HomeMy WebLinkAboutPSD-080-03
,
--!
...
a. "
L~MlJglO
REPORT
PLANNING SERVICES
Meeting:
GENERAL PURPOSE AND ADMINISTRATION COMMITTEE
Date:
Monday June 16, 2003 ~if
PSD-080-03 File #: 'P'CN11.2.6
GffJ-()x3-D3
By-law #:
Report #:
Subject:
COMMUNITY RENTAL HOUSING PROGRAM
RECOMMENDATIONS:
It is respectfully recommended that the General Purpose and Administration Committee
recommend to Council the following:
1. THAT Report PSD-080-03 be received;
2. THAT Region of Durham be advised that the Municipality of Clarington respectfully
declines to participate with the Region in the proposed Community Rental Housing
Program; and
3. THAT the Federal Minister of Human Resources Development, the Premier of Ontario,
the Minister of Municipal Affairs and Housing and the Mr. John O'Toole MPP and any
other delegation or interested party listed in this report be advised of Committee and
Council's decision
Reviewed by:d~~~-
Franklin Wu
Chief Administrative Officer
CS*NT*DJC*sn
June 9, 2003
CORPORATION OF THE MUNICIPALITY OF CLARINGTON
40 TEMPERANCE STREET, BOWMANVILLE, ONTARIO L 1C 3A6 T (905)623-3379 F (905)623-0830
69910
. ,
REPORT NO.: PSD-080-G3
PAGE 2
1.0 BACKGROUND
1.1 At a meeting held on May 7, 2003, the Health and Social Services Committee of
Regional Council considered Report 2003-J-12 entitled Community Rental
Housing Program. Regional Council has forwarded a copy of the report to the
Area Municipal Councils for their review and response by June 16, 2003
regarding their willingness to participate with the Region in the proposed
Community Rental Housing Program. They were also soliciting input specifically
relating to the parameters of the program,
1 .2 At the June 2, 2003 Council meeting, the correspondence and report were
referred to the Director of Planning Services and the Director of
Finance/Treasurer.
The purpose of this report is to:
. briefly discuss the initiatives of the Regional Chair's Task Force on
Sustainable/Affordable Housing;
. provide an overview of the Community Rental Housing Program;
. discuss the findings of the Work Group; and
. discuss the program parameters and staff's overall concerns with
the program.
2.0 REGIONAL CHAIR'S TASK FORCE ON SUSTAINABLE/AFFORDABLE
HOUSING
2.1 In 2001, the Regional Chair formed a Task Force on Sustainable/Affordable
Housing. It recognized the need for affordable housing in Durham. In March
2002, Clarington Council endorsed staff report PSD-016-02 indicating a
willingness to participate in the development of affordable rental housing subject
to further review of the financial implications to the Municipality. The Municipality
would undertake such a review at such time as the Federal and/or Provincial
Governments commit to renew funding of social housing and provides such
funds to the Region of Durham. In May 2002, the Region formed a Working
69911
,
REPORT NO.: PSD-oaO-03
PAGE 3
Group on Affordable Rental Housing comprised of Regional and Area Municipal
staff to examine ways to stimulate the development of affordable housing.
Subsequently, the federal and provincial governments announced the
Community Rental Housing Program.
The Working Group focused attention on implementing the program in Durham
Region. The Group meetings were attended by Staff of the Planning Services
and Finance Departments who, throughout the following 10 months, worked
through the parameters of the program.
3.0 OVERVIEW OF THE COMMUNITY RENTAL HOUSING PROGRAM
3.1 On May 30, 2002 the Government of Canada and the Government of Ontario
signed an Affordable Housing Program agreement aimed at stimulating the
construction of up to 10,500 units of affordable housing in the province. The
Community Rental Housing funding is one component of the Affordable Housing
Agreement.
3.2 The federal government has committed $680 million dollars to stimulate new
rental housing construction in Canada. The Province of Ontario is allocated $489
million for 12 municipalities identified with a high need for affordable housing.
Durham Region was identified as a high need area and as such $5 million dollars
was available to stimulate the construction of approximately 215 units. The
funding details include an average of $25,000 per unit in federal capital grants
that must be matched by provincial, municipal, private and not-for-profit sources.
The province's contribution is $2,000 per unit which offsets the Provincial Sales
Tax (PST) and the remaining $23,000.00 per unit must be funded by
municipalities and lor other sources such as non-profit housing corporations and
charitable organizations. Matching contributions can include land, property
69912
,
REPORT NO.: PSD-080-03
PAGE 4
management, waiving of municipal fees and charges, donations or cash or "in-
kind" services.
3.3 The Ministry of Municipal Affairs and Housing is responsible for program design
and administration of federal funds, however the Service Managers, such as the
Region of Durham, are responsible for implementing the program target areas.
