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Daily Bread Food Bank                                               

How Affordable Is the New Federal-Provincial Housing Program?

Background

On Thursday, May 30 the federal government and the province of Ontario agreed to a long-awaited new affordable housing program.  According to the joint news release, the program would:

·        provide $489.42 million in subsidies for affordable housing; half ($244.71 million) to come from Ottawa with matching provincial funds;

·        permit the province to pass on municipal funding commitments as part of its contribution, thereby allowing the province to limit its cash contribution to the $20 million previously announced, only 8% of the required matching funding;

·        provide an average subsidy of up to $25,000 per unit to lower break-even rents to average market level (defined by the CMHC average market rent calculated in the October Rental Housing Market Report);

·        lock in affordable rents for 15 year minimum, with increases following the rent control guideline;

·        distribute funding by population areas, focusing on regions with low vacancy rates;

·        qualify municipal non-profits, co-operatives, and private sector for program funding, although there may be barriers intended to exclude the former two, such as minimum equity requirements.

Food Bank Use and the Affordability of Rents

In 1995, the Ontario government unilaterally stopped all social housing projects, many of which were in advanced stages.  Then in 1998, the Tenant Protection Act came into law, giving landlords the ability to set rents at what the market would bare for vacant units, and widening the scope for above-guideline rent increase for sitting tenants.  The result of these two policies has been a significant decline in the stock of affordable housing relative to need. 

Housing costs and food bank use are intimately connected; the single greatest cost facing food bank users is rent.  Since 1995, there has been an increase of about 35% in monthly food bank use, from 115,000 to 155,000.  During the same period there has been a 30% increase in rents in Toronto.  Most food bank clients are either receiving ODSP or OW, and many are working at minimum wage jobs.  Since incomes for all of these groups have remained stagnant, after-rent income has steadily declined over the last seven years, from a high of $7.40 per day per person in 1995 to $4.11 currently.  With so little money left over after rent, the other necessary expenses of living, such as food, transportation, utilities, and clothing get cut.

Is the Program Affordable?

An affordable housing program is desperately needed.  But how affordable are these subsidized units the government is proposing?  According to the Ministry of  Municipal Affairs and Housing, a subsidy of $25,000 per unit will be provided to lower break-even rents to average market levels (NOTE: “break-even rents”: private developers require a minimum 10% return on investment which would lead to higher than average market rents).[1]  But assuming the new “affordable” units rent at the CMHC market average, how affordable will the new housing program be?  An apartment is generally considered affordable if no more than 30% of gross income is spent on housing.[2]  By that standard, in Toronto the total annual income required to make each apartment type affordable would be:

*Note: These are the averages for the amalgamated City of Toronto only.  The boundary used by the CMHC for the Toronto Rental Market Report includes parts of Durham, parts of York Region, Peel Region, and parts of Halton.

If the 30% standard is applied, the $25,000 per unit subsidy will benefit only families with incomes as high as $50,000 per year.  This is clearly NOT affordable housing to those most in need. 

The extent of the lack of affordability is obvious if the CMHC average market rents are compared to the actual monthly incomes of OW and ODSP recipients, both of which are particularly vulnerable groups as reflected in their high rates of food bank use (43.3% and 15.1% of all food bank clients respectively).  The results show that the new “affordable” housing program does not come anywhere close to meeting the 30% of gross income affordability standard.  For OW recipients rents would exceed the allowance provided for shelter in all cases, and even total income in many others.  The situation is better for ODSP recipients, but again market rents exceed the shelter allowance in all cases, and units are still far from affordable by the 30% standard.

Ontario Works (Welfare)  

*For the sake of comparison, the apartment sizes that one would reasonably expect to house each family structure were used.  There is evidence from previous food bank surveys, and anecdotally, that many families are forced to cramp into smaller accommodations or double-up to afford the rent.  

ODSP (Disability Benefits)

Currently 24% of food bank clients live in government subsidized housing.  That is unlikely to increase under the new affordable housing program.  For food bank clients a move from their current housing to the new affordable housing would actually result in a financial hit (although it might improve their apartment conditions). 

The next two tables examine the situation of food bank clients in their current housing, and what would happen if they paid the market rents proposed in the affordable housing program. 

They show that the current housing situation of food bank clients is appalling.  Housing experts generally believe that people paying more than 50% of gross income on rent are extremely vulnerable to eviction and homelessness.[3]  Every group analyzed here is in that category.  Single mothers in particular are in desperate straits, with a shocking 85% of income devoted to rent.  Couples with children are not much better off, with 73% of income channeled into shelter costs.  This puts the slogan Pay the Rent and Feed the Kids firmly into context. 

In all but three categories, average incomes are below the average market rents the government considers affordable.  The fourth column of the second table indicates the maximum affordable rent for each group of food bank client in order to illustrate the disconnect between the government’s program and the reality for Toronto’s most vulnerable citizens.

Food Bank Clients (Current Accommodations)*  

*Based on Daily Bread Food Bank’s Spring 2002 Survey

**People reporting zero income are actually a significant and increasing group.  Daily Bread has observed a noticeable rise in the last three years, from 12.6% of all food bank clients in 2000, to 13.4% in 2001, and 14.7% in 2002.  People in this category include recently laid off workers who haven’t received an EI or OW cheque, those convicted of welfare fraud, etc.  Short-term lack of income puts them at the highest risk of eviction and homelessness.

+ For couples and singles, overall family size is larger than expected (2.3 and 1.4 respectively) because of the incidence of people temporarily doubling up.  Anecdotally this occurrence is known to be increasing as rents continue to rise.

Food Bank Clients in Proposed Program

While the initial rents proposed in the government’s program are not affordable, an additional concern is the intent to allow rents to increase yearly at the rent control guideline.  Economic evictions are already a very real concern for many tenants currently renting in the private market, as rent control hasn’t adequately protected them from rising rents.[4]  The rent control guideline as it is currently formulated gives landlords an automatic yearly increase of 2% (intended to be used for general maintenance costs, although there is no mechanism in place to ensure the money is actually spent for that purpose) plus an additional amount that reflects the inflation of operating costs.  In 2002, the rent control guideline was a very high 3.9%, which was a result of a one-time increase in heating costs.  Under the current formula, assuming present conditions persist, the 2003 guideline will likely be 3.8%.  But if electricity deregulation yields the high rates many expect, the guideline may raise even more quickly, pushing rents out of the range of affordability for even those few who could originally afford them.  This will be particularly so in the absence of income security measures that take into account the cost of living. 

Conclusion

A subsidized housing program should clearly target those most in need. It is generally accepted that food bank clients are among the most vulnerable citizens in our society in terms of being able to afford the basic costs of living.  This belief is certainly borne out with respect to the current statistics regarding the percentage of income food bank clients devote to rent. 

Average market rent is simply not an adequate definition of affordability and does nothing to ease the burden on lower income earners.  Indeed, the reason why we are in a housing crisis to begin with is that market rents are far above what many can afford which, itself, is a result of the deregulation of rents that came with the Tenant Protection Act. 

For food bank clients specifically, rents in the range of $450 per month would be required just to bring the percentage of income spent on housing under 50%. For real affordability, ie. 30% of income on rent, rents of $250-300 would be in order.  This would obviously require a far greater financial commitment on the part of the provincial government than the $20 million offered to date.

For more information, contact Daily Bread.

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