Urban Renaissance Institute

Parasites in the walls

Posted on April 17, 2003 by urbanrenaissanceinst

Lawrence Solomon
National Post
April 17, 2003

First in a series:

Canada’s political leaders, appalled at the absence of affordable housing for low- and medium-income Canadians, met in Winnipeg this week to discuss how they can help.

Their agenda neglected a good place to start: They can stop gouging the tenants they’re claiming to protect.

Along with alcohol and tobacco, housing – and especially rental housing – are among the most heavily taxed products in Canada. All three levels of government in our country keep it that way, according to a recent study by the Canada Mortgage Housing Corporation that quantifies each government’s contribution to the cost of housing.

All told, the taxes embedded in a modest rental apartment built in Halifax in 2002 totaled $10,697, the taxes in a modest apartment in Vancouver totaled $12,186, and in Toronto they totaled $14,146. In the suburbs of major cities, where tenants are often unwanted, the taxes in apartments can soar higher. Vancouver suburbs Burnaby and Surrey logged taxes of $14,074 and $16,292 respectively while Toronto suburbs Vaughan and Mississauga topped the CMHC charts at $21,710 and $22,280 respectively. As a result of these taxes, which inflate building costs by more than 20%, Vaughan and Mississauga tenants in modest apartment buildings pay far higher rents than they otherwise would.

Most of the federal, provincial and municipal taxes on new rental units bear scant relationship to the services tenants will ultimately receive. The monies – pure profit, from the governments’ point of view – typically go straight to the governments’ bottom line, to spend as they wish.

But the tax take from tenants has only just begun. To the plethora of taxes loaded into the cost of building an apartment, some provinces add hidden property taxes specially designed to take advantage of renters. Picture two identical apartment buildings, side by side on the same block of the same municipality. Convert one of them to a condominium and most of the tax that the city had collected for each unit can disappear. In Toronto, renters pay almost three times as much in property tax as do condominium or house owners; in Windsor, renters pay more than twice as much; in New Brunswick, almost twice as much; in Saskatoon, 70% more. In other provinces, tenants and owners pay the same property tax rate, but the government then slips the owners rebates – $400 a year in Manitoba, $470 a year in B.C.

Our governments don’t discriminate on the basis of house type: Detached or semi-detached, bungalow or monster home, all are taxed at the same rate. The equality of taxation ends, and the discrimination begins, when governments judge different types of occupants rather than different types of homes. Owner-occupants get the red carpet treatment, tenants get the door.

Some commentators argue that home owners deserve special preferences – because they have an ownership stake in their communities, the theory goes, they make for better citizens. These theories doubtless influence some lawmakers: For this and other reasons, many governments explicitly provide subsidies in order to convince tenants to abandon their rental apartments for home ownership. Those who can’t afford to buy homes, even with the subsidies, or those who prefer to rent out of a lifestyle choice, are forced to pay for the privilege.

Current value assessment – a property tax system that many provinces are moving toward – provides another opportunity to overtax homeowners in general, and tenants in particular. Under CVA, taxes rise automatically when property values increase, which especially occurs in the tenant-rich downtowns of large cities. Politicians like automatic tax increases that come of CVA, which removes their need to face the taxpayers they represent. As a bonus for politicians, rental buildings are typically valued on the basis of the rents they fetch. Every rent increase on tenants thus gets boosted via a hidden tax that tenants blame on landlords.

Governments abuse tenants for good reason: Tenants are more vulnerable, more transient, less educated, less organized and less likely to vote than homeowners – in short, better prey. By overtaxing tenants relative to homeowners, politicians can keep homeowners at bay and increase their prospects of reelection. To salve their guilt and that of some homeowners, who know they’re benefitting at the expense of those less well off, governments return a pitifully small part of their take to tenants in the form of “affordable housing” programs of various kinds.

To the delight of politicians, organizations that espouse tenants’ rights don’t condemn the systemic discrimination that dooms tenants to be second-class residents. These organizations, instead, plead for larger pittances with which to fund more affordable housing.

The meeting in Winnipeg of politicos had everything to do with affordable housing programs, nothing to do with providing fair play to tenants. In former decades, before governments perfected the means of picking tenants’ pockets, tenants had much affordable housing and little in the way of affordable housing programs.

