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Housing
in Ontario
State
of the Crisis, 2003: Ontario housing policies
are de-housing Ontarians by Michael Shapcott
Ontario Alternative Budget 2003
Page
Contents
Read
Highlights of the Report
Read
Press Release: Give us shelter! Ontario housing policies
de-house 345,000 Ontarians
Read
the Report: State of the Crisis, 2003: Ontario housing policies
are de-housing Ontarians
by Michael Shapcott
State
of the Crisis, 2003: Ontario housing policies are de-housing Ontarians
Technical
Paper #2
Highlights
Over the past eight years, Ontario has lost 45,000 private rental units
and 23,300 affordable social housing units, along with another 59,600
affordable social housing units that should have been built. Tenants in
Ontario’s 1.4 million rental households face a growing affordability squeeze
as rents in existing units have increased significantly since 1995 – as
much as 30% or higher in some areas – at the same time that renter household
incomes have been stagnant or declining.
Social housing losses: 82,900 units
Total social housing losses in Ontario since 1995: 82,900 homes (enough
housing for 224,000 women, men and children).
The main reason: the decision to cancel government- funded social housing
programs and download the cost and administration of existing programs
to cash-strapped municipalities.
Private rental losses: 44,780 units
Total private rental losses in Ontario from 1996 to 2001: 44,780 units
(enough housing for 121,000 women, men and children).
One major reason: In 1998 Ontario cancelled the Rental Housing Protection
Act, which had allowed municipalities to regulate the demolition and conversion
of private rental housing.
Vacancy rates
A rental vacancy rate above 3% is considered healthy, while rates below
3% are in the danger zone. According to the Canada Mortgage and Housing
Corporation (CMHC) rental market survey (November 2002):
-
The overall provincial vacancy rate is still in the danger zone at 2.7%.
More than threequarters of the province, including most of the biggest
cities (Toronto, Ottawa, Hamilton, London), have vacancy rates below
3%.
-
About half the regions saw rental vacancy rates drop in 2002 from 2001,
a clear warning sign.
-
In a number of centres, such as Toronto (home to almost half the conventional
rental units in the province), vacancies were clustered at the upper
end of the rent scale— unaffordable to the majority of tenants.
Guarantee denied: No subsidies
for tenants
While the government quickly delivered on its promises to investors and
developers, it failed on the one promise that it made to tenants – shelter
subsidies for “all Ontarians who need help in affording a decent level
of shelter.”
Shelter subsidies are expensive. A plan that would help the 885,000 renter
households with incomes less than $23,000 (the median renter household
income in 1999) could cost more than $4.3 billion annually. According
to NYU researcher Scott Susin, construction subsidies may do more to improve
the housing conditions of the poor than rent subsidies which have an inflationary
impact on the overall rental market.
The province announced on November 19, 1999 that it was using part of
its share of fed- eral money (as a result of signing the Social Housing
Transfer Agreement) to fund 10,000 new rent supplement units. Those same
rent supplement units were re-announced by the province at least four
more times (January 14, 2000; November 2, 2000; May 2, 2002; August 20,
2002) and are expected to be announced yet again in the Ontario budget
in March 2003.
More rent: Same old housing
By the year 2001, 60% of Ontario’s rental housing stock was more than
30 years old. Overall, almost one-third of the province’s rental housing
needs repairs.
Ontario cuts housing spending
Ontario led all the provinces and territories in the dollar amount of
housing cuts in the late 1990s, according to a survey by CMHC in 2001.
Ontario cut $303.8 million in housing spending between 1993-94 and 1999-00
– fully one-quarter of its overall housing budget. Since 1995, the government
has cut $879.1 million from provincial housing programs.
Private programs: Big spending, little regulation
The
federal and Ontario governments have tried a number of large, expensive
private sector housing programs since the late 1940s which produced expensive
private rental units, but have been unable to deliver affordable rental
housing.
A 1997 study funded by CMHC found that the cost of subsidizing co-op and
non-profit projects was far less than subsidizing private investors, developers
and landlords. In year 25 alone, social housing projects cost taxpayers
$800,000 less than the private projects.
Ontario’s
not-so-affordable housing program
The province’s 295,000 poorest households (800,000 women, men and
children) have incomes of $11,201 or less, according to Statistics Canada.
The CMHC average rent for Ontario was $836 in 2002 – three times higher
than the amount that the poorest renter households can actually afford,
and almost double the amount that moderate-income renter households can
afford.
The Affordable Housing Framework Agreement was welcomed as a first step
towards a fully-funded national housing strategy. The 2003 federal budget
added another $320 million over five years to the Affordable Housing Program,
another welcome step at the national level. The Ontario share of the new
2003 federal money could be as much as $115 million over the next five
years, but only if Ontario produces matching funds.
OAB plan for new housing
The Ontario Alternative Budget for 2003 has a housing plan that would
generate 15,000 new social housing units annually, plus rent supplements
for 40,000 low and moderate-income renter households annually.
- $630
million annually for 12,600 new provincially- funded affordable units;
-
$72 million annually for 2,400 new units as Ontario’s share of the federal-provincial
Affordable Housing Program; and
-
$196 million annually for 40,000 new rent supplement units.
Over five years, this sustained investment will generate 75,000 new affordable
rental units and rent supplements for 200,000 low and moderate- income
households.
