How Toronto tenants subsidize the property taxes of single family home owners

A recent post at Landlord Rescue reminded me of the problem of Toronto’s unfair property tax system that leads to Toronto tenants actually subsidizing the property taxes of Single Family home owners.

 

The post from “Landlord Rescue” referenced in the above tweet includes:

Tenants Actually Subsidize Home Owners.

Property tax rates in the city of Toronto on Multiresidential buildings are 1.7265482% and the tax on homeowner properties are 0.7056037%. The taxes on your average $1,000,000 house in Toronto would be $17,264 instead of the $7056 they currently are if homeowners paid the same rate as older multiresidential buildings.

Property developers have refused in the past (like any sane person would) to build rental buildings because of this inequitable tax system. Recently we have heard that condo sites like Kingsclub are converting to residential rental. Guess what? Toronto has changed their policy for new buildings and the tax rate for new rental buildings is 0.7056037% (exactly like homeowners and condos)

To make this super clear, tenants living in homes, homeowners, condo owners and new rental building tenants will all pay the lower rate but the people living in run down bedbug infested, cockroach havens older buildings that require capital improvement (subject to legal rent increases) that represent most of the affordable housing in the city are paying the much higher tax in their rent.

It couldn’t be better explained than this.

 

Toronto taxes – Robbing from the (in most cases) poor(er) to give to the rich(er)

What? Yes, it’s true. One of the highest costs of Toronto landlords is the high rate of property taxes applied to Toronto apartment buildings. Understand that this is a cost to Toronto landords that operates to keep residential rents higher than they should be.

 

Tenants have the numbers to make this inequity a political issue, but so far they have failed to do so. At least one candidate has attempted to educate Toronto tenants. But so far, there has been no interest.

 

The post referenced in the above tweet includes:

Toronto Tenants Pay High Rents Because of Discriminatory Tax on Tenants

“It is assumed that because rental housing is a business, that higher rates of taxation can be charged, even though those levies are passed on dollar-for-dollar to the tenants under landlord and tenant laws, and even though the majority of tenants are renters because they have lower incomes and can not afford to be homeowners. Of course, since the tax levies are ultimately paid by tenants as part of our rents, most tenants unaware of the real source of any increased taxes, nor that over 20% of our rents are in fact due to municipal property taxes.”

http://www.ontariotenants.ca/taxes/toronto-property-taxes.phtml

You can see the difference in the tax rates here.

I am amazed that that few people seem interested in this issue. If you are a Toronto tenant or landlord you need to make your voice heard. Along with this video, you should read an earlier post I wrote about how tenants and landlords pay higher costs because of the discriminatory property taxes on apartment buildings.

Can a landlord first evict tenant and then seek rent for failure to give notice?

The above tweet references an article in today’s Toronto Star. Obviously I have made no effort to independently verify the facts. Frankly, I hope the facts in this article are NOT true. Nevertheless, assuming the truth of these facts, I think this deserves some comment.

The article begins with:

One of Toronto’s biggest landlords has an in-house collections agency that pursues evicted tenants for two months’ rent because they didn’t give “proper notice” when they were kicked out of their apartments, the Star has learned.

MetCap Living Management, which has more than 10,000 rental units in the city concentrated in Parkdale and Scarborough, and Suite Collections operate out of the same Richmond St. E. office. Suite’s president, Brent Merrill, who also sits on MetCap’s corporate board, says everyone must give 60 days’ notice to vacate an apartment, even if they’re being evicted.

It is MetCap’s position that residents who breach their lease or give improper notice are required to pay the rent for the unit until it is re-rented or until the date that would have been the last day of the tenancy had proper notice been given,” wrote Merrill in an email to the Star. “We believe that we are following the law in the Province of Ontario.”

The Ontario Ministry of Municipal Affairs and Housing said the practice does not appear to be appropriate.

“If the landlord gives proper notice of termination and the tenant voluntarily moves out in accordance with the notice, the tenancy is terminated on the effective date of the notice. No rent is payable after the termination date, other than existing arrears,” said spokesman Mark Cripps.

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2016 Ontario rent increase guideline set at 2%

Well, at 2% it’s much higher than the “politically motivated 2011 Ontario rent increase guideline of .7%.

Okay, this is interesting news. But does it really matter that much? In most cases probably not because real estate is a long term investment, and when it comes to Toronto residential rents:

1. Your best Toronto rent is not necessarily your highest rent; and

2.You need to be thoughtful about when, whether and how much to raise residential rents anyway.

