Does CMHC Discriminate against Certain Groups of Society?

[Mike Milovick]

Dear REIN Members;

Recently I have had legal fourplex (think apartment building) declined on the basis that the appraisal deemed the building as "student lodging." Occupants were indeed students, but each unit was rented as a household - one lease.

I was just curious if anyone was aware of CMHC blatantly discriminating against other visible groups other than students? I am not sure if most people are aware, but CMHC also does not finance lodging houses - affordable accommodation for many down and out segments of our society.

Is anyone aware of other instances of discrimination by this government organization? Does anyone have anything in writing from a bank indicating a decline based on type of tenancy?

Maybe they are using up all their reserves (and our money) on Windsor defaults so there is nothing left for these types of properties?

Feel free to post or contact me direct.

Mike Milovick

 

[gwasser]

Hi Mike,

I do know of banks having specific rules regarding to where/when they lend. For example, TD bank has/had a rule not to give out mortgages for rental pool properties. Also, several banks have rules that make it difficult for self-employed people to qualify for mortgages this because of their uncertain income.

These rules are not necessarily descriminatory in the classic sense of the word [against a minority group]. It is more about the risk that the banks perceive regarding lending in a certain type of properties or certain forms of income. The same may be true for student housing when evaluated by CMCH.

 

[Nir]

Hi Mike,
Who are they discriminating against? those students did not apply for a mortgage! we do.
Many investors do not buy students housing. It does not mean they discriminate against students because by not purchasing they do not do anything against students.
They simply look for a property with a risk that matches their risk aversion level.
Another example: car insurance companies charge divorced people more (reminds me I have to call them). They do not discriminate against divorced people, they simply use statistics to match expected profit/loss with premium.
Regards,
Neil

 

[housingrental]

Mike

It makes sense

Student properties have more defaults

Student properties are more of a hassle to operate and banks don`t want to deal with it when foreclosed.

In certain area`s (not Waterloo with good property management and product, but others) there is a high risk of four months of vacancy yearly - ie burning through cash on operations.

Here`s to continued tightening at the banks!

And to the opportunities it might create next year for the discerning student purchaser!

 

[Mike Milovick]

Ni Neil;



The last time I checked, CMHC was a government institution. Its not your local bank. Do you not think there might be something wrong with a system that arbitrarily classifies a building as "student housing" and deems it proper to not fund it?



How about this Neil? Assume you own a duplex. This year you like the prospects of renting to students. So the families move out and you pop in students. Then you turn around and try to sell the building. Its still a legal duplex. But it is now considered "student housing" because its occupants are students. Do you not think there could be something wrong with this type of system that our tax dollars are supporting?





Sub in the word student and put in visible minority. Maybe you can follow my thought process.



Mike






QUOTE (investmart @ Oct 16 2009, 11:02 PM)
Hi Mike,

Who are they discriminating against? those students did not apply for a mortgage! we do.

Many investors do not buy students housing. It does not mean they discriminate against students because by not purchasing they do not do anything against students.

They simply look for a property with a risk that matches their risk aversion level.

Another example: car insurance companies charge divorced people more (reminds me I have to call them). They do not discriminate against divorced people, they simply use statistics to match expected profit/loss with premium.

Regards,

Neil

 

[Mike Milovick]

Adam;

Show me one legal, student property in Waterloo that has been sold power of sale in the last nine years (since I have been a realtor).

If a property is not legal, it should not be classified as student housing.

Mike

QUOTE (housingrental @ Oct 17 2009, 11:31 AM) Mike

It makes sense

Student properties have more defaults

Student properties are more of a hassle to operate and banks don`t want to deal with it when foreclosed.

In certain area`s (not Waterloo with good property management and product, but others) there is a high risk of four months of vacancy yearly - ie burning through cash on operations.

Here`s to continued tightening at the banks!

And to the opportunities it might create next year for the discerning student purchaser!

 

[Mike Milovick]

So I can understand, it is OK for a bank to discrimate against a certain group of tenants?



I just want to understand your thought process.



Mike




QUOTE (gwasser @ Oct 16 2009, 10:25 PM)
These rules are not necessarily descriminatory in the classic sense of the word [against a minority group]. It is more about the risk that the banks perceive regarding lending in a certain type of properties or certain forms of income. The same may be true for student housing when evaluated by CMCH.

 

[gwasser]

QUOTE (MikeMilovick @ Oct 17 2009, 09:38 AM) So I can understand, it is OK for a bank to discrimate against a certain group of tenants?

I just want to understand your thought process.

Mike


The thought process is, that although CMCH is a crown corporation, it is still a corporation, in this case one that provides insurance coverage for banks against mortgage default. As such they follow certain rules and criteria upon which they asses default risk, and just like the banks they appear to feel that student housing is higher risk. Several of the other posters have already discussed what the reasons are for the higher risk.

