and a half parking spaces is enough, that

we can cut the costs of rental housing by another $3,000? Are

you saying that concrete-enclosed, steel-doored garbage

facilities, which the city garbage people refuse to pick up

from and become an absolute albatross, are you saying that we

should tell municipalities that they should not come up with

such ridiculous, unthought-out standards, such gold-plated

standards, without even consulting with their sanitation

engineers?

Well, Mr. Speaker, if that's what the other side is saying,

I hope they'll put in a private Member's bill; I hope that

they'll demand that I designate areas, that I get tough with

the municipalities and, Mr. Speaker, I'm sure I'd very gladly

listen to such a proposal.

An Hon. Member: Hear, hear.

Mr. Speaker: The Hon. Member for Oak Bay. Are you the

designated speaker? (Laughter.)

Mr. G.S. Wallace (Oak Bay): Well, Mr. Speaker, I thought we

came to that decision yesterday. Weren't you in the chair when

I announced that we had a very important caucus meeting and

that was the decision?

Mr. Speaker: No, I wasn't. Thank you. (Laughter.)

Hon. G.R. Lea (Minister of Highways): Any backtalk?

Mr. Wallace: Oh, there's the occasional time when I have to

talk to myself very severely, Mr. Speaker.

Interjections.

An Hon. Member: Go ahead, Scott, you're on.

Mr. Wallace: If it's all right with the House, perhaps I

could get back to housing.

I think really that the Landlord and Tenant Act represents

the poorest method of searching to achieve the goal that we are

all after in this House. I get a little frustrated about both

sides of the House perhaps arguing superfluously about the goal

of housing. Surely, we're all agreed that legislation

endeavours to achieve two goals. One is to provide decent

housing for tenants at prices they can afford. The second goal,

which is on record by both sides of this House, is to provide a

fair return to people who invest their money in housing.

Now, these two goals have been repeated by numerous speakers

on both sides of the House and certainly, just to make it

unmistakably clear, the Attorney-General himself stated in this

House on June 17 that:

The rentalsman will have the power to took at factors such as

fair return to the investor. In fact, under

section 28(l)(c), even in housing

which does not exist as rental housing at the present time, somebody can come

to the rentalsman and say: "Why should I go into that field unless I have some

assurance of a fair return on my capital." I would assume that would be something

better than first mortgage money, because why put up a building if all you are

getting is the first mortgage rate — put it out in the first mortgage?

The Attorney-General goes on:

If it is a case of existing buildings, the landlord can go to

the rentalsman and say

— and this is most important to this whole debate on this

bill, Mr. Speaker —

the landlord can go to the rentalsman and say: "I am not receiving

a fair return on capital. I am justified to a rent increase which is more than

the percentage fixed on this particular year." He produces his books. He would

have some assistance from that office, I would think. You spoke of someone who

didn't have their own lawyer or accountant. I would think the rentalsman's office

would be of some advantage to that particular party. He could go there. It will

be staffed, I presume, with an economist, and he will really get free advise.

Mr. L.A. Williams (West Vancouver–Howe Sound) : Who said

that?

Mr. Wallace: The Attorney-General said that on June 17.

[ Page 4589 ]

Mr. L.A. Williams: Our Attorney-General?

Hon. Mr. MacDonald: This is November.

Mr. Wallace: That's right. Of course, the Attorney-General

interjects that this is November, and it's very surprising the

180 degrees turns which politicians and political people can

take in a matter of a few months.

An Hon. Member: You're just fickle, that's all, like

the rest of your caucus.

Mr. Wallace: The point I want to make at the outset, Mr.

Speaker, is that we're agreed on the goals. I've quoted from

Hansard to show that our own Attorney-General believes

in a fair return to the investor, and that all of us in this

House are trying to provide decent accommodation to all the

citizens, at a price they can afford. So really what we are

arguing very clearly in this House is the method whereby these

two goals are to be pursued. Certainly it's been said many

times, but has to be said again, that of course, the basic

problem is that there is a shortage of rental accommodation.

But unfortunately, when we seek a method of solving that

problem, this government lets its theory get in the way of

practice and, time after time, ignores the fact that, whether

we like it or not, this world and its commodities — all its

commodities — function on the basis of supply and demand. Now

that might not fit in with theory — yes, you needn't shake your

head, Mr. Attorney-General. If commodities are in short supply,

the demand goes up and the cost goes up, and this is no

different in housing since it is an essential.

The fact is that the Attorney-General has laid great stress

on his concern about return on capital. In deciding on the 10.6

figure, he pointed out very clearly that this was arrived at,

in his view, because he did not agree that there should be

return on capital. Regardless of the Attorney-General's

appraisal of the Cragg report, we have the facts that we

originally had an 8 per cent limit on an increase, but at least

there was an appeal. The individual concerned could take his

case to the rentalsman and demonstrate…. I've just read the

quotation, Mr. Attorney-General, do I have to read it again?

"The landlord can go to the rentalsman and say: 'I'm not

receiving a fair return on capital. I am justified to a rent

increase which is more than the percentage fixed for this

particular year.'" This is your own quotation, just a few

months ago, at which time you were fixing it at 8 per cent. Now

you've fixed it at 10.6 per cent. You've gone one step worse,

and that 10.6 per cent is it. There is no appeal, no mechanism,

and don't tell me that this is interim.

In fact, I have discovered this really isn't the NDP; this

is the LIP party — the leftist interim party — because it's

leftist dogma and it's interim legislation, which is the description given to just about every second

piece of legislation that comes in here, and would really suit

this party for that title. So the Minister says that it was 8

per cent with an appeal. Now it's to be 10.6 per cent and no

appeal, Both measures are said to be interim. One could, I

think, very honestly ask: how interim is interim?

Hon. Mr. MacDonald: Read the bill, they are scheduled

beyond '75.

Mr. Wallace: Well, beyond '75 — that's a long time if units

are not being created in the meantime because of this

legislation.

An Hon. Member : They've already amended it twice in

one year now.

Mr. Wallace: At any rate, the important relationship to the

creation of units, and the confidence of people who will invest

money, seems to be disregarded by this government. Certainly

many of the owners of rental accommodation felt that the 8 per

cent was an interim measure and that the succeeding legislation

would give them a longer-term confidence in what the capital

and market would be in housing, or what their capital gain or

their operating gain could be in housing.