Reproduced with permission from PDF document from:
Canadian
Centre for Policy Alternatives
410-75 Albert Street, Ottawa, ON K1P 5E7
tel: 613-563-1341 fax: 613-233-1458
email: ccpa@policyalternatives.ca
http://www.policyalternatives.ca
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Press
Release - Canadian Centre for Policy Alternatives (CCPA)
FOR
IMMEDIATE RELEASE
MARCH 14, 2003
Give us shelter!
Ontario housing policies de-house 345,000 Ontarians
TORONTO — Government housing policies are de-housing low-income,
moderate and even middle-income renter households instead of giving them
access to good quality, affordable homes, according to a study released
today by the Canadian Centre for Policy Alternatives.
State
of the Crisis, 2003: Ontario housing policies are de-housing Ontarians,
by Michael Shapcott, documents the legislative and budgetary changes to
provincial housing policies and the effects of those changes on Ontario's
1.4 million rental households.
Between 1993-4 and 1999-00, Ontario cut $303.8 million in housing spending–one-quarter
of its overall housing budget–and led all the provinces and territories
in the dollar amount of housing cuts in the late 1990s. Since 1995, the
Ontario government has cut $879.1 million from provincial housing programs.
According to Shapcott, total social housing losses in Ontario since 1995
have been 82,900 homes (enough housing for 224,000 women, men and children);
and total private rental losses in Ontario from 1996 to 2001 have been
44,780 units (enough housing for 121,000 women, men and children). Currently,
the overall provincial vacancy rate–more than three-quarters of the province–is
still in the danger zone at 2.7% (above 3% is considered healthy).
Meanwhile, with the elimination of legislative controls, rents continue
to rise, jeopardizing shelter particularly for the province's 295,000
poorest households. The average rent in Ontario was $836 in 2002–three
times higher than the amount that the poorest renter households can actually
afford, and almost double the amount that moderateincome renter households
can afford.
"The cost of subsidizing co-op and non-profit projects is far less
than subsidizing private investors, developers and landlords," concludes
Shapcott. "Consequently, the Ontario Alternative Budget 2003 calls for
sustained investment over five years, generating 75,000 new affordable
rental units and rent supplements for 200,000 low- and moderate- income
households."
–30–
The
Ontario Alternative Budget is a project of the Canadian Centre for Policy
Alternatives. State of the Crisis: Ontario housing policies are de-housing
Ontarians is available on the CCPA web site: http://www.policyalternatives.ca
(webmaster's note: CCPA has document available in PDF format)
For more information:
Michael Shapcott, 416-978-1260
Kerri-Anne Finn, 613-563-1341 x306
The Canadian
Centre for Policy Alternatives is an independent, non-profit research
organization, funded primarily through organizational and individual membership.
It was founded in 1980 to promote research on economic and social policy
issues from a progressive point of view.
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State
of the Crisis, 2003:
Ontario housing policies are de-housing Ontarians
By Michael Shapcott
Canadian Centre
for Policy Alternatives
ISBN 0-88627-315-3
March 2003
Technical Paper #2
State of the Crisis, 2003: Ontario housing policies
are de-housing Ontarians
Ontario has lost 45,000 private rental units over the past eight years.
The province has also lost 23,300 affordable social housing units, along
with another 59,600 affordable social housing units that should have been
built. Tenants face a growing affordability squeeze as rents in existing
units have increased significantly since 1995 – as much as 30% or higher
in some areas – at the same time that renter household incomes have been
stagnant or declining.
It wasn’t supposed
to be this way.
No matter who’s measuring, the need for affordable rental housing
has been growing. Canada Mortgage and Housing Corporation, the federal
government’s housing agency, estimated in 1997 that Ontario needed 120,000
new rental units from 1996 to 2003 (about 16,000 per year from 1996 to
2001, and 20,000 per year since then). The mid-range scenario from the
Ontario Ministry of Finance population projections puts the need at 18,400
new rental units annually – that’s 147,200 homes from 1996 to 2003.
Since 1995, the Ontario government has had a set of housing policies that
it promised would deliver tens of thousands of new rental units and, at
the same time, provide rent subsidies to low and moderate-income renter
households to help them cope with rising rents.
But, instead of plenty of new units, Ontario is sliding backwards. Despite
a solemn “guarantee,” the government has offered almost no help at all
to low-income households facing rapidly rising rents. And it has cut shelter
allowances to hundreds of thousands of the province’s poorest households.
Tenants in Ontario’s 1.4 million rental households live in the worst
of all possible worlds. The supply of affordable rental units is declining
and rents are increasing as the need for new affordable rental housing
grows. Social housing waiting lists have grown from two years in 1995
to as much as ten years or more. Homelessness is up everywhere in the
province.
Government housing policies are de-housing low-income, moderate and even
middleincome renter households instead of giving them access to good quality,
affordable homes.
Tory plan: Private salvation for renters
Ontario’s Progressive Conservative Party government, elected
in June of 1995, said it could deliver tens of thousands of desperatelyneeded
new affordable rental units. In the Common Sense Revolution, the Tory
pre-election manifesto, party leader and future Premier Mike Harris promised:
“We will end
the public housing boondoggle that profits only the large 4 Canadian
Centre for Policy Alternatives Ontario Alternative Budget 2003 property
developers and return to a shelter subsidy program for all Ontarians
who need help in affording a decent level of shelter. By spending money
on people instead of bricks and mortar, we will be in a position to
eliminate the twoyear waiting list for affordable housing.”
