Officials at the Ontario Ministry of Municipal Affairs and Housing say that they will release a "guidebook" to the new federal-Ontario housing program (based on the deal signed between Ottawa and Queen's Park on May 30, 2002) in mid-July. This guidebook is supposed to help sponsors (that is, private, non-profit or co-op developers) to
understand the new program and how they can apply.

It's not clear whether the ministry will meet this deadline. But if they do, it might be that the province will use this as a PR opportunity to re-announce the federal-Ontario deal. I've attached a backgrounder on the federal-Ontario housing agreement that was circulated in mid-June.

The key messages, in response to any re-announcement, might include:

• The province is putting almost no new money into this deal (about $4 million a year over five years) so it shouldn't be taking much credit for any new housing that is created.
  
  
• The definition of affordability means that public subsidies will be paid to build housing that won't be affordable to the low, moderate and even middle-income renter households, the ones that need the housing the most.
  
  
• Finally, one key vehicle that the province is using to steer the money towards private developers is Ontario Regulation 189/01 and municipal capital facilities by-laws.

Below is a backgrounder on these new by-laws and what they mean for affordable rental housing in Ontario, for your information -- Source: the Housing and Homelessness Network in Ontario.

Document #1 - Q & A: Questions & Answers -- July 2002

A growing number of Ontario municipalities are passing “capital facilities by-laws” that are supposed to create more affordable rental housing. What are these new by-laws and will they work?

Question:
Why are municipalities passing these new by-laws?

Answer:
A growing number of Ontario municipalities, including London, Waterloo, Hamilton, Kingston, Toronto, York and Ottawa, had adopted or were considering new by-laws to finance “affordable” rental housing by mid-2002. More are expected to follow. These by-laws are part of a provincial strategy to hand over public subsidies to private developers to encourage them to build “affordable” rental housing. Municipalities have been able to offer financial incentives to non-profit and co-op housing for a number of years. These incentives might include grants, land, reduced fees and charges and reduced taxes. In June of 2001, the Ontario Ministry of Municipal Affairs and Housing issued Ontario Regulation 189/01 (part of the Ontario Municipal Act).

It allows municipalities for the first time to offer public subsidies to private developers. Recently, the province has been putting pressure on local politicians to pass these by-laws. On May 30, 2002, Ontario signed a housing deal with the federal government (for more on this, see document 2 below -- the June, 2002, Q and A from the Housing and Homelessness Network). The province says that municipalities must pass the new by-laws before they can access the federal housing cash.

Question 1:
How will the new by-laws work?

Answer:
O.Reg 189/01 allows municipalities for the first time to offer financial incentives to private developers. Once they pass the “capital facility by-law”, municipalities can finance private rental housing by using property tax revenue or they can borrow the money and hand it over to developers. With O.Reg 189/01, the provincial government is opening municipal coffers to private developers. But the province is offering almost no financial support to municipalities. Under the federal-Ontario housing deal signed in May, 2002, the federal government will contribute about $25,000 per unit. The province will pay only $2,000 per unit. The municipality will have to come up with as much as $23,000 per unit in direct grants, property tax reductions or reductions in development fees and charges.

Question 2:
Will the new housing be affordable?

Answer:
While O.Reg 189/01 allows municipalities to set their own definition of what is affordable, provincial officials are pressing municipalities to use existing market rents as the guideline. But rents have been increasingly rapidly in Ontario in recent years, often at double the rate of inflation, while tenant household incomes have fallen. So, market rents are much higher than the rents that tenant households can afford to pay. For instance, half of the 1.8 million renter households in Ontario have an annual income of $23,215 or less. Using the standard rule that renter households should pay no more than 30% of their income on shelter, that means that half the renters can afford to pay $580 or less per month. That’s well below the current average market rent of $815 in Ontario. The new capital facilities by-laws are designed to send limited federal and municipal housing dollars into private housing that won’t be affordable to the people that need it the most – low, moderate and even middle-income renter households.

Valuable public subsidies will be offered to private developers to create rental housing that is the same price as the housing already available on the market.

Question 3:
Will the housing remain affordable over the years?

Answer:
The new rental housing will be exempt from the rent regulation rules in the provincial Tenant Protection Act (these rules provide very little protection for existing rental housing, anyway). But the federal-Ontario deal requires the newly-funded housing must remain “affordable” (that is, at market levels) for at least 10 years. The Ontario government says it wants to add another five or more years on top of that. But this is hardly a benefit to tenants, since the large public subsidies paid to private landlords won’t produce housing that is any cheaper than the existing stock – and the cost of the new housing will rise just as rapidly as rents in existing buildings.

It’s not clear exactly how the province, or municipalities, will ensure that private developers maintain even this modest goal of keeping the rents at market levels over the years. Most likely, municipalities will rely on “self-certification”; that is, they will ask private developers to send in a form once a year outlining the rents in the publicly-funded building. Whether the municipality, or the province, will investigate and what, if any, penalty will be assessed against a developer who tries to defraud the rules is not clear.

Question 4:
Does affordable housing trickle down?

Answer:
The new by-laws are based on the “filter” theory (this used to be called “trickle down”). Valuable public subsidies will be given to build expensive rental housing. Rich tenants will be expected to leave existing units to move into the new housing, creating vacancies that will “filter” down to the lower end, so that poor households will eventually find a place to move into.

