The long-anticipated response finally arrived from the Above Guideline Increase (AGI) Unit of the Landlord and Tenant Board (LTB) in Ontario on February 2, 2022. This followed a frustrating period of silence, with seven unanswered emails sent between November 2021 and February 2022, all concerning an AGI application I initially filed on December 28, 2020 – a staggering 1.25 years earlier. The LTB’s reply offered a stark revelation: “We are currently working to resolve 2018 and 2019 year files, prior to moving forward with 2020 and 2021 year files…” This admission underscores a systemic problem within Ontario’s rental housing framework, a backlog that profoundly impacts landlords’ ability to manage their properties and recover legitimate operational costs, contributing significantly to the province’s growing housing crisis.
The AGI Conundrum: A System Straining Landlord-Tenant Relations
The Above Guideline Increase (AGI) mechanism, intended to allow landlords to recover exceptional cost increases not covered by the annual rent guideline, has become a symbol of bureaucratic inefficiency and a source of deep frustration. While the Residential Tenancies Act (RTA) requires municipalities to notify tenants when property taxes decrease – often resulting in a mandatory rent reduction, which tenants can deduct without landlord approval within 60-90 days – no such courtesy is extended when property taxes rise. In fact, neither tenants nor landlords receive proactive notice of property tax increases; landlords simply receive a new bill with an inflated amount.
This asymmetrical approach places an unfair burden squarely on the shoulders of residential landlords. When property taxes, insurance, or utility costs soar beyond the annual guideline, landlords are compelled to apply to the LTB for an AGI. This process, designed to allow for cost recovery, inadvertently positions the landlord as the villain in the eyes of the tenant, creating the false perception that the landlord is solely responsible for the rent increase. In reality, the primary driver is often an increase in municipal charges or other escalating operational costs, forcing landlords into the unenviable role of appearing greedy, when they are merely attempting to maintain financial viability and cover their expenses.
The Hidden Tax Burden: Unfair Property Taxation on Rental Housing
A critical, yet often overlooked, aspect of this issue is the disproportionate property tax burden placed on rental properties. Many Ontario municipalities levy property taxes on rental housing that are two to 2.5 times higher than those on comparable single-family homes. This astonishing disparity directly inflates operating costs for landlords, which must inevitably be passed on to tenants in the form of higher rent. Despite its significant contribution to housing unaffordability, particularly for vulnerable tenants in the private sector, this egregious form of taxation rarely garners attention from tenant advocates or the media. It’s a structural injustice that fuels the cycle of rent increases and contributes to the public’s misunderstanding of landlord motivations.
Eroding Trust and Fueling Misperception: The Cost of a Flawed System
The convoluted and protracted AGI process severely damages the delicate landlord-tenant relationship. It perpetuates a narrative of landlords as greedy and immoral, feeding hysteria and misperception rather than fostering understanding of the economic realities of operating rental housing. While the government collects its full and timely payments for property taxes and other charges, landlords are effectively forced to provide an interest-free, legislatively mandated loan to their tenants by absorbing these increased costs for years before an AGI can be approved and recovered. Landlords often wait three years or more without any benefit, enduring significant financial strain as they cover escalating expenses, all while facing public scrutiny and accusations of avarice. This system is not only inequitable but also unsustainable, discouraging essential investment in rental housing.
Is it not reasonable to expect that residential landlords, like any other service provider or business owner, desire to be paid in full and on time? And for tenants to respect the property they occupy and their neighbours? I would argue that a significant majority – perhaps 85 percent – of all conflicts that arise between tenants and landlords can be categorized under one of these two fundamental criteria. Establishing a balanced framework that upholds these basic expectations for both parties is crucial for a healthy rental market.
The Silence of the Lambs: Landlord Associations and the “Divide and Conquer” Strategy
Despite decades of suffering under what many small and medium landlords perceive as oppressive, brutal, and persecutorial whims and practices meted out by all levels of government, regional landlord associations in Ontario continue to deliberately refuse to create a unified provincial voice. This fragmentation is a textbook case of “divide and conquer,” preventing landlords from effectively advocating for their rights and for policy changes that would benefit the entire rental ecosystem. Without a cohesive front, the concerns of independent landlords – who provide a substantial portion of the province’s rental housing – are easily dismissed, leaving them vulnerable to policy decisions that consistently favour other stakeholders.
A Decade of Disincentives: Targeted Governmental Actions Against Landlords
Let’s briefly review the last two years alone, which have seen a relentless series of targeted governmental actions and economic pressures against landlords, exacerbating the challenges of providing rental housing in Ontario:
- Repeated Eviction Moratoriums: The imposition of three moratoriums on non-rent-payment evictions within a single year created immense financial instability for landlords, forcing them to carry non-paying tenants for extended periods without recourse.