Lawrence Solomon is executive director of Urban Renaissance Institute and Consumer Policy Institute, divisions of Energy Probe Research Foundation. www.urban.probeinternational.org, E-mail: LawrenceSolomon@nextcity.com

Related articles:
Homeless by decree
Homeless in paradise

Readers respond:

Monday, April 28, 2003

I have been a property manager for more than 30 years in Ontario and in Alberta. There are other areas of “taxation” that also seriously affect the availability of affordable housing. Here are a few:

– Condominiums are entitled to rubbish collection in the same manner as a single-family homeowner; rental properties must provide commercial rubbish collection. In Calgary, only the cost of container rental is billed to a condominium – in a bare-bones townhome condominium, the cost of container rental equates to about 5% of operating costs. The cost of rubbish removal from comparable rental properties is dramatically more.

– When the government of Alberta offered the Natural Gas Rebate Program last year, rental properties received a $3-per-gigajoule rebate; condominium owners were given a total rebate of $600 per household. We manage three small condominiums which did not actually have to pay a natural gas bill for 12 months while comparable rental properties received only a short-term reduction.

– In Calgary, Calhome Properties (which is owned by the City of Calgary) has subsidized the rental market with low-cost, income-geared housing and in fact skims the best long-term tenants from the market by their selection process. Calhome offers below-market rents to tenants, is heavily subsidized and seeks to maximize revenue and income by selecting tenants who have the highest income qualifications permitted.

Over the past 12 to 15 years, a substantial portion of the residential rental inventory in Calgary has been eroded through condo conversions or the sale of formerly MURB’d (Multiple Unit Residential Building) residential condominium units. “Highest and best use” has determined that the investor owners can achieve their best return through the sale of rental properties to first-time home buyers.

The availability of affordable low-cost housing will continue to decline until all three levels of government commit to changing the model for rental housing with realistic incentives to encourage investors to build/buy and hold a rental housing inventory.

Brian Franks, president, Bowside Property Management Ltd., Calgary

Thursday, April 17, 2003

Very enlightening. Further proof that welfare programs, contrary to popular belief, are not for the benefit of the needy, but for the bureaucrats that administer them.

Warren D. Green, Claresholm, Alberta

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Affordable, available, achievable practical solutions to affordable housing challenges

Posted on April 1, 2003 by urbanrenaissanceinst

The Toronto Board of Trade

April 1/2003

Toronto is an expensive place to live. Approximately one-third of families in the Toronto CMA are paying more than 30 per cent of their incomes for shelter. The average rental price forToronto apartments is beyond what many people can afford.

Click here to view the webpage

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Congestion charging zone in the context of London as a whole

Posted on March 25, 2003 by urbanrenaissanceinst

March 25 2003

A map of the congestion charging zone for London, England. March 25/2003

Click here to view map

http://www.probeinternational.org/old_drupal/UrbanNewSite/congestionchargingmap.jpg

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Wilful blindness

Posted on March 19, 2003 by urbanrenaissanceinst

Lawrence Solomon
National Post
March 19, 2003

Peaceniks in St. Petersburg [right], Russia, on March 18, protest against war in Iraq. Credit: Dmitry Lovetsky, AP Photo.

In 1981, when Israel bombed Iraq’s Osirak nuclear reactor to prevent it from making nuclear weapons fuel, Norman Rubin, my colleague at Energy Probe, lauded the Israeli action.

Energy Probe, and especially Norm, were then at the forefront of a worldwide effort to end nuclear proliferation, a movement in which Canada stood out for having supplied India with the technology that gave her the Bomb. Although India’s bomb had started an arms race with Pakistan – also the recipient of a Canadian reactor – Canada remained intent on selling more Candu technology to military dictatorships such as Romania’s Ceausescu and Argentina’s junta. Other Western countries including France, which had built Osirak for Iraq, played that same game of supplying tyrants with nuclear weapons technology, and were dogged by peace groups of their own.

That, my friend, was a peace movement to be proud of. To support their domestic nuclear industries, Canada, the United States, France, Germany, Italy and other Western governments were short-sightedly providing weapons technology to corrupt, politically unstable military regimes under the guise that the reactor sales were profitable and intended for civilian use.