Regarding you case of turning a duplex in student housing, thus reducing the insurability of the duplex and consequently its potential resale value. Just convert the duplex back into a family residence and the issue is resolved. If you don`t want to convert back because you like the student property`s ROI then you will also have to `eat the lump` of poorer insurability and reduced resale pricing. In this case you can`t have cake and eat it too (or whatever - I never seem to get this expression straight).

Hope this clarifies my point.

 

[GarthChapman]

QUOTE (MikeMilovick @ Oct 17 2009, 08:38 AM) So I can understand, it is OK for a bank to discrimate against a certain group of tenants?

I just want to understand your thought process.

Mike

As I remember it, our Constitution declares that one cannot discriminate based on charactaristics like:
-Race
-Religion
-Age
-Sexual orientation
-Gender

I don`t think students are on the list, nor are landlords.

 

[JohnS]

QUOTE (GarthChapman @ Oct 17 2009, 12:31 PM)
As I remember it, our Constitution declares that one cannot discriminate based on charactaristics like:

-Race

-Religion

-Age

-Sexual orientation

-Gender



I don't think students are on the list, nor are landlords.

And even within those criteria, we do. Muslims can't become priests and 5-year-olds can't drive. All discrimination isn't bad, no matter what we've been repeatedly told. It's a matter of looking at why the discrimination exists and evaluating whether it's reasonable or not.



Have a good one!



JohnS

 

[Andrew Benedict]

Discrimination against students is same as age. If you had a house and a student wanted to rent it... and you deny him/her because they are a student. Is that not wrong?? why does everyone think that if a student is living in a house it all of a sudden becomes a lodging house??

Here is quote from the new policy on human rights and rental housing-
"Discrimination in rental housing based on age can take plance in several different ways. For example, young people are often subjected to discriminatory perceptions about age. They may be stereotyped as being irresponsible, having too many parties, not paying the rent or destroying the property, and as a result, may have a hard time finding rental housing. Young people may be told that they have to be 18 years old to enter into tenancy agreements. They may also be subjected to rental conditions that are not required of others - such as being asked to provide a guarantor or direct payments of rent. Due to their often low income, rent-to-income rations may have a neqative impact on this group. Negative attitudes about young people, in particular that groups of young people living togerther create noise and may reduce property values, have contributed to municipal licensing by-laws that restrict student housing."

Based on those examples I think that you can`t discriminate against students.

 

[gwasser]

QUOTE (AndrewB12 @ Oct 17 2009, 12:16 PM) Discrimination against students is same as age. If you had a house and a student wanted to rent it... and you deny him/her because they are a student. Is that not wrong?? why does everyone think that if a student is living in a house it all of a sudden becomes a lodging house??

Here is quote from the new policy on human rights and rental housing-
"Discrimination in rental housing based on age can take plance in several different ways. For example, young people are often subjected to discriminatory perceptions about age. They may be stereotyped as being irresponsible, having too many parties, not paying the rent or destroying the property, and as a result, may have a hard time finding rental housing. Young people may be told that they have to be 18 years old to enter into tenancy agreements. They may also be subjected to rental conditions that are not required of others - such as being asked to provide a guarantor or direct payments of rent. Due to their often low income, rent-to-income rations may have a neqative impact on this group. Negative attitudes about young people, in particular that groups of young people living togerther create noise and may reduce property values, have contributed to municipal licensing by-laws that restrict student housing."

Based on those examples I think that you can`t discriminate against students.

Andrew,

If you advertise for a Join Venture investor or a partner in your business would you take any offer or would you try to weed out the most troublesome investor/partner and go with the one who gives you the best terms and with whom you feel most secure dealing with?

Going into business with someone in real estate includes also the person(s) to whom you rent. You may call that discrimination but most investors would call it common sense. There is a heck of a lot of difference in treating a person poorly based on their skin color than not working with a person that does not behave or has not characteristics conducive to doing business with.

What do you think about all those 55+ discounts? Is that age discrimination or is that an incentive for the type of business or clientele a business wishes to attract? There is a fine line.

Another example is that car rental agencies have often a policy that they don`t rent cars to customers younger than 25years. Why? Because it is a well known statistic that a much higher than normal proportion of 25 year old and younger drivers get involved in traffic accidents. You call that discrimination or common sense?

 

[JohnS]

QUOTE (gwasser @ Oct 17 2009, 04:55 PM) What do you think about all those 55+ discounts? Is that age discrimination or is that an incentive for the type of business or clientele a business wishes to attract? There is a fine line.