In 1995, the new government
put its faith, and the rental housing needs of low, moderate and middle-income
Ontarians, in the private market. Their radical experiment called for:
- An end to government
subsidies for new co-op and non-profit housing. Social housing had been
a key element of affordable housing policy federally and provincially
since the late 1940s. The government hoped that by eliminating new not-forprofit
housing, private developers would step in to create new affordable units.
- Major changes
to rent regulation laws to allow rents to rise to their “natural level.”
Landlords were expected to use massive rent increases to pay for repairs
and also fund new units. At the same time, the government hoped that
the “discipline” of the marketplace would allow rents to moderate as
new units came on stream.
- Elimination of
the Rental Housing Protection Act, which had given municipalities modest
powers to control the demolition or conversion of affordable rental
housing.
- Shelter subsidies
to low-income households to cushion them from big rent increases. As
Ontario’s rental housing crisis grew steadily worse, and the private
market failed to deliver new units, the government added a new element.
It offered public subsidies directly to private developers to invest
in new units.
Private
lobbyists meet privately with Minister
On September 14, 1995,
Ontario Minister of Municipal Affairs and Housing Al Leach met privately
with representatives of six private sector lobby groups: Fair Rental Policy
Organization, Greater Toronto Home Builders’ Association, Metropolitan
Toronto Apartment Builders’ Association, Ontario Association of Architects,
Ontario Home Builders’ Association and the Urban Development Institute
of Ontario. The lobbyists brought a long wish list, including:
- an end to rent
controls;
- repeal of the
Rental Housing Protection Act;
- substantial changes
to the Landlord and Tenant Act to fast-track evictions through a politically-appointed
tribunal;
- a legislated end
to an attempt by the Ontario Human Rights Commission to prevent rental
discrimination based on income; and,
- a radical overhaul
of building regulations to cut costs for builders.
The lobbyists insisted
that no one else should be at the table. “The industry must have a prominent
voice on these matters relative to other interested parties because it
is the building community that understands what State of the Crisis, 2003
5 Technical Paper #2 will and will not work,” the lobbyists warned
the minister (italics in their original document). Minister
Leach, and subsequent ministers, agreed. Tenants, homeless people and
not-for-profit housing developers and providers that had successfully
developed hundreds of thousands of cost-effective, affordable social housing
units have been largely excluded from talks about new housing policy over
the past eight years.
The private interests
wanted lots of changes, but they never actually promised that these changes
would lead to a specific number of new units. All they said was that their
plans would “encourage the development and construction of private rental
housing in Ontario.”
Minister Leach commissioned
a study based on the lobbyists’ demands. The report called The Challenge
of Encouraging Investment in New Rental Housing in Ontario was released
in November of 1995 and gave the government the go-ahead it needed to
take action.
But even this detailed
report hedged on whether the massive changes would actually create any
new affordable units. It concluded that the changes “will encourage more
building. How much? That is impossible to say. However, it seems likely
that the regulatory changes alone will not be enough to stimulate substantial
amounts of rental investment in Toronto, which presents the most serious
problem for rental supply in Ontario.” The report states:
“New private
rental projects will target the high end of the market. The economics
of building rental housing dictate that the new product will have higher
than average rents. This is the traditional market for new rental housing.
Product at the high end of the market is beneficial to all segments
since it attracts tenants from the existing lowerrent stock – thereby
creating vacancies at more affordable rents.”
In other words, the
most that can be expected is some new high-rent units. And then, through
the magic of the private market, perhaps some of those vacancies may trickle
down to the hundreds of thousands of low and moderate-income renter households
which need affordable homes.
Private sector makes donations
The Ontario government
was quick to oblige the private lobbyists, and they, in turn, made substantial
financial contributions to the Progressive Conservative Party and its
candidates.
Five of the six groups
at that key meeting with Minister Leach in October of 1995 (Fair Rental
Policy Organization, Greater Toronto Homebuilders Association, Metropolitan
Toronto Apartment Builders Association, Ontario Home Builders Association,
Urban Development Institute Ontario) have donated a total of more than
$60,000 to the governing Conservative party since 1995. Two-thirds of
those donations have come since 1998, when the government implemented
the most important changes (the repeal of the Rental Housing Protection
Act and the gutting of rent regulation rules).
But these weren’t the only private rental interests that have made substantial
financial contributions. For instance, Greenwin Property Management calls
itself as “one of Canada’s largest property managers” and “Ontario’s largest
private manager of government-sponsored developments.” It has given more
than 6 Canadian Centre for Policy Alternatives Ontario Alternative Budget
2003 $100,000 to the governing Tory party since 1995, almost half of that
($46,000) during 1999, a provincial election year.
Plenty of other private housing interests have also donated to the Conservative
Party.
Minister gives his guarantee
Although neither the
private lobbyists nor the province’s own study said that the changes would
actually create new affordable units, the Ontario government was determined
to proceed. On October 11, 1995, Minister Leach rose in the Legislature
to declare:
“We’ve
stated quite clearly that it’s the intention of this government to get
out of the non-profit housing business and get out of the co-op housing
business. We believe we should put our support behind providing shelter
allowances to people who need it and not throwing it into bricks and
mortar.”
One week later, Minister
Leach again rose to state:
“This government
has made a commitment to get out of the non-profit housing business.
. . This government lived up to and fulfilled that commitment. We also
committed to introduce a shelter subsidy program to assist those members
of our society who truly require help in their housing needs. I can
guarantee you that we will live up to that question as well.”
Faced with tough
questioning from opposition politicians, Minister Leach said:
“The minister
and the ministry, as we speak, presently are developing the details
of the program. It’s going to be an extensive program, as I mentioned.
