Appendix A
|
Appendix A |
Affordable Housing
Strategy
For
the City Of Ottawa
People Services Department
Housing Branch
Policy and Programs Division
February 2002
TABLE OF CONTENTS
1.0 Introduction
2.0 The Need to
Take Action
Housing Affordability
Housing Supply
Rental Housing Demand
3.0 Addressing
Affordable Housing Issues
Housing Affordability
Increasing the Supply of Affordable Housing
Maintaining and Protecting Existing Housing Stock
4.0 Action Ottawa: Affordable Housing
Initiatives
Historical Perspective
New Federal Affordable Rental Program
Housing as a Municipal Capital Facility
Defining Affordable Housing
Action Ottawa: Affordable Housing Initiatives
Municipal Funding and The Municipal Tool Kit
5.0 Action Ottawa
Targets
6.0 Summary of
Recommendations: Affordable Housing Strategy
Annex 1 –
Mayor’s Task Force on
Public/Private Partnerships for Affordable Housing:
Summary of Recommendations and
Proposed Municipal Actions
Annex 2 –
Draft Municipal Housing
Facilities By-law
1.0 Introduction
Within Ottawa, there is a clear and
demonstrated need for more affordable housing.
In the community this need is not news, although the magnitude of need
today is certainly alarming. What is
equally clear is that resources previously available to address affordable
housing needs have diminished and that more innovative approaches to meeting
today’s challenges are required.
Significant work has been undertaken over the past year to better understand local housing need and its root causes. These causes can be classified into three separate but interrelated housing issues confronting the City:
- Severe housing affordability problems face many residents now living in private rental housing and increasing market rents are likely to exacerbate this problem;
- Limited new rental production and sustained demand for rental accommodation are creating extremely tight market conditions, expressed in very low vacancy rates. In essence, supply is not meeting demand;
- A projected requirement exists for about 1,000 new affordable rental housing units per year between 2001 and 2006, specifically targeted to households unable to pay market rents in Ottawa. As a result, demand will continue to grow, regardless of current supply.
Within this backdrop, the role of
the municipality has now taken on a new prominence, both in response to
legislation and in terms of taking leadership.
In addition, shifting responsibilities, both at the local and senior
levels of government, have changed how issues are addressed. To set a framework for addressing challenges
within this new context, the City has developed an Affordable Housing Strategy.
The Mayor’s Task Force on Private/Public
Partnerships for Affordable Housing has recently issued its report, “Creating
a Legacy: An Action Plan for Affordable Housing” for the City of
Ottawa. The Housing Branch also
commissioned a detailed assessment of housing need, captured in “Assessing
Housing Need in Ottawa”, which was penned by Focus Consulting and Fuller
Information. Together these documents
articulate in detail, the underlying causes and potential remedies for
addressing housing needs facing the City.
With regard for these
two documents, the Affordable Housing Strategy is intended to build on the
findings and recommendations they provide, establishing a broad framework to
address affordable housing issues in the immediate and longer term. As such, this document:
·
Characterizes
the need and priority for affordable housing;
· Identifies recommendations for addressing these needs;
· Lays out the fundamental tools for addressing recommendations;
·
Identifies further work to be undertaken.
A fundamental element of this strategy is the introduction of a new coordinated municipal capital development program Action Ottawa: Affordable Housing Initiatives. This program is designed to:
·
Maximize available resources to address housing need in
a focused and effective manner;
·
Link
municipal policies and programs, opportunities for community action and the
strengths and resources of the private and non-profit sectors;
·
Take
advantage of new initiatives from the provincial and federal governments;
·
Reinforce
the City of Ottawa’s efforts to more fully engage these governments in
addressing the growing affordable housing crisis.
The strategy builds on successful initiatives of the new City and former municipalities in their response to the withdrawal of the provincial and federal governments from housing programs. The City and former municipalities have historically:
· Provided limited capital grants and start up loans to leverage private funding and development by community-based housing providers (through federal and municipal Homelessness funding);
· Established an innovative housing loan fund;
· Waived development fees in certain areas and provided exemptions from municipal charges for new non-profit affordable rental (and some private sector) projects;
· Provided municipal land at no cost for new affordable rental housing;
· Linked unallocated rent supplement agreements to new rental housing to enhance project viability and rental affordability.
Finally, the strategy responds to the changing landscape of housing responsibility, municipal amalgamation and the new leadership role being defined for municipalities. This change began with the cancellation of federal and provincial housing programs in the early and mid 1990s and was formalized through recent changes in provincial policy. These changes include:
- The downloading to municipalities of funding and administrative responsibility for most non-profit, public and cooperative housing;
- The amalgamation of 12 local municipalities into one entity, creating the need to harmonize policies, regulations and assume broader roles in relation to housing;
- The extending of greater powers to municipalities to facilitate the creation of new rental stock by providing flexibility in setting tax rates and by allowing new types of partnerships between municipalities and private developers;
- The Federal Government announcement of $680 million as their contribution to a cost shared affordable rental housing program. While details of this initiative are still being worked out, it is likely that cities like Ottawa will be designated as delivery agents for this funding and will be required to make some contribution to access this funding.