In truth, nuclear technology was so uncompetitive at making electricity that the Western governments needed to subsidize the sales heavily, and leaked Cabinet documents showed that Prime Minster Trudeau’s government feared Argentina’s military would use a Candu nuclear bomb against the British in the Falklands War.

Thanks in good part to pressure from the members of this movement, Argentina, Taiwan, Turkey, Indonesia and most of the other military regimes that sought nuclear weapons technology never did complete their plans. Meanwhile, pressure on the United States and the U.S.S.R. contributed to a reduction of their nuclear stockpiles, too. Armed with the truth, the peace movement prevailed over the patent lies of the weapons proliferators, to the credit of all involved.

But I do not feel pride in what large parts of the peace movement have become. My first awareness that something had gone horribly wrong came after Sept. 11, when so many activists strained to justify the terrorists’ grievances. I was next amazed to see the annual demonstrations in Washington against World Bank and IMF policies delayed after Sept. 11, then cancelled, then converted into a demonstration to oppose military action against the Taliban in Afghanistan. It was as if any cause would do – all that the demonstrators needed was a pretext to take to the streets.

The demonstrations against the policies of the World Bank and IMF had begun in the 1980s as environmental protests founded on years of painstaking research. The demonstrations against ousting the Taliban had no grounding in fact: The protestors’ claims – that there was no evidence linking Osama bin Laden to the Sept. 11 attack; that, even if there were, the Taliban could not be held accountable for bin Laden’s actions; that the United States had no right to overthrow the government of a sovereign nation – in retrospect are risible. The claims came of anti-Americanism, a visceral dislike of President Bush, and little else. Because the claims were groundless, they disappeared with the fall of the Taliban and the subsequent surfacing of the truth.

Much of the peace camp’s opposition to a war against Saddam Hussein is likewise based on anti-Americanism and a distaste for President Bush. It considers him a greater threat to peace than Saddam, whom Human Rights Watch holds responsible for the civilian deaths of hundreds of thousands of men, women and children. It accused Mr. Bush of acting contrary to international law even as he brought motions to the United Nations, while it defends a dictator who has continuously violated 17 United Nations resolutions over 12 years.

The anti-war movement perceives strength in numbers, but numbers will not trump truths. The anti-war movement in the 1930s – students, supporters of the League of Nations, supporters of disarmament, the Pope and the Catholic Church, isolationists, socialists, labour unions – was far more numerous and far better organized than anything mustered post-Sept. 11. In 1936, 500,000 U.S. college students boycotted classes in a nationwide “student strike” in opposition to war preparations. In 1937, Gallup polls indicated that almost 70% of Americans regretted U.S. involvement in World War I and 94% favoured containment in dealing with Hitler. After Hitler seized Moravia and Bohemia in 1939, Herbert Hoover, a former president and leading anti-war advocate, declared that Hitler presented no clear and present danger. The almost wilful blindness to the danger at hand persisted after Hitler was at war with England and France: More than 90% of Americans remained anti-war. Even into late 1941, more than 80% of Americans and 90% of Catholic clerics opposed entering the war. With the attack on Pearl Harbor, and the folly of anti-war views evident, the anti-war movement melted, many of its adherents immediately joining the war effort.

Despite the almost wilful blindness of many of today’s peaceniks, peace and human rights groups can claim genuine progress, and for this we should all be grateful. Their relentless focus on the civilian casualties of Israeli counterterrorism, and their success in forcing the U.S. government to criticize Israeli conduct, has led Israel to develop new military techniques and to enforce an unprecedented military culture designed to limit unintended casualties, even at the risk of its own troops. The United States, having demanded this culture of its ally, has had little choice but to adopt the culture for itself. Unlike the 1991 Gulf War, where substantial human “collateral damage” was accepted as a necessary evil of war, the U.S. army is now going to extraordinary expense to limit civilian casualties. In the war on Iraq, as in the war in Afghanistan, the Coalition of the Willing is sure to exact a much smaller toll on civilians than seen in previous times. This should be a war that peace-loving people everywhere can eventually praise.

Lawrence Solomon, a founder of Energy Probe, is a columnist with the Financial Post. E-mail: LawrenceSolomon@nextcity.com.

