The Globe and Mail - 13.09.2019

Withafederalelectionfastapproaching,weareinvestigatingthe

roleofpoliticaladvertisingonFacebook.Youcanhelpbyinstalling

theFacebookPoliticalAdCollectorextension.

Visittgam.ca/political-ad-collectortohelpus

monitorpoliticaladsonFacebook.

W

ro

th

Whatroledoesadvertisingplayinpolitics?

B2| REPORTONBUSINESS OTHEGLOBEANDMAIL | FRIDAY,SEPTEMBER13,

T

he Liberal election an-
nouncement on housing
on Thursday is a reminder
of how we cling to the outdated
idea of home ownership for all.
House prices in some of our
biggest cities are rising to levels
that are unaffordable for a grow-
ing cohort of young people. Ex-
pect the Liberals to be joined in
the days ahead by other parties
offering to help these young
buyers with measures that are
destined to fail in one of two
ways – by not making an appre-
ciable difference in affordability,
or by helping too well and stim-
ulating demand to a point where
it pushes prices higher.
The Liberals say they would
expand the First-Time Home
Buyer Incentive, which they an-
nounced in the budget last
spring. The program, targeted at
first-time buyers with household
incomes of less than $120,000 a
year, provides a kind of interest-
free loan to bulk up a buyer’s
down payment and thereby re-

duce mortgage costs. The incen-

tive originally set an effective

house price limit of about

$480,000. Now, homes valued at

up to $789,000 would be allowed

for Toronto, Vancouver and Vic-

toria alone.

Governments feel they must

prop up the dream of home own-

ership because young adults are

desperate to own houses. Of

course they are. Their parents

can’t stop talking about how

much their houses have gone up

in value and media is saturated

with stories about people buying

and fixing up homes. Home own-

ership is the most Canadian civic

value, and the foundation of

wealth creation.

But at some point in the past

few years, our ideas about home

ownership began to peel away

from economic reality. As we got

more and more enthused about

home ownership, rising prices

made homes more unaffordable

in many cities. We claim to have

sophisticated, internationally ap-

pealing cities with deservedly

high real-estate prices, yet we ex-

pect the young people will march

into home ownership as they did

a generation ago.

The economics of housing

make this expectation look ridic-

ulous. Incomes have not in-

creased meaningfully in years,

yet house prices have surged in

many cities over the past decade.

Low interest rates have offset this

imbalance, but they can only do

so much. Peak housing afforda-

bility has come and gone.

Politicians can’t say this out

loud because they would be

ripped for it by their opponents

and voters. Right in there would

be a housing industry that is bril-

liant in the way it pursues its own

interests by positioning itself as

the buyer’s champion. What poli-

ticians can do is work at all levels

to get more rental housing built

and allow more urban densifica-

tion through the construction of

condos, townhouses.

They can also address the

needs of the growing number of

people who must rent because

they cannot afford to own. A

renter’s tax credit would be most

welcome in cities such as Toron-

to, where high housing prices

have shrunk the rental vacancy

rate and pushed monthly rent

costs to levels that are sometimes

close to mortgage payments (no,

that doesn’t mean you should

buy a house – home owners also

have to pay for property taxes

and home maintenance and up-

keep).

There’s some fresh urgency in

the problem of housing afforda-

bility because the slumping To-

ronto and Vancouver markets are

showing signs of a possible re-

covery. The average selling price

of a home in Toronto rose 3.6 per

cent on a year-over-year basis in

August to $792,611. Already, pric-

es have crept ahead of the new

cap being offered by the Liberals’

First Time Home Buyer Incen-

tive. If the program’s a success, it

will help feed still more price

gains and work against improved

affordability.

Until we all adjust our expec-

tations of home ownership to

match the economic reality, poli-

ticians will be under pressure to

do something to make homes

more accessible to aspiring

young buyers. Hard as it will be,

they need to lay off. This country

needs to help renters more than

it needs another program to help

people buy houses they can’t ac-

tually afford.

Politiciansmuststopproppingupideaofhomeownership

-ea–housing

a{{ordabilityhas

comeandgonev

policiesneed

tohelprenters

ROB
CARRICK

OPINION

TheaveragesellingpriceofahouseinToronto,above,rose3.6percentonayear-over-yearbasisinAugustto

$792,611,hintingatapossiblerecoveryoftheslumpingTorontomarket.FRED LUM/THE GLOBE AND MAIL

Airline and tour operatorTransat
AT Inc.’sthird-quarter loss more
than doubled due to fees and ex-
ecutive compensation relating to
its impending takeover by rival
Air Canada.
For the three months ending
on July 31, Montreal-based Trans-
at said it lost $11-million, or 29
cents a share, compared with a
loss of $5-million or 13 cents in
the same period of 2018.
Revenue rose by 5 per cent to
$700-million as vacation prices
rose and the number of custom-
ers increased by 4 per cent in the
company’s main market of trans-
atlantic travel, Transat said in a

premarket release on Thursday

morning.

Transat shareholders on Aug.

23 voted in favour of selling the

company to Air Canada for $720-

million. The takeover, subject to

approval by transport and com-

petition authorities, is expected

to close in the second quarter of

2020, Transat said.

In a statement accompanying

the financial results, Transat said

the net loss included payouts as-

sociated with the takeover proc-

ess, including “professional fees”

of $6-million and stock-based

compensation worth $7.7-mil-

lion triggered by change-of-con-

trol provisions in employee con-

tracts.

Excluding the takeover fees,

compensation and other one-

time items, Transat posted an ad-

justed operating profit of $22-

million in the third quarter, com-

pared with a loss of $7.6-million

in the year-earlier period.

Transat operates a fleet of

about 40 planes and has 5,

employees.