Apart from context, the timing of the Affordable Housing Strategy is equally important. There is a fundamental need to move forward with solutions that address housing need but this action cannot happen in isolation, especially given the other activities which impact the Strategy. These related activities include:
- The recent tabling of the Mayor’s Task Force report provides immediate currency to this issue;
- Negotiations on the new federal grant program are progressing and an agreement with the Province is anticipated shortly;
- The City is preparing to complete stage 2 of the social housing transfer as Service Manager, effective April 1st, 2002;
- The City is embarking on major corporate initiatives that are related to affordable housing, namely the Official Plan Review and the Human Services Strategy.
Setting a course of action now will help ensure that housing
needs in the community can be better addressed in a coordinated and consistent
manner. To fully address affordable housing
requirements, the City needs an integrated and sustained approach, pulling
together a variety of measures to leverage resources and effect results. New tools to use within the new regulatory
framework must be developed and combined with existing strategies to address
issues both today and for tomorrow. New
partnerships, with both the private and non-profit sectors are essential
requirements.
2.0 The Need to Take Action
Having adequate, affordable and secure housing is fundamental to the well-being of individuals, families and the community. Housing is a prerequisite for full participation in our civic culture and our economy. The availability of housing affects the success of business and is a key factor in determining demands on social and health services in our City. Emerging research also shows a strong connection between affordable housing and the success of children in school and in later life.
The withdrawal of Federal and Provincial support for social housing in the early and mid 1990s has served to highlight this connection between affordable housing and community well-being. As the housing market tightened in the post-program period, so did the use of emergency hostels and food banks.
A background report prepared for the Housing Branch, “Assessing Housing Need in Ottawa” provides a detailed analysis of the need for affordable housing in the City of Ottawa. It describes the nature of housing problems and also estimates future requirements for rental housing based on population growth projections. The findings of this research provide a compelling argument for concerted action involving all levels of government and the community, particularly for affordable rental housing.
Likewise, the report of the Mayor’s Task Force, “Creating a Legacy: An Action Plan for Affordable Housing”, documents issues related to housing need in the community. It goes on to discuss, in detail, impediments to meeting this need from the perspective of housing supply. These findings have served to inform the strategy outlined in this document and can be summarized under the following themes.
Housing Affordability
Canada Mortgage and Housing Corporation’s standardized measure of housing need (the Core Housing Need measure) indicates that there are 51,000 households in Ottawa facing significant housing problems. Core Housing Need is based on an analysis of housing suitability, housing adequacy and housing affordability. Households who are unable to meet one or more of the standards and whose income is such that they cannot obtain housing that meets these standards are considered to be in Core Housing Need.
For the 51,000 households in Ottawa in Core Housing Need, the overwhelming issue is one of affordability:
· Only 7% of core need households experience problems with adequacy and suitability;
· Overall, 77% of all households in core need are renters;
· Only 7% of all owners (11,970) are in core need, whereas 35% of all renters (39,515) are in core need;
As a result, almost four in every ten renters are defined as being in need – and almost all due to an affordability problem.
Core Housing Need analysis is based on Census data and the most recent figures utilized are from the 1996 Census. Since then:
- Rents in Ottawa have increased by over 21% (1996 to 2000);
- Median weekly wages increased by only 8%;
- Income support for households on Ontario Works has decreased.
In the face of these significant increases in rents, modest income gains and losses in income support, it is reasonable to expect that affordability problems have only worsened since 1996 and the 51,000 figure may significantly understate the dimension of the problem. A steady increase in emergency shelter usage and a sustained social housing waiting list of 14,000 households during this same period are clear indicators that affordability issues are more prevalent than in 1996.
Housing Supply
Between 1996 and 2000, vacancy rates plummeted in Ottawa from 4.9% to 0.2%, giving the City the distinction of having the lowest vacancy rates in Canada in 2000. In 2001 the rental market eased slightly with overall rates increasing to 0.8% -- still an indication of an extraordinarily tight rental housing market. A primary part of the explanation for these low rental vacancy rates is the lack of new rental housing that has been produced in the City.
In the early 1990s, rental housing production averaged roughly 1,000 units annually, largely due to social housing programs of the day. However, since 1995 when social housing development programs were terminated by the Province, this average has dropped to less than 200 units per year, few which have been affordable.
Within this constrained market, even greater pressure is put on existing affordable housing stock as demand increases. Ironically, between 1991 and 2000, there was a net loss in rental stock of 5.6% (3,800 units) due to conversion, redevelopment and demolitions.
While there is recognition that all buildings have useful lifecycles, a shrinking rental supply in a low production market only serves to intensify the affordable housing crisis.
Rental Housing Demand
The amount of new rental housing required in Ottawa has been projected using modeling of migration and household formation patterns. These projections indicate that the new City required about 1,200 new rental housing units per year between 1996 and 2001. This number stands in sharp contrast to actual rental housing production during this period, which averaged less than 200 units per year.
