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REPORT TO
FINANCE & OPERATIONS COMMITTEE
Report Number: lOT 01-03
Date: June 19,2003
From:
Interdepartmental Development Team
Subject:
City of Pickering Participation in Region of Durham's
Proposed Community Rental Housing Program
Recommendations:
1.
That Council RECEIVE IDT Report Number 01-03 of the Interdepartmental
Development Team respecting the Region of Durham's proposed Community
Rental Housing Program;
2.
That the Region BE ADVISED that Council supports programs that facilitate the
development of rental housing;
3.
That the Region BE ADVISED that Council does not support the Region's
Community Rental Housing Program, as established, given the inappropriately
low Provincial financial contribution and the high required Area Municipal
contribution for a matter that is not a primary municipal financial responsibility;
4.
That the Region BE ADVISED that the City is unable to participate in this
program given both the required level of Area Municipal contribution under this
program and the City's current financial resources;
5.
That Council ENDORSE the staff comments on technical program details, as set
out in Appendix I, including support for the Regional concerns;
That the City Clerk FORWARD a copy of Report Number IDT 01-03 to the
Region of Durham.
Executive Summary: The Region of Durham has requested Area Municipalities to
indicate their willingness to participate in the proposed Region of Durham Community
Rental Housing Program (CRHP) and a number of program parameters. The CRHP is
a Federal/Provincial program to provide capital subsidies to developers of affordable
rental housing.
The subsidies are to be funded by a Federal grant of $25,000 per unit to match a
Provincial grant of $2,000 and Municipal (Regional and Area municipalities) subsidies
up to $23,000 per unit.
Report I DT 01-03
Date: June 19, 2003
Subject: City of Pickering Participation in Region of Durham's
Proposed Community Rental Housing Program
Page 2
Both Area and Regional municipalities are to meet this obligation by changing the
taxation class for the affordable units to the same class as condominiums
('foregone' taxes) and by providing direct grants up to the value of development
charges. 'Foregone' taxes for the 35 units allocated to Pickering equal $9,845 per unit
($344,568 over 20 years). Direct costs of the grants to Pickering up to $2632 per unit
($92,120) would have to be paid in 2004 or 2005. These costs would increase to
$188,600 if the City participated at the full development charge rate of $5,400 per unit.
The City of Pickering supports the provision of needed housing, including affordable
and rental housing in Pickering through the policies of the Pickering Official Plan and
has, from time-to-time, provided individual support such as the subsidy recently
authorized by Council to an Options for Homes affordable condominium. However,
support for the CRHP program is not recommended for two reasons.
Firstly, the Provincial contribution of $2,000 per unit is too low in comparison to the
required funding by the Regional and Area Municipalities. On principle, with its much
greater and more flexible income sources, the Province should pay a larger proportion
of the costs for affordable housing: affordable housing should not be downloaded to
municipalities as a new responsibility in the guise of a new program.
Secondly, the direct subsidy costs of the Regional CRHP of up to $92,120 which would
be payable by Pickering in the years 2004 and 2005 are not affordable to the City at
this time. The City does not have the financial resources to contribute the required
amounts under this program.
Also attached to this report are the details of the Region's proposed program set out in
Regional Report 2003-J-12 and an Appendix I which contains City staff's technical
analysis and comments on the elements of the proposed Regional Community Rental
Housing Program and its program parameters.
Financial Implications: No financial implications are triggered by declining to
participate in the Regional Community Rental Housing Program.
1.0 Backqround:
1.1 The Region has requested Council's participation in the Community Rental
Housing Program.
On May 7, 2003, the Clerk of the Region of Durham requested comments by
June 16, 2003 from the Area Municipalities about their willingness to participate in
the proposed Regional Community Rental Housing Program (CRHP) and a
number of program parameters (see Attachment #1).
Report J DT 01-03
Date: June 19, 2003
Subject: City of Pickering Participation in Region of Durham's
Proposed Community Rental Housing Program
Page 3
The elements of the proposed Regional CRHP were set out in Regional Report
2003-J-12 (see Attachment #2), along with a number of concerns with the
Federal/Provincial program. Due to the short time provided for comments on this
detailed program, the Region was advised that this matter will be considered by
Pickering Council on June 23, 2003.
1.2 The Region's proposed program follows thorough review of rental housing
needs and opportunities.
This request follows:
. the 2001 "Regional Chair's Task Force on Sustainable/Affordable Housing";
. Pickering's review and Council's subsequent Resolution 43/02, Item #3 in
January 2002, requesting a municipal working group to develop program details
(see Attachment #3);
. development of program elements suitable for the Region of Durham by the
arealregional municipal Working Group, including financial/fiscal impact
analysis by consultants; and,
. design of the proposed Region of Durham CRHP to implement the recently
announced Federal/Provincial Community Rental Housing Program, as set out
in Regional Report 2003-J-12.
1.3 The Housing Program requires substantial Federal and Municipal subsidy
but is hampered by poor Provincial support.
The Federal/Provincial CRHP provides Federal capital grants of up to $25,000 per
unit to match Provincial funding of $2,000 and Regional/Area Municipal funding of
up to $23,000 per unit to subsidize the development of affordable rental housing.
Under the CRHP, the Province has allocated approximately 200 units at this time
to the Region of Durham, as a high-needs area.
1.4 Allocation of rental units throughout the Region will require substantial Area
Municipal and Regional subsidy.
The Region is proposing to allocate 35 units of affordable rental housing to
Pickering under the CRHP, which reflects the City of Pickering's share of the
Region's population (17%).
Estimated program costs are outlined in Table 1.
The Region calculated the direct costs of subsidies equal to full development
charges in each Area Municipality.
Report lOT 01-03
Date: June 19, 2003
Subject: City of Pickering Participation in Region of Durham's
Proposed Community Rental Housing Program
Page 4
Using this calculation, direct costs of participation in the Regional CRHP for the
City of Pickering include subsidies of up to an average of approximately $5400 per
unit or approximately $188,600 in total (equivalent to Pickering development
charges) with direct Regional costs of up to approximately $8350 per unit for a
total of approximately $292,000 (equal to Regional development charges) for the
units allocated to Pickering.
City staff calculate that the direct subsidy required in Pickering would average
approximately $2600 per unit or approximately $92,000 in total for Pickering and
approximately $4100 per unit or approximately $144,000 in total for the Region in
order to leverage the full matching Federal grant to achieve base affordable rents.
Increased participation, up to the full City development charge, would provide a
greater level of affordability (range of $2,600 per unit to $5,400 per unit).
'Foregone' tax revenue costs are also calculated to justify the Federal matching
capital grants which implement a tax class change from multiple residential
(purpose-built rental housing) to single residential (same as condominiums) under
Provincial legislation.
The actual 'foregone' tax revenue costs for the City of Pickering are $9,845 per
unit for a total of $344,568 and for the Region are $19,160 per unit for a total of
$670,589 for the 35 units allocated to Pickering. Any units not accepted by one
Area Municipality can be reallocated to another willing Area Municipality within
Durham Region.
Report lOT 01-03
Date: June 19, 2003
Subject: City of Pickering Participation in Region of Durham's
Proposed Community Rental Housing Program
Page 5
Table 1:
Regional Community Rental Housing Program
Estimated Contributions Over 20 Years
Avg Area Average Regional
Municipal Regional Pickering Costs in
Federal Provincial Costs Costs Costs Pickering
Subsidies Equal Per Unit
to Full - average $4,008 $6,733 $5,393 $8,350
Development
Charges Program 861,807* 1,447,684* 188,763** 292,248**
Actual Per Unit
Subsidies
Required in 2,632 4,118
Pickering to
achieve Base
Affordable Rent
Proaram 92,120** 144,130**
Property Tax Per Unit 11,036 16,632 9,845 19,160
ProQram 2,372,845* 3,575,941 * 344,568** 670,589**
Other Program Per Unit 25,000 2,000
Contributions Total
- 200 5,000,000* 400,000*
units
TOTAL $5,000,000* $400,000* $3,249,696 * $5,047,190*
* 200 units
** 35 units
Councillors may wish to read Regional Report 2003-J-12 and the attached fiscal
and financial studies for a fuller understanding of the Region's proposed CRHP.
2.0 Discussion
2.1 Pickering Supports Rental Housing.
The Pickering Official Plan (POP) includes the objective to encourage the
provision of an adequate supply of housing throughout the City, including provision
of an adequate supply of affordable, rental, assisted and special needs housing.
The POP further includes the policy that Council shall require a minimum 25% of
new housing, on a City-wide basis, to be of housing forms that would be affordable
to households of low or moderate income.
The City of Pickering has continued to support the development of affordable
ownership and rental housing in the City. Recently, Council demonstrated its
support for affordable housing by reducing its required parkland contribution by
$160,000 and deferring collection of development charges to assist in making 220
condominium units proposed by Tridel/Options for Homes at 1200 The Esplanade
North (in the City's downtown area) more affordable.
Report lOT 01-03
Date: June 19,2003
Subject: City of Pickering Participation in Region of Durham's
Proposed Community Rental Housing Program
Page 6
The Region should be advised that the City of Pickering continues to support
programs that facilitate the development of affordable rental housing in the City of
Pickering.
2.2 The Provincial Contribution is inappropriately low, given that affordable
rental housing is not a municipal responsibility.
As a long established tradition, senior levels of government (Federal and
Provincial) have funded almost all of the costs of housing programs in the
Province of Ontario. In the CRHP, the Federal Government is contributing up to
$25,000 per unit, or 50% of the costs, as matching funds while the Provincial
Government is contributing only $2,000 per unit, or 4% of the maximum costs with
both Regional and Area Municipalities making up the difference of 46% of the per
unit costs.
In Pickering, 'foregone' tax revenue for both the Region and Pickering is valued at
approximately $16,250 (32.5%) per unit, leaving an average of $6,750 (13.5%) per
unit to be paid by direct Regional and Area Municipal subsidies. This results in an
average direct Regional and Area Municipal subsidy requirement of approximately
$6,750 per unit, in Pickering.
