Affordable rental housing shortages for working Canadians have hit critical levels in most major cities across Canada. For years, grim statistics of growing waitlists far outpacing the number of affordable rental units under construction have made headlines nation-wide. Yet, despite the alarming numbers, not much in the way of viable, sustainable solutions have been presented.
Take Toronto, for example, where 91,000 families are currently on waitlists for affordable rental housing. Toronto is a city that’s expected to grow by about 30,000 people each year; a third of whom are renters (approximately 10,000), and a third of those who are from lower-income households (approximately 3,300). These are households whose combined family incomes are generally in the range of $50,000 to $60,000 per year and lower. In Toronto, a family of four living on $60,000 a year is considered at or below the poverty line.
“Currently, the government’s gross capital input into the construction of affordable rental housing in large urban centres is $150,000 per unit,” says Cary Green, Chairman of Greenwin Inc. and Executive Vice President of sister company Verdiroc Development Corporation. “This non-repayable grant is a very high cost to the taxpayer.”
After subtracting the overhead and the fees, Green points out that the $1.25 billion allocated for the next four to five years will only allow for the construction of 1,500 affordable housing units across the country per year. And that’s only if all the money goes into new construction, which is not the case—some of the funding is allocated to rent assistance and renovations, both of which are badly needed. This level of capital, all experts agree, is nowhere near enough to address the extent of the growing need.
A viable, sustainable solution
For the past two years, Greenwin and Verdiroc have been quietly working with the lending community, the Federal, Provincial and Municipal Governments, as well as numerous industry stakeholders, to develop a fiscally responsible solution that could reduce the affordable rental housing problem.
Rather than a grant, their proposed solution is that the Federal Government raise capital via 35-year Development Bonds. These would be raised over three or four years, in three or four tranches of $1.5 billion to $2 billion each, for a minimum total of $6 billion in capital.
“The 35-year Bonds would be secured by the fully developed and leased rental housing properties that will be built using the funds,” explains Hanita Braun, Verdiroc’s Executive Director of Project Management, Planning and Development. “Similar to the CMHC limited dividend rental bonds of the 1950s and 1960s, these would be secured by the equivalent of a first mortgage on any new rental property.”
Simply put, the Bonds would be interest-free for the first twenty years while the capital is repaid. For the remaining 15 years, both the principal and interest payments would be paid at the same rate as the Bonds.
“This solution would solve a real problem that exists with the current system,” Braun adds. “That problem is the lack of affordable capital. The Development Bonds would leave in place the existing provincial and municipal structures, as well as CMHC’s parameters on yearly applicable rents.”
If launched as a pilot project, Green says the raising of the first $1.5 billion in capital could happen immediately, and that the benefits would be vast and direct. One notable benefit is that the cost per unit to the government would be considerably lower—just $72,784 versus the current $150,000. The proposed capital to be raised would generate more than triple the number of units compared to the existing program—about 28,750 compared to 9,000—and six times the number of jobs, up to 64,000 from roughly 10,000.
“Aside from these benefits, this would be easy to implement and open to all interested builders, developers and providers of affordable housing who meet the criteria for these loans,” Green notes. “Anyone who’s applied for a grant under the current system has experienced the drawbacks of having to wait for limited funds to become available. The current lack of affordable capital makes the uncertainty of funding even greater. This solution reduces those drawbacks.”
Gaining momentum and favour
According to Green, this proposal was endorsed by the City of Toronto’s Affordable Housing Committee, the Carpenters Union, the Greater Toronto Apartment Association and numerous politicians and ministers in both the Provincial and Federal Government.
“More than 30 elected politicians from all three levels of government were consulted, and of that 30, only one or two were not supportive,” he says.
Given the current alternatives and their extraordinary costs to taxpayers, it’s no wonder the Development Bonds are gaining such favour. For those not fortunate enough to find affordable housing in our cities, the last resort often includes one of the following options:
- Shelter bed – cost to taxpayer: $100-$150/night
- Night in jail or prison – cost to taxpayer: $2,000-$2,500/night
- Hospital bed – cost to taxpayer: $3,000-$3,500/night
- An affordable rental apartment built under the proposed affordable rental housing Development Bond plan would cost less than $11 per night to the taxpayer
With the election now behind us and a new Liberal Government primed and ready to affect change, Green is hopeful that this proposed solution will begin to regain some momentum.
“We’re excited to see this move forward and finally start once again to seriously tackle the affordable rental housing crisis in Canada,” says Green. “These Development Bonds will open new doors and opportunities for the creation of much needed affordable rental housing in our country.”
Erin Ruddy is the editor of Canadian Apartment Magazine