Manitoba Committee Hansard — 15 June 1982 (Statutory Regulations and Orders Committee, Sitting 4, 32nd Legislature, 1st Session)

32-1-sro4

Manitoba — Debates (Hansard)

ISSN 0542-5492 First Session - Thirty-Second Legislature of the Legislative Assembly of Manitoba STA NDING COMMITTEE on STATUTORY REGULATIONS and ORDERS 31 Elizabeth 11 Chairman Mr. Peter Fox Constituency of Concordia VOL. XXX No. 4- 8:00p.m., TUESDAY, 15 JUNE, 1982. Printed bv the Office of the Queens Printer. Province of Manitobe

MANITOBA LEGISLATIVE ASSEMBLY Thirty-Second Legislature Members, Constituencies and Political Affiliation Name ADAM, Hon. A.R. (Pete) ANSTETT, Andy ASHTON, Steve BANMAN, Robert (Bob) BLAKE, David R� (Dave) BROWN, Arnold BUCK LASCHUK, John M. CARROLL, Q.C., Henry N. CORRIN, Brian COWAN, Hon. Jay DESJARDINS, Hon. Laurent DODICK, Doreen DOERN, Russell DOLIN, Mary Beth DOWNEY, James E. DRIE DGER , Albert ENNS, Harry EVANS, Hon. Leonard S. EYLER, PhU . FILMON, Gary FOX, Peter GOURL AY, D.M. (Doug) GRAHAM, Harry HAMMO ND, Gerrie HARAPIAK, Harry M. HARPER, Elijah HEMPHILL, Hon. Maureen HYDE, Lloyd JOH NSTON, J.

Frank KOSTYRA, Hon. Eugene KOVNATS, Abe LECUYER, Gerard LYON, Q.C., Hon. Sterling MAC KLI NG, Q.C., Hon. AI MALINOWSKI, Donald M. MANNESS, Clayton McKENZIE, J. Wally MERCIER , Q.C., G.W.J. (Gerry) NORD MAN, Rur ik (Ric) OLESON, Charlot te ORCHARD, Donald PAWLEY, Q.C., Hon. Howard R. PARA SIUK, Hon. Wilson PENNER, Q.C., Hon. Roland PHILLIPS, Myrna A. PLOHMAN, John RANSOM, A. Brian SANTOS, Conr ad SCHROED ER, Hon. Vie SCOTT, Don SHERMAN, L.R. (Bud) SMITH, Hon. Mur iel STEEN, Warren STORIE, Jerry T. URUSKI, Hon. Bill USKIW, Hon. Samuel WALDING, Hon. D. James Constituency Ste.

Rose Springfield Thompson La Verendrye Minnedo sa Rhineland Gimli Brandon West Ell ice Ch urchill St. Boniface Aiel Elmwood Kild onan Arthur Emerson Lakeside Brandon East River East Tuxedo Concordia Swan River Virden Kirkfield Park The Pas Rupertsland Logan Portage la Prairie Sturgeon Creek Seven Oaks Niakwa Radisson Charleswood St. James St. Johns Morris Rob lin-Russell St. Norbert Assiniboia Gladstone Pembina Selkirk Transcona Fort Rouge Wolseley Dauphin Turtle Mount ain Burrows Rossmere lnkster Fort Garry Osborne River Heights Flin Flon lnterlake Lac du Bon net St.

Vital Party NDP NDP NDP PC PC PC NDP NDP NDP NDP NDP NDP NDP NDP PC PC PC NDP NDP PC NDP PC PC PC NDP NDP NDP PC PC NDP PC NDP PC NDP NDP PC PC PC PC PC PC NDP NDP NDP NDP NDP PC NDP NDP NDP PC NDP PC NDP NDP NDP NDP

LEGISLATIVE ASSEMBLY OF MANITOBA THE STANDING COMMITTEE ON STATUTORY REGULATIONS AND ORDERS Tuesday, 15 June, 19 82 Time - 8:00 p.m. CHAIR MAN, Mr. P. Fox: The Comm ittee will come to order. We have a qu oru m. We sti ll have Mr. Ron Kl assen to fini sh off his brief. Mr . Klassen, please. MR. R. KLASSEN: Thank you, Mr. Chairm an. The Commi ttee will recall that this morning I made some suggestions with respect to broaden ing the defin ition of the word "tenant," as well as the word "party," in the legislation.

I also sugge sted that tenants be allowed to designate other peo ple to act for them and to receive notices and raise objections and to bring procedu res forward un der the Act on their behalf. I also encour aged the Committee to consider adding edu cational and an advocacy assistance func tion , eithe r to the Director's office or else to ensur e that these functions are provided through some other branch of the government or possibly thr ou gh Legal Aid or some combi nati on th ereof.

I also suggested that a tenant who was a new tenant and who receives a notice of rent which is also an in crease wh ich has not yet been decided upon by any procedure un der this Act, be given an opportunity to object at that ti me.

Another suggestion that I made was that the proce dure before the rent regulation officer be possibly at the option of one or the other party, but possibly also, just as a matter of course, an oral hearing where a person who does not feel able to or is, for some reason or other, prefers to deal with the mater ial by way of an oral presentation would be able to appear and make hi s positio n known that way; suggesting that was probably perhaps an easier thing for many a tenant to do than to prepare the paper that would be required.

I believe the last two com ments I had made, I believe, related to the appeal period from the rent regulation officer's decision bei ng a very short one and wou ld, in our opinion, be at least, on occasion, a hardship for tenants and that we thought that a long er . appeal period, or time for filing an appeal, would probably be beneficial to the tenants in that it may take them long er than two weeks to get an appeal in.

I believe the last comment that I made at that time was with respect to the rents that are payable between the time when the new rental period comes in to force and the time when the rent regula tion officer, or the appeal panel, as the case may be, makes the decision which ulti mately determines what the rent is. lt was our suggestion that monie s in those cases shou ld, as a matter of cou rse, with the possibility of the Director making an exception it, be payable to the Director .and tha t when it is paid out that it be paid out, whe ther to the landlord or to the tenant, within interest.

At that point the Com mittee recessed and I will pick it up from there.

Section 29 of the Act, as proposed, provides for a roll back procedure in those situations where the land lord is found to be overcharging, that is, where he is char ging a rent that is in excess of the amount tha t is permit ted or, if one reads it in conjunc tion with the 60 following sections, wher e he has wi thdr awn services withou t a concom itant decrease in the amount of rent ch arged.

The provision that is the re is that the Direc tor may apply, if he is of the opi nion that this is the situatio n, on the basis of in formation he has him self obt ai ned or inf ormation that he has obtained from a tenant. What is very interesting there is that there is no provis ion there for the tenant himself to make an appli cation and frankly, we do not un derstand why th ere is thi s omission. lt seems that this is a situation wher e, as it were, a legal right is being granted but no remedy is being given.

There may be the possibility for the ten ant to approach a Count y Cour t and ask for a judgment in the effect that the monies should be paid back to him, that is a possibili ty and that might be a remedy that wou ld be avail able assuming that the Director wou ld cho ose not to act. I believe one of the criticisms that was made at the proposal of the pre vious admin istration that rent control would be replaced by some form of program whereby an admin istrator would have the choice of taking on his own initiative certain acti on.

The comment was that this action might not be taken and that situa ti on, I would submi t, would still be the case here. lt is hard to see a justification for not giving an in divid ual the right to bring an action on his own behalf in a situation where something should be done. Where there is a legal rig ht there must always be a remedy and, I would submit, a remedy that that person him self can take in the simpl est, most expeditious way that is available.

We are th erefore suggesting that 29(2) shou ld th erefore be amended by adding words or by altering the wordin g to state something to the effect that "an appli cation for an order un der this

section may be appli ed for by (

a) any affected tenant or (

b) the Direc tor where he believes" and then perhaps the rest of what was put in the original subsection could be appended th ere. Going on to Sect ion 33 of the proposed bil l, this is the

section where the landlord is permit ted to apply to an appeal panel for an approval to a plan of reh abil ita tio n. The procedure as it is set out is that he applie s through the Co-ordinator of Appeals who sets up a pane l and basically as I read the propo sed bil l, he presents his plan and the appeal panel can either reject it, accept it or suggest alteratio ns. Ther e is going to have to be some investment by the landlord before he gets to this point and he wi ll then have to imp lement the rehabilitation that has been approved.

He does not know what hi s payoff will be at the end, and I believe that was a comment made earlier. The tenant who is living there who may wish to continue living there in the futur e does not know what kind of tutu re he faces either. From the tenant's point of view there wou ld seem to be two reasons why the procedure as it is set out now, which is I would suggest, sort of an overcautious proced ure, isn't at its best. Landlor ds will be hesitant on the one hand to rehabil itate their buildings if they have no idea what reward wi ll be ther e for them at the other end.

I think that if we're going to dangle a carrot in front of their noses, as it were, they'd better be able

Tuesday, 15 June, 19 82 to see just how big the carrot is. The tenant, on the other hand, does not know what the future with respect to these premises will be. Will there be decon trol for four years? Will there be decontrol for one day, which is the minimum amount that the legislation now would requir e that he be gi ven? I would n't expect that ever to be gi ven but the range is simply total.

In order to preserve the in centive aspect and to in crease the efficie ncy and the certainty available to all parties involved, it is our sugge stion that the ini tia l panel . at the ini tial appl ication should, fir st of all, look at the plan and dete rmine wh ether or not it is such as to merit the exemption that is in view in the

section that we're de alin g with. Then tell them, if you com plete this rehabil itation project satisfacto rily, you will then receive an exemption from rent regulation of such and such an amou nt; X months or whatever it will be.

At the end of that time , an in spector cou ld certify that the modi fications or the rehabil itation has been done as requir ed and, up on the receipt of that certifi cation and perhaps a certai n appeal period for either party who is un satisfied with what has been done and who wishes to present a contr ary opi nion, if that appeal period passes and no objection is raised, then the origi nal appeal panel's decision cou ld simply be put in to force. I would bel ieve that this would be a more cert ain procedure, a simpler and a che aper procedure and more expeditious in the long run.

Moving to Su bsection or Clause 35( 1) (

c) Thi s is the 'part of the penalty or the prohib itions

section where it states - I'll leave out a few words - "no landlord shall, indir ectly or dir ect ly, employ, use or atte mpt to employ or use any subterfuge with a view to avoi ding or defeating any provision of this Act, etc .. " I don't know what the word "sub terfuge" means in this kind of a context.

As far as I can tell, neither will any court. lt seems to me tha t this subsection, as it stands, is not an effective proh ibition. it's sort of kind of a word saying that you're not supposed to be a bad boy without really defining what a bad boy is. it is our suggestion that, rather than have it here as a prohib ition, tha t the concept of a subterfuge perhaps be in cluded as one of the criteria available to the rent regulation officer and to the appeal panels.

For instance, a wording may state, a rent regulation officer or the appeal panel, as the case may be, may disregard any expenses or the effects of any transac tions to the extent that he finds, or they find, such expense or transaction to be a subterfuge or a colou rable device in tended to avo id the regulatory effects of this Act. If more certainty would be requir ed, it could be part of the regulations to indi cate just what was consi dered as a su bterfuge or a colour able device.

This wou ld have the advantage of placing it in a different part of the Act where the rent reg ulation officer perus ing the expenses presented by a landord, can say, ah, but this expense here is not really a bona fide expense, ther efore, we will not accept it even though it would otherwise be a pass thr ough cost that could otherwise be added to th e rent. it would seem that kind of a way of dealing with the idea of someone trying to avo id the legislation and the regulations supporting it by means of some tec hn ical device that migh t fit the letter of the law but really 61 doesn't adhere to the spirit or the in tent of the Statute and reg ulations wou ld find that his efforts, although perhaps very crafty, might not be very fruitfu l.

I wou ld also point out, as has been pointed out by some others, that the bill which is before the commit tee at this time is really a ho llow shell. lt is in tended that way and it is int ended to be fil led in by the regula tion s. The Act is essentially a procedural Act; it pro vides the context with in which the specifics of the reg ulations will be placed. If the regulations are good the Act will be effective; if the regulations are defective the Act, as such, isn't really going to provide any relief or any benefit.

This time, th erefore, we wou ld like to emph asize with respect to one particular point and I'm assuming tha t, by and large, the regulations as they will appear und er this Act when it is passed, will be very similar to tho se that were in existence under The Rent Stabil iza tion Act.

