Landlords, tenants and the cost of renovations

Why are landlords calling on tenants to oppose stronger rent control?

When the provincial government introduced the “largest expansion of rent control in decades,” landlord pushback was predictable. While Manitoba’s Professional Property Managers Association typically keeps its policy advocacy fairly quiet, they have made their position known through local media and paid social media ads urging tenants to oppose the expansion of rent control.

Real estate appraiser Carson Horsburgh, having knowledge of landlords’ consultations with the province, warned in the Free Press of “sweeping regulatory changes,” (Bad policy: the fallout from rent changes, Think Tank, March 24) but landlord pushback has primarily centred on a specific proposed amendment to the residential rent regulation. The proposal is to cut the portion of capital expenses landlords can claim toward rent increases by 50 per cent, which would essentially cut renovation-related rent increases in half.

Many tenants will surely welcome this relief, especially after a PPMA spokesperson publicly warned higher rent increases were coming after the province ended the education property tax rebate last year.

Although the NDP came to power promising to improve renters’ conditions, landlords have reacted to the government’s first step toward fulfilling that promise with disingenuous fearmongering that sends a clear message to tenants.

The PCs embraced the landlord position almost word-for-word in their recent announcement that they would designate the Residential Tenancies Amendment Act (delaying its progress until the fall session).

In short, the landlord partisans argue that the proposals will make important renovations financially unviable by preventing landlords from recovering the cost of their investment. Since lenders will not finance projects under these circumstances, landlords will have no choice but to defer important renovations. Thus, both landlords and tenants will suffer from these regulations.

Horburgh argues that the proposed amendments would make “standard capital work” in a typical 30-unit building generate negative returns. A PPMA spokesperson told the Free Press that the amendments will reduce the average profit rate for renovations from its current five per cent to more like 3 to 3.5 per cent.

These claims should be read skeptically: landlords have clear motivations for these kinds of vague, sweeping claims. Any tenant who has paid higher rent for cosmetic renovations can understand that what counts as “standard” or “important” renovations looks different to landlords who profit and tenants who pay. After all, the source of a higher profit rate on renovations is higher rents paid by tenants.

Setting aside the question of whether these self-interested claims stand up to scrutiny, it is worth grappling with the implications of the landlord lobby’s position at face value.

While they frame their position in terms of politically neutral “basic business sense,” it effectively amounts to a warning — even a threat — to tenants: if limits are placed on their ability to maximize profits from renovations, landlords will defer important renovations that will affect quality of life.

Of course, landlords are required by law to maintain their properties in livable conditions. Presumably, landlords are not publicly warning that they will neglect their obligations to the point of breaking the law.

However, these laws only matter if tenants know their rights, know how to exercise them, and have enough confidence that the Residential Tenancies Branch will enforce them to go through the process.

Legal obligations aside, Globe Property Management chief operating officer Ron Penner made clear to the Free Press how landlords would respond to these amendments: “It’s going to have to make us (as an industry) look at pushing things beyond the reasonable limits, and there’ll be more deferred maintenance.”

This is a clear indication that this industry needs to be reined in. If private landlords are openly warning that they would simply neglect their obligations rather than meet them at a lower profit rate, this signals that they are unwilling or incapable of meeting Manitobans’ needs in a housing and affordability crisis. This situation calls for expanding public housing and strengthening regulation of the private market, not for letting landlords off the hook.

Perhaps the most pernicious sleight of hand is the landlord lobby’s tendency to speak in the name of landlords, workers, and tenants alike — implicitly suggesting these groups share an interest in opposing stronger protections for renters.

Landlords are an organized political force in Canada precisely because their interests conflict with other constituencies — like tenants — that might try to influence the government.

Indeed, these proposals come in the context of growing consciousness around the conditions and struggles of tenants in Manitoba, and growing tenant movement across Canada — with rent strikes ongoing and the formation of a tenant union in Toronto. Increasingly, tenants are finding power in organizing with their neighbours to deal with their landlord from a position of collective strength.

Growing challenges to landlord power may help explain the landlord lobby’s hostile reaction to these proposals. This reaction is the latest indication that tenants in Manitoba need stronger protections yet.

Brendan Devlin is a renter and social movement organizer with a Master of Arts in Political Studies from the University of Manitoba.