Current projections indicate that Ottawa’s rental housing requirements will jump sharply upward to an average of 4,500 units per year for the period between 2001 and 2006. This threefold increase in annual requirements over the previous five-year period can be accounted for by the growth in household formation within the baby boom echo generation and pent up demand.
Within the overall rental housing requirement, a certain proportion of the new units will need to be affordable to households unable to pay market rent. This is based on an assumption that as the overall requirement for housing grows in Ottawa, so too will the number of households unable to afford market housing charges. Analysis completed for the City indicates that out of the overall rental housing demand, the new City will require 1,000 below-market rental housing units per year between 2001 and 2006.
Meeting these expected rental demands is clearly a challenge, given the production trends of the last 10-15 years. It is also acknowledged that the municipality cannot nor should it meet these demands on its own. Rather a public sector approach which enables the private marketplace to meet market needs and intervenes in more direct ways to meet the requirements of renters in core housing need is warranted. Solutions to affordability issues need to reflect this balance.
3.0 Addressing Affordable
Housing Issues
Municipalities have always maintained some role in housing, whether directly or indirectly. These roles range from advocacy and education through to policy, regulatory or direct intervention through funding or administration. With the shifting legislative environment and diminishing senior government role in housing, municipalities are being forced to consider more direct means of dealing with housing issues, in addition to the roles they may have previously performed.
It is within this backdrop that resolving affordable housing issues must be discussed, considering both traditional and new approaches, and utilizing or even establishing municipal tools not previously used. Through the Mayor’s Task Force, 26 recommendations were tabled, establishing a strong framework for working with private and non-profit sector partners. These recommendations provide a blend of new and not-so-new approaches to affordable housing.
A central part of the Task Force mandate was to identify barriers to providing more affordable housing and how these barriers could be overcome. The Task Force report recognized the need for a healthy housing market and that rental housing was one of the key elements of that market. However, it was also recognized that rental housing in Ottawa, and especially affordable housing, is simply not being produced by the private sector.
The core reasons cited for this were:
- Rental building is not attractive to the private sector due to risk and limited return on investment – economic rents are higher than the market will bear;
- Mortgage financing is a key issue for both private and non-profit sectors but for different reasons;
- Regulatory barriers create disincentives to rental development.
As a result, recommendations were made that are intended to stimulate the private and non-profit rental market, through partnerships. These recommendations address:
- Tax & regulatory barriers;
- Reducing the cost of development;
- Cost effective alternatives to new development;
- Improving tenants’ capacity to pay rent.
The Affordable Housing Strategy incorporates recommendations from the Task Force and augments them with additional suggestions to provide an integrated municipal approach. Given the overwhelming magnitude of need in the community, the primary focus of the current Strategy is on the supply of affordable rental housing. While addressing broader housing issues in the community is important, these issues are of a longer-term nature and as such, are not afforded the same priority.
In the Strategy, issues and recommendations have been grouped in three substantive areas, to respond to identified housing needs:
- Promoting Affordability in Housing;
- Increasing the Supply of Affordable Housing;
- Maintaining and Protecting Affordable Housing.
Underlying factors and the municipal role in addressing these factors is discussed in each respective area. A detailed summary of all recommendations is provided in Section 6. In addition, Task Force recommendations and proposed actions for implementation are provided in Annex 1.
Housing Affordability
The housing affordability issue is most fundamental at the household level. Where income cannot meet cost requirements for basic, appropriate housing, some form of intervention is required. Constructing new housing is not a necessary response, if a means to meet the gap between existing rents and what households can afford to pay can be met through alternative mechanisms. Either the cost of housing must be lowered (as in social housing where rent is geared to income) or the income increased through some form of supplement.
To address this issue, the Task Force identified the general need to improve tenants’ capacity to pay rent.
To address this issue, two recommendations were proposed:
· Request that the Province review existing shelter maximums in Ontario Works (OW) and Ontario Disability Support Payments (ODSP) and index this component of OW/ODSP to actual market rents, as determined in the annual Canada Mortgage and Housing Corporation (CMHC) rental survey.
· Ask the Province to increase the duration and number of rent supplement units available to facilitate integration of lower income households in new rental development or implement a shelter allowance program to assist the working poor in meeting high rent burdens.
A significant proportion of households in core housing need are currently living in housing that is suitable and adequate, but they cannot afford their rent. As a result, mechanisms such as increasing social assistance shelter maximums, rent supplements or shelter allowances, are sound ways to address these needs. However, since Ontario Works and ODSP costs are cost-shared on an 80/20 basis, the City would need to address the financial impact of such a change to the social assistance rate. At the same time, since the Province has indicated that it would include an expanded Rent Supplement or Shelter Allowance program as part of its housing strategy, the City should strongly encourage the Province to fund and act on this recommendation. Income redistribution programs, such as Rent Supplements or Shelter Allowances, most properly belong at senior government levels with access to progressive income tax revenues.