We'd like to empha size that there is a further common problem that has been encount ered in On ta rio that the way the legislation is set up will have to be cou ntered in the reg ulations. lt is our understanding from press releases and so on that it is the in tent of the admin istration to counter tho se and we would just like to emphasize that, in our opinion, that is very neces sary, and that is, in this situation where a person uses the means of remortg aging or refina ncing or wher e as a group ther e is the practice of selli ng, havi ng transac tions, the ultima te effect of which is to raise the cost.

An example cit ed in the Sunday Sun in Toronto is tha t a person owned a block and he had a pretty high equ ity in it. He sold it to his chil dren, financing it to the hi lt. What happened to hi s equ ity? lt wound up in his account in some financial in stitution, his costs were in creased imm ensely and the way the Ontario Statute was drafted, it seemed unlik ely that they wou ld be able to catch him . Therefore, it would imperative that non -arm's-length transactions be open to review and that not all expenses as a result of refinancing un der an non-arm's-length transaction be an allowable cost.

Simi larly, if a purchase is made on the basis of speculation where a person feels that, yes, if I pur chase this property I'll be able to raise the rent so much because my financing costs will be so and so high and on that basis th ere is a price which might be hi gher than that justified by what the rents are actually producing by way of reve nu e. This buyer then when he refi nances would be in a position to ask for hi gher costs.

A transaction such as that which is a trad ing transaction which, on an indi vidua l in stance, may not be so terri ble, but if there be any numb er of these it wou ld have the result of again bypassing the effects of the legisl ation. and that it would in crease a certain kin d of costs which, at least, on the surface and even on perhaps the second glance as well, would be a bona fide cost. And the regulations wou ld have to be drafted in such a way, we submi t, that would make profit taking of this kin d more difficult and less advan tageous.

Again, I would ind icate that I have looked at The Rent Stab il ization Act regulations from several years ago, I don't think that the way they are set up would do it, although I do un derstand that some other form of passing through financing costs will be intro duced by reg ulations rather than a simple looking at the books and passing them thr ough automatically. Finally, I would like to make a comment which

Tuesday, 15 June, 19 82 doesn't relate specifica lly to this Act as much as it does to the position that rent regula tion takes in the housing situation in the province. lt is indicated, I believe, that the reason for the rent regulations at this time is tha t the marketplace does not provide the kind of competition that would keep an orderly and a rea sonable rent system in place and that ther efore regu lation is requir ed to do what competition is not doing.

Hope fully, of course, the market wi ll sooner or later open up again at which time the rent regulations wou ld become less of an urgent matter and may be dealt with in nu merous ways. However, it is clear, I would sub mit, that the rent regula tion will deal with the effects and not with the cause of a situation where the market is not providing the control that we need. The Provincial Govern ment has a housing respon sibility. I wou ld submit that this hou sin g responsibility must be dealt with in the same context whe re the rent regul ation is being dealt with.

I un derstand that ther e is a fair amount of money budge ted for housing by thi s administ ratio n. If properly used, this budgeted amount may go a great distance to relieving some of the prob lems that are now forcing the imposition of rent reg ulations. In additi on, I would point out that any effort at hous ing renewal is going to have a sig ni ficant impact, for instance, on the City of Winnipeg and is a form of ur ban renewal. So that program, as well, must be dealt with by the province in some kind of co-ordination with rent regulations and with the housing program.

If th ese thr ee areas are not meshed, if they are not dealt with a conspectus of the whole picture of all thr ee of these areas, by the people making the decisions in those thr ee areas, we're going to have a form of chaos without con certed effective action and then we will be facing this kind of problem again and again and we' ll not have come up with an effective solution for the benefit of tenants in the long run .

Ther efore, it is our sug gestion as well, that the people who are in charge of the rent reg ulation scheme be in close contact with the people who are in charge of the housing program of the province, as well, as in close contact with the people who are involved in urban affairs, partic ularly with the City of Win ni peg but also, obvio usly, with any other urban centre in Mani toba. lt mig ht be possible to . have them in one department of the gov ernment or at least to have some one person acting as some form of comm uni cation between them.

Those are the sub missions tha t I have for the Com mittee at this time. If ther e are any qu estio ns I'd be happy to try to answer them. MR. CHAIRMAN: Thank you, Mr . Klassen. Are there any questions? Mr. Kostyra. HON. E. KOSTYRA: Thank you, Mr . Chairman. I'd like to thank Mr . Klassen for the presentation on behalf of Legal Aid. You made mention of

Section 29(2) of the Act and you expressed a concern that ther e is no provision for a tenant to initiate a complaint with respect to applica tion for a rollback of rent increases, with respect to

Section 29( 1 ).

Section 29(2) provides for an in vestiga tion to be undertaken by the Director, either on receipt of information from a tenant or un dertaken on his own 62 ini tiative. Do you not feel that wou ld give the neces sary protection for a tenant to lodge a complaint with the Director who would then undertake the investiga tion to determine whether or not there was incr eases levied that were not in accordance with the Act? MR. R. KLASSEN: I would feel that the provision in

Section 29(2) wou ld not provide that kind of protec tion. The information can be given by the tenant to the Director. The Director then has the option of having an investigation or not having one. Having made the investigation, even if he does find that the landlord has overcharged, he is not in any way obli gated to take any further steps.

You have two stages where there is discretion in what is an admini strative person who has, I would sugge st, no duty to act according to the rules of natural justice which stand between that tenant and some form of hearing where the ru les of natural justice wou ld apply. 1t may well be that if the subsection were reworded to say that a tenant who believes that there is overcharging may refer the mat ter to a Director who shall undertake an in vestigation and, if the investigation reveals tha t there is substance to the complaint that he then shall bring the matter forward.

That would be something of a different mat ter. However, it seems to me that we're two steps away from the tenant being able to bring the matter forward in a satisfactory way. MR. CHAIRMAN: Mr . Kostyra. HON. E. KOSTYRA: No further qu estions. MR. CHAIRMAN: Thank you. Any other questions? Thank you, Mr . Klassen. The next brief presentation, Lakeview Realty. I have two names here. Alan Borodkin or Sam Linh art. MR. S. LI NHART: Mr . Chairman, my name is Sam Linh art and I'll speak on behalf of Lakeview Realty. MR. CHAIRMAN: Thank you. MR. S. LINHART: I'm the President of the Lake view group of companies. MR.

CHAIRMAN: Do you have a written brief? MR. S. LI NHART: No, I don't. I don't have a written brief. I have some notes which I'll speak from. MR. CHAIRMAN: Thank you. Proceed. MR. S. LI NHART: We are a fully integrated develop ment company. We're headqu artered in Win nipeg and we have subsidiary development offices in Denver, Dallas and Phoenix. We established our U. S. offices in 19 77 and we've been in business in Win nipeg since 19 64. We employ over 10 0 people of which at least 75 percent of those are emplo yed in Winnipeg.

We're fully integr ated and fully diversified in terms of pro duct line and the type of development func tions we perform. By fully integrated and diversified, we start with the land acquisit ion, site selection, marketi ng, construction, design, leasing, financing and property management.

Tuesday, 15 June, 19 82 In terms of our products. we're very active in apart ment buildi ngs. at least. have been 'till the last few years. We develop office buildi ngs. in dustrial buil d in gs. and shopping centres. Sin ce 19 70. we have de veloped and still manage in the City of Winnip eg over 2.000 apartment uni ts. Some of the se buildings are probably well-known to some of you. They in clude Holi day Towers. Kena ston Vil lage. Kena ston Estates. Rob lin Oaks. Colony Squ are. Moray Vil lage and Mea dowlark Green. We've also developed the Cou rts of St.

James and Towers of Polo Park, although we no longer have a fina ncial in ter est in them and we don't manage them. In terms of development value. what this might con stitute in 19 82 dollars. I would say that we're probably talking of about $15 0 million of developments in Win nip eg, apartment-oriented and about $30 milli on of equ ity. A lot of the equi ty money that we raise is raised from private in dividuals and small private compan ies in amount s from as low as $1 0.000 to very substantial amou nts. We also. of course. put in our own capital and our own credit.

So. when we mention fairly large amou nts. we only do it basically for effect because we are a developer . we are a mobil izer of capital. but we're not what's so-called a fat cat. We have a lot of influ ence we think on people making investment deci sio ns. but the final decision is their s and we don't control the capit al. Many of the projects tha t we have developed and still manage are opera ting at very min imal cash flows · today; many of them are still in cash deficit.

When you relate tha t to $30 mill ion of equ ity val ue. you can appreciate with today's cost of money and in today's eco nomic environment that's not very attractive. Real estate is a cyclical busine ss. lt has ups and it has downs. it's not stable. And projects. particul arly some of the larger ones tha t we develop. take a long period of time to mature. lt takes two years to plan a project; a year-and-a half to two years to build it; two years to lease it up at low rents because you have to be competitive.

Proba bly another th ree or four years to bring those rents up to a level wher e you can recoup losses and get a reasonable return on invest ment and, hopefu lly, you can maintain that return on in vest ment by incr easing rents according to incr eased costs. But. it's a six to seven year process to bring the buildi ngs up to a poin t where they make some economic sense. Ther e's some front end tax benefits but. to a large degree. tha t takes care of the losses that the investors are in curring while the building s are bei ng developed. so it's a trade-off.

What in vestors really look for in the long run is a proper return on capital commensur ate with what's available in the marketplace and long-term in vest ment values. Capital or investors are very mobile and they're very sensit ive. If the y feel they're not wanted they go somewher e else. They're not just profit orient ed. I think when we look at what's happening in Canada today; when we look at what's happening with many of the American companie s that took their mar bles and went home and what kind of effect it's created in Canada, what's happene d to our dollar.

I think it's pretty evident that when you control a sit ua tion and you restrict the mobil ization of capital. th e long-term effects are devastating. The next thing that 63 we're going to hear is that the Canadian Government is going to want to encou rage all this foreign money, who sold out at the top with an 85-cent dollar. to rush back into Canada with a 75-cent dollar to buy back in at the bottom because we need jobs and our dollar is fallin g apart.

So. it's very Important to make that point because I'm extremely concerned about the long-term supply and the long-term development potential in this prov in ce and there are many alternatives available. Without going into a major philo sophical disserta tion about rent controls - because I accept the fact that they're probably here. hopefully not to stay - I think there's a lot of nega tives about them and I'll briefly go over some of them. Fir st of all, they're very costly to admini ster; they don't really protect the tena nts in the long run.

The general trend in Nor th Americ a is to get away from them and most of the provinces in Canada are gradu ally elim in ati ng rent controls in one form or another. Most of the citie s in the U.S. who have had them are trying to get out of them. In Minn eapo lis they recently had a referendum on rent controls and 70 percent of the people voted agai nst them. That was very un usual because Min neapolis has traditionally been a lib erally-orie nted city and they've been very restrictive on develop ments. They've been very control-oriented and when they put the test to the people they voted them out.

The same held true in San Bernardino. California ; in San Rafael. California and Ventner. New Jersey. All recent referendu ms; all voted heavily against rent controls by the people. given the choice. So. everybody's trying to get out of them and we're getting back in to them. I have great difficu lty with that. They distort the markets terr ibly and they discourage long-term supply of products. Peo ple will stay in rent contr olled apartments when they should be moving in to either high er rent apartments or single family housing because they've got a deal, why should they move?

People will not upgr ade if they don't have to and. ther efore. those people who should be gett ing in to those cheaper apartments can't because the peo ple who can afford to live elsewhere stay in the rent controlled apartments. They obviously hurt the single family market- and I'm sure you've heard from some single family people already - because if people have no in centive to move from apartments in to single family homes they don't move. They in hibit the potential sale of a project because inv estors are very reluctant to buy buildi ngs that have rent controls; th ere's no long-term pote ntial.

They just frig hten the devil out of lenders and in ves tors. The experience of rent controls. generally. across Nor th Americ a has been very poor. in fact. the Rand Report that was recently produced in Los Angeles ind icated that they did very little for tenants and they gr eatly hurt supply and qua lity of housing. I realize that th ere are a few situations. maybe 10 or 15 percent of the people in Man itoba need some pro tection and they should be looked after. but to go after an ind ustry and devastate it because you'r e trying to protect 10 or 15 percent of the people. just doesn't make any sense to me.

Many of the deve lopment companie s in Man itoba who are sti ll active in apartments have been the same

Tuesday, 15 June, 19 82 companie s tha t we've had for the last 10 years. Ther e have been very few new ones and there have been many who have moved out of the provin ce. it's the same group of people and the one thing that they've learned is to do busi ness in other provinces and in the U.S . They've had to, to protect them selves and to protect their long-term survival. As a result, many of these companie s, including ou rselves, have other oppor tuni es for new devel opment and so have our in vestors. We reailze tha t we're locked in with existi ng legisla tion and th ere's not very much we can do.