The province has, however, established mandatory program parameters to
access the funding, they include:
. a Regional Municipal Housing Facilities By-law and to adjust the property
tax rate for these properties to the single residential properly tax rate for
any units constructed under the program;
. a minimum of three units are eligible;
. rents for new units cannot exceed Canada Mortgage and Housing
Corporation (CMHC) average market rents;
. rents must be affordable for a minimum of 15 years with a 5 year phase-
out period for sitting tenants;
. Provincial Homelessness Rent Supplement can be included in unit count
(Durham has 50 units, 7 units are allocated to Clarington)
. funding must be allocated through a regional tender process;
. incentives offered in the tender document must be available to all
proponents replying to the tender;
. funding must be allocated to qualified projects requiring the least amount
of federal funding;
. approved projects must receive their building permits within 18 months of
receiving notification of funding ; and
. initial project selection should take place by October 31, 2003.
4.0 FINDINGS OF THE WORKING GROUP
4.1 The Region retained the services of SHS Consultants Limited to analyze the
impact of various incentives on market rents for newly constructed rental housing
to achieved CMHC target rents. C.N. Watson and Associates were retained to
review the short and long term funding implications. The information was
circulated and discussed at Working Group meetings.
4.2 Incentives ImDact Analvsis
Distribution of the 215 housing units allocated to the Region of Durham was
based on population distribution throughout the Region. The Municipality of
69913
, ,
REPORT NO.: PSD-080-03 PAGE 5
Clarington is allocated 30 housing units and is eligible for $750,000.00 in federal
grants. The funding is eligible to "affordable rents" as defined by CMHC.
Table 1: Shows a hypothetical impact of incentives on rental rates for
townhouses and apartments in Clarington to achieve CMHC target rents using
three scenarios;
. "Full costs" -showing projected rents without financial incentives;
. "Reduced Tax Rates" - showing the impact of the reduced property tax rate
(multi-residential to single residential rates) with matching federal
contributions and the provincial PST rebate;
. "reduced tax rate plus regional and municipal waivers" - showing properly tax
incentives plus offsetting program rebates equal to the cost of waiving
development charges, and the matching federal contributions to a maximum
of $25, 000 plus the PST rebate.
TABI..E1
CLARINGTON
TOWNfft:Jt:ISI!'RENTS WALKUP APARTMENT RENTS
2-Bed 3-Bed 1-Bed 2-Bed 3-Bed
Full Cost $ 1,355 $ 1 ,455 $ 1 ,095 $ 1,245 $ 1,345
Tax at Residential $ 1,035 $ 1,135 $ 835 $ 985 $ 1,085
Tax at Residential + Regional $ 880 $ 980 $ 685 $ 835 $ 935
& Municipal Waivers
CMHC Taroet Rent $ 843 $ 962 $ 684 $ 812 $ 906
4.3 FiscallmDacts
C.N. Watson examined the fiscal impact on the Region of Durham and area
municipalities and the cost of providing a program which included a rebate on
development charges and taxing multi-residential developments constructed
under the program at single residential property tax rates. Table 2 provides a
summary of the value of estimated program contributions over twenty (20) years.
The implications of the findings as they pertain to the Municipality of Clarington
are discussed in Section 5.0 (5) of this report.
69914
REPORT NO.: PSD-080-03
PAGE 6
'FABL.E1
REGIONAL COMMIJNI.T'lif;llaNTAl HOIJSINGPROGAAM
ESTIMATEDCONTAfSU"rIQNS QVER20VEARS
(Based on 215 Unit. ModelasDer C.N. Watson Ahalvsisl
FEDERAl. . PROVINCIAL AREA REGION
MUNICIPALfflES
Development Per Unit $4,008 $6,733
Charges Program 861,807 $1,447,684
Property Tax PerUnlt $11,036 $16,632
Program $2,372,845 $3,575,941
Rent Supplement Per Unit $2,800
(50 Units) Program $2,800,718
Other Program Per Unit $25,000 $2,000
Contributions Totsl $5,000,000 $400,000
$5,000,000 $3,200,716 $3,234,652 $5,023,625
5.0 STAFF COMMENTS ON PROGRAM PARAMETERS
5.1 The Region is requesting the input from each area municipality on specific
parameters of the program. These parameters are noted below followed by staff
comments.
1) Proposed 20 year program length: The program criteria indicates that rents must
be affordable for a minimum of 15 years, plus a 5 year phase-out. Should the
program proceed, staff would concur with the regional recommendation that the
program should be extended to at least 20 years, plus a 5 year phase-out. There
are significant public funds being invested and a more reasonable pay back
period would be appropriate.
2) Preliminary Unit Allocations: The Working Group proposed an allocation based
on Area Municipal population, rounded up to 10. This is a reasonable approach
and results in a unit allocation to Clarington of 30. If a municipality declines
participation, the units can be reallocated to other municipalities.