We’re going to ensure that it will provide benefits to tenants, benefits
they don’t have now, protection they don’t have now. I’m very pleased
to advise that we will be bringing forward a program for the shelter
allowances perhaps very early in the new year, as quickly as the people
in the ministry can get the facts together, and we can continue to do
that. Again, what we’re interested in is not bricks and mortar; we’re
interested in providing protection to the tenants of Ontario.”
“Our number
one goal is to put a system in place that will give builders an incentive
to get out and build new stock,” said Minister Leach in a newspaper interview
in December of 1995. He predicted 20,000 new rental units in Toronto alone
as a result of his government’s policies. “And we have to make sure we
put in a [rent regulation] system that provides tenants with the confidence
that they won’t be gouged by landlords.”
In April of 2000,
there was a sign that the government realized that the private sector
was not delivering any new affordable housing units despite generous concessions.
Minister of Municipal Affairs and Housing Tony Clement told The Toronto
Star the government had delivered and now it was time for private developers
to start building. Clement said:
“They are
running out of excuses. I am now calling upon the industry to put their
money where their mouth is. We’ve removed the impediments and we’ve
got State of the Crisis, 2003 7 Technical Paper #2 to see activity in
this sector. It’s time to fish or cut bait.”
Stephen Kaiser, President
of the Urban Development Institute, dismissed the Minister’s comments,
saying: “he doesn’t understand the industry and that’s shocking.”
Minister Clement and the rest of the Ontario government lapsed into an
embarrassed silence and returned to the housing strategy they’ve had in
place since 1995. New affordable housing must come from the private sector.
Period.
Social housing losses: 82,900 units
In June of 1995, the Ontario government cancelled 17,000 units of co-op
and non-profit housing that had previously been approved for development.
About 20,000 units were on the chopping block, but housing advocates rallied
to save 3,000.
Minister Leach also cancelled all funding for new co-op and non-profit
development. Until those cuts, Ontario was funding about 7,450 new social
housing units annually, according to Where’s Home?, a comprehensive survey
of rental housing in Ontario. The cumulative loss of these units, from
1996 to 2003, is 59,600 co-op and non-profit homes.
In addition, the province announced in 1995 that it would cut about 3,000
rentgeared- to-income units in social housing projects and in the following
three years cut an estimated 3,300 rent supplement units in private rental
housing.
Total social housing losses in Ontario since 1995: 82,900 homes (enough
housing for 224,000 women, men and children).
The main reason for the big losses was the decision to cancel government-funded
social housing programs and download the cost and administration of existing
programs to cashstrapped municipalities. But the local property tax can
barely support existing commitments, let along provide funding for muchneeded
new social housing.
Minister Leach denounced social housing as an expensive “boondoggle” through
misleading and inflated claims. A number of Ontario- funded social housing
projects were developed in the late 1980s and early 1990s when land and
other development costs were high. During this time, several large private
real estate companies collapsed under the burden of a crippling real estate
market. However, co-op and non-profit housing providers continued to pay
their mortgages, property taxes and other bills. And, as noted in the
1999-00 Ontario Public Accounts: “To date, there have been no claims for
defaults on insured mortgage loans” by social housing providers.
As mortgage rates dropped in the 1990s, and financing costs decreased,
the investment in social housing by previous governments proved to be
a sensible and cost-effective decision, both for residents and for taxpayers.
Private rental losses: 44,780 units
Canada Mortgage and Housing Corporation’s annual rental survey is considered
the best indicator of the health of the rental housing market. In 1994
(the year before the Conservatives were elected), Ontario had 652,917
units in its “rental universe.” By 2002, this universe had shrunk to 611,353,
a loss of 41,564 units.
But CMHC’s “universe” only counts conventional rental housing
(buildings with three or more units). The 2001 Census from Sta- 8 Canadian
Centre for Policy Alternatives Ontario Alternative Budget 2003 tistics
Canada reported that there were more units in the secondary market than
in CMHC’s conventional rental survey. The renters in this non-conventional
market live in basement apartments, rented condominiums and accessory
units. Many units are illegal and substandard under municipal or provincial
regulations. Tenants often have no long-term security and few protections
from predatory practices by landlords.
Ontario claims that the secondary market acts like a safety valve. As
vacancy rates in the conventional market drop to dangerously low levels,
desperate tenants can find relief in the secondary market. To test this
theory, the Ontario Ministry of Municipal Affairs and Housing and CMHC
commissioned The Starr Group, a private consultant. Its report, issued
in 2000, confirmed that secondary rental units provide a home to a majority
of renters – more than 70% in the Greater Toronto Area and 55% in Sudbury,
for instance. But their major conclusion offered no relief to tenants:
“Because of
lack of expansion of these markets, vacancy rates for such forms of
housing are quite low in most centres. Rents for most forms of secondary
rental housing have been rising sharply in most areas, consistent with
low vacancy rates in both secondary and conventional markets.”
To add to the bad
news, the secondary market is shrinking along with the conventional market.
The 2001 Census reported 1,351,365 private rented units in Ontario. The
1996 Census put the total at 1,396,145.
Total private rental losses in Ontario from 1996 to 2001: 44,780 units
(enough housing for 121,000 women, men and children).
One major reason for the big loss: Ontario cancelled the Rental Housing
Protection Act in 1998. This law allowed municipalities to regulate the
demolition and conversion of private rental housing. With legislative
controls gone, demolitions and conversions outpaced new construction.