If we've got a frozen in vestment we'll just have to live with it, but I can assure you that in the futur e it's going to be very difficult to induc e, either our company or I know many other developers and many of the small in vestors, to develop new projects here. What are some of the solutions that I see? Bearing in mind that we're probably going to have some form of control. Fir st of all, I thin k you should free up vacant suit es for control. I don't see any need for having rent control on vacant suites. The market is plenty mobile here; ther e's lots of supply and people are very rent sensi tive.

Although our projects are full, we have 40 percent tur nover and if our rents go up more than what our tenants consider reasonable, they're out. So, at least free up vacant suites so we can ulti mately get to a position where the market can dictate rents. I thin k that all projects built after 19 75 should be exempt. In the fir st place those projects still have fairly high vac ancie s. The problem is in the older projects wher e people have lived there for many years and are on low or fixed in comes. They need some protect ion, but certa inl y not the newer projects.

Also, many of the newer projects were built un der the government's MURB, Mul tiple Un it Residential Buildin gs, and ARP, Assisted Rental Programs. Onc e again, those projects are regulated by CM HC. The return on in vestment is limi ted so they don't have to be controlle d and it's just going to be a bur eaucratic nightm are to start control ling those projects where you've got assisted rental program payments bei ng reduced, and ulti mately elimi nated, and rents req uir ed to not only make up for those reductions in the rental payments but also . operating costs and incr eased financing costs.

I think you've got to recog ni ze in creased financing costs. I mean, it's a fact of life. The world's cha nged in last two years, for the worst as far as financing is concerned. You can't get money for more than five years today and at such horrendous rates. who really wants it. The fact of the matter is that many projects are coming up for refi nancing; in terest rates are bei ng dou bled.

In terest is the largest single operating cost in an apartment project and if that's not going to be recog nized, vir tu ally every project in Winn ipeg that's com ing up for refi nancing is going to be in a ho rrend ous deficit. So, I think th at those projects certainly should be consider ed for exempt purposes and refinancing should obviously be considered as a pass through, although it'll be imp ossible to pass thr ough refinan c ing costs in one year. If there is going to be a cei ling, at least it should be tied to the CPI, Consu mer Pric e Ind ex.

I think 9 per cent is a very arbitr ary figur e and really bears no 64 relation to reality. I thin k the main concentration and emphasis, on an overall basis, should be to figur e out how to create more supply, not less. The City of Winnip eg is very anxious, and I know the province as well, to create se me downtown residential. If ther e's no envir on ment for new developme nt, no matter what you do or what the gr ants are, what the financing is, or whatever, people are just not going to inv est in apartments in down town Winn ipeg when th ere's no long -term potential. That's really all I have to say.

I thank you for your time and I'd be prepared to answer any que stions you may have. MR. CHAIRMAN: Thank you, Mr. Linha rt. Are there any questions? Mr . Kostyra. HON. E. KOSTYRA: Th ank you, Mr . Cha ir man. I th ank Mr . Linh art for his presentat ion on behalf of Lakeview Developments. I just would like to discuss with you your com ments with respect to the rent -up peri od and the amount of time you'r e of the opinion that it would take to get to a position where you would only need in creased rents in li ne with operating costs.

I believe that you had said that you saw about a five year period in order to reach that level. MR. S. LINHART: That's correct. HON. E. KOSTYRA: Is that gi ven today's market condit ions? MR. S. LINH ART: That's not given today's financing environme nt, because I don't thin k you could make sense on any kind of project with today's in terest rates. But giv en a nor mal inte rest rate environ ment that we had in previous years, I would say at least five years from start of construct ion to reach a level that would giv e a reasonable return on in vestments.

That might be a little shy but I thin k that's probably reason able for a good project. HON. E. KO STY RA: You also discussed the incr eased cost of mortgage and the pass through. Would you not agree, giv en you r statements about the mobil ity of tenant s, and gi ven tha t each com plex has different debt equi ty ratios, different periods of mortgages, that you would not be able to pass through all of the costs in one giv en year of in creased in terest rates due to mortgage refi nancing? MR. S. LIN HART: That's prob ably correct.

Of course, it depends on what the original rate of interest was on the mortgage and what the new rate of int erest is, but assuming that mortgages that we could get five years ago at 10 percent have to be refinanced today at 19 percent, I would say that it would probably take two or thr ee years to effectively pass that through . Not that we don't want to do it in one year; we have to or else we run a cash deficit but the market won't accept it so it has to be phased in over a period time.

That's in addi tion to in creased opera ting costs and probably reduced our payments so there are tremen dous pass thr ough s that have to be picked up, that probably

Tuesday, 15 June, 19 82 can't be picked up in the market. HON. E. KOSTYRA: What are the ge neral level of rent in creases that you have im plemented or are propos ing to implement with respect to your properties at the present time ? MR. S. LINHART: Between 12 and 16 percent. We need more but we think tha t's all the market was pre pared to accept. MR. CHAIRMAN: Mr . Pen ner. HON. R. PENNER: Mr . Lin hart, you made statements at one point that you thought tha t there were only about 10 to 15 percent of renters who needed con trols. Did you make that statement? MR. S. LINHART: Yes, I did. HON. R.

PENNER: Who are you talking about when you talk about those 10 or 15 percent, what particu lar group? And why does this group need controls? MR. S. LINHART: Well, I think once again, controls maybe a bit of misnome r, I think tho se people proba bly need protection and I'm thin king particu larly of older people or people on fixed in comes who can't incr ease their in comes to pay the extra rents tha t might be requir ed. And I think that those people need · some protect ion. I don't think they're mobile.

I think a lot of people are mobile even if the y don' t have the in comes if they're young because they can double up, they can stay at home , the y can do a lot of other thin gs. If I can relate to my experience in the U.S. markets when ther e's a recession and things get tigh t even in growth markets with no building, vacancies go up. So demogr aphic s are very in teresting wh en there IS economic adversity. But ther e are some people that just aren't mobile and the y need some kind of protection. HON. R. PENNER: Let's see if I under stand your answer.

Are you describing people who are not mobile or people who are on fixed in come s or both as bei ng in this group in the rental market who need some protect ion? MR. S. LINHART: I would say people who are both not mobile and on fixe d in comes need some protec tion . I think people who are mobile can do other thin gs, I think they can dou ble up they can go back home , the y can do a lot of other things tha t have to be done, li ke everybody does. We all tig hten up our lifes tyles when thin gs are tou gh as they are today. HON. R.

PENNER: So that the situation you're des cribing is one in which because of fixed in come they're un able to meet the uncontrolled market if the market exceeds their static in come. That is if there's an incr ease in the market without protect ion or with out control of 5, 6, 7, 8, 10 percent whatever it might be, being on fixed in comes the y're left short that 5, 6, 7, 10 percent. MR. S. LINHART: That's correct. As I say, if they'r e 65 not mobi le, if they can't pay the incr ease and they can't move, I think they've got a problem and I think that problem has to be addressed. HON. R.

PENNER: Let me jus t carry that one step forward. So that where, for example, in the fall of 19 81 the general level of salary in creases was runnin g, let's say, 10 , 11 , 11. 5, and there were rent incr eases of 20 and 25 and in some cases 30, ther e would be a gap, would there not, just as much as if your in come was fixed. MR. S. LINHART: That's correct. I don't believe that there were incr eases of tha t natur e on newer projects, projects that have been built sin ce 19 75 or middle priced projects. I think the market has always been in very good balance at those levels.

I'm not completely famili ar with the older projects where the rents have been extremely low for a long period of time. HON. R. PENNER: You tal k about the market being in balance yet I un derstood you to say that your own projects which, I take it, are somewhere in the mi ddle range, are full. MR. S. LINHART: That's correct. HON. R. PENNER: Th ere's not much of a vacancy rate in your own projects. MR. S. LINHART: That's right. That's because, I thi nk, we manage well; we're efficient; we build a good pro duct and we're sensitive to our tenants and we try and keep them. it's very costly to lose them.

Even so, we have 40-percent tu rnover a year and we try and keep our rent incr eases reasonable because we want our tenants to stay. HON. R. PENNER: Finally, Mr. Lin hart, would you not agree tha t mobil ity which migh t make the market somewha t fluid, has been adversely affected by the sorry state of the housing market either in terms of supply- that is for people who want to purchase hous ing - or what is equally disi ncentive, the high rate of mortgage money? That has cut mobil ity severely. MR. S. LINHART: I don't know if it's cut it severely, it's certainly cut it. it's certainly a factor. HON. R.

PENNER: Thank you. MR. CHAIRMAN: Mr . Film on. MR. G. FILMON: Thank you, Mr. Chairman. I wonder if I could ask Mr. Linha rt - he ind icated tha t the emphasis in today's market should be how to create new supply. Gi ven the cir cumstances of very high in terest rates, what does he see as the answer for creating new supply in today's market? MR. S. LINHART: I don't think there is much of an answer in the short run until int erest rates come down.

But as I mentione d before, it takes two years to think about and plan a project and I th ink that gener ally, you start thinkin g about projects when thin gs are not very good because you're not busy doing so you're busy

Tuesday, 15 June, 19 82 thi nkin g and you wonder where you're going to do your next project. If the envi ron ment here isn't that attractive, we're going to be thinking about doing a project in Dallas or in Calgary or wherever because we're not going to be very excited about doing some thing new here. In terms of creating imme diate supply, I don't really see a solution because I don't think either the Provi ncial or Federal Govern ment have the kind of money it takes to subsidize the int erest rates and create the right rental structure. MR. G.

FILMON: What you said in terms of the envi ronment not bei ng good here and creating construc tion elsewhere. the in ter est rates surely are going to be the same whether you're building in Houston or Dallas or Vancouver or Calgary or Winnip eg. MR. S. LINHART: Well, that's probably true right now for Canada; it's not qui te true for the U.S.

In the U.S. th ere's some very creative financing approaches that the savi ngs and loans are using to create housing and, in fact, in Dallas and Ho uston which represent 25 percent of the U.S. starts in 19 82, just an unb elie vable fig ure, they've had par ticula rly Houston has had, its best year in 10 years. it 's hard to be lieve, but it's true because the envi ron ment is attractive and the fina n cial in stit utions are get ting in volved both in the equ ity end and in the financing end.

The Canadian in stitu tions aren't yet geared to get in to the equi ty end of housing, but the y certainly are in the States and one of the reasons is because the markets are relatively free and the potential is relatively good, so th ey've been gett ing in to tha t field. MR. G. FILM ON: So the fact that the markets are free and the pote ntial is good, is what you mean by the more attractive environment. MR. S. LINHART: That's correct. MR. G. FILM ON: No further questions. MR. CHAIRMAN: Fini shed? Mr . Kostyra. HON. E. KOSTYRA: Yes, thank you, Mr. Chairman. Just one final qu estion. Mr .

Linha rt, when you met with me back, I gue ss it was in the middle of Februar y, I think you'd indic ated th at Lakeview Properties has developed and con structed over 2,000 apartment uni ts since about 19 73- 74 in the Ci ty of Winnip eg? MR. S. LINHART: That's correct. HON. E. KOSTYRA: Could you tell me how many of th ose uni ts or projects were assisted by the various Federal Gov ern ment programs? MR. S. LINHART: Vir tually all of them. HON. E. KOSTYRA: Thank you. MR. A. KOVNATS: To Mr . Lin hart. Can Mr.

Linha rt advise - and I'm sure he wasn't thr eatening because ther e's no reason for him to be th reaten ing - but would it be the in tention of Lakeview Realty, of which you are 66 the President, to withdr aw any contrac ting or supply in g of rental uni ts at this point? MR. S. LINHART: No, I don't think we're saying that. I'm saying that if we were going to get in to new hous ir.g it probably wouldn't be in Man itoba right now. MR. A. KOVNATS: Well, rather than housing, I know that you are in apartments also. MR. S. LINHART: By housing, I'm sorry, I mean apartments.

We're not in single family housing, we're only in apartments. MR. CHAIRMAN: One moment please. Mr . Kovnats would you get closer to your microphone please so we can get you recorded? MR. A. KOVNATS: How's that. I'm just trying to estab lish at this point whether Mr. Lin hart, if these regula tions come about, are you saying that you will not be doi ng any more developing in the Province of Man it oba? Would it be your choice to develop in another area, rather than Man itoba? MR. S.