The Provincial Government has a broad range of income sources and much
greater discretion to raise the financial resources to meet its needs. Municipalities,
on the other hand, rely mainly on one source for their income, property tax. In
addition, Area Municipalities have a much narrower property tax base than
Regional Municipalities and have also not been downloaded the responsibility for
social housing.
Over the past 8 years, the Province of Ontario has downloaded significant
responsibilities to municipalities while also proposing to limit municipalities ability
to increase tax rates by a suggested requirement for a referendum for any tax
increase.
In this environment, it is not equitable or fair for the Province to contribute just 4%
of the cost of this program and expect Regional and Area Municipalities to provide
the 46% shortfall. It is most inequitable for both designated 'service managers' of
social housing (Le., the Region of Durham) and local municipalities that have no
formal housing responsibilities, to be 'downloaded' a new housing responsibility of
such magnitude. If the Province were to come much closer to eliminating the need
for direct municipal subsidy, the formula would be more acceptable. For example,
if the Provincial subsidy were raised to eliminate the need for direct Area Municipal
contribution, it would be more supportable on equitable grounds.
Report IDT 01-03
Date: June 19, 2003
Subject: City of Pickering Participation in Region of Durham's
Proposed Community Rental Housing Program
Page 7
2.3 The City is unable to participate financially, given current financial
resources.
The direct cost of participation in the program of up to a subsidy of approximately
$92,000 is not possible at this time or within the next few years, at least. This
subsidy would represent approximately 0.5% of the City budget. In order to
provide such a subsidy, funds would have to be budgeted for this amount in the
year 2004 with actual program expenditure expected late in 2004 and in 2005.
Difficult financial challenges face the City in 2004. The City should not willingly
accept any new responsibilities with financial implications of this magnitude. The
Region should be so advised.
2.4 Comments on the proposed Regional Community Rental Housing Program
parameters are provided in the Appendix to this report.
City staff analysis and comments on the proposed Region of Durham CRHP and
its program parameters are set out in Appendix I to Report Number lOT 01-03.
Report I DT 01-03
Date: June 19, 2003
Subject: City of Pickering Participation in Region of Durham's
Proposed Community Rental Housing Program
Page 8
Attachments:
1.
2.
3.
Regional Clerk's Letter Requesting Comments, dated May 7,2003
Regional Report 2003-J-12, dated May 7,2003, with Attachments
Pickering City Council Resolution 43/02, Item #3
Prepared By:
Approved I Endorsed By:
Catherine Rose
Manager, Policy
Neil Carroll
Director, Plann ng & Development
. -~~ -?~
Gillis Paterson
Director, Corporate Services & Treasurer
-
SG:ld:jf
Th mas J. Ouin
Chief Administrative Officer
'.
"
Copy: Director, Corporate Services & Treasures
Director, Planning & Development
Recommended for the consideration of
Pickering Cit - C unci!
.' ,
APPENDIX I to
REPORT NUMBER IDT 01-03
City Staff Comments on the proposed
REGION OF DURHAM
COMMUNITY RENTAL HOUSING PROGRAM
and its program parameters
Aþpendix I to Report IDT 01-03
Subject: City Staff Comments on Region of Durham
Community Rental Housing Program
Page 1
1.0
The ReQion's Request:
The Region is canvassing area municipal willingness to participate with the
Region of Durham in the Federal/Provincial Community Rental Housing
Program, both in general and specifically as it relates to a number of program
parameters. Once the feedback is received, Regional staff will proceed to the
next steps, which include proposing an enabling Municipal Housing Facilities
by-law for adoption by Regional Council, and criteria to be contained in Regional
tender documents for each participating area municipality for further
consideration by the respective area municipalities.
1.1
In response to the Region's Task Force on Sustainable/Affordable Housing,
the City of Pickering recommended that an Affordable Rental Housing
Working Group refine, clarify and identify specific implementation details
for further consideration by Area Municipal Councils.
In December 2002, the Durham Regional Chair's Task Force on
Sustainable/Affordable Housing Report provided a thorough review of the
challenges to producing affordable housing and an Action Plan to overcome the
barriers to stimulate creation of new affordable housing in the Region. The
serious need for affordable housing was evidenced by very low rental housing
vacancy rates, rental rate increases exceeding inflation and real household
income, significant percentage of residents paying more than 30% of their gross
income on shelter, growing waiting lists for social housing and increasing
homelessness. The Task Force Report concluded that the greatest challenge is
a significant gap between the market rents necessary to pay the capital costs to
justify construction of new rental units and the level of rents that are "affordable".
To close that gap, the Report suggested funding support from Federal and
Provincial Governments and financial incentives from the Region and Area
Municipalities. The Task Force concluded that new affordable rental housing will
not be achieved in the Region without Area Municipal participation. The Task
Force Report was referred to the Area Municipalities for comments.
The Task Force recommendations were reviewed in Pickering
Planning & Development Report Number PD 07-02 and considered by Pickering
City Council which passed Resolution #43/02, Item #3 (see Attachment #3) in
March 2002. The Resolution supported the concept of Area Municipalities as
partners to assist in the financing of affordable rental housing. The Resolution
further recommended establishment of an Affordable Rental Housing Working
Group with Regional and Area Municipal representation to refine, clarify, and
identify specific implementation details, for presentation back to Area Municipal
Councils to:
Appendix I to Report lOT 01-03
Subject: City Staff Comments on Region of Durham
Community Rental Housing Program
Page 2
. Investigate measures to off-set area municipal costs;
. Ensure a fair sharing of the tax burden across the Region;
. Ensure fair distribution of the resultant rental units throughout the Region, up
to a maximum of 100 units per year;
. Ensure the subsidies will result in reduced rents, the rents will not increase
beyond affordable rents and that the subsidized units will remain as rental
units, among other matters.
Resolution #43/02, Item #3, also urged a key role for both the Provincial and
Federal Governments in funding affordable housing and was forwarded to the
Region, each of Durham's Area Municipalities, the Provincial and Federal
governments.
1.2
Following the findings of the Working Group on Affordable Rental Housing
and evaluation of the newly-released Community Rental Housing Program,
the Region of Durham is now requesting Area Municipalities to respond
regarding their willingness to participate in the Community Rental Housing
Program.
1.2.1 Affordable Rental Housinq Workinq Group
In response to area municipal recommendations, the Region established a
municipal Working Group comprising Area Municipal and Regional staff to
assess the financial implications of an affordable housing program in Durham.
The Working Group was formed in May 2002, and included representatives from
the City's Planning & Development and Corporate Services Departments.
C.N. Watson and Associates and SHS consultants Inc. were engaged by the
Region to study the fiscal impact of providing a grant-in-lieu of development
charges and taxing prospective multi-residential projects at the lower single
residential property tax rate. An analysis of the potential costs to the Region and
Area Municipalities in providing such incentives was provided including the
impact on achieving affordable rents based on certain assumptions regarding
unit mix and geographic distribution of rental units.
The Working Group met through the summer of 2002, then suspended meeting
until the announcement of the Community Rental Housing Program late in 2002
by the Provincial government. Upon resuming meeting in early 2003, the
Working Group was able to determine the incentives needed to facilitate
implementation of the Community Rental Housing Program and examine the
impact of identified incentives on Area Municipalities and the Region of Durham.
Appendix I to Report lOT 01-03
Subject: City Staff Comments on Region of Durham
Community Rental Housing Program
Page 3
1.2.2 Community Rental Housinq Proqram
Regional Report 2003-J-12 (see Attachment #2) provides information on the
Community Rental Housing Program, identifies related concerns raised by the
Working Group and provides the findings on the cost of an affordable housing
program. The details of the Community Rental Housing Program are highlighted
on page 4 of Regional Report 2003-J-12.
Under the terms of the Federal/Provincial agreement, the Community Rental
Housing Program is administered by the Provincial Ministry of Municipal Affairs
and Housing. Program implementation is the responsibility of municipal service
managers such as the Region of Durham. The Province has established the
mandatory ground rules for accessing the federal government's capital grant
funding of up to $25,000 per affordable rental unit, despite providing a
contribution of only $2,000 per unit as an offset to the Provincial Sales Tax
(PST).
The remaining matching $23,000 must be provided from various Regional and
Area Municipal incentives. These include a mandatory requirement that the
property tax rate must be downwardly adjusted to the single residential rate,
which represents a major portion of the matching municipal contributions. Other
municipal incentives can include development charge grant rebates, free
municipal land, reduced parkland contributions, reduced application fees and
others. In order to qualify for the lower tax rate, projects must have a minimum
of 7 units.
The term "development charge waivers" referred to in the Regional report is
intended to mean that development charges would still be collected and the
Region and/or Area municipality would rebate back to the applicant funding in
the form of a grant equivalent to the amount of the development charges. The
City of Pickering would have to consider various options to fund subsidies of the
successful bids for the Pickering-specific tender calls. Legal opinion was
received that waiving or exempting development charges would create the
potential for legal challenges and OMB hearings to the validity of the
Development Charges By-law, as noted on page 8 of the report attached to
Report 2003-J-12 entitled, "Financial Impact of Community Rental Housing
Program".
Appendix I to Report lOT 01-03
Subject: City Staff Comments on Region of Durham
Community Rental Housing Program
Page 4
2.0
Discussion:
2.1
Concerns with the Community Rental Housing Program (CHRP)
A number of concerns with the details of the Community Rental Housing
. Program are raised on page 4 of Regional Report 2003-J-12 and are itemized in
the Report's recommendation b).
Staff strongly agree with the fundamental concern that the Provincial contribution
of only $2,000 per unit is wholly inadequate. The Province has revenue
opportunities that are much broader than those available to municipalities. This
represents one further matter that has been 'downloaded' to municipalities.