Another example is that car rental agencies have often a policy that they don`t rent cars to customers younger than 25years. Why? Because it is a well known statistic that a much higher than normal proportion of 25 year old and younger drivers get involved in traffic accidents. You call that discrimination or common sense?


I would say that they`re both. Those examples are clearly discrimination, through and through. But that doesn`t mean they`re wrong. They`re both (arguably) reasonable forms of discrimination.

It`s not a matter of whether or not a practice is discriminatory, it`s whether that discrimination is reasonable.

Have a good one!

JohnS

 

[GarthChapman]

QUOTE (JohnS @ Oct 17 2009, 11:00 AM) And even within those criteria, we do. Muslims can`t become priests and 5-year-olds can`t drive. All discrimination isn`t bad, no matter what we`ve been repeatedly told. It`s a matter of looking at why the discrimination exists and evaluating whether it`s reasonable or not.
Have a good one!

JohnS

I think some of us might be missing the distinctions between discrimination and our right to make choices and to do business with whomever we choose as long as that choice doees not impinge on the other party`s rights to fair and equal treatment on issues of their basic human rights. After all, students do not have the right to be housed wherever they like or to rent any property they select. The landlord has the right to choose who they rent to.

The legislation applies to adults as children are not ready for the rights or responsibilities of adult-hood. The Muslim would not be blocked from converting to Christianity and becoming a Priest. To be a Priest one must first be a Christian and there is no discrimination in that. Now an interesting challenge might be one where a wonman asked the Supreme Court to speak to why she is not allowed to become a Priest.

All the semantics aside, our Consititution was designed to protect indiviuals and groups within society from discrimination on issues that are fundamental to their opportunity to live full and fruitful lives, and not on the relatively unimportant things in life especially where they have other choices available. It was intended to operate within the bounds of reason and notwithstanding the rights of individuals and corporations to risk manage their decisions as long as those decisions do not impinge those basic and fundamental human rights.

That said, what it really means to us as landlords is that we cannot refuse tenancy to a person because of their religion, sexual preference, age, or race. But we are free to choose not to rent to students, or to hookers, or to people with bad credit or those without enough income - that is all a part of how we risk manage our business.

 

[Andrew Benedict]

Hey Godfried, I agree with you. I just want to throw this out there-

Every time I apply for a mortgage the banks will want to see my leases. They have never asked me who the tenant is, where they work, or anything about them...

I understand that ‘lodging houses’ are a higher risk and that is probably easy to track. However, how do banks know that any student house (legal single family/duplex/whatever -with students living in it) is a higher risk since they never ask for tenants info. This deal is not a student lodging house but a legal 4plex. So why is CMHC getting involved with who the tenants are?

4plex rented to 4 groups of people = good.
Same 4plex rented to 4 groups of students = horrible student `lodging` house - don`t finance.
This doesn’t make any sense to me.

What if he called up CMHC and said “hey, good news. I talked the students into dropping out of school. Now they are not students, will you insure this 4plex now”

 

[JimWhitelaw]

Mike, I think you`re kinda missing the point. This isn`t a case of discrimination against students, or against you on the basis of how your tenants spend their waking hours. Generally, when lenders, insurers, etc refer to "student housing" they mean housing that is rented by the room or to a group of unrelated individuals. It`s not specifically the fact that the renters are "students". The reality is that kind of rental represents a different kind of risk for them and so they treat it differently (yes, they "discriminate"). No big deal there, we`ve seen several other cases of legit discrimination in this thread. In areas where student housing is not common, many landlords would screen out (discriminate against) a group of unrelated people in favour of a family or group of relatives for the same reasons.

In your case, perhaps you can go back to CMHC with your leases and try to make the case that you`re not renting by the room and that the building should be re-classified. However, if your leases each show 2-4 unrelated tenants on them, you`re likely to still be classified as providing "student housing".

 

[JohnS]

QUOTE (GarthChapman @ Oct 17 2009, 08:41 PM) I think some of us might be missing the distinctions between discrimination and our right to make choices and to do business with whomever we choose as long as that choice doees not impinge on the other party`s rights to fair and equal treatment on issues of their basic human rights. After all, students do not have the right to be housed wherever they like or to rent any property they select. The landlord has the right to choose who they rent to.

The legislation applies to adults as children are not ready for the rights or responsibilities of adult-hood. The Muslim would not be blocked from converting to Christianity and becoming a Priest. To be a Priest one must first be a Christian and there is no discrimination in that. Now an interesting challenge might be one where a wonman asked the Supreme Court to speak to why she is not allowed to become a Priest.

Warning - semantics ahead!
Don`t way you weren`t warned.....

Well, I got curious as the the actual meaning of discrimination, so I looked it up. I had been expecting to see something along the lines of "thinking or acting differently towards an individual or group based on _________". For those interested, there is a difference between "discriminate" and "discrimination", aside from the obvious.

