Preserving Co-op Housing: Proposing Concrete Action

February 10, 2015 - In Ontario, “more than 7,000 households are slated to lose their rental top-ups.”[i] Over the years, both the provincial and federal governments have created programs to support the development of non-profit geared to income housing co-operatives. Rent to geared income (RGI) housing is subsidized housing. “The rent is based directly on the tenant’s income, usually 30% of the gross monthly household income. If you receive social assistance, the rent charges are based on the rent benefit set by the Ontario government, rather than 30% of the gross monthly income.”[ii] RGI subsidies are most often available in publicly owned social housing, but are also available in co-operative, non-profit and private housing. Subsidies have been provided to co-ops through agreements to pay the mortgage, and most were established in the 1990s for 20 or 30 year terms. These subsidies expire when each co-op building’s mortgage expires. When the federal government entered into this arrangement it was the most cost effective avenue to take: they could create affordable housing that works without actually having to run it. It was clear that this arrangement would come to an end one day, the question is – is anyone prepared for what comes next?

In order to determine possible next steps, it is important to understand the policy that led us here. That policy is the Federal Co-operative Housing Program, formerly ILM (Index-linked Mortgage), that was initiated in 1986. This program was set as a five year trial and was funded by the federal government. The rent supplement is cost shared with the province (Ontario Rent Supplement Program). The ORSP’s best known feature was the index-linked mortgage. This meant that “private lenders were invited to provide 100% of the cost of the mortgage with a floating rate of interest which gave a fixed rate of interest plus inflation.”[iii] According to the Co-operative Housing Federation of Toronto, this feature had two effects: (October 16, 2014. 2.)

1. The government’s subsidy costs per unit were lower than under the previous program standards.
2. The co-op’s monthly mortgage payments rose with inflation even though costs were lower in the first few years.

 Other features included:

• A minimum of 15% of the units must be rent geared to income units. There can be up to 50% rent geared to income units.
• The remaining units must have market occupancy charges. Each year there are indexed contributions if they are needed to bridge the gap between economic and market changes in the first years of a project. Assistance was reduced after the fifteenth year of operation.

The housing program as it was designed, created great strides in providing funding and supporting affordable housing options for low-income and fixed income individuals. Now that the end of the program is in sight there are differing opinions of which actions to take, and where the road ahead might lead. There is a leaning towards the belief that “since housing providers knew that the mortgages were coming up, they knew the agreements would be ending because mortgages are paid off.”[iv]

While the housing providers could no longer have that revenue, it is also true that they would also no longer have the mortgage expense. One solution is that Co-op boards could keep low-income residents in their units by providing an internal subsidy from people paying a higher market rate. The potential issue with this solution is that many co-ops cannot afford an internal subsidy. This is due to the fact that after over 30 years buildings have aged, have become old, and are in need of repairs and or upgrades. The reality being that the money from market rents are required for expensive capital repairs. The Canada Mortgage and Housing Corporation estimates “that from 2013 to 2014, there will be a $23.3 million decrease in funding.”[v]  The federal contribution to affordable housing was “$3.6 billion in 2010. It has fallen to about $2 billion today, and it will decrease further to $1.8 billion by 2016, a 52 percent cut over six years.”[vi] Nicholas Gazzard, the executive director of the Co-operative Housing Federation of Canada finds that “the problem is Canada’s fragmented housing landscape, and could be easily solved by getting the provinces and federal government to solve the problem collectively.”[vii] Gazzard further thinks that  “the solution which is most realistic and practical is for the provinces to provide rent supplement programs to replace this existing subsidy stream, but it would be incumbent on the federal government to cost-share those programs.”[viii]

Although Gizzard’s solution could be counted realistic from a macro lens, the notion of it being easily solved from a drilled down perspective is idyllic at best. Unless these renewed cost-sharing programs happen very soon, the municipal district services boards funding obligations could change. For example, in Thunder Bay, the District Housing Corporation (TBDHC) “will be the sole shareholder responsible for funding and administration of about 2,489 social housing units (325 of which are co-operative housing units) in accordance with the Housing Services Act (HAS).”[ix]  Without the formal unilateral projects, the local administrative boards’ obligations will cease for those projects. Housing providers whose operating agreements have expired or who have be released from under the Housing Services Act by the Minister are only required to conduct themselves in accordance with their corporate laws; they are no longer subject to district social services admin boards. In a pre and post mortgage maturity environment, the Service Manager has a legislated responsibility to meet its service level standards. “A service level standard is a prescribed obligation to fund a specified number of households on a rent-geared-to-income (RGI) basis. The Thunder Bay District Social Services Administration Board (TBDSSAB), has an ongoing obligation to fund 3,601 units of RGI housing as specified in c 6, Schedule 1, s. 40 (1) of the Act.”[x] When the service levels are not tied to specific projects, the TBDSSAB would have to enter into new agreements with formerly subsidized housing providers or acquire units in the private sector to meet its service level standards. Entering into new agreements and securing the providers commitment to offer RGI housing units could prove difficult as “there has already been a 2 percent loss from the inventory of 2011; this is due to service managers cancelling rent supplement agreements as the mortgages come up to lease at market rates because of the low vacancy rate in the District of Thunder Bay.”

As the Federal Co-operative Housing Program deteriorates, proactive policy changes must be constructed. Preserving co-op housing on a national level would require the development of a national housing strategy that provides sustained funding for existing and future housing initiatives. In order to stabilize co-op housing here in northern Ontario, “the province would need to receive an increased share of new and flexible capital funding based on an allocation model that takes into account northern factors (geography, costs, loss of employment, and demographic trends).”[xi] Concrete change would require the legal ability to retain the restrictions registered on the title post mortgage completion and operating agreement expiry.  Subsequently, to reinforce the future of co-op housing, creating municipal by-laws is key. This would ensure that all new housing developments include a reasonable minimum percentage of low income or affordable housing units would cement a viable future for those in need. Currently, no municipal bylaws exist in the District of Thunder Bay surrounding the creation of new affordable housing. At this time, the TBDSSAB has made recommendations to its Political Action Committee (PAC) to create a work plan. From there the TBDSSAB plans to enter into discussions with representatives with the City of Thunder Bay. To emphasize the necessity for municipal by laws, there are important steps that have been put in place in addition to advocacy and lobbying. Under their current Housing and Homelessness Plan, TBDSSAB will:

• Develop an internal procedure for tracking and reporting the number of current rent supplement units.
• Conduct research on best practices for delivery of direct RGI in Ontario.
• Begin recruitment of new private landlords to the rent supplement program.
• Work with current landlords to keep RGI units currently available.
• Production of information materials discussing the benefits of the rent supplement program for distribution (97).[xii]

Every part of the action plan is required to see an enhanced RGI and rent supplement system put into motion. If the demand for new affordable housing developments is to be proven, tracking and publicizing direct RGI data and gauging the success of TBDSSAB’s efforts is essential. To enforce the RGI to market ratios the district social services board must work together with public and private housing service managers, and publicly acknowledge and credit those landlords engaged in the program. According to the current trends in social housing reported by TBDSSAB in July 2014, “the number of applications for RGI housing is at 48% of all applications in the district,”[xiii] and clearly expresses the demand. Enacting a by law that guarantees future RGI units in new housing developments is important, and doing so involves all stakeholders responsible, and holds them accountable. 

Authored by Cheryl Reid, Policy Analyst with Northern Policy Institute.

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