Its inadequacy is accentuated when considered in light of the matching
contribution of up to $25,000 per unit by the Federal Government. Since the
Federal Government is making a meaningful contribution to the program, the
targeting of the units to achieve the maximum CMHC average rents appears fair.
However, a more equitable Provincial contribution could potentially lessen or
even eliminate the need for municipalities to provide subsidies equivalent to
development charges.
The CRHP requirement that projects be selected by October 31, 2003, and
receive building permits for proposed rental housing projects within 18 months
are unachievable timelines, in the opinion of City and Regional staff.
Following receipt of Area Municipal comments on Regional Report 2003-J-12,
the Region must adopt a Municipal Housing Facilities By-law, complete tender
documents for consideration by each participating area municipality, finalize the
tender documents and then administer the tender process to select the winning
bidders in each Area Municipality. Then the selected proponents will have to
obtain all planning approvals and building permits within 18 months, which
assumes Area and Regional Municipal planning approval. Such timelines would
only be feasible if Area and Regional Councils support the proposal on planning
grounds and no appeals occur to require time-consuming appeals to the OMB.
Finally, the requirement for a "tender" process, as opposed to a "request for
proposal" process, limits opportunities to assess proposals according to "value
for public money" and could also prejudice a rezoning application by prior
"qualification" of project funding.
Appendix I to Report IDT 01-03
Subject: City Staff Comments on Region of Durham
Community Rental Housing Program
Page 5
Following participation in the Working Group, staff agree with the concerns
identified in Regional Report 2003-J-12 and recommend that City Council
endorse them. Such significant shortcomings could severely impede the
success of the proposed Regional Community Rental Housing Program in
delivering affordable rental housing in the Region and the City.
2.2
Six Program Parameters requiring Area Municipal Feedback
Regional Report 2003-J-12 requested specific response from the Area
Municipalities to six proposed parameters of the Regional Community Rental
Housing Program, as follows:
2.2.1 The proposed 20 Year Proqram Lenqth is supported
The CRHP requires that rents be set at minimum market levels for a minimum of
15 years, plus a phase-out period for sitting tenants of a further 5 years.
Regional staff have suggested that the period be extended to 20 years, plus the
five-year phase-out period in order to provide a longer period of affordable rents
to better justify the municipal subsidies.
Such an extension is also consistent with the suggestion in Pickering City
Council Resolution #43/02, Item #3 that units with subsidies remain as rental
units.
City staff agree with the rationale for the 20 year program length.
2.2.2 Proportional Unit Allocations to each Area Municipality are supported
Regional Report 2003-J-12 recommends the distribution of the units under the
CRHP on a 'fair share' basis among Area Municipalities within the Region
calculated as the same proportion of units as the population of each respective
Area Municipality within the Region.
With 17% of the Region's population (based on the 2001 Census), the City of
Pickering would be allocated 35 affordable rental units by the Regional
Community Rental Housing Program out of a Region-wide total of 215 units.
This is the same allocation as for Whitby, and less than Oshawa's allocation of
55 units. Allocations for Brock, Scugog and Uxbridge were rounded up to
10 units to make projects eligible for the lower single residential property tax rate.
It is noted that Pickering taxpayers contribute approximately 20% of Regional
property taxes.
Appendix I to Report IDT 01-03
Subject: City Staff Comments on Region of Durham
Community Rental Housing Program
Page 6
A fair share distribution of units across the Region shares both the benefits of
providing needed housing affordable to residents of each Area Municipality
locally, and avoids unfair burdens to the taxpayers of any particular Area
Municipally of the required subsidies.
City staff agree with the proposed fair share unit allocation.
2.2.3 Proposed Tarqet Rents are supported
Under the Community Rental Housing Program, rents cannot exceed CMHC
average market rents for the community. The objective of the CRHP is to
provide a mix of subsidies to reduce the cost of developing rental units to a level
that achieves cost recovery at rents that are "affordable"; i.e., not to exceed
average rents for the community.
CMHC average rents are provided for each type of unit and reported for each
Census Metropolitan Area (CMA). Pickering, Ajax and Uxbridge are normally
included in the data for the Toronto CMA, which has higher average rental rates.
However, Regional staff obtained specific figures from CMHC for the three
Durham municipalities that accurately represent local rental rates. For Pickering,
the resultant rental rates are as follows:
Apartments
Townhouses
Bachelor
1 Bedroom
2 Bedroom
3 Bedroom
$ 579
$ 741
$ 922
$1,054
$ 932
$1,210
As the program requires that tenants not pay more than 30% of their gross
household incomes for rent (excluding utilities), maximum annual household
incomes for tenant eligibility in Pickering would range from $23,136 for bachelor
apartments to $48,352 for a 3 bedroom townhouse. These income levels are
consistent with the maximum income levels suggested in the Task Force report.
Although increasing the target rents to Toronto CMA levels would reduce the
required municipal subsidy to bridge the gap between market costs and target
rents, it would also decrease the level of 'affordability', making the units less
affordable to households at the lower income levels.
City staff agree with the proposed target rents and how they were derived.
Appendix I to Report IDT 01-03
Subject: City Staff Comments on Region of Durham
Community Rental Housing Program
Page 7
2.2.4 The Development of Tenders Specific To Each Municipality is supported
The Community Rental Housing Program requires that funding for units be
allocated to proponents by a "two-envelope" Regional tender process.
Representatives of the development industry, the community and charitable
organizations can be part of the selection process.
Envelope One is a pass-fail process on Provincial and Regional program criteria.
Envelope Two contains the proponent's competitive bid for funding with the
successful tender awarded to the proposal that utilizes the least amount of
Federal funding.
A problem with the lowest bidder principle is that it does not allow for
negotiations to obtain the best "value for public money". A competitive tender
process works best when a specific project is the subject of bids. Each
proponents for project funding under the CRHP, however, will be tendering for a
different project with a different unit mix on a different parcel of land which will be
at a different stage of planning approval. The process also presupposes that
zoning and site plan approval will be granted at acceptable cost to the developer
within the time-frame of the program.
The Working Group has proposed, and City staff agree that individual area
municipal tenders should be developed by the Region with consultation with
each respective Area Municipality. In this way, each Area Municipality could
tailor the program to accommodate its particular needs. Each Area Municipality
can identify which form of subsidy it may be prepared to provide which would be
equivalent to a grant-in-lieu of development charges. If Pickering were to
participate in the CRHP, the tender for Pickering should specify that the unit mix
minimize the level of Area Municipal subsidy and also specify that subsidies be
limited to those required to meet target rents.
Staff also consider that the Region may wish to issue multiple tenders within
each Area Municipally. Options could include one tender for non-profit housing
providers and one for private developers or different tenders for different parts of
an area municipality.
Regional staff have indicated that once Area Municipal responses to Regional
Report 2003-J-12 are received, a Municipal Housing Facilities By-law will be
proposed for adoption by Regional Council.
Appendix I to Report IDT 01-03
Subject: City Staff Comments on Region of Durham
Community Rental Housing Program
Page 8
Following by-law adoption, Regional staff intend to prepare a 'template' of a
tender document for comment by each Area Municipality, after which individual
tenders for use in each particular Area Municipality will be forwarded for
consideration by the respective Area Municipal Councils, probably late in 2003.
If Pickering was able to participate in the Regional CRHP, Pickering Council
could choose which specific subsidies it wished to contribute to the Regional
Community Rental Housing Program, at the time it considered a
Pickering-specific tender document. As the generator of a significant portion of
the program subsidy, the City of Pickering should be represented on the tender
selection committee to ensure that local interests were respected, if Pickering
was able to participate in the program.
City staff agree with the concept of development of tenders specific to each Area
Municipality. If Pickering could participate in the Regional CRHP, staff would
recommend that City Council identify the specific subsidies it was prepared to
support, at the time the Pickering tender documents are submitted for the
consideration of Pickering City Council.
2.2.5 The Mandatory Proportional Sharinq of Incentives by the Area Municipality to a
minimum of the Reqional Contribution is supported
Under the CRHP, municipal contributions eligible for the matching Federal grants
may include:
1. 'foregone' tax revenue resulting from taxation at the single rather than
multi-residential property rate;
2. full or partial waiver of development charges;
3. grants or loans, which could be calculated as "in lieu of' development charge
waivers, parkland contributions, planning or building permit application fees,
etc.;
4. surplus municipal land at below-market value; or,
5. fully exempting properties from local and/or regional property taxes.
Appendix I to Report IDT 01-03
Subject: City Staff Comments on Region of Durham
Community Rental Housing Program
Page 9
Consultants for the Working Group concluded that most types of low-rise
walk-up apartments and townhouses units could be made affordable if both the
Region and Area Municipalities tax these multi-residential developments at
single residential rates and provide a grant equivalent to the full development
charges (referred to as a grant-in-lieu of DC exemption). As a modeling
exercise, the consultants' calculation indicated that the grants-in-lieu of DC's
result in rents below the targeted average rents. The modeling exercise
assumed 2002 Regional and area municipal DC rates for the different unit sizes.
The proportion indicated in the modeling exercise resulted in a ratio of DC waiver
rebates of 64% Regional/36% Local, in Pickering. As indicated in Table 2 of
C.N Watson's "Fiscal Impact To Durham Region and Area Municipalities of the
Affordable Housing Program Community Rental Housing", the Regional DC's are
uniform across the Region for each type of unit, whereas, Area Municipal DC's
vary significantly across the 8 Area Municipalities. Since DC's are significantly
higher for some municipalities (Pickering, Clarington) than for other
municipalities, linking the proportionate mandatory contribution of the Area
Municipal subsidy to each area municipality's rate of DC's would appear to
"disproportionately" penalize the municipalities with higher DC's. A more
equitable sharing of direct costs of participating in the Regional CRHP would be
to base these minimal "mandatory proportional" calculations on an average of
area municipal development charges for each unit type.
Further, the level of grant-in-lieu of DC waiver should be limited to the proportion
necessary to achieve the targeted CMHC rent and not be increased to achieve
lower rents.