3) Area Municipal Target Rents: Rents in the new units cannot exceed the CMHC
average market rent for a community. For Clarington, this translates to $843 and
$962 respectively for two and three bedroom townhouses and $684, $812, and
$906 respectively for one, two and three bedroom walk up apartments as shown
in Table 1. However, this means that the Community Rental Housing Program is
not pursuing the objectives of the Affordable Housing Task Force. The intent
here is to increase the inventory of rental housing, not provide for low income
housing. Only 45% of the units can be allocated to non-profit developers. Also,
to meet the target rents, both Regional and Area Municipal incentives are
required. As well, only townhouses and walk.up apartments would be affordable.
69915
REPORT NO.: PSD-oSO-o3
PAGE 7
4) Tender development: The program criteria indicates that funding must be
allocated to projects through a tender process. This presents procedural
problems. It would be more appropriate to consider a request for proposal
process.
5) Mandatory proporlional sharing of incentives: The Community Rental Housing
Program requires that the properly tax rate be set at the single residential
properly tax rate for all units constructed under this program. For 2002, the
residential rate was 1.49% compared to the multi-residential rate of 3.05%. This
is therefore over a 50 % reduction in the tax rate. For Clarington, based on the
20 year structure, the present value cost of this incentive is approximately
$267,818. The regional cost for the Clarington proposed units is an additional
$458,549.
A concern regarding fair treatment to taxpayers is of particular issue here. Since
the units are not designated as low income housing, they are directly competing
with other market rental units in Clarington. Several owners of rental units in
Clarington have approached Council in recent years with respect to the impact of
the multi-residential tax rate. The municipality had no legal latitude to assist in
mitigating this cost for the existing landlords yet this program will do so for a new
development.
Also, the Region of Durham and Area Municipalities have been working with
owners of multi-residential properties through the long-term tax policy adopted by
Regional Council. The stated goal is to reduce the multi-residential tax ratio and
in turn the tax rate. The ratio has been reduced in both 2002 and 2003.
In order for the market target rent to be reached, the tax rate reduction is not
sufficient. It is also therefore proposed that a rebate of development charges
would also be required. Based on 2002 rates this would cost Clarington a
projected $145,527 with an additional contribution from the Region for the
Clarington units of $192,572. As a straight waiver of development charges is not
considered in our development charges by-law, an equivalent rebate would have
to be funded elsewhere. Currently, Clarington has a significant number of
projects in process through the 2003 approved budget and the addition of
another cost that is not within our primary mandate would add increased
pressures in future budget years.
6) The identification of the nature, location and type of rental housing development
required to meet local needs. Multi residential uses should be located in urban
areas and closer to various services and a transit supportive infrastructure.
Downtowns and Main Central Areas are appropriate. The lands would have to
be "prezoned" to meet the program timelines and tendering process.
69916
REPORT NO.: PSD-080-03
PAGE 8
6.0 OVERALL CONCERNS -
6.1 The Community Rental Housing Program is flawed due to the lack of significant
Provincial financial participation. We concur with Regional Staff on this point.
With limited revenue sources available to municipalities and unwillingness by
senior levels of government to provide, or share, significant new sources of
revenues, the Municipality cannot afford to participate in a program that should
remain the responsibility of senior governments. The estimated impact for
Clarington for the 30 allotted units would total $413,345 with another $651,121
from the Region for the 30 units. This compares to the Provincial contribution of
$2,000 per unit for a total of $60,000.
6.2 Between 1991 and 2000 approximately 57% of the new residential building
permits issued in Clarington were for semi-detached, rowltownhouses and
apartments. Most of the units would be considered affordable but very few of
these units were rental accommodation. The Community Rental Housing
Program proposes to address this issue by creating 30 additional rental units.
However, since target rents are based on average rents in the community, it
does not really provide housing for low income families.
6.3 This program may be of benefit for communities with Brownfield Programs where
a municipality is pursuing urban renewal objectives and has a program of
incentives to encourage redevelopment.
7.0 RECOMMENDATIONS
7.1 It is therefore recommended that the Municipality of Clarington respectfully
decline to participate in order that the unit allotment may be reallocated to
another area municipality. It would be more appropriate for our focus to remain
upon the long term taxation strategy to assist existing units in remaining in the
marketplace.
