Rent Increase for 2012 3.1% -- possible election implication
Couple interesting notes behind this figure then I'll explain election implications.
First last years was 0.7% Many tenants are not getting an increase in 2011 because the Landlords want to get them with the 3.1% as soon as possible in 2012 and have to wait a full year since the last increase. It is more profitable for a landlord to forgo an increase in 2011 and get one in for January 1st 2012.
To get the increase in for January 2012, landlords have to serve notice 90 days before. That means October 1st. A lot of tenants will be receiving this substantial 3.1% increase in their box this week-- maybe hand-delivered tomorrow.
Where does this number come from? It is the CPI index. There are two arguments going on right now.
The Landlords are upset because the HST was an increase to them as they cannot reclaim the money in credits and cannot pass it on directly since rent is not taxed but not zero-rated either. (HST inputs for food for example are reversed out as credits where as they stay as landlord costs in rentals). But landlords can and do pass it on indirectly because it is included in their costs, can produce above guideline rent increases and because it is in the CPI-driven guideline. Given how much of inflation was food, gas, heat and hydro this is a substantial part of the CPI this year.
Tenants feel the 3.1% is excessive because in many cases tenants pay their utilities, and all pay their gasoline, public transportation and food costs and these are the costs that drove the CPI up so much. So because tenants have to pay more for those things they will have to also pay more for rents.
In any case this increase is going to hurt tenants hard because they are already overstretched.
Back to the election implications. The Liberals do not want to wear that-- to admit that there is HST included in residential rents. It is just that this tax is buried. Yep-- there is a 13% sales tax buried in all your landlord's expenses. Thanks to the Liberals for that.
And the Liberal formula allows landlords to increase rent based on an index that went up mostly because of expenses that do not figure in all rents -- gas, food and home heat and electricity. Those tenants where the landlord pays the utilities can assume landlords are paying more for utilities but there is no comfort for those paying the utilities as they face both the higher utilities cost and the perverse rationale that they pay more to the landlord because those bills went up.
Back to the election. How much do you like McGuinty now?
Might be worth canvassing some of those rental communities where tenants pay the bills and pointing that out...
I have spoken to two local campaigns and suggested that they do an extra canvass in the next few days in row housing areas of the riding where there are a lot of tenants who are getting this double ding. I said canvassers could ask if they just got a rent increase notice and if they did talk about how unfair this is as it is driven by hidden HST in rents and increased utility bills even if landlords are not paying that as well as food and gas increases that are part of the CPI. I think this could motivate people to get out and vote.
If you are canvassing you may want to try this yourself...
That seems very odd and upsetting that landlords can't get HST on their purchases refunded while other businesses can.
This is the longtime difference between what is exempt and what is zero-rated.
Exempt means you could pay tax on inputs and then tax becomes a hiddden tax and zero rated means you get your money back.
Food is zero rated rental housing is exempt. It was an old scam devised back in Mulroney's day-- this was the hidden GST buried in many goods people thought were not taxable-- fact was they were but just not at retail level.
Other transactions you pay on what you buy charge on what you sell and then remit the difference.
I am a landlord. For tenants who are paying their own utilities it does seem unfair. However, those expenses are not the only expenses a landlord incurs. You have written about them in your original post but I would like to add more details.
I just processed an increase of $17 per month. This will still not cover the increase of my utilities included property or the larger expenses I have incurred i.e. a partial roof replacement $1700.00 (and there's more).
Hi Northern Rusty.
An important point is that services are taxed provincially now in the HST when they were not in the old GST which taxed them only at 5% federally (Applies to Ontario and BC-- Atlantic Canada have had this problem for years).
For landlords that means an extra 8% or so on every repair to a stove, any renovation etc. Also the landlord now pays this on every service like snow removal, grass-cutting, insurance etc. This ultimately goes in to rentals as a hidden tax because the landlord cannot get this back in a refund from the government becuase rent is exempt not zero-rated.
Tenants in Ontario facing an above guideline increase could see this reflected in the cost the labour portion of capital expenses. Bigger apartment building landlords can recover the money that way. The complications of the applications are such that above guideline increases are not practical fro small-time landlords with 1-4 unit complexes. Those landlords cannot recover the money until there is a vacancy and then they can up the rent assuming the market will cover it.
If the market can cover the increase (low supply high demand) then tenants suffer. If they cannot the landlord suffers but then may not afford needed repairs or may be harder nosed about pressuring a tenant to leave in order to get the higher rent. And so in the end both tenant and landlord suffer. The HST is a tax on housing -- make no mistake. There is also a lot of property tax buried in rent as well. Interestingly apartment dwellers pay tax at a higher rate relative to the value of their units than home owners do as apartment buildings have a commercial mill rate that is higher than residential rates.