The principle being promoted by the Region is to have both levels of municipality
at the table actively participating in the delivery of affordable rental housing.
Should the Region have to provide a full DC grant rebate, area municipalities
should also provide a subsidy equal to the full value of the average DC value for
that type of unit within Durham Region. Alternately, should the Region provide a
grant equal to 50% of its DC for a particular unit type, the Area Municipality
should provide a grant equal to 50% of the average DC for that type of unit.
This avoids the Regional First-In solution wherein the Region provides a grant
equal to all of its DC charges and the area municipality only provides the
remaining amount necessary to achieve the targeted rent for a particular. unit
type.
Appendix I to Report IDT 01-03
Subject: City Staff Comments on Region of Durham
Community Rental Housing Program
Page 1 0
The Region's recommendation for mandatory proportional sharing of subsidies
also indicates that other types of contributions such as municipal lands or other
charges could be used by an 'area municipality to make up its "mandatory
proportional" contribution. As noted earlier, this could also include foregoing
parkland contribution, planning or building permit fees. Pickering City Council
could decide which specific contribution to offer at the time the Pickering-specific
tender documents were considered, if the City was in a position to participate.
Regional Report 2003-J-12 indicates that if a municipality declines to participate
in the program, units can be reallocated to other area municipalities interested in
supporting additional units.
Pickering staff agree that the 'mandatory proportional' principle would ensure
Regional and Area Municipalities share the responsibility of the CRHP, provided
average development charges for each unit type were used in the calculations.
2.2.6 Flexibility in the Identification of the Nature, Location and Type of Rental Housinq
Development Required To Meet Local Needs is supported
Regional Report 2003-J-12 requested Area Municipalities to comment on
identification of the nature, location and type of rental housing development
required to meet local needs.
The City of Pickering Official Plan provides that 25% of new housing should be
affordable to households of low or moderate income on a City-wide basis. The
policy does not specify the locations or specific types of housing that should be
provided.
Given that Pickering has been allocated 35 units over a two-year period,
establishment of precise targets for specific areas of the City would limit the
flexibility of possible proponents for the CRHP. Also, the number of units
allocated to Pickering could not result in undue concentrations of affordable
housing in any particular neighbourhood.
Staff consider that proponents should have flexibility in identifying the exact
nature, location and type of rental housing proposed under the CRHP program, if
the City was participating in the program.
Appendix I to Report lOT 01-03
Subject: City Staff Comments on Region of Durham
Community Rental Housing Program
Page 11
2.2.7 A Further Concern Respectinq Income Testinq For Tenants
The CRHP provides that households with incomes below a maximum income
limit will be eligible to rent the units. Regional staff have indicated that tenants
will be required to provide proof that their income is not above certain thresholds
when they initially rent units under the CRHP.
City staff is concerned that the program does not provide for regular income
testing throughout the tenancies during the 20 year term of the program. Since
over time, incomes of tenants could rise substantially, the concern is that
continued benefits of the municipal subsidies should be directed to tenants who
continue to be 'needy'. Staff consider that the Region should require regular
income testing throughout the period of the Durham Region's Community Rental
Housing Program, if possible.
2.3
Financial Impacts of Participation in the Community Rental Housing
Program
Participation in the Community Rental Housing Program will have financial
impacts on both the Region of Durham and the Area Municipalities, more so at
the Regional level. Municipal financial impacts will be in the form of 'foregone'
tax revenues by taxing of such units at the lower residential tax rate for a period
of 20 years and in the form of subsidies up to an amount equal to development
charges. According to financial analyses provided by the consultants to the
Working Group, both incentives will be required to deliver 'affordable' housing in
Durham at average CMHC rental rates.
In Pickering, due to higher assessments than most other Area Municipalities in
Durham Region, the 'foregone' taxes have a higher value, resulting in a
requirement for lower direct subsidies than in most other Area Municipalities.
2.3.1 Subsidies to make the rental units 'affordable'
In order to bridge the gap between full cost recovery rents and the targeted
average rents, subsidies are required. The financial modeling prepared by the
consultants assumed for purposes of calculating the full cost recovery rents, that
the units would be produced by the private sector with private sector efficiencies
and a typical private sector profit of 10%.
Rental rates for full cost recovery, a first level of subsidy and a full subsidy
package are presented on Table 2 below, along with the CMHC market rents for
each type of unit.
Appendix I to Report IDT 01-03
Subject: City Staff Comments on Region of Durham
Community Rental Housing Program
Page 12
The first level of subsidies presented on Table 2 below demonstrates the
reduction on rents that would result from the Federal capital grant to match value
of the change in the tax assessment class from multi-residential to single
residential class, plus the Provincial subsidy of $2,000 (the PST off-set).
The full subsidy shown in Table 2 demonstrates the further reduction in rents
achieved when the addition of grants equal to both full Regional and Area
Municipal development charges is added to the first level of subsidies plus the
matching Federal capital funding. The total Pickering development charges for
the mix of units assumed by the Region's consultants would cost Pickering a
total of $188,763 ($5,393 per unit) with total Regional development charges of
$292,248 ($8,350 per unit).
Regional Report 2003-J-12 proposes a level of Regional subsidy, if required, up
to the level of Regional development charges, as permitted by provisions of the
new Municipal Act once the Region adopts a Municipal Housing Facilities By-law.
However, City staff have determined that a requirement for subsidies of only
approximately only half the value of City of Pickering and Regional development
charges would be needed to qualify for the maximum amount of the Federal
matching grants that are available under the CRHP. This would result in total
subsidy requirements for the Pickering allocation of 35 units of $92,120 ($2,632
per unit) for Pickering and $144,130 ($4,118 per unit) for the Region of Durham.
This lower level of direct subsidy appears to permit achievement of target
affordable rents for most unit types.
Application of the full subsidy package shown in Table 2 more than meets the
target rents for 3 - Bed townhouses, and all sizes of apartment units.
Accordingly, required Regional and Area Municipal direct subsidies for these
types of units will be lower.
Appendix I to Report IDT 01-03
Subject: City Staff Comments on Region of Durham
Community Rental Housing Program
Page 13
Table 2: Subsidies Required In Pickering To Achieve The Target Rents of The
Regional CRHP
Townhouse Rents Walk Up Apartment Rents
2 - Bed 3 - Bed 1 - Bed 2- Bed 3 - Bed
Full Cost $1,445 $1,545 $1 ,138 $1 ,288 $1 ,388
(No subsidy)
First Level $1,110 $1 ,210 $ 880 $1,030 $1 ,130
Subsidy
Full Subsidy $ 965 $1,065 $ 735 $ 885 $ 985
CMHC Target $ 932 $1,210 $ 741 $ 922 $1,054
Rents
2.3.2 Financial Implications of Pickerinq Participation
The consultants to the Working Group provided supplementary reports to
Regional Report 2003-J-12 entitled "Financial Impact of the Community Rental
Housing Program", April, 2003 and "Fiscal Impact to Durham Region and Area
Municipalities of the Affordable Housing Program - Community Rental Housing",
March 25, 2003. Since the supplementary reports provide a detailed analysis of
the financial implications of participating in the Community Rental Housing
Program, City staff have not provided a detailed analysis of these reports.
Council is encouraged to peruse the reports for a clearer understanding of the
financial impacts.
The consultants provided a financial model of a hypothetical situation that
included certain assumptions about the types of units that may be developed in
order to test whether target rents could be met by the combination of the
Provincial PST grant, tax class change to single residential, and a grant equal to
the development charges for the selected units at both the Regional and Area
Municipal levels. The assumption for the mix of walk-up apartment and
townhouse units is that they will be in the same proportion as the current mix of
units within Pickering.
Appendix I to Report IDT 01-03
Subject: City Staff Comments on Region of Durham
Community Rental Housing Program
Page 14
The development model assumed by the consultants is for the 35 units allocated
to the City of Pickering, comprising 26 townhouse units and 9 apartment units.
It is possible that the actual mix of units and cost components of approved rental
housing developments that program proponents may submit will result in lower
subsidies than the model assumptions, which would result in lower grant
requirements on both the Region and the City of Pickering. In the case of
development charges, it is intended that the Region will collect development
charges and then rebate back to the developer an equal value to be obtained
from either the Regional Social Housing Reserve fund or from general Regional
revenue.
Tables 3 and 4 of the CN Watson report calculate both the one-time reduction in
taxes (2002 dollars) due to the affordable housing tax class change, and
'foregone' taxes over the 20 year period of the program. For Pickering, the
one-time reduction in local taxes for the 26 affordable townhouses would be
$19,754 or $760 per unit, and $4,992 or $555 per unit for the 9 apartments.
Table 4 provides two methods of calculating the total 'foregone taxes' under the
Federal/Provincial formula. The method set out in the Federal/Provincial CRHP
for purposes of allocating the matching Federal grant calculates the present
value of the future foregone tax over 10 years, which amounts to $193,060 in
Pickering. Regional staff, however, consider that a fairer method of calculation is
to calculate the present value of the future foregone tax over the actual 20 year
term of the program and assume that taxes will rise by a modest annual 1 %
annually over the term of the program, which results in a calculation of foregone
taxes in Pickering of $344,568. It is also of note that, following the change in tax
class, the townhouse units taxed at the single residential rate would pay local
taxes of $543 and walk-up apartment would pay an average of $398 annually.
Finally, Table 5 of the C.N. Watson report shows the combined impact of both
incentives. For Pickering's 35 unit project, the cost of the two incentives over
20 years is $15,238 per unit compared to the Region's figure of $23,366 per unit.
However, Council should understand that although the calculation of the
'foregone' tax revenue is provided, no purpose-built rental housing is currently
being developed. Since multiple unit residential condominiums are assessed at
the single residential tax rate, unless federal taxation provisions for rental
housing development are changed or the current costs to develop rental housing
otherwise change dramatically, it is not likely that any buildings which would fall
within the multi-residential tax class will be built in Pickering or any other GT A
municipality in the foreseeable future.