Attachments:
Attachment 1 - Region of Durham Report 2003-J-12
69917
The Regional Municipality of Durham
To: The Health and Social Services Committee
The Finance and Administration Committee
From: Dr. Hugh Drouin, Commissioner of Social Services
RJ. Clapp, Commissioner of Finance
Report No.: 2003-J-12
Date: April 30, 2003
SUBJECT:
Community Rental Housing Program
RECOMMENDATIONS:
THAT the Health and Social Services Committee and Finance and Administration
Committee recommend to Regional Council that:
a) This report be forwarded to the Area Municipal Councils for their review, and
response by June 16,2003 regarding their willingness to participate with the
Region in the proposed Community Rental Housing Program, specifically as it
relates to the following parameters:
. the proposed 20 year program length;
. the preliminary unit allocations for each Area Municipality as detailed in the
report;
. the Area Municipal target rents as detailed in the report;
. the development of tenders specific to each Area Municipality;
. the mandatory proportional sharing of incentives by the Area Municipality to a
minimum of the Regional contribution (I.e. waiving of Develupment Charges
or other types of contributions such as municipal lands); and
. the identification of the nature, location and type of rental housing
development required to meet local needs.
b) The Premier of Ontario, the Minister of Municipal Affairs and Housing, and local
MPP's be advised of the Region of Durham's concern with:
. the lack of significant financial participation by the Provincial government in
the Community Rentai Housing Program, since the non-matching of Federal
funds by the Province creates an extraordinary higher financial requirement
for municipalities;
. the requirement for a tender instead of a request for proposal process for the
selection of affordable housing projects;
. the limitations on municipal and private non-profit housing participation; and
. the limited timetable which requires projects to be selected by October 31,
2003.
69918
Report No.: 2003-J-12
Page No.: 2
1.0 BACKGROUND
The need for affordable housing in the Regional Municipality of Durham has been
documented in previous reports to Council. In particular, the Regional Chair's Task
Force on Sustainable/Affordable Housing identified a number of factors, including:
. low rental housing vacancy rates (2.3% in October 2002);
. rental rate increases outstripping inflation and real household income;
. the significant percentage of residents paying more than 30% of their gross income
on shelter;
. the three-to-five year waiting list of some 4,900 applicants for social housing; and
. the growing number of homeless people in the community.
The Regional Chair's Task Force reviewed the types of barriers that prevent developers
from constructing a range of affordable housing in Durham,.-The Task Force concluded:
"It is clear that, if some approaches could be found to help offset costs,
rents could be reduced and the range of households able to afford such
accommodation increased, Given the high demand for rental housing in
the Region, there would be an incentive for private developers to move
ahead with new rental development in the Region."
While it was recognized that senior levels of government needed to take a leadership
role in the funding and development of affordable rental housing development, the Task
Force also identified a number actions that could be undertaken by the Region of
Durham to help stimulate the development of affordable rental housing. In addition, the
Task Force recommended that Area Municipalities be encouraged to consider local
incentives to maximize opportunities to reduce rental rates for newly constructed units.
As detailed in Report #2002-COW-01, Area Municipalities provided feedback on the
Task Force recommendations and suggested that any Regional program design must
give careful consideration to the short and longer-term impact that specific incentives
may have on the local tax base. Regional Council directed the establishment of a
Working Group of Area Municipal and Regional staff to assess the financial implications
of an affordable housing program in Durham.
A Working Group on Affordable Rental Housing was formed in May 2002 comprised of
Regional and Area Municipal staff, Subsequently, the Federal and Provincial
governments announced details of the Community Rental Housing Program in
December 2002 allowing the Working Group to begin the necessary financial impact
analysis.
This report provides information on the Community Rental Housing Program, identifies
related concerns, and presents the Working Group findings on the cost of an affordable
housing program in Durham. Section 2.0 provides the highlights of the report while the
balance of the report further describes the program criteria and identifies potential
financial impacts. The appendices provide the detailed analysis as reviewed by the
Working Group.
69919
Report No.: 2003-J-12
Page No.: 3
2.0 HIGHLIGHTS
The Federal/Provincial Community Rental Housing Program provides:
. A program to increase in the supply of rental housing at existing average rent
amounts. Thus, the Community Rental Housing Program does not purport to be a
social housing program
. $680 million in federal funding (announced in 2001) to stimulate new rental housing
construction
. $489 million allocated to Ontario
. $5 million in federal funds for rental housing development in Durham Region (one of
12 targeted communities with low vacancy rates in Ontario)
. An average of $25,000 per unit in federal capital grants that must be matched by
provincial, municipal, private and not for profit sources
. A Provincial contribution of $2,000 per unittooffset the Provincial Sales Tax
. The remaining $23,000 per unit must be matched by municipalities and/or other
sources (i.e. non profit housing corporations, charitable organizations etc.)