Now we find that all that's happened is that the 10.6 figure

has been set. Worse than that, they no longer can open up their

books and take their auditors or accountants before anyone to

justify the fact that they are losing money on a 10.6 per cent

limitation.

Of course, the other point about that is that it's called a

maximum increase but we can readily see that, in the light of

the loss of invested confidence, that is also a minimum

increase.

There will no longer be any property owner in his right mind

who will increase it by anything less than 10.6 when he looks

back on the way in which the government has handled this

situation and has, in fact, betrayed its promises of the bill

that was passed — the rent stabilization bill.

Numerous speakers have talked about receiving letters, and

of course, I've received letters too. It's interesting to make

the point that not all investors in apartment buildings are

large financial organizations, nor are they all wealthy

individuals. The Minister of Housing (Hon. Mr. Nicolson) liked

to keep repeating that the only people who invest in apartment

buildings are doctors and lawyers — the implication was that it

was only rich people. I've had letters from some very

distressed senior citizens who have put their savings into a

relatively small apartment building, the income from which is

part of their livelihood, an important part of their

livelihood. These people suffer the same as anyone else if

you

[ Page 4590 ]

limit the rent increase at a time when operating costs are

rising.

The Attorney-General talked, yesterday, about "rapacious

gougers". It's a very startling phrase and it certainly paints

the Attorney-General in the image of the knight in shining

armour protecting the little man and the little woman from the

rapacious gougers. But the fact is, and even he has admitted

it, that they are in the minority; the gougers are in the

minority.

Mr. Attorney-General, you've said that yourself many times

in debates in this House. Yet don't you think…?

An Hon. Member: He didn't recommend a 30 per cent

increase. Read the report.

Mr. Wallace: I haven't mentioned any figure yet. If you just

let me develop the argument a little further, I'm not

suggesting it should be 30 per cent, so I wouldn't want you to

put these words in my mouth, but I'm not saying they should be

10.6 either.

The fact is that we talk about gouging. It seems to me that

the government is doing pretty well itself when it puts up the

charge of interruptible gas supply to apartments by 71 per

cent.

I notice in the whole debate, and any mention of operating

costs in this debate, facts such as that were not touched upon

by the Attorney-General.

One of the other big deficiencies in this bill…. I know

that Dr. Cragg explained the deficiency on the basis of time

constraints, that there was not enough time to conduct adequate

inquiry, but in that same debate that I quoted from a minute

ago, the Attorney-General went on to say — and this is also

June 17, 1974: "They may prescribe a different allowable rent

increase in respect to different parts of the province." That's

because the cost situation may be quite different in different

parts of the province.

Later on again he goes on to say that if you go over the 8

per cent amount, you have to justify it before a rentalsman.

The rentalsman's recommendation is that threshold thing, beyond

which you have to go to him and justify your rent increase

which may be made in the light of increases and cost of normal

operations in that area. So this bill again brings in a blanket

10.6 which will not be just a maximum, it will become a minimum

for all landlords, and it takes no cognizance whatever of the

variation between different parts of the province.

Somebody said a moment ago — I think it was the Minister trying to make a point

— that there is a lot of apartment construction going on. He asked: "Where are

your figures?" I would certainly like to put into the record a study that was

done by Mr. R. Wilson of the London Life Insurance Company. This is dated October

15, 1974, and I'm talking about the Greater Victoria area: and in addition to

showing a vacancy rate of 0.2 per cent with regard to suites under construction,

there is a total in the Greater Victoria area of 13,658 suites."

At this date there were 198 units under construction, which

represents a very small percentage in relation to the 3.5

percentage increase in population occurring in the Greater

Victoria area. So the Minister is easy to answer on that score

as far as the Greater Victoria area is concerned.

The measure that the Attorney-General is bringing in is

certainly a very pitiful, political expedient for purely

short-term gain. The appearance which is created is that the

Attorney-General is protecting the tenant from inflation and

substantial increases in the cost of accommodation, even though

these costs can be demonstrated to be just as logical and

consequential as many of the other costs we have, whether we're

driving our car….

Don't shake your head, Mr. Attorney-General. Didn't you see

the front page of the Sun last night — the cost of living

up another one per cent — the equivalent of 12 per cent per

year….

An Hon. Member: It's 1.4.

Mr. Wallace: Or 1.4, or whatever the figure was. You can't

shake your head. The cost of housing has to go up like the cost

of sugar, or bread, or gasoline or any other commodity you can

buy. We can't have it both ways.

You stand in this House and talk about the inflationary

problems being international and that the federal government

can't do much about it, and we can't do much about it. But you

seem to think that the cost of housing can be looked at in

isolation, that you can subsidize that cost through the people

who happen to own the housing. Is that just?

Let me read from one of your favourite provinces. I've got a

book here that the government very carefully has avoided

publishing, called, "Programmes in Search of' a Policy"

This was a study which was carried out by a research grant

under the

part 5 of a National Housing Act and because they

didn't like what the research showed they won't publish it.

Very interesting. The publisher himself finally took the

trouble of putting out 3,000 copies. It's called "Programmes

in Search of a Policy;' it's by Mr. Denis and Miss Fish, I

believe.

[Mr. G.H. Anderson in the chair.]

One of the quotations they have is from Quebec. The

Attorney-General has talked about how much he values the advice

of a Mr. Chatelaine and the great success of the programme

there. The Castonguay Commission stated in 1971:

"The recognition of access to housing as a universal right implies a direct intervention by

[ Page

4591 ]

the state throughout that industry, which even today depends

almost entirely on free enterprise. Just, as universal rights to education and

welfare meant that the state had to assume responsibility in those sectors in

place of free enterprise, then equally the recognition of access to housing

as a universal right implies a similar direct intervention in the field of housing,

" That's from the Castonguay Commission in 1971.

But you're not doing that, Mr. Attorney-General; you have

stated that housing is a very vital essential — food, clothing,

health care, and housing is a universal right — but in this

particular instance you choose to have the owner of the housing

subsidize, instead of providing the subsidy, as we do with

health-care education out of general revenue. It is as simple

as that.

Why should we pick on any particular sector of society to

subsidize what you believe to be a universal right and which

should be provided by the state? Now your philosophy falls

apart when you try to split it into two parts. You apply that

kind of philosophy — and I think it is a reasonable one — to

health and social assistance. But when it comes to housing,

which you say is also a universal right, you expect the owners

of property to be the source of the subsidy. I just think that

that argument is completely false.