Appendix I to Report lOT 01-03
Subject: City Staff Comments on Region of Durham
Community Rental Housing Program
Page 15
Accordingly, calculation of the 'foregone' tax revenue, although used as a key
calculation to obtain the matching Federal capital contribution under the CRHP,
does not represent tax revenue that the City of Pickering could realistically
expect to receive in the absence of development for market rental housing on
suitable sites.
,', "
The Regional
Municipality ,
of Durham
Cierk's "
Department,
BOX 623
605 ROSSLAND ROAD E.
WHITBY ON L 1 N 6A3
CANADA
(905) 668-7711
1-800-372-1102
Fax: (905) 668-~963
E-mail:
clerks@region:durham.on.ca
www.region.durham.on.ca '
Pat M. Madill, A.M.C.T., CMM I
Regional Clerk, '
, ' ",,",i' , ,
, "SERVICE' , 'LLENCE '
, .fo~¡u.~:~""""".'~ "TfY'~'
" ' ",)~~:", ,
/~~
, ,This letter has been forwarded
, " I to the 8 Area Clerks.
ATTACHMENT#--L--TO '
tD.T. REPORT" tJ l~o ::ç
May 7,2003 - ,
Mr. M. de Rond
Clerk
,Town qfAjax ,
'65 Harwood 'Avenue South
Ajax, Ontario
L 1S 2H9
" " 'R'ECEIVED
RECEIVED,
CfTY,OF PICKERING MAY 1 6 2003 '
MAY 1 if 2003 : CITY OF PICKERING
, PLANNING & DEVELOrPMENT
, DEPARTMEN,
CLERK'S DIVISION
, Community Rental HousinQ ProQram (2003-J-12) - Our FUe: 506-00
Mr., de Rond, the Health and Social Services Committee of Regional,
Council considered the above matter and at a meeting held on May 7, 2003,
Council adopted the following recommendations of.the ,Cqm'mittee: ' ' '
na) ,
'THAT RepOrt #2003-j-12 of the Commissioners of Social Services'
, and Finance 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
t!°using 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 '(Le. waiving
, of Development ,Charges .or other types of contributions sÙch as
. municipal lands); and ,..~ '" " '
.. the identification of the nature, location and type of rental housing
, develoþmentrequired to meet local needs; and
, b)
, THAT' 'the Federal Minister of Human Resources Development, the
Pre~ier of Ontario, the Minister .of Municipal Affairs and Housing, and
local MPP's be ~dvised of the Region of Dl,Jrham's concern 'with:
. the lack of significant financial participation by the Provincial
government in the Community Rental Housing Program,s~nce the
n.orHnatching of, Federal funds by the Province creates al)
extraqrdinary higher financial requirement for municipalities; ,
'* '
'100% Post ConSUmer
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ATTACHMENT # i TO
¡.D.T.,RE'PORT# 01 .0'3 ,
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~, the requiremel}t fo'r a, tenderinstea~ of a reque~t for proposa'i
, p'robe~s for the selection' 'of affordable housing pròj~cts; : "
,. the limitations on municipal and private non-profit ,housing
partièipati°r"J;' ' '" , :',' ' ,
. ' the'limited timetable', whichrequfres 'projects to be selected by ,
October'31, 2003;'and, ',: . ',,' ;'
.' that,the ownership of public hous!ng is limited t025% 'and that
, public dÇ>lIars should be invested in public h?usîng i~ perp$tùiíy..11
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: EnclQsed, as'directed', is acopy of Report #2003-J-12'ofthe'Commissioners '
of Sociâl SeNices and Finance for your Councils review and response by"' " ,
,June 16!'2003. , ',' :', "',,', '," ,,' ',',:
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, P.M; Madill, AM.C.T;, CMM I , ,
Regional' Clerk, "
PMM/cs' ",'
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G.S. Ç;raham, ,Clerk, To.wnship orBroc~ "
' P.L. Barrie, Clerk, MUliicip'alîty of Clarington
8., Kranc, Clerk" City of Oshawa
S; Taylor, Clerk, City ot.-pickering , '
K. Coåtes, Clerk, Township, of Scugog
W.E. Taylor, Clerk, Town'ship 'of Uxbridge
D.G. McKày, Clerk, Town of Whitby,', ,
, S. Van Steen, 0 irectÇ> r, H,?ûsing Sèivice~ '"
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ATTACHMENT #2 TO
I.D.T. REPORT # D/- 03
The Regional Municipality of Durham
To: The Health and Social Services Committee
The Finance and Administration Committee
Dr. Hugh Drouin, Commissioner of Social Services
R.J. Clapp, Commissioner of Finance
Report No.: 2003-J-12 .
Date: April 30, 2003
From:
SUBJECT:
Community Rental Housing Program
RECOMMENDATIONS:
THAT the Joint Health & Social Services and Finance & Administration Committees
re'commend 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 (Le. waiving of Development 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 Rental 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 an9 private non-profit housing participation; and
. the limited timetable which requires projects to be selected by October 31,
2003. .
Report No.: 2003-J.12
ATTACHMENT # :¿ TO
J.D.T. REPORT # /')/ -D '3.
. ,
. I
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 of 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 new!y constructed units.
As detailed in Report #2002-COW-01, Area Municipalities provided feedback on the
Task Force recommendations and suggested that anyRegional 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.
" ..
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ATTACHMENT #:2. TO
tD.T. REPORT # D 1-03
Page No.: 3
Report No.: 2003-J.12
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 unit to offset the Provincial Sales Tax
. The remaining $23,000 per unit must be matched by municipalities and/or other
sources (Le. 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 yearphase-ollt
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.
Report No.: 2003-J-12
ATTACHMENT #:2 TO
I.D.T. REPORT # () / -0 3-
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:
Report No.: 2003-J-12
. ATTACHMENT #.2 TO
to.T. REPORT # /)/ ~o '3
Page No.: 5
Table 1
Regional Community Rental Housing Program
Estimated Contributions Over 20 Years
(Based on 215 Unit Model as per C.N. Watson Analysis)
Federal Provincial Area
Municipalities
. Region
Development
Charges
Per Unit
$4,008
$6,733
Program
Property Tax*
Per Unit
Program
Rent
Supplement
(50 units)
Per Unit
Program.
Other
Program
Contributions
Per Unit
Total
* 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 federàl 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.
Report No.: 2003-J-12
ATTACHMENT # b? TO
I.D.T. REPORT # I""J/ ~o 3
, ,
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/Provincial agreement, the Ministry of Municipal 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.
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. 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 larger communities. If a municipality
declines to participate in the program, units could be reallocated to other municipalities
interested in supporting additional units.
Municipality Population1 Housing Unit Federal Grant
# % Allocation
Ajax 73,753 15 30 $750,000
Brock 12,11 0 2 10 $250.000
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 87,413 17 35 $875,000
TOTAL 506,850 100% 215¿ $5,375,000
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 if 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.
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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:
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TABLE 3
CUMULATIVE IMPACf OF INCENTIVES ON RENT CHARGES
I Pickerina I TOWNHOUSE RENfS WALK UP APARTMENT RENTS
II 2.Bed I 3.8ed f.8edI2.8edI3.8ed
Full Co.st $1 ,445 $1 ,545 $1,138 $1 ,288 $1,3æ
Tex At Re.sidentie/ $1,110 $1 ,210 $880 $1,030 $1,130
Tax At Residential + Regionel & Municipal Weivers $965 $1 ,065 $735 $885 $985
CMHC Terqet Rent $932 $1.210 $741 $922 $1,054
I I
Ajax
Full Co.st $1 ,435 $1,535 $1,138 $1 ,288 $1 ,388
Tax At Residentiel $1 ,080 $1,180 $860 $1 ,010 $1,110
Tex At Residential + Regione/ & Municipel WaiVers $950 $1,050 $725 $875 $975
CMHC Tarqet Rent $932 $1,210 $735 $903 $1,037
I I
Uxbridge
Full Co.st $1 ,390 $1 ,490 $1,105 $1 ,255 $1 ,355
Tax At Residentiel $1 ,075 $1,175 $995 $1 ,145 $1 ,245
Tax At Residential + Regional & Municipal Waivers $935 $1 ,035 $860 $1,010 $1 ,110
CMHC Taraet Rent $932 $1,210 $759 $1,028 .$1 ,203
I I
Whitby
Full Cost $1 ,405 $1,505 $1,130 $1,280 $1,380
Tax At Residential $1 ,055 $1,155 $845 $995 $1,095
Tex At Residential + Regional & Municipal Waivers $925 $1 ,025 $715 $865 $965
CMHC Tarqet Rent $932 $1,210 $786 $894 $1,000
I I
Oshawa
Full Cost $1 ,450 $1,550 $1,160 $1,310 $1,410
Tex At Residential $1 ,055 $1 ,155 $845 $995 $1,095
Tax At Residential + Regional & Municipal Waivers $935 $1 ,035 $720 $870 $970
CMHC Tarqet Rent $843 $962 $713 $819 $925
I I
CJarington
Full Cost $1 ,355 $1 ,455 $1 ,095 $1 ,245 $1,345
Tax At Residential $1 ,035 $1,135 $835 $985 $1,085
Tex At Residential + Regional & Municipal Waivers $880 $980 $685 $835 $935
CMHC Terqet Rent $843 $962 $684 $812 $906
I I
SCJJgog
Full Cost $1 ,360 $1 ,460 $1 ,100 $1 ,250 $1 ,350
Tex At Residential $1,035 $1,135 $835 $985 $1 ,085
Tax At Resldentiel + Regionel & Municipal WaiVers $895 $995 $710 $860 $960
CMHC Tarqet Rent $843 ,$962 $684 $812 $906
I I
Brock
Full Cost $1 ,350 $1 ,450 $1,120 $1 ,270 $1 ,370
Tax At Residential $980 $1 ,080 $815 $965 $1 ,065
TaxAt Residential + Regional & Municipal Waiver.s $870 $970 $695 $845 $945
CMHC Tarqet Rent $843 . $962 $684 $812 $906
Note: The CMHC target rent must be achieved to access federal funding under the Community Rental Housing Program
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The exercise de~onstrated 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% Provincially
funded. In 2002, the Housing Services Division was advised that 60 additional units
would be allocated to Durham Region. The Province recently announced that 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).