Program Criteria:
. To access funding, the Region must pass a Municipal Housing Facilities By-law and
adjust the property tax rate for the new facilities to the single residential property tax
rate for any units constructed under the program
. Rents in new units cannot exceed the Canada Mortgage and Housing Corporation
(CMHC) average market rent rate for the community
. Rents must be "affordable" for a minimum of 15 years, plus a 5 year phase-out
period for sitting tenants (option to extend to 20 years, plus a 5 year phase-out
period)
. Only 25% of units can be targeted to municipal non-profits and up to 20% to private
non-profit housing corporations
. Program encourages private sector partnerships with non-profit housing
corporations
. Provincial Homelessness Rent Supplement can be designated to units constructed
under the program in order to make rents affordable to low income households, with
rent supplement funding guaranteed by the Province until 2023 (Durham has 50
such units)
. Funding must be allocated to projects through a Regional tender process
. The incentives offered in the tender document must be available to all proponents
replying to the tender
. Qualified projects requiring the least amount of federal funding must be selected
. Approved projects must receive their building permit within 18 months of receiving
notification of funding commitment
. Funding will be available from the Province to Service Managers, like the Region of
Durham, to help off set program administration costs
. The Province has recently indicated that initial project selection should take place by
October 31,2003.
69920
Report No.: 2003-J-12
Page No.: 4
Staff Concerns Regarding the Community Rental Housing Program:
. The Provincial government is contributing significantly less than both the Federal
Government and the amounts required of municipal governments. The token
contribution by the Province of a maximum of $2,000 per unit is inadequate when
compared to the Municipal Governments' contribution of an average of $23,000,
particularly when the Provincial revenue opportunities are compared to the very
limited Municipal revenue options.
. The Working Group analysis suggests that both Regional and Area Municipal
incentives will be required to reduce rents to the CMHC rent levels
. Furthermore, staff analysis suggests that only modest townhouses and wood frame
walk-ups are economically feasible.
. CMHC target rent amounts will still be cost-prohibitive for many households on the
social housing waiting list, yet the program would require substantially greater
funding to generate buildings with lower rents.
. Only 45% of the units can be allocated to non-profit developers, who have the
expertise in effectively managing affordable rental housing and the interest to
maintain it as affordable in perpetuity.
. Given the public investment in this program, the length of the program should be
extended to at least 20 years, plus a five year phase out for sitting market rent
tenants, to ensure maximum return for the community.
. The Province has not made any additional rent supplement units available to ensure
that those most in need are housed.
. Timelines provided by the Province are not achievable.
. The tender process limits opportunities to assess proposals according to "value for
public money" and presupposes local zoning processes by "qualifying" projects for
funding.
Financial Implications:
. Regional contributions are estimated at $1.4 million in one time costs and $3.6
million in present value terms over 20 years in foregone tax revenue as detailed in
the following table:
69921
Report No.: 2003-J-12
Page No.: 5
Federal Provincial Area Region
Municipalities
Development Per Unit $4,008 $6,733
Charges
Program $861,807 $1,447,684
Property Tax' Per Unit $11,036 $16,632
Program $2,372,845 $3,575.941
Rent Per Unit $2,800
Supplement
(50 units) Program $2.800,716 1 See note below
Other Per Unit $25,000 $2,000
Program
Contributions Tetal $5,000,000 $400,000
$5,000,000 $3,200,716 $3,234,652 $5,023,625
Table 1
Regional Community Rental Housing Program
Estimated Contributions Over 20 Years
(Based on 215 Unit Model as per C.N. Watson Analysis)
. Net Present Value for 20 years at 6% (foregone revenue)
1 Does not include potential costs of $5,393,345 for a Regional Rent Supplement Program for an
additional 93 units.
The above table also indicates that the largest financial contribution to this program will
be made by property taxpayers, both Regional and Local, who will be contributing an
estimated $8.3 million as compared to an estimated $3.2 million by the Province
(including the 100% Provincial Rent Supplement Program).
3.0 COMMUNITY RENTAL HOUSING PROGRAM
In the 2001 Speech from the Throne, the federal government committed $680 million for
the creation of affordable housing through its Federal Affordable Housing Program.
Details of the program were outlined in previous reports to Council (see Reports # 2002-
SH-15; 2002-SH-31; 2003-SH-01).
On May 30, 2002, the Government of Canada and the Province of Ontario signed an
agreement that will provide up to $489 million for the creation of approximately 10,500
affordable housing units in Ontario over the next five years.
The Community Rental Housing Program was introduced in December 2002 as a joint
Federal/Provincial program to help stimulate new rental housing construction. Durham
Region has been identified as one of the twelve "high need" communities targeted for
program funding.
69922
Report No.: 200s-J-12
Page No.: 6
As noted in the Regional Chair's Task Force report, in order to recover construction
costs for the development of new rental housing units, the rents charged by private or
non-profit developers would be cost-prohibitive. The Community Rental Housing
Program does not purport to be a social housing program. Its intent is to increase the
supply of rental housing at existing average rent amounts within Durham.