Municipalities have other options to address affordability. While these are less direct and less immediate in impact, they may result in opportunities to respond to affordability problems through municipal actions. These options include:
- Completing a comprehensive municipal housing statement update to fully document the local housing market and establish policy approaches to respond to different types of housing need;
- Reviewing municipal services to determine whether possibilities exist to address housing affordability issues through mechanisms such as grants, loans, support funding or program funding;
- Funding or undertaking research to explore new municipal innovations which lead to greater affordability in housing.
These options are translated into specific recommendations which promote affordability in housing and are included in Section 6.
Increasing the Supply of Affordable Housing
An extremely low rate of rental housing production is not just an Ottawa problem – it’s an issue that affects communities right across Canada. This problem represents the impact of decision-making by investors who have determined that rental housing is simply not an attractive investment, given the risks and limited returns. Reducing costs or eliminating factors that have cost implications are meaningful ways to induce greater participation and increase the supply of new affordable housing.
Given the importance of addressing new supply, recommendations of the Mayor’s Task Force were most extensive in this area. The recommendations revolved around core strategies to:
- Reduce/eliminate tax and regulatory barriers which add costs to affordable housing.
- Reduce the costs of development, through reductions in cost elements such as land, fees, charges, grants, or mortgage insurance.
Given that senior levels of government are responsible for much of the tax and regulatory barriers, a notable aspect of the municipal role in this area is to effect changes through advocacy.
The Task Force also made recommendations related to a number of municipal roles in increasing supply, such as:
- Extending the new multi-residential property tax class from 8 to 35 years. Legislation to permit this change in timeframe is currently in process with the Province;
- Phasing in tax parity between multi-residential and residential tax classes;
- Establishing a Housing First policy for surplus City lands and leasing land for affordable housing projects;
- Developing land use policies and zoning standards which encourage new supply such as alternative development standards, as-of-right secondary suites, residential intensification, main street development and adaptive re-use;
- Establishing a capital development program;
- Continuing efforts to streamline the development approvals process.
Clearly there are other issues that can impact on rental housing production at the municipal level over time. To address these issues, this document recommends the City:
- Support policies which require an affordable housing component in large-scale developments (e.g. Lebreton Flats);
- Establish land use policies and zoning provisions which support affordability such as affordable housing targets, the need for adequate land supply and the need to provide a mix of form and tenure;
- Provide financial assistance to community groups and other interests to explore the feasibility of innovations and mechanisms that promote affordable housing through re-activation of the former City of Ottawa Innovative Housing Loan Fund;
- Explore opportunities with housing providers to leverage existing social housing assets in order to maximize new affordable housing development.
A number of these options have specific advocacy requirements for senior government. Others arise through amalgamation and the need to harmonize policies and procedures. Fundamental to these is a municipal capital development program which is outlined in detail in the next section. This single element is the cornerstone of the Affordable Housing Strategy since it provides an opportunity to leverage new federal funding. Options for increasing supply are translated into specific recommendations which are included in Section 6.
Maintaining and Protecting
Existing Housing Stock
A third component of the Strategy is to maintain affordable housing stock. While it is not as significant a priority as new supply, there is a key need to retain what stock exists today, especially given the tight rental market. In periods where production is slow, loss of stock through redevelopment or conversion can actually eliminate the net impact of new stock. There is also a benefit in terms of affordability since older buildings may have in-situ tenants who are still protected under the Tenant Protection Act and therefore have very affordable rents.
Given the overwhelming need for new supply, this component of the Strategy was not addressed in significant detail by the Task Force. Three recommendations were proposed to encourage the adaptive use of the existing stock:
- Amend zoning bylaws to permit secondary suites, as of right, in single and semi-detached houses throughout the City;
- Devise a promotion/incentive/education campaign to encourage the development of secondary suites;
- Facilitate options for a limited rental housing acquisition program.
Additional municipal roles can also be taken to address existing stock issues and these roles are consistent with policies and approaches taken by former local municipalities in the area. Building on this experience, the Strategy includes recommendations to:
- Advocate with CMHC for continuation and expansion of the Rental Residential Rehabilitation Assistance Program (RRAP) to assist in maintaining existing stock;
- Establish policies supporting restrictions on residential conversions in tight rental markets and protecting affordable rental stock;
- Support the viability of existing social housing stock through program administration and use of assets to maintain/enhance municipal housing;
- Continue monitoring housing stock activity to track changes in the affordable supply.
Options for maintaining and protecting supply are translated into specific recommendations which are included in Section 6.
4.0 Action Ottawa: Affordable
Housing Initiatives
This initiative is the cornerstone of the proposed affordable housing strategy. The key objective is to target limited municipal resources to the most pressing housing-related problem – the need for a new supply of permanent, affordable housing for the lowest income people in our City, including those experiencing homelessness.
As addressed in the Mayor’s Task Force report, this initiative should:
· Provide for a coordinated, transparent approach;
· Use enabling legislation to proceed;
· Ensure equal opportunity for private and non-profit participation;
· Define affordable rents and targets, and monitor activity;
· Provide dedicated staff advice, direction and assistance to facilitate delivery.