You either do not believe that it is a universal right, and

try to got somebody else to pay for it, or you accept the fact

that decent shelter is a universal right for all citizens; and

if there needs to be a subsidy, and indeed there does, then the

subsidy, the same as hospitals and medicare and social

assistance and education, should come from general revenue

through the Minister of Finance.

This caper that we are going through on this bill not only

is wrong and unjust, but it leads to the other problem which

has been touched on by many speakers — that all that will

happen is that fewer and fewer units will be built while the

population continues to increase, and we will have some

disastrous crises within the next few years.

There is no doubt, regardless of philosophy as to whether

free enterprise should do the construction or not, that this

climate that has been created by this government by a series of

interim restrictive legislation can only continue to discourage

investors to move into the construction of rental units. As

that happens, the very person you are dedicated to helping, the

tenant who is of average- or low-income means, finds it harder

and harder to find the accommodation.

As one speaker pointed out today, many of these people have to be relatively

mobile in order to obtain employment. If they are low-income earners, they are

often the head of the household whose employment is often interrupted and he

has to travel to other parts of the province to obtain work. You can't move

from A to B unless there is some accommodation at point B. So it is a very real

factor, which I think the Attorney-General is overlooking, that if new construction

does not occur, all we're doing is making it more and more difficult in the

long run for the tenant of low or average means to find accommodation when

they have to move to another centre or another city to obtain re-employment.

It has been said many times — and is so inevitable, and it

has been expressed to me in letters by tenants — that already

landlords are cutting corners. Can you blame them? One kind of

example I have had described to me is that when the tenant

moves out, the apartment would very often be repainted and the

drapes would be sent out to be dry-cleaned, and there would be

a general measure of sprucing tip of the apartment prior to the

new tenant entering. Well, in the present financial state, due

to these restrictive pieces of legislation we're debating, this

is just not happening.

So, once again, who suffers? It's the tenant who suffers.

The very short-term gain of limiting the rent increase looks

very rosy and attractive on paper, but just look down the road

a little further and see that all we're doing in the long run

is making it very much more difficult for the very tenant you

are trying to help.

The buildings deteriorate, the standard of upkeep, and

therefore the quality of the apartment for which the tenant is

paying, deteriorates. We have the whole issue of encouraging

apartment owners to convert to condominiums, which further

reduces the stock of rental units available. Another point which I think is worth mentioning is that this

form of economic protection, or purported economic protection,

is like all other similar government measures. Once it is

introduced, it is very difficult to remove it.

It's the kind of action by a government…. In this case

the decision on the 10.6, I think, was blatantly political.

Having taken that kind of blatant political decision — regardless of the logic and the research and the skilled person

you called upon…. To just turn your back on him and tell him

he was all wrong anyway is really not significant of this

government's espoused belief that it will always take the best

expert advice it can find. You sought the advice of this expert

and then you turned your back on him because it didn't suit you

politically to follow his advice. And I'm not talking about 30

per cent. I'll quote what I'm talking about in a minute.

It is very difficult to have confidence in the long-term

future of the provision of rental accommodation when we see

that this government is so keen simply to take the politically

expedient way out. If it was keen and willing to do that by

imposing

[ Page 4592 ]

this rent restriction, then we have to face the fact that it

is unlikely that it would ever remove the rent control even

when the need is gone. The need would be gone when we have a

vacancy rate as they have in Alberta of 3, 4 or 5 per cent on

apartments in Edmonton.

But at any rate, the overall consequence of what has been

happening is that the shortage continues to increase, the

quality of accommodation continues to deteriorate, and you

create a black market and under-the-table dealings when people

become desperate to have a roof over their heads. You are

encouraging, if not actually inciting, people to enter into a

black market situation, and that's the way it always has been

down through history.

But then again, you don't accept this supply-and-demand

situation which we realists on this side of the House try to

acknowledge. As long as men have been on the face of the earth,

when a commodity is in short supply and you are desperate to

obtain it for whatever reason, there is always the drift to

illegal dealings.

So when you think of these three points I have made — that

the shortage will continue to increase, that the quality of

accommodation will deteriorate, and that you will have created

a black market situation — I think the clear conclusion is that

rent control does not even begin to solve the problems we have

in the rental housing field.

This isn't just my opinion or the opinion of the people

here. There's a quotation in the Province newspaper of

November 6 showing a classic example. The writer was Mr. Len

Taylor, who titled his column: "Rent Curbs Don't Work." He goes

on to give some specific documentation in other parts of the

world where it has been tried. Just to quote one paragraph

alone, he says:

"The classic example of the corroding effects of rent control can be found in New York city, where it has

been shown that upwards of 400,000 housing units have been

abandoned to the vandals and city control in the past 20

years."

I understand that an apartment owner in Vancouver yesterday

is offering his apartment for $10. These measures have been

tried elsewhere, and the effect of the rent control has been

the three areas that I have described.

So what are the alternatives to the measures we consider are undesirable which

the Attorney-General has put forward? Well, I happen to believe and support

the essential statement that the Castonguay commission put forward and which

I quoted earlier. I do not in any way fail to see the problem in this province,

and that we must make the most serious efforts to provide the decent housing

for citizens at costs they can reasonably afford. I happen to believe that if

basic subsidizing from general revenue applies to health and education and social

assistance, it is equally reasonable and logical to apply a subsidy from general

revenue to housing.

There are two main ways, I believe, in which this has been

done successfully and can be done; it is either by demand

subsidy or supply subsidy — in either case derived from general

revenue.

The demand subsidy is paid in cash to the consumer, and

this, of course, leaves the consumer with some measure of

choice as to what kind of accommodation he will spend the

subsidy on.

The other is the supply subsidy, which is applied to the

actual property occupied. In one sense the supply subsidy is

less attractive because it ties down the consumer to that

particular property,

whereas a demand subsidy leaves the

resident some measure of freedom of choice.

It is really quite interesting, Mr. Speaker, that no one

else has raised the concept that has applied in the United

Kingdom for years and years and years. We all called it

"council housing" in the old country. It is very simply housing

which is subsidized out of general revenue for a fair

percentage of the residents in the United Kingdom. The money

comes from general revenue and is in the form of a direct

subsidy by government to housing.