And as a reminder:

On the one hand:

But, on the other hand:

Procedure at the Ontario Landlord and Tenant Board @LandlordU

I believe that the landlords should work hard to avoid Ontario’s Landlord and Tenant Board. Although not intended to be unfair to landlords, it does provide protection to Ontario tenants. The procedure is costly and dangerous. Although landlord lawyers at Landlordrelief will assist you with tenant eviction, we work hard to avoid this necessity.

In order to avoid the Ontario Landlord and Tenant Board, Ontario landlords should:

1. Be careful in how they select residential tenants.

2. Treat their residential tenants with respect and dignity.

3. Respect their properties so that the tenants will respect the properties.

4. Work WITH tenants to end difficult tenancies, rather than work AGAINST tenants in an adversarial proceeding.

Notwithstanding this advice, I came across three posts from Ontario Justice Education Network that helps people (both Ontario landlords and tenants) prepare themselves for a landlord and tenant hearing.

Here they are:

If the landlord doesn’t respect the property the tenants won’t respect the property

The Toronto Star article referenced in the above tweet is a reminder of the principle that:

“If the landlord doesn’t respect the property then the tenants won’t respect the property”.

This means that if you want your tenants to respect the property, you as the landlord should demonstrate respect for the property. Remember also that the value of a rental property (unless it is also a single family home) is proportional to the amount of the rents. The amount of the rent is proportional to (among other things including accessibility to public transit) the “quality of life” in the building. The key to successful landlording is attracting and retaining good tenants. Tenant turnover is very costly for landlords. All small landlords should review the principles for finding and selecting good residential tenants.

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The relationship between public transit and real estate investing

The above tweet references an article in the Toronto Star describing the growth of “Go Train Service” in Southern Ontario. This is great news. It will certainly connect communities East and West of Toronto with the downtown Toronto core. It will improve the opportunities to live West of Toronto and commute to the City. At the present time, commuting from Hamilton to Toronto is somewhere between difficult and impossible. (Speaking of Hamilton, there is likely a market for renting to Ontario university students. But, first make sure that are familiar with any zoning bylaws that might affect renting to students.) As always, ensure that your respect the principles for how to select residential tenants.

This will also be good for real estate values. It has become increasingly difficult to afford housing in Toronto proper. Furthermore, there is a huge discrepancy between the cost of owing and he cost of renting. This is traditionally an indicator that the price of real estate is at a high valuation. Would improvements in public transit  make real estate outside Toronto a better investment? I believe that it would.

The article in the Star includes:

Matti Siemiatycki, a University of Toronto professor specializing in urban planning and transit, says the impact of GO expansion on real estate will be felt everywhere along the system. He expects it will be gradual, and will hit some places far more than others.

The overall impact of the investment, though, is hugely positive for everyone, he says. “If you make a place more accessible, people will want to live there.”

Siemiatycki says the transit plan is so big and costly it will take a long time to come together. The pieces include laying track, securing rights of way and co-ordinating space for more passenger trains between freight trains. The plan also means renovating stations, building maintenance yards, buying trains and equipment and adding staff.

Metrolinx spokesman Burke says work is already underway. A third track is being added between the Guildwood and Pickering stations. Construction starts soon on a new East Rail Maintenance Facility that can handle electric trains. A Stoney Creek facility will store, service and maintain trains, as will a new one in Mimico.

In the end, better transit is a high tide that lifts all boats. When it comes to real estate, it’s one more reason to bet on the GTA.

A “high tide that lifts all boats” is good for both owners who live in their homes and for investors.

 

 

As the price of #TorontoRealEstate increases the demand for #TorontoRentals increases

The above tweet references a timely article written by Susan Pigg of the Toronto Star. It appears as though we are coming full circle. You may recall that the Toronto housing market was in a vicious correction from 1990 – 1996. Those were very bad years with the price of housing falling significantly. Those who bought in 1989 were the most hurt. Prices fell so low that for a period in the late 1990s, it actually cost more to rent than to own. In other words the rent to purchase price ratio was very high. Translation – it was very expensive to rent. This was a significant factor in fueling what has been probably the longest real estate boom in Canadian (certainly Toronto) history.

We have now reached 2015. The ratio of rent to purchase price is now very low. Translation – it’s getting very very expensive to buy. Hence, the demand for Toronto rentals is high.  The question has now become:

Is it worth buying Toronto real estate at current price levels? It is now longer assumed that residential real estate is a good investment. Renting residential property can be the right choice for many.

The headlines include:

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