Related articles by Larry Solomon:

Bush the redeemer
Ignorant by decree
The consensus on Iraq
Iraq’s odious debts

Posted in Nation states, Political reforms | Leave a comment

The toll on business

Posted on March 6, 2003 by urbanrenaissanceinst

Lawrence Solomon
National Post
March 6, 2003

Toronto Mayor Mel Lastman spoke for many when he voiced his fear of tolling city roads, as London, England, so daringly did to eliminate traffic congestion three weeks ago. “Please tell me how much business we’re going to lose in the evenings particularly with people not coming to Toronto to restaurants,” he asked. “If you pay to come into Toronto, and a toll to get out of here, you might as well go to a restaurant in your own neighbourhood.”

To Mr. Lastman, tolling Toronto roads would chart a path to ruin. Without customers, local businesses would leave the city. Toronto “might as well roll up the sidewalks.”

Mr. Lastman is wrong for two fundamental reasons and two narrow ones. The fundamental reasons: He doesn’t understand what makes people come and what makes businesses go. The narrow ones: He doesn’t understand how London’s tolling system works, or that London’s experience indicates that less congested cities would even more easily be able to eliminate congestion.

London’s mayor eliminated traffic jams in its heavily congested core by charging drivers £5 a day (about $12) to enter or leave it weekdays between 7:00 a.m. and 6:30 p.m. Although, this unprecedented feat has earned him near universal praise – from big business to automobile associations to environmentalists – the £5 charge, in fact, worked too well. Instead of an expected 10% to 15% decline in traffic – all that would have been needed to make London traffic flow freely – the £5 charge convinced 20% of drivers to leave their vehicles behind.

The streets of London, it is now clear, could have been decongested with a lower toll, perhaps £4 or £3. In less heavily congested Toronto, which needs to deter far fewer vehicles from its roads to eliminate congestion, the charge would be smaller still, perhaps $3 or $2, or about the same as a bus ticket. Looked at another way, very few people would be deterred by such a small levy from driving into Toronto, and that is a good thing: Very few people need to be deterred in order to eliminate congestion. Once the few are deterred, the great majority would obtain carefree driving conditions for the price of car fare.

Some people, to avoid the toll, will refuse to come into Toronto, costing the city “customers,” as Mr. Lastman puts it. But they will be very few. Most who decide to avoid the toll would do so by coming into Toronto by taxi, by public transit, by walking, by bicycle, by scooter, by sharing a ride, or by changing their schedules to travel in off-peak hours – this is how people are avoiding the tolls in London. Meanwhile, other people who had been deterred from entering the city at all – not by price but by congested roads – would now be new customers. On balance, Toronto would have more customers, not fewer, once the city’s transportation systems become efficient.

Mr. Lastman fears that tolls will discourage people from travelling, and encourage them to do more of their business in their own neighbourhood. In this, he is right. He is wrong in not realizing the larger, more profound effect of Toronto tolls: They will encourage more people to choose Toronto neighbourhoods as their own. After all, apart from changing their travel hours, or coming in by public transit, commuters have another way to avoid tolls to enter Toronto: They can simply move into the city.

In Canada and around the world, people have been flocking to major cities because of the quality of life that only large population centres can offer – restaurants, parks, theatre districts, shopping, museums and art galleries. In Toronto as in many other large centres, about half the commuting now goes in the reverse direction – from city to the suburb – because many people insist on living in cities, even when the jobs are elsewhere. The jobs are elsewhere chiefly for one reason: Big-city mayors have taxed them away.

In Toronto, because municipal taxes have often accounted for more than half the rent paid by local businesses, many businesses pulled up stakes and moved outside the city’s boundaries. Their employees sometimes followed them. From outside the city limits, the businesses then tried to service their city clientele, losing less in extra transportation costs than they gained in taxes. New businesses, likewise, set up outside the city to avoid ruinous municipal taxes.

With tolls negating the tax advantages that businesses obtain from moving away, many businesses would now profit from a city location, close to their customers, and move back. Tolls could convince businesses to move to the city another way, too: By using toll revenue to reduce unfair business taxes, cities could bring back more businesses still. With more businesses, and more residents, contributing to the city’s tax base, average taxes would decline for all. Then we’d see a new kind of traffic jam, as businesses, their employees, and their customers, rushed to relocate in cities.

Lawrence Solomon is executive director of Urban Renaissance Institute and a director of PEMA, a non-profit with a patent pending on toll road technology. E-mail: LawrenceSolomon@nextcity.com.
Background sources

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