I feel that the very least that should be done is to explore

the more successful areas of housing subsidy in parts of the

world where there has been some measure of success rather than

to follow the example of these places that have been mentioned,

whether it's New York or St. Louis, or wherever the subsidy

system has lead to the consequences that have been described by

so many speakers in this debate.

I am not suggesting, if my friend from West Vancouver–Howe

Sound (Mr. L.A. Williams) is wondering, a massive intervention

of the state as an owner and developer of housing. I'm

certainly opposed to that. I can't think of any clear example

in any country in the world where massive intervention into the

business world by government has been a riotous success. It

usually is an abysmal failure.

Most people in the debate have already touched on the Cragg

report in great detail and I think it would be repetitious to

repeat some of the statistics. But I think the

Attorney-General, with respect, came to the wrong conclusions

and has made one particularly serious contradiction in his

decision on the Cragg report.

We oppose rent control as such and believe that subsidies

from government revenue are the answer to provide fair return

to the owners. Putting that aside for the moment, basic as it

is, there is this question: how did the Attorney-General ever

come up with the figure of 10.6 per cent?

As I said earlier, this government has repeatedly stated

that it believes in seeking the best professional advice

available in whatever field is being considered.

[ Page 4593 ]

So the Attorney-General sought the advice of Dr. Cragg who,

I understand, is a highly respected professional in his

field.

I don't want to repeat all the pages of the conclusions

where he gives various alternatives. But even if you look at

the extremes of the two figures which Dr. Cragg mentioned as

being reasonable, the lowest mentioned anywhere is 10.6 per

cent and the highest is 40 per cent. Even if he was wildly out

on the 40 and wildly low on the 10.6, one would expect on the

law of averages that surely the fair final figure should lie

somewhere between the minimum and the maximum which he

covered.

In effect, regardless of this argument about how much return

on capital is fair, the final figure which was arrived at

depends on the amount of time over which Dr. Cragg suggests the

owner should be given a chance to catch up with inflation. He

talks about the extreme, the moderate and the minimal.

It's been covered by many others in the debate but just let

me very quickly make my point. He says, "An allowable rent

increase of 30 per cent would cover completely the past changes

in costs." On page 86 he says:

"An allowable rent increase of the order of 21 per cent

provides a significant easing of the burden on tenants, though

these burdens would still be heavy. Such a figure does provide

important protection from gouging. Announcement of such an

increase," — that would be 21 per cent — "would be a

sufficiently strong move that there would be an adequate

incentive for the provision of needed new accommodation and the

maintenance of existing premises."

That's just the point we made earlier. If any other measure

leads to no creation of new facilities and the poor maintenance

of what you've already got, the only person who suffers is the

tenant.

Then he goes on in the next paragraph and says:

"An

allowable increase of the order of 16 per cent is probably a

lower bound on the feasible operation of rent control under

section 28. This figure leaves a very large adjustment still to

come."

Meaning that as inflation continues and since this is a

minimal amount, the owner is still falling further behind than

what should be a fair return. He makes the clear point in the

paragraph at the bottom of page 87:

An allowable rent increase of a still smaller magnitude" — that's smaller than 16 per cent — "can be expected to entail

very strong dangers. The usually cited, undesirable effects of

rent control will begin to emerge and new rental construction

will not occur."

Anything less than 16 per cent.

"These effects may easily impose costs on rents that are

heavier than the gains from the reductions from the 16 per cent figures."

Of course, when he wrote this paragraph, he was under the

impression that

section 28 would still be in effect and there

would be some mechanism of appeal. I go on to quote Dr.

Cragg:

"Applications for justification can be expected to

occur in unmanageable numbers. If it should be possible to handle them

adequately using the reasonable-cost basis of

section 28, they may well

lead to typical rent increases at a size quite divorced from the

allowable rent increase."

That paragraph sums up the whole terrible mess that you're

in with this legislation, Mr. Attorney-General, with

respect.

The first 8 per cent stabilization bill was interim, and

this is interim. The reason that you scrubbed

section 28 was

that you knew very well that those owners would appeal under

section 28 and that two things would happen: there would be

large numbers of them because 8 per cent is just completely

unrealistic and the numbers would be unmanageable. You would

have to create a bureaucracy of staff which would be an

embarrassment to you.

Secondly, if all these appeals were heard under

section 28,

the kind of figure which the rentalsman would have had to

accept as being reasonable under the circumstances would also

have embarrassed you because the figure would be quite divorced

from the 8 per cent.

It's very obvious why the Attorney-General scrubbed the

appeal

section that was in the stabilization bill. The appeals

would have been so frequent that we would have needed an army

of people to deal with the appeals. If the appeals had been

heard fairly, as I'm sure they would, the awards would have

been far in excess of 8 per cent, which would have shot the

validity of your legislation all to pieces in the first

place.

These are some of the contents of the Cragg report which I

think the Minister has very cleverly skated around. He has

avoided saying anything about these last two or three pages and

paragraphs which really are essential to understanding the

Cragg report. The Cragg report offers varying approaches based

on the length of time that owners might be expected to recoup

their fair return. The figures vary from 10.6 to 30 per

cent.

I think the Minister has simply chickened out of the real

responsibility of trying to be fair to owners of rental

accommodation by choosing the lowest single figure that was

mentioned, namely the 10.6 figure. He has completely overlooked

what is the long-term challenge in this whole matter — and that

is the statement by Dr. Cragg on page 87. If the lowest figure

is used, then the "cited undesirable effects of rent control

will begin to emerge and new rental

[ Page 4594 ]

construction will not occur." That's right at the bottom of

page 87.

We have to look at alternatives and come forward with a more

positive way in which we should attempt to solve the

problem.

I have already mentioned that I think this bill is worse

than the rent stabilization bill because it has removed the

appeal against 10.6 per cent when there used to be an appeal

against the 8 per cent. But I've tried to point out that the

Minister, in doing this, has done it by intent. It is no

mistake, for the reasons I have mentioned, that he does not

wish to be embarrassed by a flood of appeals and a flood of

awards that far exceeds 10.6.

On our programme last night on CBC radio I know the

Attorney-General made a very heated defence of this bill, and

repeated again the statement that it is only interim.