LINHART: I think -I hate to say never because cir cu mstances change - but I would cert ainly feel bet ter about deve loping apartments in an area where ther e's no rent controls than wher e ther e is rent con trols and with lim ited capital we have to make the choices. I think we'd go to a more attractive environ ment. That's for new development only and that's only as it pertains to apartments.

I mean, as far as the other forms of developme nt, office buildings or indus trial, we'll respond to opportunities whether it's Man itoba or Alberta or Texas; but housing defi ni tely it would be a very negative thing as it relates to other places. I mean if everybody had rent contr ol, fine , then we're on an equal footing. If we're the only place that has rent control and we're going to go in to apartments, I don't think we would be looking at this area. MR. A. KOVNATS: Thank you, Mr . Lin hart. MR. G. FILMON: Mr . Chairman, I forgot to ask Mr .

Linhar t, I had wr itten down one of th e comme nts he made and he can correct me if I'm stating it in cor rectly, but he said that rent controls are probably here, ho pefully not to stay, and I'm wondering if he's aware tha t the Min ister has said - and the Min ister can cor rect me if I'm not expressing his position correctly - but the Mi nister has said that this system of controls is desig ned to be in place permanently. MR. S. LINHART: Yes, I am aware of that. MR. CHAIRMAN: Any further qu estions? Thank you very much Mr . Lin hart.

Before we go on to the next one, I'd like to suggest to the Comm ittee members that they co-operate with the Chair. If they would address their questions through the Chair so they can be recognized and also the person who's making the representation can be recogn ized. Oth erwise, the transcribers will not be able to attribute who said what and I think it's essential that we not be misquoted. I'd like to ask the eo-

Tuesday, 15 June, 19 82 operation of the Committee members. Mr. E. Hil ler, Landma rk Agencie s. Mr. Hil ler? Very well. Danita Onyebu chi, Crystal Properties. MS D. ONYEBUCHI: I have a brief here, Mr . Chair man, if you'd like it distributed. MR. CHAIRMAN: Yes, please. We'll have our Clerk distri bute them. MS D. ONYEBUCHI: Yes, my name is Danita On ye buchi. it's spelled wrong so it's not your fault. MR. CHAIRMAN: Thank you. Would you kindly spell it for us, so we'll get it right? Is it just the "k" wrong, an "h, " is that rig ht? MS D. ONYEBUCHI: That's right. The "k" is an "h." MR. CHAIRMAN: Thank you.

Proceed. MS D. ONYEBUCHI: Mr . Chairman, I would like to preface my com ments conc ern ing Bill 2 with a few general statements about rent controls. lt is com monly believed that rent controls protect the poor and improves their housing condi tions. But in dividual tenants freq uently have in comes which are hi gher than property owners, particu larly wher e rental hous ing has been invested in as a type of ret irement plan, ·and represents the owner's life savings.

Even if tenants' in comes were systematically lower than landlords, rent control would still be a very in equ itable method of assisting the poor because benefits wou ld be avail able only to tho se famili es able to obta in a rent con trol led uni t. Newcomers to an area always find it extremely difficult to obt ain such un its and mobile low in come groups are thus effectively shut out. Although rent control does make housing cheaper, it does not necessarily impr ove the housing condi tions of the poor.

In deed, it is well known and docu mented that rent controls result in poor mai ntenance and, ther efore, a serious deterioration in the quali ty of rental housing. Faced with a rate of return on inv est ment that is too small, many landlo rds recoup their losses on a cur rent basis by allowing the physical stock of uni ts to depreciate at a faster rate, thr ough negl ected mainten ance and repair.

From the property owner's poin t of view, rent control reduces the capital value of the buildi ngs supplying the housing service, since capital value is determ ine d by the expected reve nue from rents in the futur e. The extraction of capital in the form of repair and maintenance fore gone is a rational way of equalizing the rent contr olled rate of return with the expected rate of return before rent controls. The ensuing depreciation of rental un its reduces tenant benefits by prov iding them with less housing services for a fixed rental price.

Hi gh er rents, on the other hand, would lead to additiona l rental un its and - via filteri ng - result in better housing for the poor. We often hear, as the Comm ittee heard last nig ht, that hou sing should be for people and not for profits.

But profits attract in vestments to the areas most desired by consum ers; they are the means thr ou gh which entrepreneurs try to antici pate future demands 67 There is no dichotomy between profits and needs, desires and aspir ations of the people. lt is only by finding out what people's demands are and cateri ng to them in minu te detail, that the busi nessman can earn a profit. The real estate developer in the private sector earns profits only insofar as he provides the kinds of housing people want at the lowest possible price.

Co-op housing was established in Man itoba thr ough Canada Mortgage and Housing Corporation. Fifty year mortgages were provided to these non-pr ofit organizations at just 8 percent. lt was in teresting to note last nigh t, however, that these non -profit co operatives were granted a rental in crease by CMHC of 10 •;, percent, and this was to cover operating expenses alone. Yet, priv ate inv estors may be held to a 9 percent in crease or less, despite the fact tha t many property owners are faced with substantial mortgage rate incr eases.

Detrimental effects of rent control in clude erosion of the tax base and subsequent shifting of the tax bu rden to ho meowners. Rent control reduces the val ue of rental property, and with a given reve nue requir ement, governments that rely on the assessed value of property as a tax base, must in crease the tax rate on all property. Si nce the assessed value of owner- occupied housing will probably rise during the rent control reg ime, the burden of property tax is gradually shifted to homeowners.

Why should shelter costs for renters be fixed at the expense of home own ers while housin g costs for homeowners are un predictable and escalati ng? Reduced mobil ity is a further consequenc e of rent control in two ways. Fir st, to the extent that it reduces construction of new rental housing and leads to lower vacancy rates, residents will be deterred from moving because of the incr eased difficulty of locating a vacant rental uni t. Second, residents of rent-co ntrolled un its will be particu larly discour aged from moving because in so doing, they must forego the subsidy associated with tenur e.

Th ere are several disadvan tages associated with this reduced mobil ity. Fi rst, it tends to result in a misallocation of the existing hous ing stock. Young, gro wing famil ies will be incl in ed to endur e crowding rather than relin qui sh their subsidy, while older neig hb our s hold on to larger uni ts as their family size decli nes with older chi ldren leavi ng home. A second problem tha t is li kely to result from reduced mobili ty is an incr ease in un employment. Most labour markets are characterized by rapidly changing job locations.

As a result, many employees find it neces sary to move freq uently to keep their present job or to find a new one. Any obstacle to this mobil ity makes it more difficult to match job seekers with available posi tions. Alterna tively, tenants of rent-co ntrolled uni ts may choo se to travel great distances to their job rather than relin qui sh a contr olled uni t. The detri mental results of unn ecessary com muting range from incr eased fuel consumption to less time spent with family. In vestors in rental housing are motiv ated by profit consi derations.

Even advocates of rent control seem to accept this notio n, for they are not hesitant to con demn what the y perceive to be the greed of landlo rds. This bei ng the case, any legal change whi ch has the effect of reducing the profi tabili ty of rental housi ng will result in a reduction in its construc tion. This will

Tuesday, 15 June, 19 82 ultima tely result in a severe housing shortage. Accompanying this lack of construction activity will be an in crease in un employment, an issue which must certainly be of concern to any govern ment. Public housing is not a viable alternative to this problem. The case against public housing is as tho rough as it is devastating. The gigantic 2,9 00 uni t development in St. Louis, which cost $36 milli on to build in 19 56, became a "vertical slum" of such stag geri ng proportions that it had to be completely demol ished less than 20 years later- by the same authoritie s that had built it.

Nor is this case unr epresentative. Public housing projects, in their short history, have become synonymous with crime, abject poverty, hope lessness and a prison-like atmosphere. Thousands of such un its have decayed, been boarded up and even tually abandoned. The un attractiveness of this alter native can be witne ssed in Winnip eg. While public housing suffered extensive losses to vacancy, suites in Lim ited Dividend projects, which were constru cted under

section 15 , and 25 percent of which were allo cated for use by Winn ipeg Regio nal Housing subsid ized tena nts, had a long waiting list. What is lacking in public housing is not good ideas and skillful execu tives but a process whereby in novation and compe tence are rewarded and their opposites pun ished. This is precisely what obt ains in the ordi nary work ings of the free market - in the absence of rent control thr ough the profit-and-loss system. Rent control was born from noble motivation - tha t of concern for the well-being of low-i ncome ho use holds.

Ho wever, rent control is far from the best way to express this concern. If aid to such famil ies is in the public in terest. then equ ity requir es that the cost of provi ding it be spread among concerned famil ies. There is no justification for requiring almost the entir e cost to be borne by the small proportion of the popula tion who own rental property. Fur thermore, there is no justific ation for prov iding aid to middle and upper in come famili es as is typical of rent control.

The vast majority of renters who can afford to pay their fair share for shelter should be made to do so, and at levels which reflect today's costs. Despite our objections to rent control in general, and gi ven that the im posit ion of rent control in Mani toba now appears to be an inevita bil ity, I wish to address several specific issues cont aine d in the pro posed legislation, with the goal of minimizing the una voidable and detri mental effects of such leg islation.

Th ere are nume rous wel l managed buil di ngs in Man itoba with relatively low in terest mortgages which con tinue to lose money for many years following their construc tion. lt is for this reason tha t even in the absence of rent control the Federal Government fou nd it necessary to implem ent tax deferral mea sures to encour age private invest ment in residential premis es. Si nce elim in ation of the se measures, the re remains no motivation to produce rental housing in Man itoba, and a severe housing shortage may result.

Even the promise of high demand for rental accom modations as vacancy rates di mini sh will not be suffi cient inc entive un less rents are permitted to reach levels which will service debt and operating costs. As was shown in data presented by the Manit oba Home Bui lders Association, it is unlik ely tha t eco nomic 68 rents can be achie ved in just four years. The attached table demonstrates the economic inviabilit y of new apartment construction in Winnip eg in a free market. When existing stock is under rent contr ol, the problem is exacerbated.

Un der the Assisted Rental Program of 1975-76, aid was granted to rental property owners during the early years of their projects when rental in come is far below its potential due to vacancies and low rental rates. Subsid ies granted to such property owners decrease by a fixed percentage to offset antici pated rental in creases. Should rent control deny th ese owner s rental incr ements requir ed to meet the annu al step-up in debt service, they will find it necessary to extract capi tal in the form of negle cted repair and maintenan ce.

This will ulti mately result in a serious deterioration in the quality of rental housing in Man itoba. CMHC has recently developed a Residential Rental Assistance Program. (RRA P) , aime d at re habil itation of specified core areas. Un der this program the prop erty owner will provide 50 percent of the cost of reha bil itation, with CMHC prov iding the remai nin g 50 per cent, to a maximum of $2.500 per suite. Rental rates of these premises will be un der the control of CMHC for a period of 10 years and will be based on a break-even bu dget with an, as of yet, unspecifie d percentage of return on investment.

However, since proposed legis lation grants exemption for a maximum of just 4 years after approved rehabilit ation has been comp leted, such property owners would be un der conflicting controls. Their ag ree ment with CMHC will be meaningle ss. In light of the foreg oing, we support the proposals made by the Mani toba Home Bui ders Association, that all residential rental premises constru cted from and after January 1s t, 19 76 be entitle d to a minimum of 15 -year exemption from the date of first tenancy, and that buildin gs built un der the ARP Program in 19 75 and 19 76 also be exempt.

In addition, we pro pose that all buildings whose rents are contro lled by CMHC be exempt from provincial rent control legisla tion until their agreement with CMHC expir es. The acceptabil ity of any measure designed to pro duce and maintain rental housing is li kely to decrease as the complexity of admin istration in creases. Sim ilarly, disincentives are likely to be greater where the cost of admi ni stration is not contr olled. Admin istra tion of the proposed legislation is most cum bersome and costly.

If the bur eau is to be provided with in for mation concern ing rental rates of each in dividual ren tal uni t in Man itoba sinc e Janu ary 1s t, 19 81 , and in some in stances two years prior to that date, it will be inu ndated with paperwork. The task of dealing with applications for and notifica tions of current rent in creases alone will be over whel ming, not to mention that of in creases imposed prior to im plementation ot the bill. This is cer tain to result in costly del ays for property owners and government alike.

A more logi cal role for the bur eau would be that of arbitr ator in those cases where tenant objections to rent in creases meet specified criteria. I think it unnecessary to reite rate all of the very val id objections which have already been raised. lt should be obvious to the Comm ittee that Bill 2 as it now stands poses some serious problems. I will repeat,

however, that since tenants objecting to rent in creases are not made responsible for prov iding any justifica tion for their objec tion, it is ob vious that both the Rent Regu lation Bu reau and property owners are going to in cur a great deal of expense deal ing with unw ar ranted disput es. Criteria should be established to determine what constitut es a valid objection to a given percentage incr ease and objec ting tenants should be requi red to demon strate that these criteria have been met.

