The rental housing landscape in Ontario is a diverse one made up of both small-scale and larger, institutional Landlords. The recent populist rules and regulations of provincial and municipal governments present a concerning trend and, in my opinion, are intensifying the current rental housing crisis in Ontario.
This post aims to delve into the differences between small-scale and institutional Landlords and attempt to shed some light on what seems to be an unfair targeting of small-scale Landlords which in turn, hurts most Tenants in the Province.
To begin, let’s define the two types of Landlords:
1) SMALL-SCALE LANDLORDS
Small-scale Landlords typically own a limited number of rental units, often a single rental property or a small portfolio of properties (three or less). They generally rely on the rental income to supplement their livelihoods or retirement savings, making their investment in rental proprieties crucial for their financial stability. These Landlords are often deeply involved in the management of their properties, handling Tenant interactions and maintenance personally. Their ‘hands on’ approach with Tenants and properties often fosters a sense of community, accountability and pride of ownership which benefits both Landlords and Tenants. Small-scale Landlords generally do not have bags of money sitting around nor do they have a Scrooge McDuck sized bank vault for them to swim in their gold coins (I think we all can agree however that Ducktails was the best). Instead, they are often highly leveraged, are out of pocket month-to-month in terms of cash flow and can’t withstand long periods of vacancy nor can they financially survive a Tenant not paying rent for extended periods of time (i.e., while waiting for the Landlord and Tenant board to adjudicate an application).
2) INSTITUTIONAL LANDLORDS
Institutional Landlords operate on a much larger scale and own extensive portfolios of rental properties. These corporate entities include real estate investment trusts (REITs) and large property management companies. With substantial financial resources and professional management teams, institutional Landlords can efficiently manage numerous properties across multiple geographic locations (sometimes spanning cities, provinces and the entire country). They are more likely to prioritize the maximization of profits (an inherent requirement for corporations) and have less involvement in the day-to-day operations. They are more equipped and apt to fight Tenants at the Landlord and Tenant Board, can withstand and sometimes encourage long periods of vacancy and are cash flow positive on a month-to-month basis.
Landlords Play a Vital Role in Ontario’s Housing Market
Despite the obvious differences, both small-scale and institutional Landlords play a vital role in Ontario’s rental housing market. Governments have made in clear over the past few decades they cannot and do not want to be in the business of providing rental stock. However, recent provincial legislation and municipal policy trends have disproportionately burdened small-scale Landlords exacerbating the many challenges they face which in turn is leading them to leave the rental market in droves. When you consider that it is small-scale Landlords that provide the majority of rental stock in Ontario and the types of housing they do provide are the larger desired types of housing (that can accommodate families, etc.) this helps demonstrate the problem as this ‘good’ supply dwindles while demand increases.
Here is a small sample of municipal and provincial level policies/regulations levied since the beginning of 2020 that often impose more stringent requirements and burdens on small-scale Landlords and in some cases totally exempt larger scale, institutional Landlords.
Provincial Level:
- No financial subsidy or support offered to small-scale residential Landlords during COVID-19
3 residential eviction bans
- Passed Bill 184 (the Protecting Tenants and Strengthening Community Housing Act) which increased the scrutiny on Landlords
- Levied a provincial rent freeze (2021)
- Stayed silent on a 10+ month hearing backlog at the Landlord and Tenant Board
- Introduced short-term rental bans
- Poor messaging encouraging tenants to stop paying rent, financially hamstringing many small-scale Landlords
Municipal Level (City of Ottawa used as an example):
- No financial subsidy or support offered to small-scale residential Landlords during COVID-19
- Proactively asked the Province to reinstate a residential eviction ban hurting many small-scale Landlords (as tenant could not be removed even if damaging the unit, not paying rent and/or conducting illegal activities) and leading to a larger backlog at the Provincial Tribunal once the eviction bans were lifted
- Introduced the Inclusionary Zoning Bylaw which compelled Landlords to set aside a percentage of units within their new residential projects as ‘affordable housing’
- Vacant Unit License introduced and adopted (excluding large multi-residential properties such as those owned by larger institutional Landlords)
- Vacant Unit Tax introduced and adopted (excluding large multi-residential properties such as those owned by larger institutional Landlords)
- Launched the ‘Renoviction Study’ to prohibit existing LEGAL evictions
- Introduced and adopted the City of Ottawa Rental Housing Property Management Bylaw
Cumbersome and poorly written property management bylaws
A prime example of all of this is the City of Ottawa’s Rental Housing Property Management By-Law which at best is a cumbersome and poorly written policy which seemingly contradicts provincial legislation and complicates the duties of a Landlord. Some have gone so far as to argue the reason that this policy has been adopted is to harass small-scale Landlords and add an extra layer of bureaucracy to an already overcomplicated industry.
