Who will pay for the Residential License Bureaucracy – Tenants or Taxpayers?

Cornwall City administration presented City Council a report detailing a draft bylaw to create a licensing system for rental units in Cornwall last June.

The Cornwall and Area Chamber of Commerce closely follows any issue that may cause higher housing costs or may increase taxes. Higher housing costs discourage people from moving into the area to fill the hundreds of available jobs at our member businesses. High property taxes make the City more expensive to live, work and invest in.

We expected that the report detailing the proposed Residential Licensing system would present to the Council the cost of running this new department to see the potential impact on the cost of housing or property taxes. Before the City embarks on a new initiative, it needs to understand the cost of implementing such a bylaw and include that information for citizens to reflect on before asking for feedback.

The report, however, makes no mention of the expense, leaving Council in the dark. There were some clues in the report that allowed us to create a sense of what this would cost.

The report to Council reference reports made to the Ottawa City Council. One of these reports, titled Rental Accommodations Literature Review and Interjurisdictional Environmental Scan City of Ottawa 2019, has useful information on the costs of running a Residential Licensing system. The summary states that “Licensing application and inspection fees are based on a cost-recovery model and range from $300 to $600 in Canadian jurisdictions. “

The Rental Accommodation Literature Review report provides some detail on the residential licensing systems. One of these examples is Oshawa. Their system only licensed approximately 500 units as it focused solely on rooming houses. To operate the program, it took three full-time staff and cost $400,000. That works out to a cost of $800 per unit.

Cornwall has 8449 rental units, according to the City’s data. Using the numbers provided in the Ottawa Report, we can project the cost to run a residential licensing system in Cornwall for the 8449 units would range from $2.5 million to $5 million. Cornwall has proposed to have a license last three years so that the annual cost would range from $844,900 to $1.7 million. If the system is as expensive to operate as Oshawa’s, it could cost as much as $2.25 million annually.

The Cornwall draft bylaw has an appendix with a proposed fee structure. The basic fee for a three-year licence is $50. Assuming that, on average, they licence a third of the units each year, the revenue would be $140,800. According to the Ottawa report, this amount is a far cry from the cost to run the program. There could be a deficit of as much as $2.1 million per year.

The City has one of two ways to pay for the Residential License system – raise taxes or raise the licence fee. To cover the cost through fees would make the licence cost between $300 - $800, leading to increases in rents of $100-$267 per year. To cover the cost through property taxes would increase property taxes in the range of 1% to 2.8%.

It is difficult to comprehend that the City could run the Residential License System at the cost of a sixth of the least expensive projection. This system will cost much more than what will be raised by the license fee. Right now, the taxpayer will be on the hook for up to $2.1 million per year to operate the program.

Rental Accommodations Literature Review and Interjurisdictional Environmental Scan City of Ottawa 2019 https://documents.ottawa.ca/sites/documents/files/RAS_ES-en.pdf

City of Cornwall Data Book 2019 https://www.cornwall.ca/en/do-business/resources/Planning/DATABOOK-2019---Final.pdf

City Council Agenda June 8^th, 2020 https://pub-cornwall.escribemeetings.com/FileStream.ashx?DocumentId=2599