At a recent mayoral candidate debate (for the City of Toronto), candidates could not come up with reasonable answers as to why rental landlords are not upgrading their buildings. Their answers related to making funding available, low interest loans etc seeming to believe that rental landlords were simply not enlightened about the opportunties. None seemed to understand the crux of the matter, which is that the Tenant Protection Act serves as a disincentive for rental landlords to upgrade their buildings. Adam Krehm, from O'Shanter Developments summarized the frustration of rental landlords eloquently in a report which I have forwared to Rob Ford. Excerpts are copied below:
"• The concept of “cost no longer borne” causes the annual amortized portion of any investment made for the purposes of saving energy or water to be removed from the buildings annual operating costs when the investment has been largely amortized the rental income is then reduced accordingly. Thus the payback on the investment is eliminated about the time the investment is fully paid for. Thus the incentive for the investment is eliminated. Alleviating this problem would stimulate the desired energy conservation investment.
• With the existing rent control legislation if the absolute dollar value of a particular utility cost is reduced the regulations stipulate that this reduction be passed back to the tenants in the form of reduced rent. This requirement acts as a deterrent to the owner investing to cause large reductions in energy or water consumption.
• Under current rent control legislation if a capital expenditure is made to reduce a utility cost and the building has never been taken to rent review seeking an above guideline increase due to increased utility costs then the points made in the preceding two bullets do not apply. In the context of encouraging energy and water conservation in rental apartment buildings this is clearly irrational.
• It seems obvious that the idea that reduced utility costs should all flow back to the tenants in the form of reduced rents is at odds with the objective encouraging building owners to invest in reducing their building’s energy consumption. I would argue that any attempt to both pass the savings directly back to the tenant while simultaneously encouraging private sector participation is likely to require a cumbersome administrative system that is unlikely to function as intended."
The organizations representing rental landlords of Toronto need to meet with the new Councillors after the election to help them understand the conundrum they face so that the City of Toronto can better support the landlords in effecting change that will balance the protection of tenants with the incentives needed to green existing buildings.