Denis Pétrin, Transat’s chief

financial officer, said on a confer-

ence call with analysts that the

operating results show Transat

has been able to sell tickets at

higher prices in a competitive

market for leisure travel spend-

ing.

Mr. Pétrin said the rising share

price is expected to add another

$10-million in costs related to

stock-based compensation by the

time the Air Canada takeover

closes.

The takeover means Jean-Marc

Eustache, Transat’s 71-year-old

founder and chief executive offi-

cer, will receive total compensa-

tion worth more than $14-million

after the deal closes and another

$5.5-million if he is dismissed by

the new owners of the company,

according to company docu-

ments filed with regulators. This

amount includes the values of his

stock holding, bonuses, stock op-

tions and share units.

Mr. Eustache has not said

whether he plans to stay on when

Air Canada completes the deal,

but he has said Transat will not

need a CEO once Air Canada takes

over.

TRANSAT(TRZ)

CLOSE: $15.20, UNCHANGED

Transatlossmorethandoublesonfees,executivepayaheadofAirCanadadeal

ERICATKINS
TRANSPORTATIONREPORTER Denis Pétrin,

Transat’s chief

financial officer ...

said the rising share

price is expected to

add another

$10-million in costs

related to

stock-based

compensation by the

time the Air Canada

takeover closes.

An Ontario judge has frozen the
province’s cannabis retail licens-
ing process for at least two weeks.
Twelve of the original 42 win-
ners of the Aug. 20 lottery draw
were disqualified for failing to
submit all the required applica-
tion materials within five busi-
ness days of the results and one
voluntarily withdrew. All 13 were
replaced by names from regional
wait-lists across the province.
All but one of those disquali-
fied for not filing applications on
time filed a legal challenge of that
decision earlier this week request-
ing the licencing process be fro-
zen until their case can be heard.
Justice David L. Corbett of
Ontario Divisional Court issued a
preliminary decision Thursday to
freeze the Alcohol and Gaming
Commission of Ontario (AGCO)
review process.
Justice Corbett “was not per-
suaded that a two-week delay is
going to cause anyone irreparable

harm,” Caryma Sa’d, a Toronto-

based cannabis lawyer who was

present in the courtroom for the

decision, said in an interview.

“However, [he said he did] be-

lieve that if he paused only part of

the process and not all of it, that

will cause chaos.”

“He decided the lesser of two

evils was to pause the process for

everyone,” Ms. Sa’d said.

Thursday’s preliminary deci-

sion means that until the Court

“has had an opportunity to hear

the judicial review on September

25, the AGCO should temporarily

halt the lottery process,” AGCO

spokesperson Ray Kahnert said

via e-mail. “As a result, the AGCO

will pause the lottery process un-

til the Court issues its decision on

the judicial review.”

Peter Brauti, co-managing

partner at Brauti Thorning LLP

who is acting on behalf of all 11

disqualified lottery winners,

called Thursday’s decision “a

huge win.”

“It is more than what I had

even hoped for,” Mr. Brauti said.

“You hope for a home run, but a

grand slam is what this was. [Jus-

tice Corbett] suspended the en-

tire system right across the prov-

ince.”

When the case resumes on

Sept. 25, Mr. Brauti will argue for

his 11 clients to be reinstated “as if

they were never disqualified and

can submit their applications.”

Ms. Sa’d, meanwhile, says the

final decision will depend on

what Mr. Brauti and AGCO law-

yers submit into evidence.

“That is the date when the

court will actually delve into the

issue of whether these [11] indi-

viduals were properly disquali-

fied, if there is some kind of proce-

dural flaw in the lottery, what

happens to them, what is their

remedy? I don’t know that you’ll

actually get a decision on the 25th

but that is when they intend on

making their submissions and

presenting their evidence,” Ms.

Sa’d said. “Shortly thereafter, the

judge would make an order.”

Mr. Brauti said earlier this week

there were a “few nuances”

among the 11 plaintiffs behind the

request for judicial review, but all

are effectively cases of the AGCO

failing to properly notify the win-

ners.

“The AGCO sent [winners] an

e-mail notification saying con-

gratulations, except that the e-

mail didn’t go through, it

bounced back,” he said. “They al-

so sent registered letters but those

were received two days later and

[the winners] assumed they had

five days from when they received

the letter because they never got

the e-mail. Once they were noti-

fied, they met the requirements,

but the AGCO position is they

were notified by an e-mail they

never got.”

In total, the second lottery had

4,864 submissions from about

1,800 businesses or sole proprie-

tors. The process was intended to

be an improvement upon the first

lottery in January, which saw

more than 17,000 individuals

compete for the right to apply for

Ontario’s first 25 permits.

While Mr. Brauti is arguing for

his clients to “bump those that

were moved up from wait lists,”

he says thegovernment has an-

other option available.

“The government could simply

amend the regulations and open

up 11 new licences, so instead of

there being 42 there would be 53

so they can reinstate those 11 peo-

ple who were not notified proper-

ly but the 11 people who got

moved up from wait-lists, they

can get licences too, because at

the end of the day, there is going

to be more,” Mr. Brauti said.

Ontario was originally plan-

ning an open licensing system for

cannabis retail stores, but two

days before the AGCO was due to

begin accepting applications in

December, 2018, the province an-

nounced a move to a “phased ap-

proach” amid a national cannabis

supply shortage.

After the results of the second

lottery last month, the province

said it was working with the AG-

CO and the Ontario Cannabis

Store “to return to our original

plan to allocate retail store licenc-

es based on market demand,” ac-

cording to Jenessa Crognali, spo-

kesperson for Ontario Attorney-

General Doug Downey.

Ontariojudgepausescannabisretaillicensingprocessamidlegalchallenges

JAMESONBERKOW
CANNABISINDUSTRYREPORTER