Are Residential Rents exempt from HST?

By D. Wallace, Guest Contributor

With the HST set to take effect in July 2010, there are several crucial questions all tenants in Ontario should be asking: a) Do tenants know what impact the harmonized sales tax (HST) will have on their rent? b) Will HST be added if hydro is included in their monthly rent? c) How are landlords going to be reimbursed for a list of extra costs and, d) Do tenants know what costs are on this list? In apartments, this list includes utilities such as gas heat, electricity, hydro, and other costs related to maintenance contracts, property management services, retrofitting for energy saving, renovation contracts, and so on. When HST is added to these costs, will it be passed on to tenants? We do not know the answers, as the government has ignored these important questions from rental tenants. On the government web site http://www.rev.gov.on.ca/en/taxchange/consumers.html under ‘Exemptions’, residential rent is listed, but nowhere on this site is there an explanation of how landlords will recover the above costs.

According to a Press Release issued last year by The Federation of Rental Housing in Ontario (FRPO), it is estimated that this new action (HST) will increase residential rents in Ontario by 2.5 to 3.0 percent. “We estimate that this will increase rents for the average Ontario tenant by $270 to $320 per year” said Vince Brescia, President & CEO of FRPO. FRPO called on the province to exempt rental housing providers. So far, no response from the government!

The Federation of Metro Tenants’ Associations (FMTA) wrote a letter to The Honourable Dwight Duncan and, in conjunction with FRPO, also called for exempting rental housing providers from the HST. In the reply FMTA received from the Ministry of Finance, the question is ignored, not answered. Those letter(s) can be accessed at this link: http://www.torontotenants.org/news/hst-letter-finance-minister

In August 2009, I emailed specific questions about the impact of the HST on apartment rentals, to Premier Dalton McGuinty. In a response received from the Premier’s Office, these questions were ignored. In October 2009, I replied to the Premier’s letter again asking how the HST would impact my rental costs and, to date, have not received a reply.

A search at The Ministry of Municipal Affairs and Housing website (http://www.mah.gov.on.ca/page11.aspx) did not produce any information regarding the impact of HST for renters, I emailed the Minister on February 24, 2010, the following message: “Due to the HST, I know my landlord is going to incur increased costs for certain services like hydro, maintenance, repairs etc. I understand rents are exempt from the HST. However, the question as to how is my landlord going to recover these extra costs must be addressed? I can’t find this kind of information anywhere”? To date there is no reply from our esteemed Minister of Municipal Affairs and Housing.

On the website of The Landlord and Tenant Board, under the tab “What’s new”, not one word about HST! In fact, HST is not mentioned anywhere on this web site. That is not surprising since the Landlord and Tenant Board comes under the jurisdiction of the Ministry of Municipal Affairs and Housing.

The Toronto Sun published an article titled “Hudak appeals to renters in HST fight” where the Progressive Conservative Leader Tim Hudak says “he wants renters to hop on his anti-harmonized sales tax bandwagon, pointing to a study that says it could add $320 a year to the cost of a $1,000-a-month apartment”. (See this LINK). However, the Globe and Mail article “10 simple HST myths” seems sceptical about Mr. Hudak’s position on the HST.

Michael Prue, MPP, Beaches-East York, made this statement in the Ontario legislature on October 1, 2009: “I heard a question asked the other day and what a question: Are rents going to go up? No, the rents can’t go up and the rents aren’t going to go up, but the cost to the people who own the apartment buildings are going to go up approximately 3%, and they are going to apply to have that rent increased. You know and I know it’s going to happen”. (Refer to Ontario Hansard – 01-October2009 ). That last sentence by Mr. Prue is sobering and speaks volumes for what tenants could expect with regard to rent increases.

So far, this is what we know . . . . Landlords are going to incur extra costs! Residential rents are exempt from HST! What we don’t know is how landlords are going to recover their costs and the government is leaving tenants in the dark! Common sense dictates that the statement, “residential rents are exempt” has to be seriously questioned as to its veracity. Will landlords apply to the Landlord and Tenant Board for an Above Guideline Increase to protect their profit margins? Will the government exempt rental providers from the HST so that the HST on utilities and other maintenance and other operating costs are not passed on to renters? Will the HST impact Vacancy Decontrol thereby allowing landlords to increase rents for new tenants above and beyond the Annual Rent Guideline Increase? Why will our government not provide the details we need to properly anticipate the impact the HST will have on all renters? And …. What are they afraid of?

From a renter’s perspective and, given the uncertain economic climate, it is incumbent on the Ontario government to provide meaningful answers to crucial questions related to how the HST will impact their monthly rent. Original Post http://eastyorktenantsgroup.com/2010/02/27/are-residential-rents-exempt-from-hst-%E2%80%A6/

David Pylyp; I have been pondering the very same issues myself. There has been no application for an increase due to the additional taxes so there is as yet no ruling or decision. Yet a Landlord may apply for rent increase for an increase in expenses or taxes. (once it occurs) This would presume that applications would start post the July 1st date for HST.

It will be interesting to see how it shakes out.

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