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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. -
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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 revsnues 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
RJ. 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
ATTACHMENT # ;;) TO
I.O.T. REPORT # C /- 03
Financial Impact of the
Community Rental Housing Program
April 2003
Prepared by the staff of:
Finance Department
Social Services Department - Housing Services Division
Planning Department
With the assistance of:
SHS Consultants Inc.
C.N. Watson and Associates Ltd
ATTACHMENT #.:2 TO
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Financial Impact of Community Rental Housing Program
Introduction
In December 2001, The Regional Chair's Task Force on Sustainable/Affordable
Housing reviewed the types of barriers that prevent developers from constructing a
range of affordable housing in Durham.
While it was recognized that senior levels of government needed to take on 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. The Task
Force also recommended that Area Municipalities be encouraged to consider local
incentives to maximize opportunities to reduce rental rates for newly constructed units.
As a result of feedback from Area Municipalities, a Working Group of Regional and Area
Municipal staff was formed in May 2002 to detail and cost an affordable housing
program for Durham Region. Subsequently, the Federal and Provincial governments
announced a number of initiatives to help stimulate the construction of affordable
housing, including the Community Rental Housing Program. This document is a
supplement to Report 2003-J-12 and summarizes the findings of the Working Group, as
it relates to Regional and Area Municipal participation in the Community Rental Housing
Program.
1.0
Affordáble Housing Definition
The Community Rental Housing Program specifies that "target rent" levels cannot be
higher than the average rents published annually in Canada Mortgage and Housing
Corporation's (CMHC) rental market survey.
An important consideration by the Working Group was that given the costs associated
with new construction, should the target rents be set too low, even with incentives
provided, they would not be achievable. Low target rents also require significantly more
public money to bridge the gap between the actual cost for development and the rent
levels achieved with public investment. At the same time should the target rents be set
too high the program could end up in competition for the same households who could
afford home ownership in many parts of the Region.
In Durham Region, CMHC market rent information is not available for some
communities (i.e. Brock and Scugog). Further, information relative to Ajax, Pickering
and Uxbridge is aggregated in Toronto CMA information. Finally, average rental
charges for specific unit sizes and housing types are not readily available for all of
Durham Region. Ministry of Municipal Affairs and Housing staff have advised that
Service Managers can use other "reasonable" data sources to establish target rents in
areas where CMHC market rental survey information is not readily available.
By drawing on the detailed information from both 2001 and 2002 CMHC market data,
the following target rent amounts have been identified below:
Region of Durham - April 2003
2
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Finariciallmpact of Community Rental Housing Program
Table 1
Region of Durham Rental Housing Program arge en s
Walk Up Apartment Townhouse
,
Bach. 1 Bed 2 Bed 3 Bed+ 2 Bed 3 Bed+
Ajax $579 $735 $903 $1037 $932 $1210
Pickerinq $579 $741 $922 $1054 $932 $1210
Uxbridqe $579 $759 $1028 $1203 $932 $1210
Whitby $579 $786 "$894 $1000 $932 $1210
Oshawa $579 $713 $819 $925 $843 $962
Clarinqton $552 $684 $812 $906 $843 $962
Brock $552 $684 $812 $906 $843 $962
Scugoq $552 $684 $812 $906 $843 $962
1
T
t R t 1
Source. Based on CMHC Average Market Rent Survey- Oshawa CMA, Toronto CMA (October 2001, 2002)
As the CMHC Market Rent Survey is published every October, these rent levels would
be reviewed on an annual basis.
Assuming new tenants would not be required to pay more than 30% of their gross
household income for rent, excluding utilities, recommended maximum annual
household incomes eligible for the program are set out below:
Walk Up Apartment Townhouse
Bach 1 Bed 2 Bed 3 Bed+ 2 Bed 3 Bed+
Ajax $23,136 $29,371 $36,804 $41 ,438 $37,243 $48,352
Pickering $23,136 $29,610 $36,843 $42,118 $37,243 $48,352
Uxbridge $23,136 $30,330 $41,679 $48,072 $37,243 $48,352
Whitby $23,136 $31 ,409 $35,724 $39,960 $37,243 $48,352
Oshawa $23,136 $28,491 $32,727 $36,963 $33,686 $38,441
Clarington $22,058 $27,333 $32,448 $36,204 $33,686 $38,441
Brock $22,058 $27,333 $32,448 $36,204 $33,686 $38,441
Scugog $22,058 $27,333 $32,448 $36,204 $33,686 $38,441
Table 2
Maximum Annual Household Income Limits 1
Source: Based on CMHC average market rent data in Table 1 on an annual basis, multiplied by 3.33
As Table 2 illustrates, eligible household 'income levels vary from just over $22,000 per
year for bachelor units to $48,352 for a 3-bedroom townhouse unit. These income
levels are in keeping with the Regional Chair's Task Force Report, which suggested
Region of Durham - April 2003
3
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Financial Impact of Community Rental Housing Program
household income levels of up to $50,000 per year should be accommodated in units
created under an affordable rental housing program.
2.0
Potential Distribution of Units in Durham Region
In order to ensure the availability of program dollars across the Region and that
program costs are equitably .shared among the m Jnicipalities, an initial "fair share"
distribution of available Community Rental Housing Program units based on Area
Municipal population is proposed by the Working Group. Using 2001 Census data, the
proposed distribution allows for up to 10 units in smaller municipalities and between 30-
55 units in the larger communities. Where a municipality declines their participation in
the program, the units could be reallocated to other municipalities interested in
supporting additional units. The minimum number of units in less populated
municipalities was rounded up to 10 to allow projects to have more than seven units.
This would allow the projects to be 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. For the theoretical purpose of assessing potential program costs
to the Region and Area Municipalities, the following distribution of project funding was
utilized:
Municipality Population 1 Housing Unit Federal Grant
# % Allocation
Ajax 73,753 15 30 $750,000
Brock 12,110 2 10 $250.000
Clarinaton 69,834 14 30 $750,000
Oshawa 139,051 27 55 $1,375,000
Pickerina 87,139 17 35 $875,000
Scuaoa 20,173 4 10 $250,000
Uxbridae 17,377 3 10 $250,000
Whitby 87,413 17 35 $875,000
TOTAL 506,850 100% 215:¿ $5,375,000
Table 3
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 if fewer federal funds are required by an
approved project. This model assumes a distribution of approximately 215 units across Durham Region.
3.0
Potential Impact of Incentives on Rent
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.
As discussed in the Regional Chair's Task Force report, high-rise construction costs
prohibit the development of rental housing that would be affordable to households with
Region of Durham - April 2003
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Financial Impact of Community Rental Housing Program
incomes under $50,000 per year. For this reason, the Working Group focused on the
construction of modest townhouses and wood frame walk up apartments.
For each of these dwelling types, three scenarios were prepared in each of the eight
municipalities:
. "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.
These notional scenarios were used to develop an understanding of the impact various
incentives can have on rent charges. Some of the underlying assumptions for the
analysis included:
. A private developer will have a 10% cash upfront outlay and is purchasing the
land at market rates;
. The private developer will achieve a 10% return on the cash investment;
. Mortgage interest rates are assumed at 6%;
. Annual property tax savings equal present value of the difference in rates (multi-
residential to single residential) over 10 years, discounted at 6% (as allowed by
the Province); and
. Federal grants available for matching purposes would not exceed $25,000 per
unit.
These assumptions build on the factors assumed in an earlier analysis by the Regional
Chair's Task Force, which included members of the development and mortgage
financing industries. The consultants also reviewed these assumptions with other
industry experts. However, it must be recognized that any changes to the assumptions
including built form, number of units created, and financing information will have an
impact on the results achieved. In some cases, the full range of incentives applied in
the scenarios would not be required, as would be the case for a proponent who did not
have to purchase land or had charitable funds to contribute towards matching federal
dollars.
In addition, since the matching federal contributions are based on an average $25,000
per unit, there may be opportunities for some projects to access federal grants in
excess of $25,000 - provided fewer federal matching dollars were required for other
approved projects.
The Community Housing Program does not specify the same cash upfront criteria for
non-profit groups as it does for private developers. In addition, non-profit groups are not
Region of Durham - April 2003
5
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Financial Impact of Community Rental Housing Program
seeking a 10% cash return on investment. However, these "savings" could be offset by
higher professional fees and other construction savings not realized by non-profit
groups, which are generally not able to negotiate more favourable rates for these
services.
As indicated earlier in this report, affordable rents were assumed to equal the CMHC
average market rent by unit type for the Area Municipality. This creates an opportunity
to achieve a range of rents across Durham Region. Detailed scenarios for each of the
Area Municipalities and the impact of incentives on resulting rent charges are provided
in Appendix A. .
The theoretical scenarios were based on specific assumptions regarding land costs,
mortgage interest and debt financing rates, as well as size and density of projects,
which ultimately influenced the full cost amounts used for this analysis.
The exercise demonstrates 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 mitigate 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 are achieved.
Section 05 of the Regional Chair's Task Force Report makes a number of observations
regarding further opportunities to significantly impact on the rent levels achieved by the
Region and Area Municipalities through the application of various incentives.
Specifically, the direction of development into serviced areas in need of intensification or
redevelopment could ultimately reduce development costs assumed in the scenarios
and enhance opportunities to achieve target rents without fully utilizing Regional and
Area Municipal incentives.
4.0
Financial Impact Analysis
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. Appendix B describes the process undertaken in the
analysis and details the findings for the Region and Area Municipalities.