"Discrimination" does actually say "unfair treatment...". With this in mind, choosing not to rent to students, drug lords, etc. shouldn`t be classified as "discrimination" because as many of us have said, it is a reasonable way to protect ourselves against loss. (Of course, then some would argue about who gets to decided what`s fair and what isn`t, but I promise not to get into the definitions of those.)

"Discriminate", however, doesn`t mention the idea of "unfair". It just says, "to single out a particular person, group, etc, for special favour or, especially, disfavour". Meaning, offering seniors a discount is discriminating in favour of them, but it isn`t discrimination. Weird!


Anyway, the long and the short of it, no matter how you slice it, is that as landlords, investors, and business owners we have the right to protect ourselves from people that could realistically hurt our investments. We can choose to accept people with bad credit or we can choose others instead; we can choose students or others instead; and we can choose people with pets or those without.

Have a good one, all!

JohnS

 

[Mike Milovick]

Andrew;

You hit the nail right on the head. Its discrimination. And our tax dollars support this garbage.

Mike

QUOTE (AndrewB12 @ Oct 17 2009, 02:16 PM) Discrimination against students is same as age. If you had a house and a student wanted to rent it... and you deny him/her because they are a student. Is that not wrong?? why does everyone think that if a student is living in a house it all of a sudden becomes a lodging house??

Here is quote from the new policy on human rights and rental housing-
"Discrimination in rental housing based on age can take plance in several different ways. For example, young people are often subjected to discriminatory perceptions about age. They may be stereotyped as being irresponsible, having too many parties, not paying the rent or destroying the property, and as a result, may have a hard time finding rental housing. Young people may be told that they have to be 18 years old to enter into tenancy agreements. They may also be subjected to rental conditions that are not required of others - such as being asked to provide a guarantor or direct payments of rent. Due to their often low income, rent-to-income rations may have a neqative impact on this group. Negative attitudes about young people, in particular that groups of young people living togerther create noise and may reduce property values, have contributed to municipal licensing by-laws that restrict student housing."

Based on those examples I think that you can`t discriminate against students.

 

[Mike Milovick]

QUOTE (JohnS @ Oct 18 2009, 12:00 AM)
Warning - semantics ahead!

Don't way you weren't warned.....



Well, I got curious as the the actual meaning of discrimination, so I looked it up. I had been expecting to see something along the lines of "thinking or acting differently towards an individual or group based on _________". For those interested, there is a difference between "discriminate" and "discrimination", aside from the obvious.



"Discrimination" does actually say "unfair treatment...". With this in mind, choosing not to rent to students, drug lords, etc. shouldn't be classified as "discrimination" because as many of us have said, it is a reasonable way to protect ourselves against loss. (Of course, then some would argue about who gets to decided what's fair and what isn't, but I promise not to get into the definitions of those.)



"Discriminate", however, doesn't mention the idea of "unfair". It just says, "to single out a particular person, group, etc, for special favour or, especially, disfavour". Meaning, offering seniors a discount is discriminating in favour of them, but it isn't discrimination. Weird!





Anyway, the long and the short of it, no matter how you slice it, is that as landlords, investors, and business owners we have the right to protect ourselves from people that could realistically hurt our investments. We can choose to accept people with bad credit or we can choose others instead; we can choose students or others instead; and we can choose people with pets or those without.



Have a good one, all!



JohnS

 

[Mike Milovick]

Hi Jim;



I am not missing anything. So, in your opinion, its fair for a government organization like CMHC to choose NOT to insure mortgages on properties rented to lower income people - like lodgers (shared accommodation) and students?



When you get a decline back from lender saying, applicant was denied because "property was student housing", it makes it very difficult to think otherwise.



The deal I am specifically referencing is a four plex - with four leases - and it is not being rented by the room.



Mike




QUOTE (JimWhitelaw @ Oct 17 2009, 11:35 PM)
Mike, I think you're kinda missing the point. This isn't a case of discrimination against students, or against you on the basis of how your tenants spend their waking hours. Generally, when lenders, insurers, etc refer to "student housing" they mean housing that is rented by the room or to a group of unrelated individuals. It's not specifically the fact that the renters are "students". The reality is that kind of rental represents a different kind of risk for them and so they treat it differently (yes, they "discriminate"). No big deal there, we've seen several other cases of legit discrimination in this thread. In areas where student housing is not common, many landlords would screen out (discriminate against) a group of unrelated people in favour of a family or group of relatives for the same reasons.



In your case, perhaps you can go back to CMHC with your leases and try to make the case that you're not renting by the room and that the building should be re-classified. However, if your leases each show 2-4 unrelated tenants on them, you're likely to still be classified as providing "student housing".