3.1 Available Funding
As one of twelve municipalities in Ontario with a "high need" for affordable housing,
federal grants to a maximum of $5 million will be made available to help stimulate the
construction of approximately 200 units of rental housing in Durham. Funding details
are summarized below:
. An average of $25,000 per unit in federal capital grants that must be matched by
Provincial, Municipal or other sources (i.e. non-profits, charitable foundations etc.) is
available.
. Province will provide $2,000 per unit to offset the Provincial Sales Tax
. The remaining $23,000 per unit must be matched by municipalities and private and
non profit developers.
. Matching contributions can include land, property management, waiving of Municipal
fees and charges, donations of cash or "in kind" services.
3.2 Program Criteria
Under the terms of the Federal/Provincia! agreement, the Ministry of Municipai Affairs
and Housing has responsibility for program design and the administration of federal
funds. Municipal Service Managers, such as the Region of Durham, will be responsible
for implementing the program in areas targeted for program funding. Despite the fact
that the Province is contributing significantly fewer dollars to the program, it has
established a number of mandatory criteria that must be met including:
. To access funding, the Region must pass a Municipal Housing Facilities By-law and
adjust the property tax rate for these properties to the single residential property tax
rate for any units constructed under the program.
. A project must consist of a minimum of three units to be eligible for funding.
. Rents in new units cannot exceed the Canada Mortgage and Housing Corporation
(CMHC) average market rent rate for the community.
. Rents must be "affordable" for a minimum of 15 years. plus a 5-year phase-out
period for sitting tenants.
. Only 25% of units can be targeted to municipal non-profits and up to 20% to private
non-profits.
. Private sector partnerships with non-profit housing corporations are encouraged.
. Provincial Homelessness Rent Supplement can be designated to units constructed
under the program in order to make rent costs affordable to low income households,
with rent supplement funding guaranteed by the Province until 2023.
. Funding must be allocated through a Regional tender process.
. The incentives offered in the tender document must be available to all proponents
replying to the tender.
6992:5
Report No.: 2003-J-12
Page No.: 7
. Funding must be allocated to qualified projects requiring the least amount of federal
funding.
. Approved projects must receive their building permit within 18 months of receiving
notification of funding commitment in order to remain eligible for funding.
. Funding will be available to the Region of Durham from the Province to help off set
program administration costs.
. Initial project selection should take place by October 31,2003.
3.3 Potential Distribution of Units
In order to ensure the availability of program dollars across the Region and that
program costs are equitably shared among the municipalities. an initial "fair share"
distribution of available Community Rental Housing Program units based on Area
Municipal population was proposed by the Working Group. The minimum number of
units in less populated municipalities was rounded up to 10 to allow for projects to have
more than seven units. This would make projects eligible to have the property tax rate
set to the single residential rate as opposed to the multi-residential rate, and thus
leverage matching federal contributions.
Using 2001 Census data, the proposed distribution allows for up to 10 units in smaller
municipalities and between 30-55 units in the largel communities. If a municipality
declines to participate in the program, units could be reallocated to other mUnicipalities
interested in supporting additional units.
Municipality Population'- Housing Unit Federal Grant
# % Allocation
Ajax 73,753 15 30 $750,000
Brock 12,110 2 10 $250.000 I
Clarington 69,834 14 30 $750,000
Oshawa 139,051 27 55 $1,375,000
Pickering 87,139 17 35 $875,000
Scugog 20,173 4 10 $250,000
Uxbridge 17,377 3 10 $250,000
Whitby - I 87.413 35 $875,000
17
_. TOTAL 506,850 - 215" $5,375,000 I
100%
-.-.-.--
Table 2
Proposed Unit Distribution and Resultant Federal Grant
Based on 2001 Census data.
2 Available funding announced for Durham Region for the first phase is based on a federal funding cap of $5 million. At $25,000 per
unit, this means that approximately 200 units can be built More units could be created jf fewer federal funds are required by an
approved project. The impact model used by the Working Group assumed a distribution of approximately 215 units across Durham
Region.
69924
Report No.: 2003-J-12
Page No.: 8
3.4 Rent Charges for Newly Constructed Units
With the assistance of SHS Consultants Inc., the Affordable Rental Housing Working
Group developed theoretical scenarios for each Area Municipality, analyzing the impact
of various incentives on market rent rates for newly constructed rental housing.
It is important to note that the scenarios are hypothetical and are used solely for the
purpose of ascertaining the impact of incentives on rent levels. Costs for both modest
townhouse developments and wood frame walk up apartment construction were
identified using three potential scenarios:
. "Full cost" - showing projected rents without any financial incentives;
. "Reduced tax rate" - showing the impact of the reduced property tax rate (multi-
residential to single residential rates), with matching federal contributions and the
$2,000 per unit PST rebate; and
. "Reduced tax rate plus Regional and Area Municipal waivers" - showing the impact
of the property tax incentive plus an offsetting program rebate equal to the cost of
waiving of development charges, and the matching federal contributions to a
maximum $25,000 plus the $2,000 per unit PST rebate.