The analysis provides a per unit estimate of the fiscal impact on the Region of Durham
and Area Municipalities for providing a program to rebate development charges - and.
taxing multi-residential developments constructed under the program at the single
residential property tax rate. This exercise was undertaken to develop an
understanding of the impact those financial incentives, including Federal and Provincial
grants, could have on rents for newly constructed units. However, the implied costs for
Region of Durham - April 2003
6
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Financial Impact of Community Rental Housing Program
this analysis rely on the assumptions detailed below. It is important to note that unit
type, built form, and actual construction costs will result in different financial outcomes.
For the purposes of this analysis, a number of assumptions have been made for the
development of 215 units of various sizes and built forms:
. Development will be distributed between townhouse development and walk up
apartments in ratios reflective of the existing rental housing stock in each of the
Area Municipalities;
. Developments will be fully serviced;
. All developments will have more than seven units, thus qualifying as multi-
residential projects for property taxes;
. A program to rebate development charges will be provided at the full amount by
both the Area Municipality and the Region;
. Property tax reductions will remain in place for 20 years;
. Property tax rates are assumed to increase at an annual rate of one per cent
(1 %)1; and
. All units will be constructed by 2005.
4.1
Program to Rebate Development Charges
As discussed earlier in this report, recent changes to Provincial legislation allow for the
waiving of development fees and charges in order to stimulate the construction of rental
housing as a municipal capital facility. Development charges are collected from
developers and are essentially held by the Region to finance future residential growth
and related projects for water, sewer, roads and other specific purposes.
The Region's Legal Department has reviewed this option and has expressed. concern
that even a limited waiver of Regional development charges may be cause for
potentially litigious concerns. Undertaking such an initiative would require careful
definition since a waiver of development charges could expose the municipality to future
challenges for an exemption in development charge by-laws and be subject to review by
the Ontario Municipal Board.
By creating a defined exemption in the Development Charges By-law, it is believed that
the Region would lose the ability to cof:]trol when and if that exemption is applied. If a
party unsuccessfully tried to exploit such an exemption, then there would be potential
for the Region to face complaints regarding the application of its development charges
by-law and de novo proceedings before the Ontario Municipal Board to determine the
matter. .
1 The conservative assumption of a 1 % tax increase over a twenty year period is based on the premise
that it is not possible to predict the rate at which the multi-residential tax may increase relative to the
single residential tax rate. The consultant and Regional Finance staff agreed that a modest increase 1 %
is appropriate for the purposes of this exercise. .
Region of Durham - April 2003
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Financial Impact of Community Rental Housing Program
Therefore, rather than waiving development charges, it is recommended that a Regional
Rebate Program be developed. This would allow for the collection of all applicable
development charges with a one-time rebate being made available to eligible program
participants. In this way, development charges would continue to provide the revenues
required to fund residential growth. Funding for the rebate program could be made
available from the Social Housing Reserve Fund. It is important to note that actual
program costs cannot be determined until the location, number of units, unit sizes,
assessment value, built form and amount of incentive requested are known.
Many Service Managers like the City of Toronto, City of Ottawa and the Regional
Municipalities of Waterloo, Peel and York are funding affordable housing incentives
through the use of Social Housing Reserves.
Based on the assumed distribution of units as identified in Table 4, the program could
require one-tim'e Regional rebates of up to approximately $1.45 million, or an average of
$6,733 per unit. Further details on development charges for each of the Area
Municipalities and the Region of Durham are attached in Appendix C. .
4.2
Property Tax at Residential Rates
The Community Rental Housing Program stipulates that property taxes must be set at
or below the single residential rate in order for Service Managers to be eligible for
program funding.
Program guidelines specify that federal matching funds for foregone tax revenue will be
based on the net present value (NPV) of 10 years of foregone tax revenue (using a 6%
discount rate). However, the Province has stipulated that in order to be eligible for any
funds, projects must be affordable for a minimum of 15 years, followed by a five-year
phase-in of market rents. Staff recommend a 20-year program with a five-year phase
out in order to maximize the benefits of publicfunding for the program. .
The Working Group estimated the financial impact of the lower property tax rate using
two methods:
. Using the Provincial formula, detailed in the Community Rental Housing Program
guidelines, which calculates the allowable municipal contribution in property tax
to be the present value of 10 years of foregone tax revenue based on a constant
value of foregone revenue; and
. Assessing the impact over 20 years with a constant value of the units and an
annual property tax rate increase of 1 % to determine the financial impact in
present value terms for the Region and Area Municipalities. The conservative
assumption of a 1 % tax increase over a twenty-year period is based on the
premise that it is not possible to predict the rate at which the multi-residential tax
may increase relative to the single residential tax rate. The consultant and
Regional Finance staff agreed that a modest increase 1 % is appropriate for the
purposes of this exercise.
Region of Durham - April 2003
8
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Financial Impact of Community Rental Housing Program
The former method allows for the estimation of Area Municipal funds eligible for
matching federal contributions at rates ranging from $3,431 per unit (in Uxbridge) to
$8,307 per unit (in Oshawa), while the Region would forego an average property tax
revenue of $9,319 per unit (based on the assumed current value assessment amount).
The latter method identifies potential costs for Regional and Area Municipalities over the
proposed length of the program. Based on this method, over 20 years Area
Municipalities can expect to forego taxes ranging from $6,123 per unit (in Uxbridge) to
$14,826 per unit (in Oshawa). The Region can expect to forego property tax revenue of
$16,632 in present value terms on average per unit.
Table 4
Foregone Tax Revenue
Municipality Annual Reduction in
Taxes
MU:C~AL REGIONAL AREA
MUNICIPAL
Ajax 30 23,358 36,327 182,235
Brock 10 8,436 10,678 65,813
Clarington 30 19,234 32,932 150,058
Oshawa 55 58,560 65,090 456,868
Pickering 35 24,746 48,160 193,060
Scugog 10 5,391 10,993 42,060
xbridge 10 4,398 10,986 34,309
'by 35 26,289 41,650 205,098
Tot.. 215 110,412 256,815 1,329,499
10 Year Present Value@6%
20- Y ear Present Value @ 6%
TOTAL PER AREA
Po, Unit REGIONAL Per Unit TOTAL UNiT MUNICIPAL
6,075 283,413 9,447 465,649 15,522 325,248
6,581 83,304 8,330 149,116 14,912 117,460
5,002 256,924 8,564 406,981 13,566 267,818
8,307 507,812 9,233 964,680 17,540 815,403
5,516 375,730 10,735 568,790 16,251 344,566
4,206 85,761 8,576 127,821 12,782 75,067
3,431 85,706 8,571 120,015 12,002 61,234
5,860 324,942 9,264 530,038 15,144 366,048
6,184 2,003,591 9,319 3,333,090 16,503 2312,846
10,842 505,826
11,746 146,677
8,927 458,549
14,826 906,325
9,845 670,589
7,507 153,063
,6,123 152,965
10,459 579,946
11 036 3,575,941
16,861 831,074
14,868 266,138
15,285 726,367
16,479 1,721,729
19,160 1,015,157
15,306 228,130
15,297 214,199
16,570 945,993
16,632 5,948,186
TOTAL TOTAL PER
UNIT
27,702
26,614
24,212
31,304
29,004
22,813
21,420
27,028
21,669
Per Unit REGIONAL Per Unit
The analysis demonstrates Regional foregone property tax revenues with a present
value of $3,575,941 would enable the production of up to 215 units of rental housing,
which would be affordable over a twenty-year period.
It is important to note that the reduction of property tax to the single residential rate does
not require any cash contribution by the Region or affected Area Municipality. In effect,
these foregone municipal dollars leverage federal capital funds of up to $25,000 per
unit. Detailed information on the cost impacts on each of the Area Municipalities is
provided in Appendix B.
5.0
Rent Supplement
Development charge rebates and reduction in property taxes can help stimulate rental
housing construction where rent charges would be in the range of current average
market rents in Durham Region. However, such rent levels 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.
A 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.
Region of Durham - April 2003
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Financial Impact of Community Rental Housing Program
The Province initially allocated 135 units to Durham Region under its Homelessness .
Rent Supplement Program in November 1999. These units are 100% Provincially
funded. In 2002, the Housing Services Division was advised that 60 additional units
would be allocated to Durham Region. The Province recently announced that funding
for the five-year program will now be extended until 2023. .
The Province is encouraging Service Managers to make use of one-quarter of their
homelessness rent supplement allocation for new units created under the Community
Rental Housing Program. In a previous report to Council, 50 of the 60 Homel~ssness
Rent Supplement units were held pending Council resolution on the Region's
participation in the Community Rental Housing Program (Refer Report 2003-SH-02),
Assuming the Provincially funded Homelessness Rent Supplement program will be
available to 25% of the total number of units created through an affordable housing
program in Durham Region, 50 units could be allocated across the Region as follows:
Proposed D' t 'b f
IS n U Ion 0 or a e ousm~ en a niSin
Municipality Housing Unit Rent Supplement
Allocation Allocation
Ajax 30 7
Brock 10 2
Clarinqton 30 7
Oshawa 55 14
Pickerinq 35 8
SCUqOq 10 2
Uxbridqe 10 2
Whitby 35 8
215 50
Table 5
f Aff d bl H
R t I U 't ' Durham Region
The Regional Chair's Task Force Report recommended that up to two-thirds of the units
created under an affordable housing program be made available to lower income
households. Appendix C details the costs for a rent supplement program that would
include 100% Regional funds to expand the program for an additional 93 units. Table 6
summarizes potential Regional costs for additional rent subsidies. .
sima e en upplemen osts
Average Annual Estimated 20 Year
Cost Cost*
Estimated Cost for 143 Units $409,703 $8,194,061
Provincial Funding for 50 Units $140,036 $2,800,716
(estimated)
Net Estimated Cost to Region of $269,667 $5,393,345
Durham
E f
Table 6
t d R t 5 I
te
* Net Present Value Discounted at 6% per year
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Financial Impact of Community Rental Housing Program
While the annual costs will vary as a result of tenant income and market rent amounts,
Provincial rent supplements could provide approximately $2.8 million to offset the rent
charged to approximately 50 households over the current life of the Homelessness Rent
Supplement Program.