Simila rly, it is simply un fair to expect property owners to refund rent which six months later is deemed to be excessive. Rent s at Janu ary 1, 19 82 may be used as a basis for determ ining what the allowable in crease should be after a percentage has been arrived &t in the reg ulations, but it is a blatant injustice to force property owners to refund money, which was collected in accordance with existing leg islatio n, par ticu larly when tha t money has already been spent on property taxes and in the operat ion of the rental property.

Fi nally, since full admin istrative procedu res are yet to be determ in ed, we join others in urging the Min ister to consult property owners and managers prior to form ulation of the reg ulations so as to reap the benefit of their experience and practical considerations. Thank you. MR. CHAIRMAN: Thank you, Ms On yebuchi. Any questi ons. Mr . Film on. MR. G. FILMON: Mr. Chairman, I would like to ask Ms Onyebuchi what level she would think would be rea sonable in today's market as a cutoff point to exempt suites from controls.

The level proposed in the Act is $1 ,000 and a numb er of people have made comment on the fact that there are probably only a handful of suites in all of Mani toba that are at or above $1 ,000 a month rent. Does she have any recom mendations on that? MS D. ONYEBU CHI: I personally don't have the sta tistic s at my disposal but on reading the Act for the first time it was fairly obvious that the $1 ,000 cutoff well it wasn't obvious it was simply mystifying why it was ever put in - because it is unr ealistic and it doesn't apply to the Man itoba market at all.

I belive that people far more qualif ied than myself have poi nted to a $400 cutoff point. MR. G. FILMON: Does Ms Onyebuchi have any sug gested criteria, the matter of friv olous objections or bei ng able to sift out object ions, particu larly tho se that are for rent in creases below the gu ideline sug gested of 9 percent, does she have any suggested criteria that may be used in other ju risdictions that would be used to determine what constitutes a va lid objection to a percentage incr ease, say, applying them at least to those below the suggested tideli ne. MS D.

ONYEBUCHI: I personally can think of no pos sible reason why a 9 percent incr ease should be objected to, but I as sume that, sin ce it has been allowed for in the legislation, the people who set tha t 9 percent guid eli ne, or at least have voiced it, must have 15 June, 19 82 69 thought that it was a fairly equ itable amount and they must know of reasons, which are a total mystery to me, of why an in dividual could possibly object to a 9 percent incr ease or below. I personally can think of none though. MR. G.

FILMON: Well, let's assume that, because of the person's equ ity position bei ng large in a suite and the percentage of variable costs, the percentage of their total costs of which the variable cost is small - let's say that the y have a fixed payment that has to be made on a mortgage and were getting, as of last year's rent, a fair return on that and the only variable is their operating mai ntenance costs - let's say, and their utili tie s and a few other thing s and maybe that only amounts to say 30 percent of the over all costs and those were going up by 12 percent but the rest of their costs were fixed and so, ther efore, there might not be a justific ation for going up any more than 6 percent un der those cir cu mstances; it is conceivable that that could be the case.

MS D. ONYEBUCHI: I suppose it cou ld be con ceiva ble, although I already poi nted to non-pr ofit co-op housing where tenants are, in fact, owners and proba bly take more of an in terest in the maintenance and care of their property and, even in those situations, CMHC has allowed an in crease of 10 .5 percent. So I really find it very unl ikely, given that most tenants have absolutely no in terest in owner ship of the rental accommodations, that you would find where it would be less than 9 percent. MR. G. FILMON: I have no further questions, thank you. MR. CHAIRMAN: Thank you Ms On yebuchi. Mr . Barry Matthews.

Mi ss Lori Bell. I un derstand Mi ss Bell has a brief that will be distri buted. MS L. BELL: I hope you can all see me, my name is Lori Bell, I'm a com muni ty worker for St. Matthews Maryland Communi ty Min istry. The staff of the St. Matth ews-Maryland Communi ty Min istry has, for a long tim e, been con cerned about the futur e of tenants in the province, specifically those living in the in ner city of Winn ipeg, this bei ng the main focus of our work. For many years we have helped hard to place tenants in to rental accommodations.

We have also talked with many tenants who have had difficu lty with housing due to high cost and hi dden prejudic es. We have come to you, the Standing Comm ittee on Statu tory Regula tions and Or ders, because of our support for rent regulations and also to suggest specific chan ges in the proposed Act which we feel would be of benefit to the tenant without being prejudicial to the landlord. With regard to Bill 2, The Residential Rent Regula tion Act, there are a few sections which cause us some concern which we would li ke to draw your attention to. The fi rst

section that is of concern to us is

Section 28( 1) . We foresee many problems and hardships on tenants that are on low or fixed in come or social assis tance if the y must pay an amount in excess of the regulations withou t a decision being first made as to whether this incr ease is justifiable . Already this year

15 June, 19 82 we have been inv olved with tenant s who have been forced to move or relocate out of their area because they could not afford the rent in crease on their apartment. lt is im portant to further point out to this Commit tee that these rental in creases have as yet not been justi fied by the landl ord. We wou ld like to see this

section changed so tha t the tenant shall only have to pay an incr ease at the amount set out in the reg ulations until such time as a decision is made and only then have to pay the in crease. By doing this the tenant, if he so chooses, can stay and fight an unfair rent incr ease without undue hardship to him or his fami ly, or find an adequate place to move without having to relocate in an undesirable area. Un der Sect ion 21 (3) we strongly recommend that any decision that is made on one particula r apartment be applied to the entir e complex.

Thr ough our work with tenants we have experienced the frustration of having legislation apply only to one tenant and one landlord as The Landlord and Tenant Act does because it does not benefit the greatest nu mber of people. lt is our concern that if this

section does not apply that some landlords, and I stress the word "some," may use this

section to evict tenants who would object to a rent incr ease and only keep tho se who will not. Some time s because of frustration with the system people tend not to fight for what is rig htly their s and if some one else, perhaps not as frustrated, is willing to figh t we feel the gr eatest nu mber should benefit from this action. I would also like to comment briefly on

Section 16 of the Act dealing with frequency of rent in creases. Again, thr ough our work with tenant s, we have at ti mes seen a particula r suite in an apartment block in crease as many as thr ee or four ti mes in a six or eig ht-month period with out the landlord making any change s in the apartment. There must be some pro tection for new tenants so that they will not be char ged exorbitant rents for what is, in the majority of cases, deplorable housing conditions.

A tenant should not have to be su bjected to rent in creases that are un fair solely because the landlord is aware of how difficult it is to find housing in particular areas of the city. For this reason we would like to applaud this ·

section of the Act and urge the Comm ittee to leave it in tact even after they have heard argu ments agai nst this section. A final note of concern is found in

Section 33, Sub

section 1. We agree with the landlords that upon applic ation for renovat ion. the y should get approval or not at this tim e. However, we feel the rent incr ease should only come in to effect after proposed renova tions have been completed and an in spection done by the rent reg ulation officer to ensu re renovat ion s are com plete and done adequately. In conclusion, we, at St. Ma tthew's -Ma ry land Communi ty Min istry support the need for rent con trols in the Provinc e of Man itoba and wou ld like to applaud the Min ister, Eugene Kostyra, for his con cerns for tenants in this provinc e. Thank you. MR.

CHAIRMAN: Thank you Ms Bell. Are th ere any qu estions? 70 HON. E. KOSTYRA: Thank you for your presentation on behalf of St. Matthews-Maryland Communi ty Min istry. I'd just li ke to give a couple of comments on your presentation and this one question. You made refer enc e on the first page at the bottom with respect to

Section 21 (3) of the Act. The reason that

section is in the Act is precisely for the reasons that you outli ned th at allows that in situations I could describe, that the Bu reau can enjoin other suites in a review of rent in creases in that particular block. So, I'm not certain of your concerns as to whether or not you feel that would be imple mented or there was misinformation. The ot her area that I just wanted to get some further discussion from you on, is dealin g with

Section 28(1 ). Qu ite frankly, this was a difficu lt area for us in looking at with respect to the payment of the hi gh er rent level until such time as a determi nation is made. Yesterday, in response to similar concern, I indic ated that, hope ful ly, the decisions wou ld be made prior to any rent in creases being imp lemented. However, in the in te rim , there may be some difficultie s with that whe n the legislation is fi rst pro clai me d and is bei ng admin istered.

I guess the difficu lty that I would have with your suggestion is that because of the kind of problems that you'r e talkin g about at the time of the actual rent in crease, if the in crease was granted at the level that was first requested or some thing close to that, then the problem for the low-i ncome tenant wou ld be com poun ded by the numb er of months that go past that they would not be paying the hi ghe r rent incr ease. MS L. BELL: Un like a sugge stion that was made ear lier tha t they pay it back afterwards, we're not being qu ite as wis hy-washy.

We'd just li ke to see a 9-percent in crease until such time until the decision has been made and never having to pay back, if it is justified. Just a strai ght 9 percent until the decision has been made. HON. E. KOSTYRA: So then, you're suggesting that the y would pay the hi gh er rate at the point in time when the in crease is approved? MS L. BELL: That's correct. HON. E. KOSTYRA: I see. MR. CHAIRMAN: Mr. Corri n. MR. B. CORRIN: Mr . Kostyra made both my points, Mr . Chai rperson. MR. CHAIRMAN: Thank you. Mr . Fil mon. MR. G. FILMON: Yes, thank you, Mr . Ch airman. I'd like to ask Ms Bell, in the

preamble to her brief, she in dicates that as commun ity workers, they have talked with many tenants who have had difficu lty with hous ing due to high costs and hi dden prejudices and have come to us because of their support for this Act. I wonder, is the implication that this Act will, in some way, reduce the hi dden prejudices or address that aspect of them, Ms Bell?

Tuesday, 15 June, 19 82 MS L. BELL: Perhaps. MR. G. FILMON: I wonder if I could ask Ms Bell in what way she sees this Act as removi ng hi dden preju dices from the marketplace? MS L. BELL: it's a good que stion. MR. G. FiLMON: I'm sorry, I don' t mean to put you on the spot. I know tha t the con cern is in providing affor dable housing for those who are in need in the pro vinc e.

I wonder if Ms Bel l could answer the que stion. do you really think that the same kind of leg islation is needed for people who are paying $900 a month rent. as for people who may be in the circu mstances who you'r e dealing with in the in ner city in very low inc ome and low-rent areas. MS L. BELL: I don't know of anybody who pays $900 a month for rent. so I really don't think I'm in a position to answer that. MR. G. FILM ON: Alrigh t.

If you have the concern - as I think most of us do - that the issue in the rental market is affordabil ity. wou ld you see an adequate system of rental supplements as perhaps addressing your con cerns for the affordabil ity for the people you serve? MS L. BELL: I don't understand your que stion. 'MR. G. FILMON: I mean supplements that are avail able under some govern ment program that would serve to reduce the rents that they pay.l MS L. BELL: Such as CRI SP. like the CRISP Program? MR. G. FILMON: Well. CRISP is supplements for childr en; for child support but for rental support. let's say. MS L.

BELL: I don't know. MR. G. FILMON: Well, I thank Ms Bell for her presentation. MR. CHAIRMAN: Mr. Penner. HON. R. PENNER: Just a brief com ment relating to the qu estion that Mr . Film on had asked. As I under stood the

preamble to the brief. it simply gave a back ground with respect to th e areas in wh ich the staff of St. Matthews-Maryland Com muni ty Min istry has been working and mentio ned two kinds of problems they had encount ered. one being prejud ice. the other high costs and then the rest of the brief just went on to talk about high costs. I don't think it was suggested in the opening paragraph at all. eithe r expressly or implic itly. that rent controls would deal with the qu estion of prejudic e. MS L. BELL: Thank you. Mr. Penner. MR. CHAIRMAN: Mr . Kovnats. MR. A. KOVNATS: Just two que stions.

Fir st one, as a staff of the St. Mathe ws-Maryland Communi ty Mini s- 71 try, is that a paid position? MS L. BELL: Yes it is. MR. A. KOVNATS: Fair enough. I would think that the type of work that you do particula rly with the presen tation that you have made - an excellent presentation and I think that through the chur ch organiza tions th at they do a lot of good work partic ularly in looking after the people who can't look after the mselves.

