It’s a combination that has St. Paul’s buzzing: the harmonized sales tax and rents.
Considering large portions of the riding’s residents are tenants, many critics have noted the proposed HST’s effect on rents would reach dramatic levels of an extra $300–360 per year on a $1,000 monthly rent.
Their argument is based on numbers provided by the Federation of Rental Housing Providers of Ontario, which expects only a 2.5 to 3 percent increase in rents due to the implementation of the HST.
The Town Crier has done digging of its own to uncover the facts, and has discovered not all tenants will be affected. Those that will be affected will have at least 18 months before they feel the HST’s pinch.
Sonya Rolfe, manager of the Ministry of Municipal Affairs and Housing’s policy division, said that while rent itself will remain sales tax free, landlords will be able to pass the buck to tenants for expenses that were previously not provincially taxed.
Operating costs that are absorbed into rents like repair services and heat, hydro and water costs will now be subject to an 8-percent provincial portion of the HST.
It’s something that concerns federation president and CEO Vince Brescia.
“Some landlords will avail themselves of that and so that’s another way tenants will get those costs passed through (to them),” he said, adding tenants who pay for their own hydro will pay the new tax directly on their bimonthly bills.
But landlords have to wait at least a year before costs are passed down, Rolfe said. Unless these new costs are 50 percent above the rent increase guidelines of 1.8 percent (2009) or 2.1 percent (2010), landlords are unable to saddle renters with extra costs.
In addition, property managers may be hesitant to lose good tenants to large increases, Rolfe said.
“Landlords tend not to like to use those applications, to my understanding,” she said. “If they can, they would prefer to wait until the unit is free and then adjust the rent for the new tenant.”
But there are leasers that are exempt from the new controls. In particular, those living in buildings built after 1991.
“They are not controlled by the rent controls at all,” Rolfe said. “If (landlords) thought their costs were increasing and they thought a rent increase wouldn’t make them lose their tenant, they could charge anything they wanted to.”
The ministry has fielded complaints regarding the 1991 limitation, and Rolfe said it has considered changes.
“It’s a complaint we have heard from tenant groups because that’s an older provision that was held over from previous acts and people are starting to say, ‘You know, it’s been long enough, we should put a limitation on that’.”
Still, even if utilities go up, other factors in the Consumer Price Index can drop, offsetting any increases, Rolfe said.
Brescia said the federation is looking to get relief from the cost impacts for those affected, even if the only solution means phasing them in over a few years rather than the full increase.
“We really hope the province will make some effort to ameliorate the impact of this on tenants,” he said. “We’ve raised it with them, but we haven’t got any response from them yet if as to whether they are considering anything.”
The current government has said a series of rebates and income tax benefits will be enacted to offset new costs incurred by the HST.
Premier Dalton McGuinty told the Town Crier in a May his government would give 93 percent of Ontarians a permanent income tax cut, while low-income families would receive an additional $260 per person annually.