Most tenants just don't know how much tax they pay -- if they did perhaps more would vote at the city level at least. Many think they are not invested because they think all that money just goes to the landlord.
A smart landlord association would produce a chart like the one you see at the gas pumps laying out exactly how much rent you pay is actually tax... maybe they don't becuase they don't want all those tenants to vote.
An aside-- while we acknowledge the plight of tenants and landlords lets consider that of people working in repairs-- to cars to appliances etc. As the cost of using them goes up by the value of the HST-- their relative cost to replacement narrows. This means it can be cheaper to buy something new made in China than to pay a Canadian to keep the old one working. The HST is also a tax on jobs becuase that is what services are. That tax can only be passed on to the workers who are forced to keep their work competitive so they effectively pay the tax.
The HST is thus an excellent fuck the people tax.
What happens when a landlord raises the rent 3.1 percent and doesn't even provide the very basics to the tenants? is there some way to get the landlord to secure the building, do the necessary repairs, as reported by the city when they did an inspection?
I have a new landlord, a massive development company, they took over my townhouse complex and have let it go into total and complete decay. We have no secure exterior doors, hell, we barely have doors left! Why should I pay these creeps an additional 3.1 percent for leaving us in slum-like conditions? The city has been here multiple times and there are work orders like crazy but nothing ever gets done. The property was recently transferred to the new owners (about 3 months ago) and the new people have done absolutely nothing but harass and intimidate people here. They have said they will not do a thing and are doing this to get people to voluntarily move out so they can tear down. My impression is they will sit on this property, doing nothing, until the last hold out leaves.
What options do we have as tenants? My city councilor is a waste. No option to speak with him
You need to bring an application to the Landlord Tenant Board. The form is a T6 and you do have to pay a filing fee of $45 but you should be able to recover the costs.
You can not refuse to pay rent but you can make an application to pay it into the Board.
If you have found the landlord harassed you, interferred with reasonable enjoyment (other than just maintenence issues) or withheld services you should also file a T2 Application-- there is no charge for that.
All the forms are here:
http://www.ltb.gov.on.ca/en/STEL02_111281.html
Whatever you do -- do not withhold rent as that will give the landlord a reason to evict-- do the application and ask for a retroactive rent reduction.
Thanks Sean. It gets worse. This new landlord had one of their crew spray paint the doors in big red circles to show which tenants had not paid their rent (even though it was found that the majority of them HAD aid their rent) They also posted up beg bug spraying signs in every unit (there are 5 rows) regarding one place in the end row. They have now been coming to people's doors telling them they will pay them 3 months rent if they leave by the end of November.
These new owners are horrid people who have been intimidating and harassing people since they took over.
That is clear harassment and I thin the Board will take action. Please go ahead and file a claim it will help many poeple where you live... Take pictures arrange witnesses if you can. It is not that hard to do that and it can make your case...
That's the plan Sean. Thanks
Sean..thank you for such a detailed explaination of the HST. There is another area that affects the cost of housing & it involves the Social Assistance procedures when a tenant does not pay rent. Are you aware of the problems?
Stargazer - Your situation is awful and you would have a juicy case to bring forward at the LTB. I am all for justice for tenants as well as landlords when they are being scammed or mistreated. Everything they are doing is illegal. Red circles on doors? How demeaning. When you get to the hearing you will be offered assistance from legal counsel. When you submit your application & notify the owners be prepared for more harassment but don't worry about it because it's out of your hands & will be in the system. If anything is really urgent like a safety issue, the Board may give you an earlier date i.e. flooding issues, a recent fire due to electrical issues etc.
Each city department who has been giving work orders can be subpeoned. They won't want to come but this is how you do it. Call the department head & ask for the name of the person who would attend the hearing. If they don't want to cooperate tell them you really need help in resolving this issue & that you are legally entitled to request a witness & that if they are not willing to give you the staffer's name you will put their name on the form. They have to show up -- they can't ingnore it. The Ltb website has a form or they can fax one to you. You can do this for any city dept that has been giving out work orders.
If they want to tear down the complex they can pay you to leave. Something that is worthwhile to you. I would do this as a group. Ask the LTB if you can put multiple tenants on a form or if each one must be submitted individually. Or perhaps one person can submit the application & the remaining tenants are witnesses.