Unfair Targeting of Small-Scale Landlords
Small-scale Landlords frequently find themselves targeted by these types of rules and regulations larger Institutional Landlords are exempt from OR are able to accommodate more easily through leveraging their vast financial resources.
This unjust treatment stems from various factors, including but not limited to:
Limited Resources: Small-scale Landlords lack the financial resources and institutional support enjoyed by their larger counterparts, As a result, they may struggle to navigate complex regulatory frameworks and comply with the costly requirements. Imagine if a Tenant decided to stop paying rent. A small-scale Landlord may not be able to take on the financial burden of hiring a Tenancy Lawyer/Paralegal, waiting 10+ months for an adjudication from the backlogged Landlord and Tenant Board (vs. a larger, multinational company that manages 1000’s of rental units and more resources to fight)
Lack of Advocacy: Unlike institutional Landlords, small-scale Landlords often lack collective representation and advocacy groups to champion their interests. This leaves them vulnerable to policies that disproportionally impact their ability to operate and provide rental housing
Impact on the Rental market
The unfair targeting of small-scale Landlords has profound implications for Ontario’s market:
Shrinking Supply: Burdensome regulations and policies discourage small-scale Landlords from entering or remaining in the rental market. As a result, the supply of rental housing diminishes, increasing the existing shortages and ultimately leading to a spike in rental rates
Inadequate Options: The loss of small-scale Landlords translates into a reduction of diverse rental options, particularly in neighbourhoods where institutional Landlords may be less inclined to invest in (i.e. types and location of housing that don’t turn as much of a profit). This limits Tenant’s choices and contributes to housing inequities
Mismatched Housing Stock: Policies that either disadvantage small-scale Landlords or exclusively target them, promote the proliferation of certain types of rental stock favoured by institutional Landlords (i.e., large rental towers containing bachelor and 1 bedroom rental units). This can lead to an oversupply of certain housing types while neglecting others (the ‘missing middle’ rental housing which are larger 2 to 4 bedroom rentals that can accommodate families)
Conclusion
The disparity in treatment between small-scale Landlords and institutional Landlords in Ontario evident. Small-scale Landlords face unfair targeting and are burdened by regulations that hinder their ability to provide much needed rental housing. This unmerited treatment not only undermines the livelihoods of small-scale Landlords but also detrimentally impacts the Ontario rental market as a whole. To foster a more equitable and sustainable rental market, policymakers must address the challenges facing small-scale Landlords and ensure fair treatment cross all segments of the sector.
Please do not get me wrong, I am not arguing that all institutional Landlords are inherently bad, breaking rules OR are substandard Landlords. I am also not arguing that all municipal staff and provincial politicians are purposely trying to eliminate small-scale Landlords,….but it is happening and we can’t ignore it. Instead I am simply trying to say that the type of housing many are looking for is generally owned by small-scale Landlords and if you eliminate them from the equation the vast majority of housing that will remain are apartment style properties. If our goal is to have truly diverse communities with owners, renters, and everything in between, policy makers and politicians need to stop implementing populist policies that on the surface look and sound good, and instead introduce policies that support those actually trying to provide rental stock for all.
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