Previously affordable rental housing was lost, and homelessness increased.
Vacancy rates
Canada Mortgage and Housing Corporation released its latest annual rental
market survey in November, 2002. The vacancy rate measures the number
of vacant units in the conventional market. A rental vacancy rate above
3% is considered healthy, while rates below 3% are in the danger zone.
The latest CMHC numbers show a small increase in the rental vacancy rate
in Ontario, and in about half the regions in the province. Provincial
officials leaped on the new numbers as “proof ” their rental policies
were finally working. But the CMHC numbers tell a different story:
- The overall provincial
vacancy rate is still in the danger zone at 2.7%. More than three-quarters
of the province, including most of the biggest cities (Toronto, Ottawa,
Hamilton, London), have vacancy rates below 3%.
- About half the
regions saw rental vacancy rates drop in 2002 from 2001, a clear warning
sign. And CMHC analysts say that the rates in other communities will
likely fall in 2003.
- In a number of
centres, such as Toronto (home to almost half the conventional State
of the Crisis, 2003 9 Technical Paper #2 rental units in the province),
vacancies were clustered at the upper end of the rent scale. The majority
of tenants cannot afford these rents.
Higher vacancies are
not translating into more moderate rents. The community with the highest
rental vacancy rate in Ontario in 2002 – Kapuskasing – also had the biggest
rent increase. Everywhere across the province, rents are increasing –
usually faster than the rate of inflation – even though vacancy rates
are easing in some areas. The one exception, Barrie, saw a decrease in
average rents of less than one percent. Yet, Barrie has a very low rental
vacancy rate.
Private market theorists
argue that increasing rental vacancy rates will lead to lower rents as
landlords “compete” for tenants. The real market in Ontario delivered
the opposite.
There are reports
that some landlords in Toronto are using incentives to attract tenants
to high-rent units. But this doesn’t help low, moderate or even middle-income
renters. The benefits only go to wealthy renters.
Guarantee denied: No subsidies for tenants
A key promise in the
Common Sense Revolution, and “guaranteed” by Minister Leach, was shelter
subsidies for “all Ontarians who need help in affording a decent level
of shelter.” While the government quickly delivered on its promises to
investors and developers, it failed on the one promise that it made to
tenants. The province has never explained why it has shelved this oft-repeated
promise.
One reason may be that shelter subsidies are very expensive. The subsidies
cover the difference between the amount a low-income household can afford
to pay (usually calculated at 30% of household income) and the actual
rent. Since private rents usually increase every year, rent subsidies
are guaranteed to cost more every year. The costs were compounded when
the government eased rent regulation laws.
The province never released its own estimate of the cost of a comprehensive
shelter subsidy program, but a plan that would help the 885,000 renter
households with incomes less than $23,000 (the median renter household
income in 1999) could cost as much as $361 million monthly (using the
2002 average rent of $836). That’s more than $4.3 billion annually.
Rent subsidies have an inflationary impact on the overall rental market,
according to research by New York University researcher Scott Susin published
in the Journal of Public Economics in 2002. Says Susin:
The main finding
of this study is that the voucher program has already caused a large
increase in the price of housing for the poor in the 90 metropolitan
areas examined here. The most robust estimate presented here suggests
that the voucher program has raised the rent paid by unsubsidized poor
households in the average metropolitan area by 16 percent. . . . An
upward sloping supply curve also has the familiar implication that vouchers
are not simply a transfer to those who receive them, but also to landlords.
Considered as a transfer program, the estimated 16 percent increase
in rent implies that vouchers have caused an $8.2 billion increase in
the total rent paid by low-income non-recipients, while only 10 Canadian
Centre for Policy Alternatives Ontario Alternative Budget 2003 providing
a subsidy of $5.8 billion to recipients, resulting in a net loss of
$2.4 billion to low-income households.
His conclusion: “construction
subsidies may do more to improve the housing conditions of the poor than
do demand side subsidies like vouchers.”
Housing advocates,
noting that most lowincome households live in private rental housing,
agree that rent supplements (a form of rent subsidy in which the landlord
signs a contract and agrees to keep the rents affordable and to properly
maintain the property) are a necessary part of an overall housing strategy.
People on welfare – among the poorest households in Ontario – not
only didn’t get the rent subsidies promised by the government, but they
had the shelter allowance portion of their welfare cheque cut by almost
22% in 1995. Not one penny has been added since then, even though rents
have increased an average of 26% from 1995 to 2002. Currently, there are
188,824 households receiving Ontario Works, which includes more than 389,000
women, men and children. More than 80% of them live in private rental
housing.
In 1999, the Ontario government signed the Social Housing Transfer Agreement
with the federal government. Under this deal, the province agreed to administer
almost all federally- funded social housing units in the province (except
for federally-funded co-ops, which won a political campaign to be excluded
from the download). In return, the federal government agreed to give Ontario
hundreds of millions of dollars annually, including surplus funds that
became known as the “signing bonus.”
The province announced on November 19, 1999, that it was using part of
these surplus federal dollars to fund 10,000 new rent supplement units.
At first, all the money was supposed to go to private rental units, but
private landlords balked at the rent caps (which limited the rent that
could be charged to avoid having the funds drained as rents rose thanks
to lax rent regulation laws).
Those same rent supplement units, funded with the federal dollars, were
re-announced by the province at least four more times (January 14, 2000;
November 2, 2000; May 2, 2002; August 20, 2002) as the government tried
to get landlords on board. There are still at least 1,000 to 2,000 units
that haven’t been allocated. These units are expected to be announced
yet again in the Ontario budget in March, 2003.
