Update: August 20, 2002 - PM and Martin agree: housing a top priority

Both Prime Minister Jean Chretien and his unofficial leadership rival, Paul Martin, say that housing is among top issues for the federal government in the coming parliamentary session.

A Canadian Press story that ran August 19, 2002, included this paragraph:

The prime minister has rhymed off the policies he wants to focus on in the coming parliamentary session - health care, the Kyoto protocol on climate change, child poverty, aboriginal self-government, electoral financing reform, urban transit, affordable housing, better highways and rail lines.

Meanwhile, a Toronto Star story of the same day included these paragraphs:

Martin said he would be talking with his colleagues about parliamentary reform "so that members of Parliament have the opportunity to represent their constituents and influence national policy. "I think it would be a shame if that was not to occur in Chicoutimi," he said.

Besides that, Martin said, the party has to talk about the future of Canadian cities, the way they are financed, social housing and transportation problems. "These are issues that are of concern to Canadians and we have to deal with them," he said.

Update: August 19, 2002 - Housing announcement postponed

At the very last moment, the Ontario Ministry of Municipal Affairs and Housing has postponed announcing the details of the new federal-Ontario housing program. As I noted in a memo circulated on the weekend, the new program was to be announced at the Association of Municipalities of Ontario annual meeting in Toronto today and tomorrow.

Two points to note, however:

• Ontario housing minister Chris Hodgson is expected to make an announcement about rent supplements for low-income households, perhaps as early as Tuesday. Rent supplements are paid to low-income households based on need. This is neither new money nor a new program. The province first announced a rent supplement program back in 1999 using surplus federal housing dollars. It has had a great deal of difficulty in getting private landlords to pick up those units (landlords have to agree to cap their rents at affordable levels, something few are willing to do in the current tight rental market), so the province has re-announced the same old program, using the same old federal surplus housing dollars, several times since then. This week's announcement will be the 1999 program re-heated but without any additional provincial dollars.
  
  
• I was able to get some details of the provincial housing plans. It looks like the program will be formally unveiled in early September. I will send a note later today with more details on what will be in the new housing scheme.

HHNO Media Advisory August 19, 2002

Money? Rents? Units? - Ontario set to unveil new "affordable" housing plan

The Ontario government is set to unveil details of its new "affordable" housing program during the Association of Municipalities of Ontario meeting on August 19 and 20 in Toronto. The new deal is based on a federal-Ontario housing deal signed in May which, in turn, follows from the national Affordable Housing Framework Agreement signed last November.

"We're glad the province has finally realized that its decision seven years ago to get out of housing has been a costly failure for the 4.8 million people living in rental housing," says Michael Shapcott of the Housing and Homelessness Network in Ontario (HHNO). "But we're concerned that the province is planning to give public subsidies to expensive private rental housing that won't be affordable for low, moderate and middle-income renter households." HHNO partners will monitor the announcement. They will look at three key questions:

How much new money will Ontario provide? The federal government has committed $245 million over five years for new housing and Ontario is supposed to match that. But Ontario has only offered $20 million in new funding over five years. Less new money means a lower per-unit subsidy, which means fewer units and higher average rents any units that are built.

Will rents be affordable to those who need the new housing the most? The province defines "affordable rents" as "average market rents". The poorest half of renter households in Ontario can only afford $580 a month or less, yet the average rents for a two-bedroom unit is $863 monthly - almost 50% higher. See the attached sheet for detailed information on Toronto.

How many units will be built? The province says 10,500 units will be funded over five years. But the lack of provincial funds makes this figure uncertain. Even if the target is reached, it is well short of the need. A provincial study estimates Ontario needs 18,000 new units every year.

For more information, or for housing and homeless contacts throughout Ontario, call:
Michael Shapcott - 416-605-8316

Selected regional contacts:
Tom Appleyard, London - 519-660-0874, x235
Barbara Anello, North Bay - 705-494-9078
Cathy Crowe, Toronto - 416-560-7235
Rev. Terry O'Connor, Northern Ontario - 705-472-8877
Peter Hutton, Hamilton - 905-527-4572
Maura Volante, Ottawa - 613-241-7913, x205

Average rents are NOT affordable rents: Comparing average rents of tenant households in Toronto

• Two-thirds of Toronto renter households (about 52,000 households, or 1.4 million women, men and children) cannot afford average market rents.
  
  
• The entire income of the poorest one-sixth of Toronto renter households (about 130,000 households, or 351,000 women, men and children) is $11,602, less than the annual average market rent in the city.
  
  
• Fully 44% of Ontario renter households are in Toronto. Average rents and incomes are different in other parts of Ontario, but the ratio is the same.

