Tenant-landlord tango: Rental supplement is one right answer during COVID-19
Wednesday, May 20, 2020 @ 10:56 AM | By Ismail Ibrahim
Suspension of rent would assist tenants, but the cost would be borne by the landlord.
Is it fair to arbitrarily put that burden on landlords?
Even if there was a suspension of rent and mortgage, it should be needs-based to assist those who have been impacted by COVID-19, and not simply apply to everyone.
Rent deferral or forgiveness under Housing Services Act
Under the Housing Services Act and its regulations, each service manager has been given the authority to set rules with respect to rent deferral or rent forgiveness. So, in theory, a service manager can forgive all rent. The practical reality is that social housing providers are already in dire need of more funding. In reality, it is very difficult for them to forgive rent unless they receive funding to cover the lost revenue.
British Columbia model
The government of British Columbia introduced a rental supplement program that provides up to $500 a month to low and moderate-income renters experiencing loss of income and hardship due to COVID-19. This supplement is not available for existing rental assistance programs.
Although the program is commendable in that there is a recognition of the problem, it has its limitations. Specifically, if such a program were to be implemented in Ontario, the following considerations would have to be addressed:
- A monthly limit of $500 is not likely enough assistance in Ontario, where the average rent is $1,273, especially in a region like Toronto, where the average market rent for a two-bedroom apartment is $1,591, and;
- Social housing residents must be accounted for, either through direct funding to social housing providers or the creation of rent banks or programs that social housing tenants impacted by COVID-19 can access.
What seems fair about the British Columbia initiative is that it focuses on providing the supplement to those individuals who have low and moderate incomes who have been impacted by COVID-19.
United States bill
On April 17, the Rent and Mortgage Cancellation Act was introduced in the U.S. House of Representatives. Under this bill all rent and mortgages in the U.S. would be suspended until the end of the pandemic, while impacted landlords and lenders would be able to recover their losses through a new fund.
This bill has some very helpful provisions, including providing relief to both market and social housing renters, while protecting landlords and lenders from losses. The difficulty with the bill is that it puts very stringent requirements on landlords to access funds. These requirements include:
- Agreeing to a rent freeze for five years;
- Giving 10 per cent equity in their rental property to the tenants; and
- Agreeing to a right of first refusal for the government to purchase any properties being sold by the landlord over the next five years for the purpose of using the property for social housing.
These requirements will put tenants in better position than they were at before COVID-19, while putting landlords in a worse position. It seems unfair to favour one side over the other, and the bill will likely require modification if it is to become law.
Where we go from here?
Addressing the issues facing renters in these unprecedented times is complex as there is no silver bullet that is going to resolve the issues for renters, landlords, lenders and taxpayers.
The British Columbia model is a good start and can be modified to meet the needs of Ontarians.
By addressing the issue early on, potential massive evictions may be avoided. If these massive evictions do occur, there will be both a human impact to the tenants who will suffer from inadequate housing and an economic impact to landlords that will percolate to rest of the Ontario economy.
This is the final part of a five-part series. Part one: Tenant-landlord tango: Implications of COVID-19 on residential rent arrears. Part two: Rent arrears during COVID-19: What landlords, tenants ought to know. Part three: Tenant-landlord tango: Evictions not good option in wake of COVID-19. Part four: Tenant-landlord dealings: COVID-19 implications more dire for social housing.
Ismail Ibrahim is an associate at Robins Appleby LLP where he works on affordable housing projects in the real estate and corporate groups. He was previously general counsel at Toronto Community Housing Corporation (TCHC). Prior to that, he was an engineer at a nuclear plant; he holds an engineering chemistry degree. He also has an MBA from University of Oxford and has played in the World Chess Olympiad.
Photo credit / doyota ISTOCKPHOTO.COM
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