Above guideline rent increases are the most “regressive” way to fund green retrofits in rental housing, a new report from Ontario ACORN argues.
The report from the tenant union spells out how some landlords have used above-guideline rent increases (AGIs) to pass the cost of climate-conscious upgrades on to tenants and make a profit.
“ACORN members agree these retrofits are needed and at a much greater scale. However, it shouldn’t be low-income tenants paying the bill so we can achieve our climate goals,” the report says.
The report looks at 16 applications to raise rents above the provincial maximum for rent-controlled units to cover the cost of energy and water conservation projects — including things like new boilers, windows and doors, lighting retrofits and common area renovations.
In one case, an AGI application for one Toronto building was approved to cover nearly $77,000 for new toilets and breaker panels.
But because the cost of water is built into the rent for most of its units, tenants aren’t “seeing any of the savings on the water bill,” said Stacey Semple, who lives in the building and is a tenant leader in ACORN’s downtown Toronto chapter.
The report outlines how AGIs, especially when applied repeatedly, can drastically increase rent costs over time.
In Ontario, units occupied before Nov. 15, 2018, are rent-controlled, meaning for this year rent in those units can only be increased by 2.5 per cent (for 2026, the rent increase guideline is 2.1 per cent). However, the Residential Tenancies Act allows applications to the Landlord and Tenant Board for AGIs for a number of reasons, including covering the cost of energy and water conservation upgrades.
Landlords can apply for AGIs for a maximum of 9 per cent over three years on top of the rental increase guideline.
Increases are cumulative, so when an AGI is carried out over multiple years, the annual increase is based on the last year’s rent rate, not the rate when the AGI was first granted — which Ricardo Tranjan, senior researcher with the Canadian Centre for Policy Alternatives, who had no involvement in the report, sees as a flaw.
For example, on top of the 2.5 per cent increase allowed annually, a 9 per cent AGI spread over three years applied to a starting rent of $1,500 a month grows to $1761.40 a month at the end of the three years.
Another flaw noted by Tranjan is that AGIs for capital expenditures have interest built in at the standard five-year mortgage rate to cover the upgrade’s useful life. But that interest rate, “may or may not be what (landlords were) charged themselves if they borrowed” to pay for the upgrades, he said.
“If you’re charging more interest than you’re paying yourself, you’re keeping the change,” said Tranjan. “It’s is a pretty bad formula that benefits landlords instead of tenants.”
Ontario ACORN, which advocates for an end to AGIs altogether, is calling on the province to make green retrofits ineligible for AGIs as well as require landlords to prove they aren’t eligible for any rebates or funding in their AGI applications, according to the report.
The report notes there are government programs to help fund green retrofits, but says there’s low uptake by private landlords and a mismatch between what’s offered and what tenants need.
Because many tenants pay for utilities themselves, and thus pay the price for energy inefficiency, landlords don’t have much incentive to apply for grants or low-cost financing to cover improvements when they could apply for an AGI instead, the report says.
“AGIs will always be seen as more attractive to corporate landlords because they’re easy to approve and they make a huge profit,” said Jamie Gooch, a leader in the McWatters ACORN Tenant Union in Ottawa.
In addition to ACORN’s demands to ban AGIs, the union wants to see more funding for green retrofits in rental buildings from all levels of government.
“If private landlords won’t pay for green retrofits, then the government should,” said Gooch.