I think when he winds up this debate that we should have

some statement from the Minister as to what he visualized as

the date when a more realistic and fairer avenue of approach

shall be afforded to owners of rental accommodation. Does the

Minister intend to reinstate at a certain date an appeal

mechanism? I presume the rent review commission will be the

body that will be advising him in this regard. I would like the

Minister to make notes because I am asking a series of

questions and I would be very interested to get answers to each

and every one of them. I slipped up yesterday and didn't get an

answer to one of the questions I asked the Minister of Health.

I wouldn't miss a question two days in a row.

I am asking if there is a date in the Minister's mind by

which the rent review commission will report to him regarding

the new appeal procedure. Has the Minister made up his mind as

to who is going to…?

Interjection.

Mr. Wallace: I am sure he would like to put that on the

Hansard record when you reply and wind up the debate,

Mr. Attorney-General.

I am rather interested that whoever is serving on the rent

review commission would have to be thoroughly independent and

above any question of political influence, and since this was

exactly the role filled by D r. Cragg, and ignored by the

Attorney-General….

Interjection.

Mr. Wallace: Well, he was an adviser, but a professional and an expert

whose advice has been totally disregarded. I would wonder if the Attorney-General

can give us any idea of who he has in mind to serve on the rent review commission,

and in what way we can be assured that rent review commission recommendations

will not be given the same kind of political appraisal as the Cragg report.

Interjection.

Mr. Wallace: Oh, I wouldn't want to make you feel hurt, Mr.

Minister, but that happens to be my decision and my opinion as

to why the 10.6 figure was chosen.

The other fact about this bill, Mr. Speaker, is this

incredible…. I just find this incredible that while on one

hand we're to have rent control on existing property, it seems

to be justified to have no control whatever on new property in

the hope that that new property will be built.

We've had the Minister change gears two or three times and

mislead investors with the statement that the 8 per cent is

interim and that the 10.6 is interim. When we debated the

stabilization bill and the figure of 8 per cent, it was clear,

as I said earlier in my remarks, that there would be an appeal

mechanism, and that if they could open their books and justify

that 8 per cent wasn't enough, then, of course, they would not

only have a chance to prove that it was too low but they would

even have the help of economists, for example, in the

rentalsman's department.

Of course, all that high-powered help has disappeared and

the appeal has disappeared, and the owners of rental properties

are now told that the maximum is to be 10.6 per cent.

I just want to ask the question: in the light of that kind

of performance by the Minister, can investors considering the

construction of new buildings really have any confidence that

this five-year promise means anything, or is it just a come-on

gimmick?

HON. R.M. STRACHAN (Minister of Transport and Communications): Oh!

MR. WALLACE: The Minister of Transport says: "Oh!" I've just

tried to point out that when the Attorney-General has already

changed his direction twice on what the content of the bills

would mean in relation to the right of appeal, I don't think if

I was contemplating investment in a new building that-I would

be so sure that this suggestion and promise of a five-year

programme with no rent control was really something that we

could be completely sure of.

HON. MR. STRACHAN: I only said oh! I didn't say oh,

oh!

MR. WALLACE: Or, oh no!

I acknowledge your correction, Mr. Minister. (Laughter.)

Seriously, Mr. Speaker, this proposal for the five-year lack of

control on new buildings has two very serious aspects to it — the one I've just mentioned, that investors really can't be too

confident that that will be adhered to, or for that

[ Page 4595 ]

matter, that a change of government would necessarily adhere

to some measure brought in, and that applies to any government.

So I'm saying that as a measure on its own….

HON. MR. MACDONALD: There is some fear of the

Conservative Party coming in.

MR. WALLACE: Are you trying to give me a sense of optimism,

Mr. Attorney-General?

But the other aspect of the five-year fact is, of course,

that in fact they will be completely uncontrolled as far as

rents are concerned. With the rising costs of construction,

with the cost of money and the cost of land, the new

accommodation is certainly bound to be expensive, and this can

only result in a very undesirable two-class system of renter. A

person with better means and a better income can afford to live

in the new apartments. The other

section of our society, the

middle and low-income group, are not only compelled to put up

with what they have but also face the deteriorating quality of

accommodation and the impaired mobility that I mentioned

earlier on.

So I do feel that the suggestion that new accommodation

would be free of any control for five years is a very

short-sighted and ill-considered suggestion, I've certainly had owners contact me and their statement is

very simple: "If we can't trust the Attorney-General over the

last few months, how can we trust him on a five-year

proposal?"

I think another factor would be that this proposal would,

perhaps, encourage the demolition of old buildings in order to

create new construction, and however old the buildings might

be, they would be available at lower rents for the tenants than

the rents that would apply to new buildings.

I would just like to close my remarks by offering some

positive proposals. The basic positive proposal is that

subsidies should come from general revenue, and should be

channeled through either demand subsidy or supply subsidy.

I do believe that the point made earlier this afternoon,

which would be most useful, perhaps more useful than any other

commitment by this government, would be to combine incentives

to construction with a commitment that all rent controls would

be removed by a certain date, and that the condition for

removing the rent controls would be an established vacancy rate

in excess of 3 per cent.

In other words, it would be a clear proposal that if the arguments of the owners

are valid and if a fair percentage of vacancies means that the rents are fairly

stable, then the promise by this government to remove all rent controls by a

certain date could be contingent on having created, let us say, a 3 per cent

vacancy rate.

The basic argument that we have is that the shortage of

accommodation can only get worse because of rent control. So

the other side of that argument is that if you remove rent

control and provide incentive to construction, then the

increase in construction should increase the vacancy rate. I

pick the figure of 3 per cent as being considered a figure

which gives most tenants some reasonable cross-section of

choice. It might be a higher figure. I believe the vacancy

figure in Edmonton at the moment is 5 per cent.

I certainly appreciated one comment of the Minister of

Housing, because I was also going to refer to the situation in

the municipalities. The person he quoted was the person that I

had planned to quote — the Mayor of Surrey, Mr. Vander Zalm, who

said — I'm quoting from the Vancouver Sun of October

15:

"More housing would only add to Surrey's already severe

imbalance of taxation revenue and place further burdens on

homeowners,

"He explained that only 8 per cent of Surrey's tax revenue

is derived from industrial and commercial property, compared to

Richmond which receives about 40 per cent from industry and

commerce. Present homeowners would be strapped with paying for

more police and fire protection, schools, roads, recreational

facilities and other amenities which newcomers would

require.