Backgrounder from Housing and Homelessness Network in Ontario (HHNO) on new Ontario housing program - July 31, 2002

New housing program announcement expected August 20

Ontario housing minister Chris Hodgson is expected to make a major announcement regarding a new Ontario housing program during a speech to the Association of Municipalities of Ontario on August 20, 2002, in Toronto. The province says the program will fund 10,500 new "affordable" rental and ownership units over the next five years. The lack of provincial dollars makes that target far from certain. The bulk of the $490 million for new housing will come from the federal government ($245 million) and municipalities ($180 million). The Ontario government is only contributing $20 million in new funding over five years - that's 4% of the total - but the provincial government is deciding on all the details of the program. The province may even decide which housing providers get the money using a "pre-qualification" process. According to the 2002/03 estimates tabled by the Management Board Secretariat, Ontario is only planning to spend $200,000 on the new housing program in 2002/03, an amount that will fund four new units for the fiscal year ending in March of 2003.

The announcement may include a re-announcement of a rent supplement program that was first announced on November 19, 1999; then again on January 14, 2000; November 2, 2000; and as recently as May 2, 2002. The program, funded with surplus federal dollars (no provincial money), is designed to give low-income households a small subsidy to help pay their rent. However, in order to prevent predatory rent hikes by private landlords, the province set rent caps. With landlords able to command any rent they want on a vacant unit, there is little incentive to sign on to the new program. The province has still not allocated all of the 5,000 units originally announced almost three years ago. It is these unallocated units - funded with federal housing dollars - that the province will include in its rent supplement plans.

Even if the new program actually creates the 10,500 units over five years (or 2,100 units per year) that the province claims, this is far short of the actual need. The July 2000 population projection from the Ontario Ministry of Finance estimates that the province will need about 18,400 new rental units annually over the next 20 years to keep pace with population growth. Private developers have built less than 2,000 new rental units annually in recent years. At the same time, thousands of affordable rental units are being demolished or converted to non-rental uses, which has led to a net loss of rental stock in some parts of the province.

No consultation with housing experts

There are plenty of uncertainties about what may be in the new program. The provincial housing ministry has not consulted with provincial housing sector organizations (such as the Co-operative Housing Federation of Canada - Ontario Region and the Ontario Non-Profit Housing Association). The announcement may be long on rhetoric and short on specifics, so it may not be possible - even on August 20 - to fully assess the new program. Ministry officials are briefing the Minister and provincial Cabinet on key details of the new program. A guidebook is being prepared for groups that are interested in applying for funding to build new housing. This guidebook may, or may not, be available on August 20.

New program based on November and May agreements

The new Ontario program is based on two agreements signed by Ontario. The Affordable Housing Framework Agreement was signed by all the provinces and territories, and the federal government, on November 30, 2001, at a special meeting of federal, provincial and territorial housing ministers in Quebec City. Under the terms of that deal, the federal government will spend $680 million over five years on new housing initiatives. The provinces and territories are supposed to pay a matching amount, but the November deal gives them plenty of wiggle-room. Provinces can claim spending by municipalities and third parties (such as non-profit housing providers) as part of their matching share. In addition, provinces can claim money already spent on housing back to January 1, 2001. The November agreement is clear, however, in stating that "this initiative needs to create affordable housing for low to moderate income households".
But, in the name of "flexibility", the November deal leaves critical details about what kind of housing will be financed, and how it will be funded, to bilateral deals to be signed between the federal government and the provinces and territories. So, although the federal government is spending half the total of $1.36 billion allocated under the Affordable Housing Framework Agreement, it is allowing the provinces to decide all the key details.

Almost no new provincial funding

Ontario signed a bilateral agreement with the federal government on May 30, 2002 - six months after the November deal. Under that deal, the federal government will spend $245 million over five years for new "affordable" housing in Ontario. While the province is supposed to provide a matching amount, in fact, Ontario is only offering $20 million in new funding over five years (or $4 million a year). The province is counting, as part of its matching share, about $35 million that it has already spent on housing initiatives (mainly supportive housing programs). This money is already spent and won't be available to fund new units. The province is counting, as its share, about $180 million from municipalities. Some of this money will come from reductions or waivers in municipal development charges, levies and fees. Most will come from a cut in local property taxes. Ontario is also counting, as its share, about $10 million from housing providers.