By bundling resources and authority together under this municipal initiative, it is possible to make a significant and concerted impact on the supply of affordable housing in Ottawa.
Historical
Perspective
Since the withdrawal of provincial and federal funding for social housing in the early and mid 1990s there has been little or no affordable rental construction in Ottawa. This tailing off of development highlights the critical role of government in meeting the housing needs of the lowest income members of society. Simply put, without public intervention through programs and funding, housing for those most in need will not be built. Homelessness will continue to grow and the attendant social problems will increasingly plague communities like Ottawa.
The small number of targeted, affordable housing projects built since the mid 1990’s have been the product of unique partnerships forged between community-based groups and municipal governments. An example is the Nepean Longfields project now under construction that will provide 76 homes for low and moderate-income families. The Nepean project uses municipal land provided at no cost, a small City grant and an equity contribution from the Nepean Non-Profit Housing Corporation. Affordability in the project is further enhanced by a City of Ottawa decision to redirect existing Rent Supplements under its management to the project. While projects like Longfields will only be able to meet the needs of a small number of the families waiting for affordable housing, they serve as important examples of what can be achieved with limited public resources used in partnership with community groups.
In this report it is recommended that the Longfields model serve as a basis for a coordinated municipal housing development program, Action Ottawa: Affordable Housing Initiatives. This program will package the range of development tools being provided by the City and make these tools available through a program of regularly scheduled Requests for Proposals (RFPs). Through the RFP, community development partners (potentially both non-profit and private housing organizations) will be provided a ‘one-window’ point of access to municipal tools with additional funding and support being provided by senior levels of government, as available.
New Federal Affordable Rental Program
In November, 2001, the federal government announced its commitment to a new Affordable Rental Housing Program. The Program is to be designed in conjunction with individual provinces, and the federal government is in the midst of finalizing provincial and territorial agreements. The Province of Ontario has not yet signed an agreement.
Key elements of the federal program are as follows:
- Provinces and territories will have the primary responsibility for program design and delivery;
- The program is aimed at low to moderate income households;
- This short term initiative is not to be taken as diminishing the federal and provincial/territorial commitment to the long-term sustainable improvements to the business and tax climate for affordable housing;
- Local supply initiatives can include new construction, renovation, rehabilitation, conversion, home ownership, new rent supplement and supportive housing projects;
- Units must remain “affordable” for a minimum of ten years;
- The maximum federal contribution is an average of $25,000 per unit over the duration of the program;
- The total federal commitment is $680 million over 5 years;
- Provinces and territories may participate at any point in the 5 years, including taking less time;
- Provinces and territories will be required to match federal contributions overall. Their contributions can be capital or non-capital in nature and can include certain program funding in place since January 1, 2001 and contributions by third parties. Third parties include municipalities and charitable or non-profit groups but would not include the equity of private developers.
The Mayor’s Task Force Report includes an analysis of the new federal program and demonstrates that two municipal initiatives - reductions in property tax for new rental housing and waiving of development charges and municipal fees - would be sufficient to match the federal $25,000 per unit capital grant. When linked with a proposed provincial PST rebate of $2,000 per unit, capital costs could be further reduced. The combination of a $25,000 capital grant, reduced property taxes and waived development charges and fees, with a PST rebate of $2,000, would result in housing units being built at average market rent levels. However, this would not permit any of the units to be made available to lower-income families and individuals who cannot afford average market rents. In order to meet the needs of these households, additional incentives are needed.
These could take the form of:
- Municipal Capital Grants;
- Rent Supplements;
- Long-term lease of Municipal Land at no cost.
Figure 1
The combination of one or more of these
incentives with the federal program and reduced taxes and municipal fees, would
result in at least 60% of the housing produced being made affordable to
households on the waiting list (see Figure 1).
With
the municipal contribution doubling that of the federal government, it would be
reasonable to stipulate that any housing produced be kept affordable for a minimum
of 20 years, or double the 10-year requirement of the federal program.
Housing as a Municipal Capital Facility
The City’s ability to work more closely with private sector partners has been enhanced by recent changes in regulation under the Municipal Act. Specifically, housing has now been identified as a “Municipal Capital Facility”, meaning that benefits can be conveyed to private individuals or companies in exchange for commitments to provide affordable housing without violating bonusing provisions in the Municipal Act.
In order to take advantage of these changes in regulation, municipalities are required to establish a “Municipal Housing Facilities By-Law”, that sets out the terms and conditions of any agreement between the City and a private sector partner and include the following:
· A definition of affordable housing for the purposes of the by-law;
- Policies regarding eligibility for the housing units to be created;
- A summary of the provisions that agreements are required to contain.