Compli menting the Min ister for bri nging in the bill now. just on the alternate part of it, would you think that the payroll tax that the Pro vincial Gov ernment is bringing in on all organiza tions MR. CHAIRMAN: Order please. If you wish to discuss the payroll tax. discuss it with a politician I think it's un fair to ask the witness who is making presentat ion in respect to a bill to discuss a political issue which is really not to the bill. Thank you. Mr . Kovnats. MR. A. KOVNATS: Mr . Chairman. I think that every thing that goes on at this meeting is politic al and I am trying to make a point. MR.

CHAIRMAN: That's true. but the payroll tax has nothing to do with this particular bill and that's my rulin g. You wish to challenge it. you have that right. MR. A. KOVNATS: No. I don't think I'd wish to chal lenge your rulin g, Mr . Chairman. if that's your ruling. No matter what happens. I don' t have enough support here in Opposition to challenge your ruling but I think that freedom of speech has just been curtailed. I think that the public should be aware of it and I thank you very much. MR. CHAIRMAN: Order please. You're reflecting upon the rulin g of the Chair and you know better than tha t.

Are there any further qu estion of Ms Bell? Mr. Corrin. MR. B. CORRIN: I just have a brief comment with respect to the question Mr. Filmon addressed to the delegation respecting hid den prejudice. In that regard. I would ask Ms Bell whether she's had the opportun ity and when Mr . Filmon put the question to her. she seemed a bit su rprised but upon reflection. I would ask whether she's had the opportunity to reflect upon the provision in

Section 35( 1) (

a) that prohi bits land lords attemptin g to or actually collecting from tenants. commissions. bonus es. penalties or key deposits which in deed may have an effect with respect to land lords who attempt to exact those sorts of premiums in order to discour age tenants from occu pying their premises. That isn't the only purpose of that particu lar provision. but I just draw to her attention that there is a clause in the legislation tha t may well deal with the question of prejudice in some of its in ferential circum stances and situations anyway.

I'd like to thank the delegate for a fine presentation. enjoyed it very much. MR. CHAIRMAN: Mr . Joh nston. MR. F. JOHNSTON: In your Brief. when you mak e

Tuesday, 15 June, 19 82 reference to Bill 2,

Section 28, and as you go along you say it is important to further point out to this Commit tee that these rental in creases have, as yet, not been justified by the landlord. I think you're inferring that the person or the tenant had to move before the new rent decision was made. Am I not correct? MS L. BELL: Partly, and just as a point of reference that because of just frustration with the system, a decision was never made on whether the in crease was justifiable or the person did not file for any type of appeal because of a frustration with the system. MR. F.

JOHN STON: Well, then you were aware and when you were advi sing tenants that a tenant who made a protest to the Comm ittee automatically had the right to stay in that apartment at the rents that were being paid until the decision of the Board or there was a decision of agreement between the tenant and the landlord in the previous legislation. That was fact. They did not have to move until a decision was made. Were you aware of that? MS L. BELL: Well, in one particular case, she chose not to go through official chan nels and therefore just moved. MR. F. JOH NSTON: Well, tha t is the choic e of the person, then.

Thank you. MR. CHAIRMAN: Thank you, Ms Bell. Mr . Martin Bergen. MR. M. BERGEN: Mr . Chairman, Comm ittee, actually I have a question and a statement. Why do we need rent control? To me, it does not make sense since I feel it ruin s the whole housing industry thr ough artifi cial market mani pulation. Sorry, I'm not a lawyer, so I am a bad reader. MR. CHAIRMAN: Take your time , Mr . Bergen. MR. M.

BERGEN: If your goal is to protect people who canno t afford to pay the fair market value for rental accommo dati on, then the sim plest method of looking after them is to im plement programs like the SAFER progr am, which would directly benefit only those people who actually need the help. Rent con trols benefit the poor and the rich alike. The Govern ment of Mani toba owns 14 ,0 00 un its out of 80,000 rentable un its in Man itoba at a cost to the taxpayer of an excess of $50 million a year. Now clearly, that should take care, I th ink, of all the tenant s which have representation here at this meeting.

There hasn't been any representa tion here at this Comm ittee from tenants. The only presentations were here from people who really need help and I think th at's why the government buil t. At least, that was what we were told in the past by the previous govern m•.:lnt and previous to that. We buil t tho se uni ts for the needy ones? If the gov ernment buil ds subsid ized housing and civil servants, Manitoba Hydro workers liv e in them, then there is something wrong or the government doesn't pay their civil servants enough money and the Mani toba Hydr o alike.

Well, they 72 should have a raise then or they should be forced to move into accommodation in the private sector so that the people who were represented here by the previous speaker could have those uni ts without being discrim ina ted, without anythin g to liv e in. I fully agree that they need help, but not all the tenants of Manitoba. Rent control discou rages people who can afford it from buying a sing le-family house. Why should they, when they can liv e cheaper in a rental un it?

In the 19 50s a house sold for $1 2,000 with monthly pay ments of $87, and a two-bedroom suite at that tim e rented for approxi mately $1 35.00. lt would th erefore, in my view, be much wiser to sti mulate the single family housing market. So that means at that time a two-bedroom suite was more expensive than a hou se. So the refore, people as soon as the y could afford or as soon as they saw their way through, they would be better off to have a down payment of $2,000 and then move into a house with $87 monthly payments. At least, it became their s with time.

Today, we protect th ose tenants with cheap rent so they sell their house and move in to a rental un it. In Saturday's paper I saw ads which advertise ho uses as low as $45,000 with a down payment of $1 5,000.00. If the government were to subsidiz e the down payment by $1 0,000, there would be sufficient fund s in the $50 mil lion which the Pro vincial Govern ment has allocated to stimu late housing construction for 5,000 single -family ho uses, which people with $5,000 down would be able to afford.

The balance of $30,000 would be a mortgage at 18 percent with a monthly payment of $436, which would be very close to a rental thing. I'm sure that with today's wages and ever ything 80 percent of the work force can save $5,000.00. If the government would not benefit so much on the high inter est rate, it could go to Eur ope and borrow money at 8 percent, giv e the homeowne rs a mortgage at 12 percent. The 4 percent would then at least gi ve the government as much in come as it bene fits on high in terest rates. The monthly payments would be $302.00.

Now, why I mentione d high in terest rates is, one of the Comm ittee members here, to my surpr ise, admit ted that it's foolish for a person to go to the bank and in vest this money at 14 percent and thin k he's going to get 14 percent out of it when, in reality, by the time it comes to the end, he only gets 3 percent out of it because the rest the government takes in taxes. That's why I menti oned high inter est rates here. So I thin k it came from a Commit tee member here that the gov ernment benefit s out of it and what I've been te llin g, of cou rse, long ago to everybody.

Thi s proposal would elimi nate all the problems we have with the housing economy. 1t would put people back to work; it would make it possible for renter s to move in to a sing le-family homes as is natur al, ther eby vacating apartments and re-establishing a competi tive market. Controls would not be needed as the ind ustry would look after itself. Government should stay out of building and owning anyth ing whic h it does not already own. Non profit housing is not a solution either, sin ce it only puts a heavy burden on the taxpayer. (See Sche dule A).

When you look at Sche dule A, I gi ve you an example there. The la test house on Hender son Hi gh way was built with government help. The rent there

Tuesday, 15 June, 1982 are $230-$320 for a one-bedroom suit e; $350-$360 for two bedrooms. Now if you look on the right side there are five apartment blocks listed there which are pri vately owned, also for senior citizens, and the rent is comparable with them. So are the suites. The non-pr ofit housing that costs the taxpayer $467 per suit e a month subsidy and that's going to be for 50 years. Sur ely that is not the solution.

If we already have 14 ,000 uni ts in this provinc e which cost us $50 million a year subsidy, plus some more coming on the market every year, one of these days even the taxes are going to run out and we could not afford that either. You will see that the free-market rents are compar able to the rent in non- profit housing. Governmen ts should stay out of all giv eaway programs with the exception of the one which will stimulate the move by fami lies, from rental to single family dwelli ngs.

What I'm saying here is that government should stimulate single family housing because then the people look after it and its not a bu rden anymore to any govern ment and they also pay taxes to look after it and they look after the property. it's better than having apart ments a[ld any other rental un its. I have just returned from a country where rent con trols have been in force for the past 40 years and no in creases have been perm itted during that time . Of cour se, repairs have not been done during the same period either.

Su ites are passed down from parents to chil dren and kept in the family for generations, · because ther e simply are no new ones avai lable to accommodate new famil ies. Proper ty owners are unable to pay for maintenance and, ther efore, it just doesn't get done. If major repairs are requir ed, like a new roof, the government has the work done, pays for it and then seizes any property the owner has to cover payment. In this manner it is onl y a matter of time before every pie ce of land and building is owned by the government.

The government, before building any rental uni t requir es the followi ng from each person who wishes to live in the uni ts. Like the gentleman, Mr. Martin dale, consider ed co-op housing, they build co-op housing but before they get permission or before they get accepted to be able to have a suite in there they have to pay $2,000 cash down payment and 600 hour s of free labour which he can provide in whatever manner he sees fit.

This method, if applied to a $3.5 mil lion, 200 suit e. apartment building in Winnip eg would look as follo ws, and there's the table. it's 200 suites at $2,000 is $400,000 would take care of the land, engi neeri ng, design and all that kind of thing; 12 0,000 hours at $12 an hour wou ld gi ve you another $1,4 40,000 to a total of $1, 840,000 paid toward contruction by applic ants. Now that is what I wou ld call co-op housing. The balance of $1 ,660,000, which is material cost, could be reduced to $1,1 60,000 as frills such as carpets, fixtur es, appliances etc., wou ld be the tenants responsi bil ity to supply.

Ther efore, the monthly rent per suite wou ld be $88.80 and that at 19 percent for 30 years. Of course, there are no property taxes and maintenance and util ity costs are looked after by the tenants. As a landlord with extensive experience, without and with rent controls, I see a massive bu reauc racy 73 created to gain absolute control of the ind ustry and tu rn it into a public util ity.

Sinc e the proposed Act will permit tenants to object to any in crease, even if it is only 1 percent, and to draw the rest of the tenants into the action, at the same time , I can predict that all rental un its in the Province of Mani toba will be subject to a total review of expenses and revenue. No in dustry has ever been subjected to so much scrutiny.

If I may say, through past experience we have, where ther e was class action allowed, it was people like the fi rst speaker we had this evening who went to an apartment building with 15 0 suites and it took him thr ee days to canvas the whole block. ln thr ee days he fou nd one person who went along with him and said, "O kay, you can appeal if you think it's right as long as it doesn't cost me anything." They made an appeal and I had to go before the Board.

They made it a class action and it was so cheap that the Board members at that ti me, and the lawyers and the tenant who was in volved in this thin g, argued that I didn 't have to have two telephones. I did n't have to have a telephone in the block and I didn 't have to have a telephone in my office. lt was excess expense.

Now if you have a mil lion dollars expense a year and you argue about the telephone bill ttJat goes too far, I think, and I think this class action which, to my luck at that time, was tu rned over by the cou rts and was not allowed; I hope it will not be allowed this time either by the cour ts since I think the precedent was set by the judges that it can not be allowed and I hope that the Hum an Righ ts will really look after this; that there's no way that one tenant can create a class action and pull all the other tenants with him. That is the most dangerous bad legislation that's in here.

If a person, over 18 , today, cannot stand up for his own rights with all the educa tion and the advertising we have, then I don't think he needs anybody from Legal Aid, lawyers, to go to knock on his door and persuade him to come and file an appeal. I think those ki nd of lawyers shou ld be disbarred. I feel that if the government sees fit to set a percen tage in crease of 9 percent it should not be permit ted, on the part of the tenant, to object to this figur e. Past experience has shown that tenants will object to any thing if the provision is ther e.

The possibilit y of one tenant's action, out of 321 on one buildi ng, being responsible for voiding h.is neighbour s' lease agree ments wou ld appear to go against a tenant's basic rig ht. Most tenants feel a sense of security once their lease is signed and their dwellin g secured for 12 months. A Central Regis try, as proposed, also viola tes the basic righ ts of a tenant whose movements will now be traced from suite to suite thr ough out the province.

Section 16 provides that rent cannot be in creased more than once in a 12 -month period on the un it. Th is, I think, has come up a few ti mes so I won't read that section.