Provincial housing cuts continuing

Within days of being elected in 1995, the provincial government cancelled 17,000 units of co-op and non-profit housing that were under development. It cut more than $300 million in housing spending. In 1998, Ontario started to download the cost and administration of social housing programs to municipalities (except for supportive housing initiatives transferred to the Ministry of Health and the Ministry of Community and Social Services). Provincial spending on housing has dropped from $1.3 billion in 2000/01 to $708 million in 2002/03 - mainly due to continued downloading of social housing to municipalities. That $708 million is offset by $530 million that Ontario will receive from the federal government for federally-funded housing in Ontario and another $100 million that Ontario will receive from municipalities. Net housing spending by the province is $78 million

"Average rents" not "affordable housing"

The definition of "affordable housing" shifted significantly in the May agreement. Instead of producing housing with rents that are affordable to low and moderate-income households (as stated in the November agreement), the May deal says that "affordable" units are those that rent at or below the "average market rents" as determined by the annual market survey of Canada Mortgage and Housing Corporation. The CMHC survey measures rents that are paid by renter households, then produces an average. It doesn't measure whether these rents are affordable. In fact, average rents have been increasing in most parts of Ontario in recent years, often at double the rate of inflation or higher. Changes in provincial rent regulation laws with the introduction of the so-called Tenant Protection Act have led to even higher rent increases. This law allows landlords to charge any rent they want on vacant units.

Renter household incomes are stagnant or falling

A fact sheet from the Centre for Urban and Community Studies at the University of Toronto, based on special tabulations of data from Statistics Canada, reports that the median renter household income was $23,215 in 1999 (virtually unchanged from 15 years earlier). That means that 885,000 renter households (or about 2.4 million women, men and children) have $580 per month that they can afford to spend on rent. Yet, the average rent for a two-bedroom apartment in Ontario is $863 monthly - almost 50% higher than the amount that low and moderate-income renter households can actually afford to pay.

Detailed income data for Toronto (which has 44% of the renter households in Ontario) paint a compelling picture. The poorest sixth of Toronto's renter population have annual incomes of $11,602 or less. They can afford rents of $290 per month or less. The next sixth have annual incomes of $18,955 or less and can afford $474 per month or less. The next sixth have annual incomes of $27,414 or less and can afford $685 per month or less. The next sixth have annual incomes of $35,805 or less and can afford $895 per month in rent or less. The next sixth have annual incomes of $50,081 or less and can afford $1,252 per month or less. The richest sixth of tenant households in Toronto have annual incomes of $256,015 or less. They can afford $6,400 or less per month. Each sixth represents about 125,000 households. The average rent for a two-bedroom apartment in Toronto is $1,027 monthly. Only the richest one-third of renter households can afford this average rent, which the provincial government defines as "affordable". In fact, the entire annual income of the poorest 125,000 renter households in Toronto is less than the "affordable" rent target set by the Ontario government.

Private vs. social housing

Private developers dominate the housing market in Ontario. They build almost all the ownership housing (60% of Ontarians live in ownership housing). They own 85% of the rental housing in the province. There are two main types of non-market (or social) housing: non-profit housing owned by municipalities or community-based groups and co-op housing owned by the residents. Federal and provincial governments funded government-owned and managed public housing projects, mainly from the 1950s to the early 1970s. These projects have been integrated into municipal non-profit housing entities. Social housing providers are the main source of affordable housing, but the federal government stopped funding new social housing in 1993 and Ontario stopped funding in 1995.

The Ontario government, in announcing its plans to "get out of the housing business" in 1995, portrayed social housing as an expensive "boondoggle". It has been reluctant, for ideological reasons, to restore funding for new social housing since then. The handful of housing initiatives announced by the Ontario government in recent years have been mainly geared to private rental development, not social housing. It is not expected that the new Ontario program to be announced on August 20 will explicitly be geared to private developers versus new social housing. However, there may be invisible barriers to co-op and non-profit participation based on program rules and project selection criteria.

Affordable housing doesn't trickle down

Private developers have made it clear that they cannot, and will not, build housing with rents that are affordable to low and moderate-income renter households, even though these households need the new housing the most. They simply cannot recover enough money in rents to cover the financing and operational costs of the new housing, plus make what they consider a reasonable return on investment. Private investment in existing rental housing can be very lucrative, especially if investors take advantage of weakened tenant protection laws to buy buildings with moderately-priced rents, then quickly raise the rents and realize substantial returns. But even private investment in existing rental housing does not produce rents that are affordable to lower-income renter households.

In recent years, the Ontario government - and private sector lobbyists - have been promoting the "trickle down" model. They say public dollars should be invested in housing with higher rents (at or close to the "average" market rents). They argue that wealthy tenants will leave existing units for the new buildings, creating vacancies that will work down the rent scale. But the Tenant Protection Act allows landlords to increase rents on vacant units as high as they want, so any vacancies created are likely to trigger rent increases across the spectrum. Federal and provincial governments have tried a number of schemes to subsidize private rental development over the last 30 years. Few of the programs have been targeted to low-income households, so there has been little benefit to the people who need the new housing the most.

Prepared by Michael Shapcott on behalf of the
Housing and Homelessness Network in Ontario on August 1, 2002.

Update: July 15, 2002 - Housing in Ontario

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.

---------

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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