Once the facilities by-law has been enacted by a local council, the municipality has the authority to enter into agreements with private sector interests to provide affordable housing, provided the agreements conform to the provisions of the by-law. However, legislation also requires that prior to executing an agreement, the municipality must enact an enabling by-law authorizing the municipality to enter into such agreement. In this manner, any agreement to convey benefits in exchange for affordable housing shall be clearly enunciated and subject to Council scrutiny. Once executed, there would be an on-going requirement for the municipality to monitor and administer the conditions of the agreement.
Defining Affordable Housing
In order to adopt a Municipal Housing Facilities By-Law, it is required that Council adopt a definition of affordable housing within the by-law. There are a number of considerations to be taken into account in adopting such a definition:
- There are 14,000 households on the waiting list for social housing and more than 1,000 individuals in emergency shelters for families and singles every night in Ottawa. The definition of affordable housing must be designed to meet the needs of these families and individuals;
- Years of experience with large-scale public housing projects that were totally targeted to low-income households suggests that community acceptance and quality of life are improved when affordable housing involves a mix of low-income households with moderate-income households. The definition of affordable housing should take into account the benefits of income-mixed housing;
- The federal program is using a definition of the CMHC Average Market Rent as the upper limit on affordability. We understand this definition is also being used by the City of Toronto and other major municipalities;
- The lower the rent used to define “affordable”, the greater the need for incentives or subsidies;
- The definition of “affordable” must reflect local market conditions, be updated on a regular basis and be objectively determined. The CMHC Average Market Rent Index meets these requirements.
This report recommends that the City of Ottawa use average market rents in the City of Ottawa as established by Canada Mortgage and Housing Corporation (CMHC) as the maximum affordable rent for housing funded through the Municipal Housing Facilities By-Law. These rents are adjusted on an annual basis and are currently at the following levels:
|
Unit Type |
Average Market Rent |
|
Bachelor |
$622 |
|
1-Bedroom |
$762 |
|
2-Bedroom |
$916 |
|
3-Bedroom |
$1,059 |
These rents represent the maximum rent levels for units to be built under the Municipal Housing Facilities By-law. In order to ensure that lower income households are served (especially those on the social housing waiting list), at least 60% of the units should be targeted to below average market rent. Rent levels for these units would be in the order of 70% of the Average Market Rents, or if Rent Supplements are available, would be at the level of the shelter allowance for Social Assistance recipients or 30% of income for working poor and elderly households.
These levels are consistent with existing social housing policies and ensure that units developed under the facilities by-law address affordability in a meaningful way.
Action Ottawa: Affordable Housing Initiatives
To utilize new Housing Capital Facility authorities under the Municipal Act, capitalize on federal grant funding, and merge these resources with existing municipal tools and resources, it is proposed that the City establish a housing capital development program called Action Ottawa: Affordable Housing Initiatives. The program would be:
· Focused on providing new affordable rental units;
· Targeted to low and moderate income households;
· Eligible to private and non-profit housing providers;
· Geared to reduction of capital costs as a means of ensuring sustained affordability;
· Bundled to leverage community resources with available government resources;
· Designed for delivery through a competitive bid process.
Funding through Action Ottawa will be targeted to development of housing specifically for low and moderate-income households. This will be achieved by establishing average market rent levels affordable to moderate income households for any housing to be funded, and by requiring that at least 60% of units be made available to low income households (i.e. those on the waiting list for social housing). Furthermore, affordable rent levels will need to be guaranteed for a period of at least 20 years.
Establishing this type of targeting plan helps meet several important program objectives:
· It ensures that limited public expenditures are directed to those in greatest need and those with fewest housing options;
·
It allows the full participation of private sector
housing providers who can only receive municipal funding through a Municipal
Housing Facilities By-Law where they meet the municipal definition of
affordable housing;
· It helps maximize the development impact of public expenditures. While at least 60% of any housing being developed will be available to low income households (i.e. on the social housing waiting list), another portion of the housing will be available to moderate income households in the community. Having this type of mix reduces the average per unit subsidy requirement and consequently, allows more housing to be built with the limited public funds available;
· It will help foster the creation of balanced communities. One of the main criticisms of old style public housing is that it tended to ghettoize the lowest income members of the community. By having a portion of the housing in every development targeted to moderate-income renters, a more balanced type of community will be developed;
· It will help to reduce government expenditures by decreasing use of emergency shelter facilities.
Municipal
Funding and The Municipal Tool Kit
The success of Action Ottawa will depend on the City’s ability to use a variety of tools to impact on the economics of development and leverage federal funding. Several of the tools being proposed for the program have already become part of the municipal inventory of development incentives approved by City Council. These include the following:
· Capital funding, such as the decision of Council to authorize the use of $1 million from the Social Housing Reserve Fund for new permanent affordable housing (Item 3, Health, Recreation and Social Services - Report 11 to the Council of the City of Ottawa, 26 September 2001);
- The exemption of charitable and non-profit housing organizations from planning application fees, building permit fees and cash in lieu of parkland fees (Item 1, Health, Recreation and Social Services - Report 8 to The Council of the City of Ottawa, June 27, 2001);
- Establishing a surplus land policy that recognizes "housing" as a city mandated program and as such affords the Housing Branch the opportunity to utilize City property for housing purposes (Item 7, Corporate Services and Economic Development Committee Report 18 to The Council of the City of Ottawa, 14 November 2001).