"Vander Zalm said that he wants Victoria to lease to the

municipality serviced lots on Surrey industrial land which the

government owns but is not using."

Now if this is valid information, I think there is great

potential for this provincial government to hold meetings with

the municipalities or with the B.C. Union of Municipalities

with a view to finding out why there are financial

disincentives to the creation of more residential accommodation

in many of these municipalities.

It's also interesting that the Minister of Housing made a

bitter attack on the concept of allowing depreciation on

apartment buildings as a tax allowance. Again he chose, in his

rather blinkered fashion, to malign professional people who

invest their money in such buildings, and he used the phrase

"tax loopholes." It is no loophole, Mr. Speaker. The

legislation was written with the specific purpose in mind of

making this kind of investment legal and desirable, no

differently from putting $4,000 a year into a registered

retirement savings plan. That is a way of deferring the payment

of income tax, and it is legal and honourable and designed for

the very specific purpose of encouraging individuals to save

for their later years.

This incentive, which the Minister of Housing attacked so

vigorously, was supported by the Premier

[ Page 4596 ]

(Hon. Mr. Barrett) just during the closing weeks of the

spring session.

I'm delighted that the Premier's back in the House, because

I want him to know that earlier today, when his Housing

Minister was out of the House — his designated ribbon-cutter,

the Minister of Housing — viciously attacked the concept of

allowing investors….

Interjections.

MR. WALLACE: Oh, I'm sorry, the Premier has just left. I

think he was unhappy, Mr. Speaker, that I should point out this

very distinct division of opinion between the Housing Minister

and the Premier.

But the fact is — and I've been unable at short notice to

get the exact clipping out of Hansard — but the Premier

not only said that he favoured this incentive in the form of

federal tax legislation, but said he was going to ask the

federal government to reintroduce that very principle. So we

have a very fundamental difference of philosophy between the

Minister of Housing and the Premier of the province, who also

happens to be the Minister of Finance.

So I feel that there's great potential for closer

cooperation with the municipalities, and there's need for

greater cooperation at the federal level. The Premier himself

was quoted in the newspapers yesterday in an interview as

stating that the amounts of money required are so great that we

cannot do it on our own, and that there is a real need for

greater help at the federal level.

And I agree; that is so. In fact, housing, as with health

and education and social services, is very much a tri-level

responsibility. We should, in housing as in these other fields

of health and education and social assistance, strive to get

the closest cooperation and participation by the federal level

and try to build stronger lines of communication and

cooperation with the municipalities.

I would only end by saying that although I am in favour of

subsidies to housing from general revenue, I would hate anyone

to interpret that remark as meaning that the government itself

should move in in some massive way with large sums of money and

a centrally-directed housing corporation to build

accommodation.

The facts have shown in this debate that no matter how you

look at it, the costs of accommodation along with all the other

costs, due to inflation, are rising. I think the Member for

Capilano (Mr. Gibson) made it very plain that if the government

were to move in in a massive way and build its own homes, it

would become the landlord, and landlords are not very popular

when rents have to be raised, however sound and demonstrable

and justified the raise may be in the light of economic factors

and the cost of living.

So I am suggesting, basically, that we have subsidies from

general revenue; that we have a commitment by this government

that when the vacancy rate reaches, let us say 3 per cent, all

rent controls will be removed; and that we attempt, through

greater efforts at the federal and municipal levels, to provide

the necessary incentives to get more new accommodation

constructed.

Mr. H.W. Schroeder (Chilliwack): Mr. Speaker, we have heard

quite a bit of argument over the last two days concerning the

effects of control on existing accommodation.

We have heard quite substantial evidence that rent controls

which do not afford a fair return to the investor leads to

abandonment of the supervision and management and, yes,

ownership of the rental accommodation, and hence leads to

instant slums. This has been proved and cited in this House in

various cities around the world.

We have had a little bit of discussion on the effect of

controls on supply, but I would like to discuss with the

Attorney-General, through you, Mr. Speaker, that the effect of

the controls on supply, of necessity, has to take a two-fold

route, because the effect of controls has to affect both kinds

of a supply of rental accommodation.

Without argument, there are two kinds: there is the existing

rental accommodation, which admittedly, right now, we do not

have enough of; and then there is new construction. To take one

unilateral action and try to let that unilateral control be the

control for existing and new accommodation is folly, in my

opinion, because two different rates apply.

I can't see how the Attorney-General — and I sympathize with

you — could be expected to come up with any one figure, be it

30 per cent or be it 5 per cent. It's impossible to come up

with a figure that would reflect the proper control on both

kinds of supply. Existing accommodation is the easiest to

control because the prices and costs of that are more fixed

than they are on new construction.

I think it goes, without too much argument, that the rent

figure, whatever it is, must reflect the actual cost of

providing that accommodation and that the allowable rents must

reflect the cost of new construction more so than on existing

units because, admittedly, right now we do not have enough

accommodation. If we want more, then the stabilization of rent

has to provide for that new accommodation.

Existing accommodation is more stable — I've already said

it. The cost of the land is no longer to be considered. It is

one-time cost; it's in the past; it usually, unless it is

financed, has no variable. The building itself, once the labour

has been injected and the building is constructed, it becomes

fairly stable. The other costs that are involved are

financing,

[ Page 4597 ]

operations, management, depreciation and repairs — there are

variables there. The cost of operations increase, and I have

substantial figures here that would lead the House to figures

ranging between 16 and 22 per cent. But operations are only a

part of the total cost, so you can't say that the 16 to 22 per

cent represents a figure which could be considered as a proper

rent freeze.

Then there's management. The cost of management is more

stable, particularly in "Mom and Dad"-owned apartments, because

they're the same managers and although their costs of living

rise as do the rest of ours, it can be said that their cost of

management could be more stable than, say, in new construction.

However, when you come to the area of depreciation and repair,

the existing accommodation has a much higher figure when it

comes to cost.

So there are fluctuating figures in each of the areas. How

in the world, then, could the Attorney-General, Mr. Speaker, be

expected to come up with a figure, first of all that was

acceptable, and next that was non-political? How in the world

could the Attorney-General come up with a figure that would

truly reflect the cost? It would almost seem that if he were to

direct a control at all, it would have to be a two-pronged

control. That again, as has been stated already by a previous

Member, would set up a house of horrors as far as trying to

control a two-price system.