It’s a dubious assumption in general, and it’s downright impossible in Ontario’s rental market, thanks to the 1998 rent regulation changes made by the provincial government. “Vacancy decontrol”, a key element of the provincial Tenant Protection Act, allows landlords to increase the rent in a vacant unit as high as they like. So, even if a few new high-end units are funded (with public subsidies) under the new capital facilities by-laws, any vacancies that are created will only help to push up rents even higher in existing units.

For more information or to find housing contacts in your community, call Michael Shapcott at the Housing and Homelessness Network in Ontario, 416-366-1711, x224.

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Document #2 - Q & A: Questions & Answers -- June 2002

On May 30, 2002, the federal government and Ontario signed an “Affordable Housing Program Agreement”. Here are some answers to basic questions about the new housing deal.

Question 1:
How many new units will be built?

Answer:
Federal and provincial politicians say the deal will produce 10,500 affordable units in Ontario over five years, but the actual number will likely be much less. Few units are expected in 2002. Most are expected in years two, three and four. Most of the units, approximately 85%, will be in areas with vacancy rates below 1.5%. This includes Ottawa, Toronto, Waterloo, York, Halton, Wellington, Hamilton, Durham, Kingston, Barrie and possibly London. A fraction (3%) go to remote and northern places with fewer than 10,000 people. The remaining units will go to the rest of Ontario.

Question 2:
Who will decide which projects will get funded?

Answer:
Almost all the allocations will be done by municipal service managers, based on an agreement to be signed with the province. Ontario will start negotiations in mid-July with municipalities. Negotiations with service managers are expected to take several months. Municipalities will not be allowed to give more than 25% of the units to their municipal housing company. However, if the municipal housing company forms a partnership with a private developer, then these units will be in addition to the 25% municipal cap. As a “guideline”, Ontario has agreed that 20% of the units will go to co-op and non-profit housing. This is not a requirement, just a suggestion.

Question 3:
How much funding is available?

Answer:
The federal-Ontario deal is to be funded with $245 million from the federal government over five years, which is supposed to be matched by a provincial contribution of $245 million. However, Ontario is only contributing $20 million in new funding ($2,000 per unit). The province is claiming about $35 million in funding already spent on existing housing programs. This is not new money, so it won’t help to get new units built. The province wants credit for about $180 million that municipalities will contribute (most of it in future property tax cuts) and $10 million donated by charities. The lack of new provincial money means that the average per-unit subsidy will be about $27,000 – far less than the $50,000 per-unit in the Affordable Housing Framework Agreement.

The province has said that it may make changes to its current rent supplement program to allow units built under the federal-Ontario agreement to qualify. However, this is not new funding, just a re-allocation of money already committed. The funding for the provincial rent supplement program came from surplus federal housing dollars, not provincial funds.

Question 4:
Will units be affordable to low and moderate-income households?

Answer:
The federal-Ontario agreement defines affordable housing as units that are “priced at or below average market housing rents and community norms”. This is significantly different from the Affordable Housing Framework Agreement, which states “this initiative needs to create affordable housing for low to moderate income households”. Average market rents have been rising rapidly in recent years in most parts of Ontario, often at double the rate of inflation. Average rents are much higher than the rents that low and moderate-income households can afford to pay. The average market rent in Ontario is $815. Renters would need an income of $32,600 to afford that (based on 30% of income). Two-thirds of renter households (1.2 million of 1.8 million renter households) have annual incomes below $32,000. So, only the richest one-third of renters will be able to afford the housing – a clear violation of the Quebec City deal.

Question 5:
How will potential projects be judged?

Answer:
The province will require municipalities to use two criteria to assess potential projects:

• length of affordability. The federal government wants projects to remain affordable for 10 years. The province wants to extend that by another five years. Projects that can guarantee affordability over a longer period of time will be given additional points.
  
  
• level of subsidy. Projects that require less subsidy will get additional points. Since private developers will be required to pay a higher level of equity than co-ops or non-profits, the ranking of projects based on level of subsidy would create a bias towards private projects with rents that are as high as possible and therefore require a minimum level of subsidy. This would allow more units to be funded, but the units would be less affordable to those who need the housing the most.

Question 6:
Is this a good deal for renter households in Ontario?

Answer:
Partly yes, but mostly no. Yes, because for the first time in almost a decade, the federal government is funding desperately-needed new affordable rental housing in Ontario. And, for the first time in more than seven years, Ontario is also funding new rental housing. Both senior levels of government have tried to abandon their responsibility for funding new housing in recent years. No, because the number of units and the amount of funding is critically low. Even if all the 10,500 units that are promised are actually built over the next five years, that’s far short of the real needs in Ontario. The province needs at least 18,000 new rental units every year. It’s unlikely that the deal will produce anywhere near the promised number of units because Ontario has failed to pay its matching share.

Question 7:
What more can be done?

Answer:
Keep up the political pressure on the federal and Ontario governments. The federal government needs to take the next step towards a fully-funded national housing program. Queen’s Park should pay its full share of the $245 million in matching funding under the federal-Ontario deal, and then it should take the next step towards a fully-funded provincial housing program.

For more information or to find housing contacts in your community, call Michael Shapcott at the Housing and Homelessness Network in Ontario, 416-366-1711, x224.

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