Section 21 (2) (ii) states that a rent regu lation officer shall consider in creases in the actual expenses incu rred by the landlord. I don't know about other landlords, but I do not know my actual expenses for 19 82, until my year end, in Janu ary 19 83. Ther efore will I have to wait until then to have my application for 19 82 determ in ed? lt would

Tuesday, 15 June, 19!l2 appear to me that bu dget figur es should be accepted and determ ine in creases by a rent regulation officer. If a property has no increase in expen ses but is still losing money, an in crease must be permitted. I think I should say see Sche dule B. I can discuss that later when it comes up once more and then we can discuss

Schedule B. I also un derstand that financing costs of capital expenditur es and mortgage rollover will not be rec ogn ized as an expense and the return on equ ity has not even been consid ered. As it is, property owner s are finding it increa singly difficult to meet high in ter est financing and with rent controls we have no hope of future recovery. This will in evitably result in fore closures and return of property to the mortgage holders. For example: I have a building which is at an age that it needs all applianc es replaced at the total cost of $1 50,000.00.

This is a capital expenditure which would probably be amortized over 15 years. Therefore, I could be permitted to write off $1 0,000 to expenses in the fi rst year and fina nce the balance of $1 40,000 at the rate of 23 percent over the next 15 years with the monthly payment of $2,665.00. How can you possibly handle those payments at a ti me when your mortgage becomes due and renewable at a rate of 19 percent? With the proposed rent controls I am not perm itted to earn any money on equ ity which could be used to cover some of the expenses. I feel that if a 9 percent threshold is set, it should be permitted.

If a landlor d can only justify an incr ease of 6 percent, he should be able to get another 3 percent for reserves, financing costs, in come, call it wh atever you will, but at least he will be given a sligh t margin to work with. (See Sche dule B.) New construction should be exempt for at least a period of 15 years. Th is, given with a realistic int erest rate would create a clima te favourable to rental hous ing construc tion. Rent controls, which do not permit any return on equ ity or realistic rent level, only further the negative aspects of construction today.

Given a tight market and an economic rent level in the pro vi nce, would be an imme diate sti mulus to multi-family housing construc tion. (See Sche dule B.) So if you discuss

Schedule B, you can see that it is · an actual statement fro m an apartment building, a town house comple x with 64 un its, a 1 0-year project. Now, as you see, we lost money in 19 80 and we onl y had an incr ease of 3.9 percent in expenses, but we incr eased the rent 14 percent that year. From 19 80-82, we increased the our rent 10 percent; our expenses didn't incr ease at all because we went down with expenses; we did not put in so many new carpets or pai nting and things like this.

Now, in 19 82, our inc rease will be 7.97 percent on expenses and we would like to have an in crease of 12 percent and you sti ll will see that we will lose $8,000 on this project. This is a project which we have to refinance in May of this year, and the int erest rate today is 19 .5 percent. We made an application to Royal Trust for refinancing and they came back to us and they said, we don't want to have it refinanced, we want our money back. Now, I didn 't deal with Royal Trust the first time , ther efore, I told him where they could go and find their money; I haven't got it.

They are going to take a mortgage and I pay them 19 .5 percent or the y're not going to get 74 anything. So the results of it is, if they're stubborn in Mont real, they'll probably take the property. But you can see that the incr ease in one year from $83,724 mortgage payment to $1 36,000 - now surely nobody could expect that that is not an expense. I do not incr ease the mortgage; I leave it at the same amount as I took it 10 years ago. I paid 9 percent on that mortgage; after 5 years I had to renew it to 1 0.5; that was bearable. But then, going to 19 .5, you see what it does.

So I think if you look at a statement lik e this, surely you have to be convinced that a 9 percent ceiling plus, I'm taking here a 9 percent thr eshold rent whatever you call it plus 3 percent for extra financi ng. I think if a mortgage goes up by 9 percent at 3 percent a year, it would take me 6 years to the point again where that 3 percent every year would be the balance between the $83,000 and the $1 36,000.00. So in 5 years we don't know what the in te rest rate will be; maybe by that time at the way we're going it could be 25 percent.

So I think there should be some allowance for refi nancing if it's legitima te financing I'm sure that is the easiest way to look for anybody if you monke yed around with your figur es and refinance, or if you didn't. To allow an extra 3 percent on a total rental roll is not asking too much. Than!< you. MR. CHAIRMAN: Thank you Mr. Bergen. Are there any questions? Mr . Filmon. MR. G. FILMON: Mr . Chairman, I wonder if Mr . Ber gen could comment on the ceiling of $1 ,000 per month rent, what he would consider would be a more appropr iate ceiling for ... MR. M.

BERGEN: I surveyed that rent today in North Ki ldonan and what we have there with other apart ment building s, out of 3,500 suites we have 70 suites over $400, and I can tell you out of the 70 suit es over $400 that half of them are senior citizens. My building on Oakland Avenue which is a senior citizens' bui ld ing and that's all full of seni or citizens over $400, 39 of them are senior citizens, the rest are townhous es.

In this complex as you see there are some over $500 and I think if you look at this town house project, we have suites there for $19 0 going up to $213, and that's a one-bedroom suite, surely enough for any tenant who today earns $800; it would be 25 percent of his in come. If you protect the person who pays $566 and his goes up to $630 or $650, he doesn't need any protec tion because some of them earn more, proba bly, than I do.

Ther efore I think 400 should be suffi cient, anybody in this province who can afford $400, he probably earns enough that he can pay the incr ease and if not, there's always the way open for him to get in to a house where he can live cheaper. MR. G. FILMON: I wonder what way Mr . Bergen would consider would be a fair method of consideri ng return on equ ity. Does he feel that there should be an assumed debt equ ity ratio as an average applie d to every project regardless of what the actual is? MR. M. BERGEN: I don't think I'm that fussy about return on equity. I think that each project should be

Tuesday, 15 June, 1982 allowed to make all the payments, that much we should at least get. We always have said if we make 2 percent to 3 percent on our money inv ested, be satisfied. MR. CHAIRMAN: Mr . Filmon. MR. G. FILMON : No further que stions, Mr . Chair man. MR. CHAIRMAN: An yone else? Thank you, Mr . Bergen. Mr . Peter Thie ssen. Mr. J. P. Borowski. MR. J. BOROWSKI: Thank you, Mr . Chairman. I don't have copies of the brief. I have a few pages of thi ngs I wou ld like to say regar ding thi s bill.

Fir st of all, I am here to speak because I consid er the bill to be un just, unfair and discri minatory in the extreme. I am not a landlord, nor am I a tenant, but I must say one thing, I do have one tenant in the back of the store and so I say thi s for the public record so I cannot be accused for coming here and speaking for priva te, personal in ter est. We have good friends living in the back.

I don't expect to raise their rent even 1 percent this year, but I am concerned about what this bill is going to do to people who inv ested a lot of their money and are, in fact, depending on their rental un its to gi ve them a fair living. I am also concerned about the constitutional rig hts of the people involved. Everyone knows there is a grave crisis in this count ry thanks, in part, to the Lib 'eral Government and their in competent handling of the economy.

Prices for goods and services are in creasing faster than income and the areas where people are most severely hur t is the cost of food and shelter, util ities and the cost of operating a family car; but nothing com pares with the cost of shelter, be it rented unit or home ownership. We are told by the politicia ns in Ottawa that approxima tely 40,000 peo ple will lose their homes this year. That is an in credibl e nu mber of people. I suspect that if anybody did any research on that they would find that probably has not occurred since the depression years. These fami lies will lose their ho mes.

For many of them their lifelong savings will go with that. Compare that with people who are renting. What do they lose? I am not sugge sti ng that they don't have a problem. They have a problem that everyone, I'm sure, sympa thiz.es with, but the people who are renting will lose a roof over th eir head and one month's deposit. I find it strange that there is so much concern shown by the government for people who are renting and so little concern shown for people who have their life savings tied up in homes. Governments are taking steps to help those who have homes.

I notice in Saskatchewan, the Cons erva tive Government won the election, I belie ve, because they said they wou ld give 13 .5 percent mortgages for people who have difficulty financing. Of cour se, I am sure the reduction in the price of gas by 29 cents a gallon had a great deal to do with it. I know thi s gov ernment is also taking steps to help, in some small way, for people who are home owners.

I received this brochure with my bill from my munic ipal ity and in it there is a program that provides dir ect subsidie s up to $275 to homeowners facing mortgage, princip al, interest and property tax payments of more than 30 75 percent of the household in come. Un fortunately, there are very many limi tations in this thing here and a lot of people are sti ll going to lose their homes in spite of this halfhearted effort by this government. The government has a program for various other groups. I know there has been a considerable debate about government in volvement in cow-calf opera tions , beef operations.

There are subsidies and var ious programs to help various groups in our society because they are in financial difficu lties - through no fault of their own. All of that is borne by the taxpayer, by the general treasury of the government, and I am wondering how the government can bring in legisla tion saying to one group that you are going to be penali zed for the actions of some other party, perhaps an international party. The banks and the trust companies and the in su rance compan ies who make obscene profits, Mr .

Chair man, that are embarrassing to their most staunch supporters, these people are allowed to raise their rents - and I call them rents even though they're mor tage payments - anywhere from 50 percent to 10 0 percent. They do so with impuni ty. This government, I submit, doesn't seem to have the courage or the back bone to tackle those money in terests.

In deed, when they pay thi s money which I just talked about, they really are subsidizing the banking interest, the in su rance companies and the trust companies and the money barons; but when it comes to the landlord, when it comes to people who are renting, what is the government doing? They are saying to a small group, unpopula r and perhaps deservedly so but very unpopular, th ey're saying that we're going to make you the goats that take the rap for the problems in our economy. We are going to impose an indir ect tax on you - because that's what it amou nts to.

When you turn around and say to a select group of citizens, in this case the landlords, that out of all the people in this province, with all the difficultie s we have, you gu ys are going to carry a special bur den because the tenants are having diffi cu lties of meeting those payments. I think that is terri bly un fair; I find it offensive and I am surprised that this government, of all governments, should bring in such legislation. I recall, when the Federal Li berals brought in price controls a few years ago with no controls on anyth ing else, on any other commo ditie s.

I know that the uni ons and the NDP screamed the loudest in this cou ntry, and rightly so. They said, it is unfair to put controls on workers and not controls on manage ment, on busine sses, on professionals, and they were rig ht. Just as they are dead wrong today when they select a small group in our society - and I don't know how many landlords there are. I am not a member of them, I don't associate with them, I don't know their workings, but perhaps th ere are several thousand of them.

This government is doing the very thing that they condem ned the Li beral Government in Ottawa several years ago, except they are doing it in reverse. At least the legislation that Trudeau brought in had some sense of un iformity in that it affected wor king people. In un iformity and fairne ss, if one can use that, there was some measure of fai rness because I belie ve there was an appeal board and if the incr ease was too low, then you could appeal to that board. I recall the

Tuesday, 15 June, 1982 workers in the In ternational Nic kel who went on strike over tha t thin g because they felt tha t the in crease was unfair . As I un derstand this legislation, even that type of provision is not going to be incl uded. lt seems to me that if a gov ernment can find money, Mr . Ch airman, to subsidi ze all these other prog rams from the public Treasury, then I think that they should be able to find some money to subsidize whatever amount of tenants there are who are going to be faced with the difficu lties and I am sure there are going to be great difficultie s.

The gentleman who just spoke before us ind icated his mortgage rates are going to just about dou ble. Now, where on earth is that man going to get the money? Is it fair for the government to say to him, we don't care about your financial affairs. If you lose your property and if you lose your suite, we are going to put a cei ling of 9 or 10 or whatever it is and if you lose it, well, that's just too bad, but we are going to do it. I think that is a cruel, inhumane and heartless approach to take to a small group of citizens who are unable to defend themselves.

I would be opposed to this by any gove rn ment, but I particu larly find it offen sive because I happen to have been a memb er of this government at one time and I know that we have acted frequently as holier than thou and we're always con cerned about the rights of the various citizens, all citizens. I know tha t this bill, although I haven't read any more of it tha n what I've read thr ough the press, is riddled with anti-discri minatory clauses and that's good. I think a gove rn ment should bring in legisla tion that makes it fair for everyone.

They went to great lengths to make sure that land lords cannot discrimi nate against people who are going to come, whether they are welfare recipients or homosexuals or some other deadbeats in society and the government wants no discri mination, but yet this bill is a masterpiece of discrimation. I consider this bill a masterpiece of discri min ation because you have selected the landlords in Manitoba and have imposed a special tax on them. I know tha t if this government incr eased the sales tax from 5 percent to 10 percent and say, but only the landlords will pay it, I think everybody would scream.