- Zero Percent Rent Increase: The politically motivated decision to implement a zero percent rent increase cost landlords an estimated $2.5 billion in lost equity in just one year, preventing them from covering even basic inflationary increases in operating costs.
- Protracted Eviction Processes: Landlords routinely face 10- to 12-month eviction processes for non-payment of rent, during which time they receive no income, effectively making these units “rent-free” for tenants who exploit the system. This directly impacts a landlord’s ability to pay mortgages, taxes, and maintain the property.
- Capped Annual Increases vs. Inflation: The annual rent increase guideline is capped, purportedly tied to the Consumer Price Index (CPI), yet it often falls significantly below real-world inflation, which has frequently exceeded four percent. This gap means landlords are continually losing ground against rising expenses.
- Three- to Four-Year AGI Hearing Process: As highlighted by my own experience, the unacceptably long AGI hearing process forces landlords to absorb escalating costs for years before potential recovery, undermining the very purpose of the AGI.
- Soaring Utility Costs: A 55 percent increase in electricity costs in a single year adds substantial pressure to operating budgets, further eroding profitability and making it harder to provide affordable housing.
- “War Profiteering” Insurance Premiums: Landlords have endured 30 to 100 percent “war profiteering” insurance premium increases, reflecting a broken insurance market that disproportionately impacts rental property owners.
- Cumulative Property Taxes and Fees: A multitude of taxes, including general property tax increases, a speculators tax, a vacancy tax, and the contemplation of a renovation tax, all contribute to soaring operational costs and directly add to housing unaffordability by making investment less attractive.
- Unused Municipal Funds: Billions ($5.5 billion) in available municipal contribution-in-lieu funds remain unused, funds that could potentially be deployed to alleviate some of the financial pressures on housing providers or to stimulate new construction.
- Escalated Bylaw Enforcement “Fundraisers”: Landlords face increasingly aggressive bylaw enforcement practices, often perceived as “fundraisers” due to massive increases in fine amounts for various legislative infractions (such as fire code violations), adding another layer of financial risk.
- CMHC’s Removal of Equity Extraction: The Canada Mortgage and Housing Corporation’s (CMHC) removal of equity extraction for non-property-related purposes (such as retirement income) limits financial flexibility for small landlords who often rely on their property as a long-term investment and retirement vehicle.
- Absence of Damage Deposits: Ontario remains one of the few jurisdictions without a damage deposit system, effectively empowering a minority of tenants to damage and destroy rental properties with near impunity, leaving landlords to bear significant repair costs.
- Lack of Late Rent Fees: Despite every financial institution and government agency charging late fees, landlords are prohibited from doing so, creating little incentive for timely rent payments and further complicating financial management.
- Disparate Income Tax: Small, independent landlords pay a 50 percent passive income tax, while large-scale corporate landlords often benefit from a mere 13 percent corporate tax (if that), creating an uneven playing field and punishing those who provide vital “missing middle” housing.
- These points represent just a fraction of the challenges; I could easily fill 10 bulleted pages detailing the abuses and systemic disadvantages faced by landlords.
The Fallout: A Deepening Housing Crisis and a Call for Justice
While there may have been some minor legal process modifications in recent times, there has been a notable absence of legislative change to reverse any of the many detrimental policies and laws outlined above. These policies continue to actively discourage both residential rental and purchase housing construction, critically impacting the development of the much-needed “missing middle” housing options – such as duplexes, triplexes, and townhouses – that are essential for addressing diverse housing needs.
It is no mere coincidence that Ontario currently boasts the lowest housing per capita in Canada, and indeed, among all G7 countries. Scotiabank recently issued a stark warning, estimating that Ontario requires an astonishing 650,000 homes – instantly – just to achieve parity with the rest of Canada. This severe housing shortage is a direct consequence of decades of policy decisions that have systematically disincentivized investment and construction in the rental market.
As Robert F. Kennedy, the former United States Attorney General, once profoundly stated, “Every society gets the kind of criminal it deserves. What is equally true is that every community gets the kind of law enforcement it insists on.” By extension, one could argue that every province gets the kind of housing market its policies create.
To politicians, tenants, media, and even the leadership of landlord associations, it is imperative to step back from short-sighted self-interests and collectively ponder a fundamental question: Why would any rational individual or entity choose to invest in building any kind of housing in this province, once they have fully grasped the immense financial and legal risks they must shoulder, the suffering they will undergo due to persecutorial practices by government and others, and the systematic denial of the justice that every citizen is otherwise entitled to? The current trajectory is unsustainable and detrimental to the long-term well-being of all Ontarians.
We urge you to voice your concerns and feedback directly to the Landlord and Tenant Board (LTB) at: [email protected]. Your input is crucial for advocating for a fairer, more balanced, and ultimately more sustainable rental housing market in Ontario.