If the 8,000 or so rent supplement units already allocated are set against
the 6,300 rent subsidies that were cancelled, the overall increase is
less than 2,000 rent subsidies – far short of the comprehensive program
originally promised. Once the cuts in shelter allowances for welfare recipients
are factored in, the government took away far more rent subsidies than
it ever delivered.
More rent: Same old housing
By the year 2001, fully 60% of Ontario’s rental housing stock was more
than 30 years old. As housing ages, major systems begin to fail unless
they are properly maintained. The oldest rental buildings – those built
in 1945 or before – have the highest need for repairs. Overall, almost
one-third of the province’s rental housing needs either minor or major
repairs. Housing advocates have warned for years that aging and crumbling
private rental housing State of the Crisis, 2003 11 Technical Paper #2
will become a costly issue, not just for tenants and landlords but also
for governments and taxpayers.
The Ontario government hoped that landlords would voluntarily use at least
part of the massive rent increases generated as rent regulation laws were
relaxed in 1998 to repair private rental stock.
The 1996 Census found that 65% of Ontario’s 1,396,145 rental units were
in reasonable condition, needing only regular upkeep. Approximately 345,000
units (25% of overall units) required minor repairs and 147,000 (10% of
overall units) needed major repairs. Five years later, the 2001 Census
reported that 64% of Ontario’s 1,351,360 rental units required only regular
maintenance. Approximately 343,000 units (25%) needed minor repairs and
141,000 units (11%) required major repairs.
By 2001, Ontario was already three years into the new rent regime. Rents
were rising to their “natural levels” in order to allow landlords to invest
in new rental housing and fix up their existing stock. However, not only
was there a loss in the number of rental units, but there was no change
in the percentage of units that needed major or minor repairs.
Ontario cuts housing spending
Ontario led all the provinces and territories in the dollar amount of
housing cuts in the late 1990s, according to a survey by Canada Mortgage
and Housing Corporation in 2001. Ontario cut $303.8 million in housing
spending between 1993-94 and 1999-00 – fully one-quarter of its overall
housing budget.
The Expenditure Estimates from the Management Board, pick up the story
from there. The Housing Market Program of the Ministry of Municipal Affairs
and Housing funds social and market housing, including subsidies for existing
social housing and administration of tenant protection. The annual spending
numbers:
- 1999-00 –
total spending of $1,147,389,240, minus a federal social housing transfer
of $358 million, for net provincial housing spending of $789.4 million
- 2000-01 –
total spending of $1,341,261,700, minus a federal social housing transfer
of $466 million, for net provincial housing spending of $875.3 million
- 2001-02 –
total spending of $1,273,948,400, minus a federal social housing transfer
of $541 million, for net provincial housing spending of $733.0 million
- 2002-03 –
total spending of $738,056,400, minus a federal social housing transfer
of $524 million, for net provincial housing spending of $214.1 million
Since 1995, the government
has cut $879.1 million from provincial housing programs.
Private sector: More demands, no
affordable units
As the province-wide housing crisis and homelessness disaster has grown
worse in recent years, provincial officials once again moved 12 Canadian
Centre for Policy Alternatives Ontario Alternative Budget 2003 behind
closed doors with private sector interests to come up with a plan.
The Housing Supply Working Group has 23 members appointed by the province,
and it meets in private. Eight members are from the Fair Rental Policy
Organization, three from the Greater Toronto Home Builders’ Association,
two from the Ontario Home Builders’ Association and three from the Urban
Development Institute. Sixteen of 23 members of the working group are
from the same organizations that met secretly with Minister Leach in 1995,
so it’s no surprise that they have the same demands: More subsidies and
tax cuts for private interests. And they are still not making any specific
commitments to actually build new affordable homes.
The Housing Supply Working Group issued its second report, called Creating
a Positive Climate for Rental Housing Development Through Tax and Mortgage
Insurance Reforms, in November of 2002. The lobbyists have lost none of
their zeal for changes that favour private rental interests. They are
also anxious not to lose anything that they have won over the past eight
years. And the working group insists that the small amount of new federal
funding for affordable housing shouldn’t only be spent on affordable units.
They say that even expensive condominiums should get public subsidies.
They say:
“The Working
Group’s view is that the ability to convert rental units to ownership
is an important feature of the current regulatory environment and should
be maintained. We welcome the response to our earlier recommendations
regarding PST offset grants. Providing such grants to units in the new
Affordable Housing Program is a good step, however, we also would continue
to urge the government to provide sufficient funding so that the grant
can be made available to all new rental units. As well, we continue
to believe that the rebate should apply to purpose-built rental units
that are condominium registered, that consideration should be given
to eliminating the PST on mortgage insurance for home owners and that
similar consideration be given to extending the offset grant to building
materials used in the construction of affordable ownership homes.”
The faith in private
markets to solve the province’s affordable housing crisis is undiminished
despite eight years of failure. Just like in 1995, the latest working
group won’t promise to actually build any new affordable housing in exchange
for the rich benefits that they are seeking. Low-income tenants desperate
for new affordable supply will have to continue to be patient and wait
for vacancies to trickle down. The final paragraph of the latest report
says:
“Currently,
builders appear to be interested again in entering the market, especially
at the luxury end, which offers higher income streams and potentially
higher rates of return. As mentioned earlier, high-end rental production
may help to create market liquidity and new opportunities for loosening
the pressure on available stock. New high-end rental attracts higher
income tenants, thereby freeing up some existing lower priced stock
for tenants. However, an ongoing objective of governments must be to
encourage developers to build for mid- State of the Crisis, 2003 13
Technical Paper #2 range rental markets – and this has been a recurring
theme in Working Group discussions. We believe the implementation of
the measures reviewed in this report will be a major step to achieving
this goal.”