In order to capitalize on the federal program and take advantage of new
municipal authorities, additional tools are required. Recommendations to establish these tools are identified in
Section 6. These recommendations flow
from both broad recommendations of the Mayor’s Task Force and recommendations
of City staff.
The following municipal incentives for affordable housing development are proposed as components of Action Ottawa: Affordable Housing Initiatives:
- Providing capital grants of up to $25,000 per unit;
- Setting new rental multi-residential property taxes at the residential rate for up to 35 years;
- Waiving of development charges and exemptions from municipal fees;
- Long-term lease of municipal land for $1;
- Rent Supplements, funded through the existing Social Housing budget.
Under the Action Ottawa initiative, municipal, federal and provincial resources will be made available to non-profit and private sector groups to reduce costs associated with development. In exchange, proponents will be required to provide affordable housing units to low and moderate income households. While a heavy emphasis will be placed on one-time capital funding (land, grants, loans, etc.), some on-going funding such as access to rent supplements may also be offered.
Resources will be made available through a competitive Request for Proposals (RFP) process. RFPs will be issued on a regular basis over the course of the year and be administered by Housing Branch staff. The competitive tendering process will create a level playing field for potential community partners including private, non-profit and co-operative housing groups. The competitive process will also ensure the City and other public funding partners receive maximum value for public expenditures.
The basic administrative elements of Action Ottawa are as follows:
Municipal Housing Facilities By-law – The by-law establishes the authority of the City to enter into Housing Facilities agreements. Per statute, the by-law sets out a definition of affordability (for the purposes of the by-law), the basis under which the City will make incentives available, the obligations of partners, and the provisions required for agreements. A draft by-law is attached as Annex 2 to this strategy and is recommended for approval.
Program Guidelines – These guidelines will outline the Action Ottawa program requirements, overall delivery strategy and program administration details. Once Federal grant program guidelines are formalized later this year, it will be possible to put local program guidelines in place. These will be brought forward for Council approval.
Request for Proposal Documents – RFPs will be used to outline the bidding process for potential applicants and identify incentive packages available. Under the competitive bid approach taken by the program, it is expected that RFPs will be issued in rounds at regular intervals. These documents will outline the specific incentives being offered for that proposal call, what program objectives are being emphasized and how proposals are to be evaluated. These documents will be developed on a base format and tailored to meet the requirements of the specific proposal call.
Housing Facilities Agreement – Proponents successfully chosen through the RFP process will enter into discussions with the City, based on the substance of the proposal submitted. These discussions will lead to a draft Agreement which meets the requirements of the facilities by-law. These agreements will be developed on a base format and tailored to meet the requirements of the specific proposal.
Enabling By-law – To authorize municipal approval to enter into the Agreement, Council will need to adopt an enabling by-law on a facility-by-facility basis. A base by-law will be developed and tailored to the specific needs of the Agreement, for approval by Council.
Once formal federal program requirements are clear, establishing the majority of these administrative elements would be a priority. The facilities by-law is one exception and could proceed immediately in that it secures municipal authority and is not encumbered by federal program requirements. In the interim, as housing need in our community continues to rise, using this by-law in a test scenario would be beneficial in getting units delivered while evaluating how best to address program design and the structure of facility agreements.
5.0 Action Ottawa Targets
As noted earlier, there is a total projected demand for 1000 units of affordable rental housing per year for the 2001 to 2006 time period. Financial analysis undertaken for the Mayor’s Task Force demonstrates that for every 100 units to be provided, $2.5 million in capital contributions and an equal amount in foregone revenues (property tax reductions and waived municipal fees and development charges) is needed to produce units at average market rent levels. Further capital grants of $1 million or no-cost municipal land or Rent Supplements are needed to produce units affordable to lower-income households.
Final targets for the Federal Affordable Rental Program have not been provided to the City. However, it is the understanding of staff that an allocation of $24 million over 4 years is anticipated. This level of funding would be sufficient to produce 240 market rent units a year for the next four years, if matched by municipal foregone revenues (property tax reductions and waived municipal fees and development charges). Further capital contributions of $2.4 million, no-cost municipal land or Rent Supplement units are needed each year to produce these same units at rents affordable to lower-income households.
Thus, Action Ottawa, at anticipated levels of federal funding, creates the capacity to meet one quarter of the required annual target for affordable housing. If the Province provided a similar grant vehicle in conjunction with municipal incentives, it would be possible to meet another quarter of the annual target. It is expected that the remaining need for 500 units could be achieved through implementation of the following actions:
- Property tax reductions for newly-constructed rental accommodation;
- Promotion of secondary suites in existing housing;
- Acquisition of existing properties;
- Policies to promote affordability through the Official Plan and zoning by-laws.