The impact on rents achieved through the application of Regional and Area Municipal
incentives is summarized in the following table'
69925
Report No.: 2003-J-12
Page No.: 9
TABLE 3
CUMULATIVE IMPACT OF INCENTIVES ON RENT CHARGES
I Pickerina I TOWNHOUSE RENrS WALK UP APARTMENT RENTS
I I 2-Bed I 3-Bed I-Bed 12.Bed 3-Bed
F vii Cost $1,445 $1,545 $1,138 $1.288 $1,388
Tax At Residential $1,110 $1,210 $880 $1,030 $1,130
Tax At Residentia! + Regional & Municipal Waivers $965 $1,065 $735 $885 $985
CMHC T iJrQel Rent $932 $1,210 $741 $922 $1,054
I Ajax I
FuJI Cost $1,435 11,535 11,138 11,288 $1,388
Tax At Residentia! $1,080 $1,180 $860 11,010 $1,110
Tax At Residential + Regional & Municipal Waivers 1950 11,050 P25 $875 1975
CMHC T araet Rent $932 $1,210 $735 $903 $1,037
I Uxbridge I
Ful/Cost $1,390 11,49lJ $1,105 11.255 $1,355
Tax At Residential $1,075 11,175 $995 11,145 $1.245
Tax At Residential + Regional & Municipal Waivers 1935 11,035 1860 11,010 $1,110
CMHC T araet Rent $932 $1,210 $759 $1,028 $1.203
I Whitby I
FuJI Cost 11,405 $1,505 $1,130 $1,280 $1,380
Tax At Residentia! 11,055 $1,155 $845 $995 $1,095
Tax At Residential + Regional & Mumcipal Waivers $925 $1,025 $715 $865 $965
CMHC T arqe! Rent $932 $1,210 $786 $894 $1,000
I OshalN8 I
FuJJ Cost $1,450 $1,550 11,160 $1,310 $1,410
Tax At Residential 11,055 $1,155 $845 $995 $1,095
Tax At Residential + Regional & MlJnicipal Waiver.s $935 $1,035 $720 $870 $970
CMHC T arae! Rent $ll43 $962 $713 $819 $925
I Clarington I
Full Cost $1,355 $1,455 $1,095 $1,245 $1,345
Tax At Residential $1,035 $1,135 $835 $985 11,085
Tax At Residential + Regional & Municipal Waivers $880 $980 $685 $835 $935
CMHC T a,qet Rent $843 $962 $684 $812 $906
I SClIgog I
FuJI Cost $1,360 $1,460 $1.100 $1,250 $1,350
Tax At Residential 11,035 $1,135 $835 $985 $1,085
Tax At Residential + Regional & Municipal Waivers 1895 $995 $710 $860 $960
CMHC T arqet Rent $843 $962 $684 $812 $906
I Brock I
FuJi Cost 11 ,350 $1,450 $1,120 $1,270 $1,370
Tax At Residential $!HJ $1.080 $815 $965 $1,065
Tax At Residential + Regional & MUnicipal Waivers $870 $970 $695 $845 $945
CMHC T aroet Rent $843 $962 $684 $812 $906
Note: The CMHC target rent must be achieved to access federal fundmg under the Community Rental Housing Program
69926
Report No.: 2003-J-12
Page No.: 10
The exercise demonstrated that, depending on built form and unit size, affordable rents
could be achieved in most municipalities through the application of both the reduction of
property taxes to the residential rate and the use of a program to offset Regional and
Area Municipal development charges. In some communities, the application of all
available incentives may help reduce rental rates to amounts that are below the target
market rent. This would make rents affordable to a greater number of lower income
households. In some areas, built form may be restricted to walk up apartments in order
to ensure affordable rent levels could be achieved.
3.5 Rent Supplement
The rent charges achieved, even with the incentives provided (i.e. Federal $25,000;
Provincial $2,000: and Municipal $23,000 per unit, are still out of reach of those
households with incomes at the lowest levels, particularly those in receipt of social
assistance or on fixed incomes.
The rent supplement program provides rent-geared-to-income to eligible low-income
tenants in non-profit or privately owned rental buildings. A supplement is provided to
landlords to bridge the gap between the market rent of a unit and the amount the tenant
can afford to pay, based on 30% of the tenant's gross household income.
The Province initially allocated 135 units to Durham Region under its Homelessness
Rent Supplement Program in November 1999. These units are 100% Provinciallv
funded, In 2002, the Housing Services Division was advised that 60 additional units
would be allocated to Durham Region. The Province recently cmnounced 1hat funding
for the initial five-year program will be extended until 2023. In a previous report to
Council, 50 of the 60 Homelessness Rent Supplement units were held pending Council
resolution on the Region's participation in the Community Rental Housing Program
(Refer Report #2003-SH-02).
