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Opinion: The real issues with housing affordability for seniors

REM published a story July 6, 2021, titled Ottawa Realtors urge municipality to address senior housing issues. While it’s commendable that the Ottawa Real Estate Board and Ontario Real Estate Association (the agencies) identify a worthy cause, everyone’s already known about this challenge for years.

According to Canada Mortgage and Housing Corp., one in four Canadians will be over the age of 55 within five years and many of them won’t have enough money to see them through “aging in place with dignity” (and within walking distance of all the amenities they want to be next to). The five bullets the agencies cited in the article are uninformed and over-simplistic solutions that have been addressed in many forums, venues and discussions.

The over-arching issue, which Realtors should know but generally don’t, is that seniors – actually any person who stays in a rental unit in Ontario for more than three years – systematically wipes out the equity investment of the property owner over the extended term of their tenancy. I have a saying that I teach in a “landlording” course: “$1 of NOI (net operating income, pronounced “noy”) is $20 of joy (or “Oi” if NOI decreases)” assuming a five-per-cent cap rate.

For example, a senior moves into a one-bedroom rental unit today and pays $1,100/month (most seniors are looking for $800/month or less). Ten years later the happy senior is paying $1,300/month because of rent control but the market is paying $1,600. That $300 difference may seem a reasonable cost for a residential landlord’s social responsibility. However, $300 x 12 = $3,600/year difference. Multiply that by 20 (or divide this “NOI” by five per cent) = $72,000 in lost equity … per senior. A 10-plex of only-seniors could lose arguably a million dollars in equity because of the devastating long-term effect of the failed policy of rent control. That last statement alone would require a book to discuss and prove.

Notwithstanding that, the market isn’t paying $1,500 just because of the housing shortage and high demand, which is a driving factor for sure, but also because operating costs have skyrocketed. Government-run electricity rates are up 60 per cent over the last two years. A 20- per-cent carbon tax was added to natural gas last year (in the middle of finance-strapped COVID). There was two-and-a-half times more property tax on apartment buildings versus single-family homes, water cost increases (40 per cent over five years), building insurance increased 100 per cent in the first year of COVID, 50 per cent corporate tax on residential housing businesses and so on.

It would take a day to explain all the reasons why the agencies’ suggestions are uninformed and ill-conceived but you can start with Ontario’s Residential Tenancies Act (RTA) and certain municipalities discouraging second suites (despite a provincial mandate to embrace them), which was the province’s original key strategy for housing relief. Add in rent freezes that cost private sector rental investors $2.4 BILLION in lost equity in 2021 alone (aren’t property taxes based on property value?) and multiple eviction bans that empowered tenants to live rent-free for 10 to 20 months while the Landlord and Tenant Board (LTB) sorts out their debilitating mess that was created by … the provincial government cutting back on adjudicators four years ago. It’s a long list, of which a part is being presented to the province’s lawyers by Small Landlords Ownership Ontario (SOLO) in its bid to bring forward a class action against the province.

OREB and OREA ought to be talking about these hard, influencing facts and drilling down to practical solutions that don’t simply ask the government for more money. The government doesn’t have it. Actually, the government can print money all day but the taxpayers don’t have it.

Ontario’s debt is the largest subnational debt in the world. Ontario’s debt in 2018 was higher than that of Austria, Switzerland, Russia, Sweden, Israel, Norway and 166 other countries. It was ranked number 20 in the world out of 186 countries ranked. Ontario’s net public debt in 1985 was $28.9 billion, $38.4 billion in 1990, $101.9 billion in 1995 and $287.3 billion in 2014 under Wynne and representing in that year 40-per-cent net debt to Ontario’s entire GDP. The Ontario Financing Authority says Ontario’s net debt for 2019 is $353.3 billion and projects it will increase to $398 billion for 2020. The debt increased 10.4 times (1,000 per cent, if that makes sense) in just 30 years. Ontario was formed in 1867 but 87 per cent of its net public debt was accumulated since 1990.

If you think seniors have it bad today, wait until the full effect of the last year’s government bailouts is felt in the next three years and hyper-inflation wipes out seniors’ savings, while a compounding recession tightens the flow of money throughout the province (and possibly the world’s) economy. The government has to get that money back and tighten the money supply or risk having Canadians and the world lose confidence in the Canadian dollar.