Now, when you come to applying controls on new construction,

the bill provides that no controls on new construction will

take place for the first five years. Is that a control at all,

or is this a control in mirage? What kind of a control is a

control that gives you a five-year holiday? It is a control

that exerts yet another pressure on the production of new

accommodation.

It can be drawn, by consensus from all of the arguments here

yesterday and today, that one thing we're together on is that

we have to produce new accommodation. The fact of a control — which is no control — for five years presents then another

pressure on the new accommodation in that there will be a

pressure to recoup whatever investment was necessary in the

early periods, so that the control of the 10.6 which comes

after five years can be avoided. There is yet another

pressure.

It almost seems, and I'm sure that this has occurred to the

Attorney-General, Mr. Speaker, that the whole idea of enforcing

any kind of control is futile. Perhaps a little later on in my

talk today this will become even more obvious.

I wish by some miracle — this is very elementary now — that we could create

existing accommodation. If that were the case, we could come up with a figure,

given enough input, that perhaps would relate to the 10.6, if not exactly the

10.6, and it would be just. However, since we cannot create existing accommodation,

and we must direct our attention to the construction of new accommodation, it

seems that a 10.6 freeze not only is not just, but ought not to have been considered

in the first place.

The Attorney-General has said that he believes that those

people who provide accommodation, shelter for others, should

realize a fair return for their investment. This fair return is

part of the reflection of the true cost of providing that

accommodation.

If this is yet another fluctuating factor among the ones

that I have already mentioned, it becomes still more of a

problem for the Attorney-General to state that a 10.6 per cent

figure would be right.

We have done some research. We have asked, for instance,

HUDAC what various percentages did mean in terms of return.

They simply said that the same percentages had been cited in

the Cragg report. We said to the housing industry: "What would

a 30 per cent increase represent to you?" They said that it

would represent a one-increase, catch-up figure, meaning that

in one increase of 30 per cent in one year they could catch up

in their gross revenues so that they would not operate at

losses.

A one-increase catch-up. I suggest that a one-increase

catch-up in housing is no more desirable than a one-increase

catch-up in assessments. In the assessments it didn't work, and

I would suggest that in housing rent control it couldn't work.

We asked them about a 21 per cent increase. They said that 21

per cent over a four-year period would represent an eventual

catch-up. We asked them about the 11 per cent, because we

couldn't anticipate the 10.6. We didn't know it would be 10.6,

so we just had to guess. What would 11 per cent represent? To

them 11 per cent represents a "never-catch-up."

Under a never-catch-up programme there is no way that they

could become involved in producing new accommodation in the

province. As a matter of fact, one of them suggested that they

were already taking steps to provide accommodation in the

neighbouring Province of Alberta, where it was less desirable

to create accommodation because their occupancy rates are lower

than ours. Their vacancy rates are higher than ours.

In Edmonton it is as high as 10 per cent, depending on which

month you cite, So it was less desirable, from a demand

viewpoint, to move to the neighbouring province. But here in

our province, where the demand is atrocious, they said that

under that kind of a plan, under a "never-catch-up" plan, there

is no way they could be involved in providing

accommodation.

I find that it's a paradox. Worse than that, it's a

conundrum. How, in the Province of British Columbia, Mr.

Speaker, where we have almost zero vacancy, fantastic demand

for housing, we have in this province at the same time a drop…? I have the figures here from the Vancouver area. By the

way,

[ Page 4598 ]

these are broken down for Vancouver and Burnaby and North

Vancouver City and North Vancouver District, Richmond — but I'm

only interested in the totals.

In the totals the value of the building permits for the

month of September, 1974, as compared with the previous year,

are down $5 million from $33 million to $28 million. That

doesn't sound right. There's a fantastic demand for housing,

yet building permits in the lower mainland area dropped by some

17 per cent by last figuring — by some 17 per cent from $33.26

million to $28.48 million. At the same time I read in another

clipping that British Columbia is the only province that shows

a jobless increase.

We have a fantastic demand and we have a supply of the

natural product for building of shelters — namely forest

products — yet we have a drop in building permits and we have

an increase in unemployment. I don't understand it at all. I

think that the Attorney-General needs to accept at least part

of the responsibility for this conundrum. Surely, somewhere or

other, we must be able to inject into the economy enough

confidence so that we would provide for ourselves one of the

three basic needs of man.

What is the real cost of providing rental accommodation?

Let's start from scratch. You're going to start with a piece of

land, ground on which to construct it. If you're outside of the

central city area, you're going to pay anywhere from $3 to $8 a

square foot to build the accommodation on. If you're in the

downtown area, it's anywhere from $11 to $16 and $18 a square

foot.

The price of land on which to build accommodation has seen

fantastic increases in the past two years. Again, Mr. Speaker,

the Attorney-General, through the other departments of his

government, has to accept the responsibility for these

increased costs; and they are not related to 10.6, Mr.

Attorney-General.

These figures don't even look or smell like 10.6. The

figures of increase for the cost of the land on which to build

rental housing represent an increase of anywhere up to 200 per

cent. Let me just cite a lot on which I just built my home two

years ago. I bought my lot for $5,600. The lot not next to mine

but one lot over, not quite as desirable as mine — and at that

time not quite as many dollars as mine was — is today on the

market for $19,800. Are you listening, Attorney-General? That's

$19,800 for a lot not 75 feet away from where I bought mine at

$5,600. Now that's personal. That happened over a two-year

period. That represents a fantastic increase in the price of

land.

Now then, you want to say that my lot has also increased.

That's fine and good to argue. The point is that my building

already exists; the one that we're interested in is the one

that we must create.

Building costs: I just happen to have them here. Building

costs on a per-square-foot basis, have increased…. I've got

the figures here from 1967 on; any year you want you can ask

for it. It went up from $12.49 per square foot in 1967 to $25

per square foot in 1974. Now this is bare, essential

construction. If you want a carport, carpets, kitchen

appliances and fireplaces, and soon and so forth, it's higher — it's $30 a square foot, That $25 a square foot increased over

two years from 1972 from $16 to $25 a square foot.

That doesn't look like 10.6. It doesn't smell like 10.6. I

don't see where the 10.6 is related to that. Yet I think that

both of us agree, Mr. Speaker, and the Attorney-General agrees

with the two of us, that rent prices must reflect the true cost

of providing that accommodation. If we don't accept that

premise, then we must accept the premise of subsidies, which

I'm going to talk about a little later.