The estimated Provincial cost (in net present value) of 50 rent supplement units to 2023
is $2.8 million.
3.6 Financial Impact Analysis
The Community Rental Housing Program requires that the property tax rate be set at
the single residential property tax rate for all units constructed under this program. The
Working Group also reviewed what additional Regional and Area Municipal incentives
could be offered to ensure available federal grants were maximized. It was determined
that if development charges were reduced or waived, additional federal grants could be
leveraged.
With the assistance of C.N. Watson and Associates, the Working Group reviewed short
and long term funding implications of an affordable housing program for both the
Regional and Area Municipalities if these two incentives were made available. (Detailed
analysis is available in Attachment A).
69927
Report No.: 2003-.1-12
Page No.: 11
Based on the assumed distribution of units as identified in the earlier Table 2, the
program could require one-time rebate of Regional development charges of up to
approximately $1.45 million, or an average of $6,733 per unit. The analysis also
demonstrated Regional foregone property tax revenues with a present value of $3.6
million would enable the production of up to 215 units of rental housing, which would be
affordable over a twenty-year period.
3.7 Program Concerns
While the Community Rental Housing Program provides an opportunity to access new
federal capital grants, a number of concerns with the program criteria have been
identified:
· The Provincial government is contributing significantly less than both the Federal
Government and the amounts required of Municipal Governments. The token
contribution by the Province of a maximum of $2,000 per unit is inadequate when
compared to the Municipal Governments' contribution of an average of $23,000,
particularly when the Provincial revenue opportunities are compared to the very
limited Municipal revenue options.
. As a result, the Working Group analysis suggests that both Regional and Area
Municipal incentives will be required to reduce rents to the CMHC rent levels
. Furthermore, staff analysis suggests that only modest townhouses and wood frame
walk-ups are economically feasible.
. CMHC target rent amounts will still be cost-prohibitive for many households on the
social housing waiting list yet the program would require substantially greater
funding to generate buildings with lower rents.
. Only 45% of the units can be allocated to non-profit developers, who have the
expertise in effectively managing affordable rental housing and the interest to
maintain it as affordable in perpetuity.
· Given the public investment in this program, the length of program should be
extended to at least 20 years, plus a five year phase out for sitting market rent
tenants, to ensure maximum return for the community.
· The Province has not made any additional rent supplement units available to ensure
that those most in need are housed.
· Timelines provided by the Province are not achievable.
. The tender process limits opportunities to assess proposals according to "value for
public money" and presupposes local zoning processes by "qualifying" projects for
funding.
The issue of providing Regional and Area Municipal incentives to amounts that exceed
the financial commitment of senior levels of government is of particular concern.
Organizations including AMO and FCM have repeatedly called for federal tax changes
related to rental housing investment opportunities and the indexing of income
assistance programs to reflect actual rental rates in Ontario. In addition, the Province
has a greater base of sustainable financing than Municipalities and therefore, should be
a larger contributor.
69928
Report No.: 2003-J-12
Page No.: 12
4.0 CONCLUSION
The Regional Municipality of Durham has the opportunity to stimulate the construction
of affordable rental housing but will require the financial participation of Area
Municipalities in order to ensure that the rental units created achieve the average
CMHC market rents as required under the Community Rental Housing Program.
With Area Municipal support, Regional Council could leverage significant capital
contributions from the Federal government, and to a lesser extent the Provincial
government, to create approximately 200 units of permanent affordable rental housing
for the next 20 years.
In order to access up to $5 million in federal grants and an additional $400,000 in
Provincial contributions, the program would require one-time Regional costs of
approximately $1.45 million and foregone tax revenues with a present value of $3.6
million over a twenty year period.
Staff recommend that this report be distributed to the Area Municipalities to ascertain
their interest in participating financially with the Region of Durham in the Community
Rental Housing Program and to identify local program parameters.
Based upon the feedback received, Regional staff will provide a subsequent report to
Council outlining next steps including any further program cost, information relative to a
Municipal Housing Facilities By-law, as well as details to be contained in the Regional
tender documents for each Area Municipality.
Senior levels of government must continue to playa role in the provision of affordable
housing. The lack of significant Provincial contributions to the Community Rental
Housing Program is of particular concern and it is therefore recommended that Regional
Council continue to press the Provincial Government for additional funding to increase
the supply of affordable rental housing within Durham Region.
Dr. Hugh Drouin
Commissioner of Social Services
R.J. Clapp
Commissioner of Finance
Recommended for presentation to Committee.
Garry H. Cubitt, M.S.w.
Chief Administrative Officer
Attachment A:
Financial Impact of the Community Rental Housing Program and Appendices A-C
69929