But this thing is worse, Mr . Chairman; it is worse in terms of actual financial clout. Those who have a large numb er of suit es, it is cer tainly going to cost them a lot more mone y than if you raised the sales tax from 5 percent to 10 percent. You are doing it on this group and this group, I must say, seems to me li ke they are almost hypnoti zed when they come up here and they're pleading for a little fairness under this section, and maybe a percentage point on ther e.

What they should be sayi ng is, we cannot accept legislation which makes us the scape goats, which picks us, which makes us the Neg roes as ther e were in the Un ited States or the In dians of Can ada, and say, you guys are going to be second-class citizens. We have fought that and we have elim inated tha t to a large extent, but it seems to me no w you are bringing it back against the landlords.

There is a new Canadian Constitution and th ere is a Ch arter of Rig hts and I would urge the landlor ds and those people who are concerned about civi l rig hts of everyone to chal lenge this leg islation all the way to the Su preme Cour t. I think the legislation is terri ble, and it should not be allowed to stand on the Statute 76 books, regardless of who brings that in.

If this Legisla tur e passes it and since the government has a major ity, I suspect that they will pass it and I hope that everybody in the Opposition will oppose it and gi ve good reasons why, but I hope that the landlo rds will im mediately hir e a good lawyer and I can suggest to them one lawyer, Dr. Morris Shum iacher, who is the best constitutional lawyer in Canada, who is handling my abortion case. I would reco mmend tha t they start up a fund and challeng e this legis lation all the way to the Su preme Court.

I belie ve that all the rig hts that are giv en un der the new Constitution, the Charter, that this government would lose that. I urge the landlor ds not to take this lying down and to tell this government that you are not going to pick on us and make scapegoats out of us and make pol iti cal pawns out of us. This thing was a cheap elec tion gim mic k and you are now paying it off. I think politi cians should keep their election prom ises, but I also think politicians should be careful of the kind of elec tion promises they make. Thank you, Mr . Chairman. MR. CHAIRMAN: Thank you, Mr. Borow ski. Any questions?

Ms Karin Warkenti n. Proceed please. MS K. WARKENTIN: Mem bers of the Com mittee: As property manager for 268 apartment un its in Win nip eg for the past two years, I have seen the effects of rent controls. How is that possible, you ask, sinc e rent controls have not been in effect for the last two years? lt is because, once rent controls were lifted, its damages were clear for all to see. Tenants who could not afford the realistic rents now set by own ers had to seek housing more in line with their in come.

Many could not un derstand that although rents were now going up, new carpets and other cosmetic amen ities the y felt they were entitled to were still very diffi cult to ob tain and the hostility towards the old "cartoon" image of the landlord became very apparent. At the same time, the frustration of the owners was also apparent. Sinc e pass throu gh costs were not allowed at that time, the government with its rent controls had forced them to subsidize the tenants' rent by ob tain ing loans so they could keep their buil din gs.

Many barely kept afloat during this period of ti me and the buildin gs suffered from extended deferred maint e nance since the money was simply not th ere. On ce rent controls were removed, the slow process of bring ing the blocks back up to the standard at which they should have been mai ntained had the fin ances been ther e, was begun.

On July 11 th, 19 81, the Win nipeg Free Press, Consume r and Corporate Affairs Min ister, Gary Filmon, stated that the results of a department survey - it was in the newspaper - showed no massive across-the-board incr eases and that he felt most land lords has acted responsibly during the first year of rent decontrol and that the transition had been smooth. Naturally, it was smooth. Tha t's only good busi ness and the landowners of Manitoba are in the rentals busi ness.

To have un happy tenants is not good busi ness and, for this reason, in creases in rent were fair and reasonable as they would continue to be without rent controls. For those businessmen who were not fair and reasonable, vacant suites would result.

Tuesday, 15 June, 1982 The NDP Government's reason for wanting to implement rent controls is that they are concerned about the vacancy rate in the city. Naturally, when this was introduced as part of the election campaign, vir tually all housing projects slated for Mani toba were frozen. Now, we do have a low vacancy rate. Despite this, without rent controls, rents would still be main tained at reasonable rates due to the following factors. Mor tages are not created equal: all new in terest rates are. This wou ld be a large factor in the amount of rents that would have to be charged.

The location:- rents have always been affected according to which area of the city they are. The amen ities tha t the block has access to, as well as the safety and desirability of the selected area can cause landowners in less popu lated or desir able areas to lower their rents as an incentive to renting. The tenants: as in all busi nesses, apartments wou ld not exist were it not for the tenant and all landowners realize th is. The rent cannot be raised above reasonable levels because the tenants will move out.

The Rentalsman's Office is also still avai lable for arbitration and yet the rents shou Id cover the going in terest rates of both mortgage and the owner's equ ity. New construction: at present, with rent controls pending, new construction is not feasi ble. Even though they wou ld be exempt from rent controls, they are not able to set their rents at reason able prices for retur n due to the low rents that rent controls would impose.

If rent controls were banned, I feel new busi ness wou ld come to Mani toba and our ·e conomy overall wou ld grow in stead of suffering the depression now felt by everyone and getting worse. This time, though, passthrough costs are going to be allowed or so the Honour able Eugene Kostyra has stated at a May 6, 19 82 meeting of the Landlor ds Association with Mr. Kostyra.

How ever, he stated that not all pass through costs were going to be allowed because when the city vacancies were high, all the landlords had to keep their rents low and, in some cases, subsidize the tenants because they wanted to keep their vacancies as low as possible. Question: does thi s mean that because apartment owners carried costs in the past, they are expected to carry them again? Where was the government when there was this hardship on the lando wners of Ma ni toba and they needed subsidizing?

Will the govern ment also put simi lar restrict ions on other busmesses so that we may purchase our supplies and have our services at the same price as we had in the past? Will the government see to it that the in terest on our mort gages are frozen at the lowe st rates and/or rolled back? Will the government do the books and rebating fort he landlords while they continue with their already full

schedule of operations? Will they pay for the excess labour costs they have im posed on the lan downer s of Man itoba in processing the rebates? How can the government justify a 13 percent cost-of-living incr ease for its own employees and yet allow lan downers only 9 percent? Ho w can the government, with the knowledge of 17 percent in City taxes; 33 percent in gas heat ing incr ease and a mortgage in ter est in crease of approximately 10 percent, then only allow 9 percent for landowners? Fin ally, I must ask this qu estion.

Why have you selected the apartment-block owners of Man itoba to be the inv estors which you are going to place all of 77 the se unjust and un called for restrictions and losses on? Why do you cause a few in vestors to shoul der indir ect taxation? That responsibil ity, in fact, belongs to the government of the day. I maintain it to be consti tutionally wrong. As a tenant myself, I can see many people going through hardships, with employment bei ng difficult to find and getting to a point of nonexistence, and elderly people not being able to get by on their own pensions.

I do not, however, feel that it is right to point at one

section of the private sector and make them responsible for these people's problems. They are already paying their own taxes. lt is the government's duty to provide these people with low-income hous ing or to in crease pensions, etc., not the landowne r or the cloth ing store or the gr ocery store, but the gov ernment to whom we pay to do these th ings. i�o w can the government justify hi ring people, renting office space, spending more of the private sector's tax dol lars whil e im posing low-inc ome rent restrictions on the private busine sses?

They should use that money for the pensione rs and in setting up support programs for pensioners living in apartment blocks. As a government, you are responsible for the people and were elected by the people. it is your duty to do what is best for all of the people of Manitoba and not neces sarily what they feel they want at the expense of oth ers. For me, as a tenant having $5 to $10 more in my pocket now won't change my lifestyle. But, to the landowners, when multi pled by X numb er of suites, it can make a difference in terms of property improve ments and his right to profit in his busi ness.

I trust that you will use your position wisely in mak ing a decision in regard to rent controls, not only for the effect it will have over the next year or two, but wha t the lo ng-range effects will be, which are unk nown. I submit that the rent controls should be abandoned and discarded comp letely for the short and long-range benefits for all. Thank you. MR. CHAIRMAN, P. Eyler: Thank you, Ms Warkentin. Are there any questions? Mr. Kostyra. HON. E. KOSTYRA: Thank you, Mr. Chair man, I'd like to thank Ms Warkentin for her brief on behalf of Dart Holding s. I just have one question thr ough you, Mr .

Chairman, to Ms Warkentin. On the top of Page 2, you suggest that when the rent control issue was raised dur ing election campaign virtually all housing projects slated for Manit ob a were frozen. Could you tell me which projects that were proposed, were fro zen at that ti me? MS K. WARKENTIN: No, I'm sorry, I can't. HON. E. KOSTYRA: Are you aware of any projects that were frozen at that time ? MS K. WARKENTIN: I have heard from various peo ple but I have no specific names or anything at hand. Sorry. HON. E. KOSTYRA: No further questions.

Tuesday, 15 June, 19 82 MR. CHAIRMAN: Any other questions? Thank you, Ms Warkentin. Mr. A. Seku ndia k. MR. A. SEKU NDIAK: Mr. Chair man, Commit tee Members: I' m a small inv estor. For the last 28 years I have bought smaller uni ts, modernized them, and put them back on the market. Now, I see that my inv est ments and my lifesavin gs seem to be in jeopardy due to rent controls. What is it all about? We, as inv estors, in vest money in these smaller un its as a small in vestor which at one time provided approxi mately 60-65 percent of the housing in Win nip eg.

Now, what is happen ing is that we cannot really turn around and say that we're losing X numb er of dollars, because we can't afford to lose X numb er of dollars. I recognize the fact that there is a severe problem for many tenants, that are on fixed in co mes, such as the elderly, low-wage earners, single parents and in certain cases, there are indi viduals are out for a free ride and are trying to get something for noth ing. The problem is not alone for tenants, it is also a prob lem for many small landlords.

They have in vested their lifesavings and in to rental uni ts and now are seeing their in vestment dwindling away. In many cases, landlor ds have subsidized tenants for a few years where, in some cases, this is what the government should have been doing. I do believe that the tenants have rig hts but also should the landlords. In both cases, this should be specified by government legislati on. Un fortunately, there are more tenants than there are landlords. You would get fair legislation if you had equal amoun t of tenants and landlords. I'm deeply anno yed by being called a gouger by certa in politicians.

Exam ple: I had a uni t where my rental in come was $1 0,891 .00. There are no capital cost allowances, no depreciation or anything. There was just a basic in surance-mortage-int erest-power-realty tax. My total expenses were $1 0,258.00. After a year's work and in vesting $1 5,000, I ended up with $633.21 . That's gouging? That's non profit housing, I'd say. lt is about time that landlor ds and tenants did get together as to why the rents are excessive. If rents must be contr olle d, the costs of operations must also be contro lled. Landl ords should be allowed a fair return on their investment.

Percentages are not a true estimation of in creases. This contri butes to the incr ease in many cases to rents, because in a lot of cases when the re's allowance, say, for example, of 9 percent that is allotted by the govern ment now, possi bly, a certa in in dividual that has his property paid off and he wou ld be satisified with 6 percent. Bu t, he says heck, the government allows us 9, we'll incr ease it to 9. So, I feel, that this in many cases, contribut es to rent in creases. Also, a percentage incr ease is not fair.

As the exam ple as I've used previously is wher e, say, a unit is valued on the market for $200 - we were talking about gouge rs- they've been renting them for 250 where the guy that sort of has to play catc h-up, he was renting it for $1 50.00. At 10 percent, the one indi vidual is getting $15 per month, the other one is getting 25; the differ entiation is getting larger and larger. There's also a great human outcr y at the in creases and exorbitant rents. As an owner, I do agree. But this 78 is not entirely the owner's making. He is not making great sums of money.

The owner has become a collec tor for mortage compan ies, tax deparments and pub lic util ities. An example: the taxes alone in one year have in creased $1 ,500.00. Also, an incr ease in fuel in this particu lar building is $320.00. The mortgage payments have incr eased from 13 percent to 19 .5 percent which in term s, is $6,430.00. Now, 9 percent isn't going to cover this, because per un it, I have to get approx imately $40 now.

Without having any fair return on the invested money that I have and this is a mortgage that has been there for the 15 years, as time progresses, from 7.5 to 9, 9. 75, 10 . 75, and the mortgage amoun t has not been incr eased at all. If controls must be, it should be based on a yearly financial statement and owner s must have a cash flow to be able to operate apartments properly. There are many abandoned un its in Winnip eg in the last few years, due to high cost of operations, and people just could not stay in busine ss, so t

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Collection	Manitoba — Debates (Hansard)
Citation	32-1-sro4
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Volume / chapter	32nd 1st hansardpdf sro4.pdf
Language	en
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