Private programs: Big spending, little regulation
The federal and Ontario governments have tried a number of private sector
housing programs since the late 1940s. The pattern is clear. The big expensive
programs produced expensive private rental units, but have been unable
to deliver affordable rental housing. Private sector programs are the
least regulated housing programs, produce the fewest benefits to low-income
households and have almost no accountability to taxpayers.
A brief history:
Limited Dividend Program (1946 to 1975) created 101,300 units that
were, initially, moderately priced. But, over time, rents were allowed
to rise beyond those affordable to low-income tenant households.
Multiple Unit Residential Building – MURB (1974 to 1981) created
195,000 units at an estimated cost to taxpayers of $2.4 billion. There
were no rent restrictions, so rents tended to be at the upper end of the
market.
Assisted Rental Program (1975) created 122,650 private rental units
at a cost of $300 million. The federal government provided grants or loans
to private landlords with no restrictions or requirements on rents. An
early study showed that in Toronto, average ARP rents were 32% higher
than average market rents.
Canada Rental Supply Plan (1981) cost taxpayers $258.5 million
(including the subsequent Canada/Ontario Rental Supply Program). Under
this program, one-third of the units were supposed to be set aside for
lowincome households. Of the 24,667 units funded across Canada, only 1,526
(6.2%) were affordable. For CORSP, 2,675 units were funded, but only 474
units (18%) were affordable.
Ontario Rental Construction Loans program (Ontario, 1981) cost
taxpayers $75 million for 15-year interest free loans to private landlords
with no restrictions on rents. Landlords were supposed to offer up to
20% of units to local housing authorities for RGI. Of the total of 14,540
units produced, with only 1,029 (7.3%) were affordable.
Convert-to-rent (Ontario, 1983), produced 11,900 units with a range
of rents, all well above market rents and not affordable to low-income
households.
Renterprise (Ontario, 1985) cost a modest $15.4 million and had
the goal of building 5,000 new private rental units. Target market rents
were established and many developers withdrew in favour of condominiums.
Only 2,176 units were built.
A 1997 study funded by Canada Mortgage and Housing Corporation compared
the longterm costs and benefits of private sector and social housing projects.
It found that the cost of subsidizing co-op and non-profit projects was
far less than subsidizing private investors, developers and landlords.
The study reported that in year 25 alone, social housing projects cost
taxpayers $800,000 less than the private projects:
“In all ten
comparisons, the non-profit break-even rents started out higher than
private rents but then rose more slowly than market rents. In nine of
the ten 14 Canadian Centre for Policy Alternatives Ontario Alternative
Budget 2003 cases, the non-profit rents crossed below market between
the fourth and eighteenth year of operation. Assessing the resulting
subsidy costs for comparable households (based on the use of a consistent
30 percent RGI scale), the study found that, over the past two decades,
the non-profit vehicle has been the most effective vehicle in nine of
the ten cases. On average, over time it is less expensive to subsidize
households in non-profit projects. For example, in year 25 the estimated
average subsidy of a non-profit unit compared to the estimated subsidy
for a market unit is some $20,000 a year less. . . Since the ten projects
have a total of some 400 units, the total savings in year 25 for these
projects alone would be some $800,000. . . Non-profit projects can be
more cost effective than subsidizing the construction of comparable
market units and renting units from a private landlord.”
Ontario’s not-so-affordable
housing program
In November
of 2001, Ontario joined with every other province and territory in signing
the Affordable Housing Framework Agreement with the federal government.
This deal states: “In light of declining vacancy rates and low production
of rental housing, federal, provincial and territorial governments believe
there is an urgent requirement for short-term measures to increase the
availability of affordable housing across Canada,” adding: “This initiative
needs to create affordable housing for low to moderate income households.”
The provinces and territories were supposed to design and deliver the
programs. Each province and territory was required to negotiate a bilateral
deal with the federal government spelling out the details of the new Affordable
Housing Program in their jurisdiction. The federal government committed
$680 million over five years. The provinces and territories agreed to
match this money, with a big loophole:
“Provinces
and Territories will be required to match Federal contributions overall.
Provincial and territorial contributions may be capital or non-capital
in nature, and may be in cash or in kind. These contributions may be
made by the Province or Territory or by a third party.”
Ontario signed a
bilateral housing deal with the federal government in May, 2002, taking
maximum advantage of the loopholes. While the federal government will
spend $245 million over five years to Ontario, the province is only promising
$20 million. More than $180 million of the so-called provincial share
will come from municipalities.
Ontario downloaded most of the cost to municipalities and also gave them
the responsibility for administering it. However, the province kept control
of key details. Heavyhanded actions by Ontario, even though it is only
paying a tiny share of overall costs, angered a number of municipalities
and delayed the roll-out of the plan.
The province finally announced details in December, 2002, but it still
has to negotiate separate agreements with every municipality that wants
to get the federal cash. In March of 2003, seventeen months after Ontario
State of the Crisis, 2003 15 Technical Paper #2 signed the framework agreement,
not one unit of new affordable housing has been built. And no units are
expected for months to come.