As requirements for the new Affordable Rental Program are not yet firm, there is a need to continue seeking program specifications which:
- Ensure municipal administration of the program;
- Require the Province of Ontario to match the Federal contributions under the new Affordable Housing Program;
- Maintain accessibility to both private and non-profit partners.
6.0 Summary of
Recommendations: Affordable Housing
Strategy
Recommendations of the Affordable Housing Strategy are proposed in three timeframes: Short-Term (within the next three months), Medium-Term (within the next year) and Long-Term (in future years). Recommendations incorporate an implementation strategy for the work of the Mayor’s Task Force.
In the Short Term, it is recommended that:
- The Housing Branch, working with the Association of Municipalities of Ontario (AMO) and other municipalities, advocate with the Province for an expanded Rent Supplement Program.
- The Housing Branch work with Employment and Financial Assistance to assess the impact on municipal budgets of equating Ontario Works shelter maximums with Canada Mortgage and Housing Corporation (CHMC) average market rents.
- Council approve a Municipal Housing Facilities By-Law, including a definition of Affordable Rent, in order to extend benefits to private and non-profit developers in exchange for the provision of affordable housing.
- Council approve a pilot project, to be administered by the Housing Branch, to combine existing social housing capital ($1 million) with city-owned land, reduced property taxes (as in recommendation 5) and waived development charges and municipal fees, in order to assess the viability of the Municipal Housing Facilities By-Law.
- The Housing Branch develop an advocacy strategy for working with other organizations in order to implement the recommendations of the Mayor’s Task Force directed to the federal and provincial governments.
- The Housing Branch assess community interest in establishing a voluntary professional assistance foundation, as recommended by the Mayor’s Task Force.
- The Housing Branch assume a Housing Facilitator role to pursue affordable housing development, coordinate implementation of the Mayor’s Task Force recommendations and report to Council annually on the achievement of targets and recommendations.
In the Medium Term, it is recommended that:
- The Director of Finance assess the recommendations of the Mayor’s Task Force regarding property tax to determine the impact of:
· Extending eligibility for the new rental multi-residential tax class from 8 years to 35 years;
· Establishing parity between the multi-residential tax class and the residential tax class, in the context of the Task Force on Property Assessment and Property Tax Issues;
· To report on the findings of this assessment to the Corporate Services and Economic Development Committee.
- The Director of Finance assess the recommendation of the Mayor’s Task Force to enable Development Charge exemptions outside of the Capital Facilities By-Law and, if supported, work with AMO and other municipalities to seek changes to the Development Charges Act.
- The General Manager of Development Services consider the Affordable Housing Strategy and the Mayor’s Task Force in the development of the new Official Plan and include policies on the following:
· “Housing First” policy for surplus municipal land;
· Alternative development standards for multi-residential development including provisions for reduced parking standards in areas serviced by public transit;
· Policies to support the creation of affordable rental units through conversion of non-residential space, adaptive re-use and intensification;
· Restrictions on rental conversions where the vacancy rate is under 3%;
· Policies to protect affordable and special needs housing;
· Policies that require affordable housing in large-scale developments.
- The General Manager of Development Services consider the following recommendations of the Mayor’s Task Force, in addition to policy implications arising from the preceding recommendation (#11), as part of the next Comprehensive Zoning By-Law review:
· Permit secondary suites, as of right, in single and semi-detached houses throughout the City;
· Reduce or eliminate parking requirements for affordable housing developments at or near transit stations and at other practical locations;
· Establishing zoning by-law provisions which encourage the development of affordable housing.
- The Housing Branch work with Development Services to:
· Complete a comprehensive municipal housing statement update to fully document the local housing market and establish policy approaches to respond to different types of housing need;
· Create an information service within the City of Ottawa to coordinate and provide information on funding for affordable housing and to work with other levels of government and mortgage lenders to consolidate funding and financing sources;
· Establish targets for rental housing and monitor affordable housing stock activity, including construction, conversion and demolition.
- The General Manager of Development Services identify opportunities for streamlining approvals and define a process whereby applications for affordable housing are given priority.
- Real Property and Asset Management, Development Services and the Housing Branch continue to actively pursue surplus properties owned by the federal and provincial governments for use in creating affordable housing.
- The Housing Branch work with Development Services to develop an incentive program to encourage homeowners to add secondary suites.
- The Housing Branch review options for establishing a limited Rental Housing Acquisition Program.
- The Housing Branch advocate with the federal government for expansion of the Rental RRAP program and explore options to assume a delivery role for this program.
- The Housing Branch develop program guidelines to re-activate the Innovative Housing Loan Fund.
In the Long Term, it is recommended that:
- The Housing Branch work with local non-profit housing corporations to support the viability of the existing stock and to explore opportunities to maximize existing social housing assets to leverage new housing development.
- The Housing Branch fund or undertake research to explore new municipal innovations which lead to greater affordability in housing.
- The Housing Branch build community capacity to create affordable housing through research, education and information sharing.
- The Housing Branch review municipal services to determine whether possibilities exist to address housing affordability issues through mechanisms such as grants, loans, support funding or program funding.