Reports / Articles

July 31, 2002

Backgrounder from Housing and Homelessness Network
in Ontario (HHNO) on new Ontario housing program

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.

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