In addition to delays and almost no provincial funding, Ontario has written
the rules to ensure that little of the new housing will be affordable
for low and moderate-income households – the ones who were supposed to
benefit. Ontario has defined affordable as units “priced at or below average
market housing rents.” Average market rents are much higher than the amount
that most households can afford to pay.
The province’s 295,000 poorest households (800,000 women, men and
children) have incomes of $11,201 or less, according to Statistics Canada.
They can only afford rents of up to $280 per month. The next 295,000 poorest
renter households are only slightly better off. They have annual incomes
of $17,000 or less and can afford rents of up to $424. The CMHC average
rent for Ontario was $836 in 2002 – that’s three times higher than the
amount that the poorest renter households can actually afford, and almost
double the amount that moderate-income renter households can afford.
The province has decided that one key factor in selecting eligible projects
is the level of subsidy required per unit: The smaller the subsidy, the
greater the chance of receiving a grant. Spreading a small amount of money
over a large number of units is a smart political ploy for a government
that wants to boast about a large number of units being funded. But a
tiny subsidy per unit means that the rents per unit will be higher, and
less affordable, than if the per-unit subsidy was more reasonable. Once
again, the province is telling low and moderate-income renter households
to wait as the latest set of public subsidies are directed to higher-rent
units.
The National Housing and Homelessness Network and others welcomed the
Affordable Housing Framework Agreement as a first step towards a fully-funded
national housing strategy. The 2003 federal budget added another $320
million over five years to the Affordable Housing Program, another welcome
step at the national level.
The Ontario share of the new 2003 federal money could be as much as $115
million over the next five years, but only if Ontario produces matching
funds. And, like the $245 million assigned to Ontario under the original
framework agreement, the new money won’t reach the households that need
the help the most unless the province changes the rules that it announced
in December of 2001.
Many national groups are calling for the federal government to commit
$2 billion annually for new social housing as part of a national project
called the One Percent Solution. In the last two years, the federal government
has upped its commitment to an average of $200 million annually – ten
percent of the way towards this goal.
But Ontario, which consistently cuts its housing spending and refuses
to even match the new federal dollars, is falling farther behind.
OAB plan for new housing
The Ontario government’s housing policies have almost eliminated
the province’s affordable housing programs in the hope that the private
market would step in and fund new affordable housing. Not only has Ontario
lost tens of thousands of rental units, but rising rents and stagnant
renter household incomes have meant that the rental housing crisis has
grown worse in the past eight years.
Private interests have not charged to the rescue, even as they cashed
in on the many lucrative changes they demanded from the provincial government.
Of course, the lobbyists never actually said that they would build any
new affordable units. And private investors, developers and landlords
still won’t promise to build a single new truly affordable unit even as
they ask for more generous subsidies from government.
There is a real alternative: A substantial public investment in new affordable
social housing based on a administratively-efficient and fully-accountable
program of capital grants coupled with rent supplements for low and moderate-income
households in both existing and newly-built units.
This investment plan, along with a return to effective tenant protection
laws (real rent regulation and strong laws to protect existing rental
housing from demolition and conversion), would reverse the trend of the
past eight years and start to ease the province-wide housing crisis and
homelessness disaster.
The Ontario Alternative Budget for 2003 has a housing plan that would
generate 15,000 new social housing units annually, plus rent supplements
for 40,000 low and moderateincome renter households annually.
The cost of these initiatives:
- $630 million annually
for 12,600 new provincially- funded affordable units,
- $72 million annually
for 2,400 new units as Ontario’s share of the federal-provincial Affordable
Housing Program, and
- $196 million annually
for 40,000 new rent supplement units.
Over five years, this
sustained investment will generate 75,000 new affordable rental units
and rent supplements for 200,000 low and moderate-income households.
The full Ontario
Alternative Budget, to be released in late March of 2003, will have details
of the housing plan within the context of a fiscally responsible provincial
budget.
Notes on data sources:
Where’s Home? is available on the Housing Again Web
site at www.housingagain.web.net.
Follow the links from the main page. Click on Resources to access an extensive
on-line library of housing research.
Information on financial contributions to political parties is available
from Elections Ontario. Click on www.electionsontario.on.ca
and follow the links to election finances.
Canada Mortgage and
Housing Corporation’s annual rental market survey is on their Web site
at www.chmc-schl.gc.ca.
Go to Newsroom. The survey is released in November annually. CMHC also
has extensive housing data for sale.
Statistics Canada data, including the 1996 and 2001 Censuses, is available
on their Web site at www.statcan.ca. The home page has a direct link to
Census data.
Information on provincial
government finances is published in the Public Accounts, posted at http://www.gov.on.ca/FIN/english/engpaccts.htm.
Spending is reported in the 16 Canadian Centre for Policy Alternatives
Ontario Alternative Budget 2003 State of the Crisis, 2003 17 Technical
Paper #2 provincial Expenditure Estimates from the Management Board at
http://www.gov.on.ca/MBS/english/mbs/estimates/index.html.
Previous technical reports on housing in Ontario are available on the
Canadian Centre for Policy Alternatives Web site at www.policyalternatives.ca.
Click on Provincial Offices, then CCPA – Ontario. Then click on Research
& Publications.
About the author:
Michael Shapcott is Co-ordinator of the Community-University Research
Partnerships Unit at the Centre for Urban and Community Studies at the
University of Toronto. He is a member of the Ontario Alternative Budget
Working Group and a long-time housing and homelessness advocate. E-mail
address: michael.shapcott@utoronto.ca.
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