Now financing is a fluctuating cost that even affects

existing accommodation. I was talking to a fellow who has just

a small rental accommodation unit — about $ 100,000. It's in

the Chilliwack area. He originally financed the entire project

for something like 9.25 per cent interest. That was the going

rate at the time. However, there was lack of confidence in the

economy at the same time and they introduced into his mortgage

draft a clause — a five-year clause; we're all acquainted with

it.

Here we go. It is now nearly time for the renegotiation of

that clause. The figure quoted yesterday is now 12.5 per cent,

the lowest possible. Other quotations were received but that's

the lowest possible. So here we have still another fluctuating

cost, 9 per cent to 12.5 per cent to 13 per cent. Even if it

were at 12 per cent it would represent a 25 or 33.3 per cent

increase — whichever base figure you want.

An Hon. Member: Over five years.

Mr. Schroeder: Over five years. However, that cost will be

an annual cost from here on in, so it's not an over-five-years

cost. The increase is computed over five years but it will be

an annual cost from here on in, at least for five years.

Interjection.

Mr. Schroeder: He did know at the outset; he knew it was

coming. However, there was no way he could project how much it

was and there is no way that he could gouge the tenant to lay

by enough funds, hoping to lay by enough to cover a cost that

he couldn't even anticipate.

Then the next area of fluctuating cost is the area of

operations. And again, the Attorney-General has to accept some

of the responsibility for the fluctuation

[ Page 4599 ]

because one of the costs of operation is the caring for both

the yard and the building — the facilities in total.

The costs there again have increased from some $1.60 per

hour — which in my opinion was not enough — in 1972 to now

$2.50, representing another cost. Again, the percentage doesn't

have any relationship to the 10.6 per cent.

I would say, in conclusion, about the 10.6 per cent — and

this is with all respect to the Attorney-General — that the

10.6 at worst would be a stab in the dark and that,

expediently, it is a compromise. At best, it can only be an

educational guess. Therefore, the 10.6 per cent leaves itself

wide open to question.

What do we suggest? Who is in the best position to know what

the real costs are? I would think the operators, the managers,

the owners, if necessary, would be in the best position to let

the Attorney-General know what the real costs are. They might

only be able to let him know on the basis of last year's

figures and it may take them 90 days to have it all put through

the process. But, nonetheless, they could give him the best

idea of what the increase per year is at the present time.

Rather than to go through the charade of trying to decide

what the percentage is, knowing full well that they must vary

depending on whether it's new accommodation or existing

accommodation, it's far better that the Attorney-General should

stop rent gouging and excessive profiteering in renting in this

province by doing it this way: attack the profits — attack the

gouging. Don't attack it at some mystical figure down at the

bottom, hoping that you can be right. Even politically that's

not smart because you are going to be wrong maybe 95 per cent

of the time.

Why not attack it where the problem is? Go after the

gougers. Go after the profits. Rather than placing controls at

the rent level….

Hon. Mr. MacDonald: That's federal legislation.

Mr. Schroeder: Just a minute now. Rather than placing

controls at the rent level, impose those controls at the profit

level. Let the tax structure care for the gougers. I understand

you're going to have to go to the federal fellows and work out

some negotiations, but this is why you were elected. Inject

that revenue which accrues into whatever level of the housing

provision plan that you wish to choose.

In any case, housing in B.C. under that kind of a plan would be the principal

beneficiary because the operators would be allowed to operate at a minimal profit

level. They would be encouraged to produce new accommodation; they would be

encouraged to invest and help others to provide that accommodation. Housing

in British Columbia would be the beneficiary, and both the government and private

industry would then feel free to give it its full support.

How much do we need? There are various reports. In your

research, sometimes you wonder which figures to accept. But,

for instance, HUDAC says we have to have 25,000 housing units

each year for the next four years.

I wish the Attorney-General would get a load of this: "We

need 25,000 housing units each year for the next four years

just to catch up with the backlog of the demand. That's a

quotation out of one of their briefs. Do you have your pencil

there? It will cost $50,000 per family unit to construct, the

amount of dollars that we are talking about is $1,250 million

each year for the next four years.

I'm sure the other Members of the House can remember that in

the last session, Mr. Attorney-General stood, and proudly so

and rightly so, and said: "For the first time in British

Columbia the government is going to inject $100 million into

direct provision of housing."

Do you remember that, Mr. Attorney-General? I remember. You

must remember. You stuck your chest out the size of a sparrow's

kneecap. It was a proud day for the Attorney-General. Don't you

remember?

[Mr. Speaker in the chair.]

Interjection.

Mr. Schroeder: I ask you to compare $100 million to be

injected, supposedly to help answer the crying need for housing

in British Columbia, when actually, according to HUDAC figures,

we would need $1,250 million every year for four years just to

catch up.

I would like to say that there's no way that this

government, not under this administration or any other

administration, could accept the responsibility of providing

that kind of housing for the people on a collective or social

basis. No way.

We have to encourage private industry; we have to encourage

the private owner; we have to encourage the private investor — the fellows with the savings accounts, if they have any. They

must be encouraged to put their money into shelter. There's

only one way they can be encouraged and that is, to take the

words out of the Attorney-General's mouth, to give them a fair

return. There's only one set of people who can tell you what

that fair return would be.

And by the way, I don't believe in gouging; I don't believe

in excessive profits. No way. But at least the return that

could be expected should be equal to the amount of return that

can be expected on a long-term deposit. So therefore, there's

only one answer, and that is if we accept the premise that rent

prices must represent the actual cost of provision. The only

other

[ Page 4600 ]

way out is subsidy.

It seems to me that no matter which plan you look at, it's

going to come in the form of a subsidy. Either you subsidize

the owner so that he has a fair return. Again, you've got to

set up a long list of officers and rentalsmen and inquirers and

accountants to try to determine what that subsidy should be. Or

you have to come with a plan that is already instigated in the

province — a rent-grant programme — which is available on

application. Or the government is going to have to go into

construction on its own.

We've already concluded that there's no way that the

government can come up with the finances because that's the

most expensive kind of subsidy right there. There's no way that

the government can come up with the funds to meet the

construction. Therefore, what's the answer?

I believe that we are placing the controls at the wron