Further analysis is required by Regional staff to assess the potential for a Regional Rent
Supplement Program.
6.0
SUMMARY OF FINDINGS
A summary of the value of estimated potential program contributions over 20 years,
based on assumptions agreed to bY. the Working Group, is set out below:
Table 7
Regional Community Rental Housing Program
Estimated Contributions Over 20 Years
Based on 215 Unit Model as er C.N. Watson Anal sis
Federal
Provincial
Area
Municipalities
Region
Development
Charges
Per Unit
$4,008
$6,733
Property Tax*
Program
Rent
Supplement
(50 units)
Other Per Unit
Program
Contributions Total
* Net Present Value for 20 years at 6%
1 Does not include potential costs of $5,393,345 for a Regional Rent Supplement Program for an
additional 93 units.
Attachments:
Appendix A - SHS Inc: Analysis of Impact on Affordability of Alternative Rental
Housing Incentives
Appendix B- C.N. Watson and Associates Ltd.: Fiscal Impact to Durham Region and
Area Municipalities of the Affordable Housing Program - Community Rental
Housing
Appendix C - CN Watson and Associates Ltd.: 20 Year Cost of a Rent Supplement
Program
Region of Durham - April 2003
11
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DURHAM REGION
FISCAL IMPACT TO DURHAM
REGION AND AREA
MUNICIPALITIES OF THE
AFFORDABLE HOUSING
PROGRAM - COMMUNITY RENTAL
HOUSING
C.N. WATSON
AND ASSOCIATES LTD.
ECONOMISTS
Draft
4304 V!IIage Centre Court
Mississauga, Ontario, Canada
L4Z 152
March 25, 2003
Telephone: (905) 272-3600
Fax: (905) 272-3602
e-mail: Info@cnwatson.on.ca
PLANNING
FOR GROWTH
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1.
FISCAL IMPACT TO DURHAM REGION AND AREA
MUNICIPALITIES OF AFFORDABLE HOUSING PROGRAM
1. Introduction
Background
Various legislative changes over the last few years have enabled service managers, like the
Region of Durham, to stimulate the production of new affordable housing by using a number of
financing incentives, including:
.
Grants;
Loans;
.
.
Development Charge (DC) exemption;
Exemption of other fees and charges; and,
Discounted purchase of municipal land.
.
.
In 2001, the Regional Chair struck a task force to examine how to increase the supply of
housing within the Region and to develop an action plan that identified ways to do so. In 2002,
a Regional Working Group that includes Area Municipality representation was established to
further develop and cost recommendations from the Chair's Task Force Report.
In 2002, the Province of Ontario and the Government of Canada entered into an agreement to
increase the province-wide stock of affordable housing through a program of matching financial
incentives. The Federal-Provincial Affordable Housing Program - Community Rental Housing
Program funding will consist of contributions toward affordable housing development that will
equal, to an average maximum of $25,000 per unit. The Province will provide $2,000 per unit
provincial sales tax (PST) rebate as its share of matching contributions. Municipal contributions
eligible for matching by the Federal Government under this program consist of:
. Waivers or reductions of Development Charges or other municipal fees;
. Cash contributions;
.
Land; and,
Foregone tax revenue resulting from taxation as a residential property instead of as a
multi-r~sidential property.
.
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2.
The Regional Affordable Rental Housing Working Group enlisted the services of SHS Inc. to
determine what measures the Region and Area Municipalities might have to take to ensure
affordable housing is developed considering the requirements of the Provincial Community
Rental Housing Program. The conclusion of their work was that, generally, rental housing could
be made affordable by both tiers of local government providing a grant-in-lieu of full DC
exemption and by taxing these (assumed to be multi-family) 'developments at the single family
residential rate.
Purpose and Scope of this Report
The purpose of this report is to build on the finding of SHS Inc. and to estimate the fiscal impact
of an affordable rental-housing program of approximately 200 units that will remain affordable
for 20 years.
The analysis contained herein is an attempt to estimate the fiscal impact on the Region of
Durham and its constituent area municipalities of providing a grant-in-lieu of full DC exemption
(DC grant hereafter) and taxing multi-residential developments at the residential rate. The
purpose of this analysis is to provide an approximation of what it might cost the Region and the
Area Municipalities to provide these incentives given a development scenario based on certain
assumptions regarding unit mix and geographical distribution. It is likely that through the tender
process required to select projects, a different distribution of affordable units will actually
develop. However, this analysis will also provide approximate per-unit impacts that will help the
Regional and Area Municipal Councils understand the impact of a different unit distribution.
This report proceeds by discussing, for each step of the analysis, the key assumptions and
results, which are followed by a concluding section. All tables referred to throughout this report
are. provided in Appendix A.
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3.
2. Fiscal Impact Analysis
Total Units, Unit Distribution, and Unit Mix
The first phase of this program includes Federal funds sufficient to match municipal
contributions for 200 units at an average contribution of $25,000 a unit.
It is too early in the program time-line to know where units will develop or the number and kind
of unit-mix that might evolve. However, in order to develop a meaningful estimate of potential
fiscal impact, this analysis assumes a value for each of these variables. These assumptions are
developed in Table 1.
Table 1 contains the assumed number of total units, their distribution among the area
municipalities, and the assumed unit mix (walk-up apartments (by unit size) vs. town/row
houses).
The total number of units to be distributed in Durham Region is 200 units. The allocation of
units to the Area Municipalities' is based an their share of 2001 census population. The
Affordable Rental Housing Working Group agreed that a reasonable basis for distributing units
across the region is each municipality's share of the Region's 2001 census population.
This distribution of units on this basis leaves some municipalities such as Brock and Scugog
with too few units to which full incentive could be offered. Therefore, the total units have been
rounded to ensure that at least as many units as those needed to be considered as multi-
residential (seven) are allotted to each municipality. The result of the rounding is that a region-
wide total of 215 units are used in this analysis.
In order to estimate DC revenues, the following variables must be explicitly determined:
.
The number of town houses;
The number of apartments with two or more bedrooms; and,
The number of bachelor and one-bedrooms apartments.
.
.
The unit mix assumed for this analysis is based on the unit mix identified by the 2001 Census
and adjusted to ensure that development sizes made sense, e.g. strict application of the Census
unit mix yielded one town house in Scugog and Uxbridge which was then assumed to be zero. '
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4.
Estimated Development Charge Grants
The SHS Inc. analysis concluded that, generally, both Area Municipalities and the Region must
offer DC grants equal to the full development charge payable on each unit of affordable
housing.
Table 2 calculates the potential DC revenues due to the Region and Area Municipalities with
respect to the affordable housing units created under the proposed program and provides
estimates of the grant amounts that could be paid to the developers in lieu of DC exemptions.
This table does not assume an explicit timing of either collections or grant dispersal. Thus, the
rates used have not been adjusted for construction cost increases. This table als,? assumes
that each development will be fully serviced and that each municipality and the Region will
provide grants equal to the full amount of the development charge.
Total DC revenue estimates shown in this table assume the unit distribution and mix detailed in
Table 1.
The per-unit impact of any unit is equal to the DC for that unit. .The average Area Municipality
DC grant, given the assumed unit mix, ranges from approximately $25,000 (average of $2,588
per unit) in Brock to $207,000 (average of $3,788 per unit) in Oshawa. The Regional DC
grants would total approximately $.1.45 million or an average of $6,733 per unit.
The Impact of Foregone Tax Revenue
One of the municipal contributions required for inclusion in the Federal matching scheme is
foregone tax revenue. The SHS Inc. analysis concluded, in general, that the combination of a
reduction in taxes for the developer in each municipality, in addition to a related matching grant,
would be necessary to produce affordable-rent units. It is important to note that developers
might currently be paying taxes on potential development sites that are lower than the full
residential rate. Therefore, development of affordable rental housing that is taxed at the full
residential rate might result in tax revenues that are higher than what could be collected in the
absence of this program.
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5.
One key aspect of this portion of the analysis is its time horizon. The Province has specified
that municipal funds eligible for matching will be based on the net present value (NPV) of 10
years of foregone tax revenue (using a 6% discount rate). However, the Province has also
stipulated that in order to be eligible for any funds, projects must be affordable for a minimum of
15 years followed by a five-year phase-in of market rents. This analysis assumes that
municipalities will offer developments the full tax reduction' for 20 years.
Table 3 presents the current assessment values and tax rates to be used as the basis for the
multi-year foregone tax revenue analysis. This table also includes the calculation of a single-
year's tax revenue impact as an example of how each year's impact in the multi-year analysis is
estimated.
The per-unit value of assessment assumed for this analysis was provided in the analysis of SHS
Inc. The tax rates are the municipalities' 2002 tax rates. This portion of the analysis assumes
that all affordable housing units will be developed as multi-unit residential developments of a
sufficient size to be taxed at the multi-residential tax rate (MT).
Table 4 is a summary of the total foregone tax revenue estimated using two methods.
Method 1 is the method used by the Province to calculate municipal costs eligible for matching
(as detailed in the Matching Funding Worksheet in the Province's Affordable Housing Program-
Community Rental Housing document). This method will recognize, for contribution-matching
purposes, 10 years of foregone tax revenue based on a constant value of foregone revenue
over the ten years 1. Estimates of this eligible amount, shown in Table 4 (third column of
numbers), are based on the total foregone tax revenue calculated in Table 3.
Based on this method, Area Municipalities can expect to forego taxes over 10 years ranging in
value from $34,309 (or $3,431 per unit) in Uxbridge to $456,868 ($8,307 per unit) in Oshawa
The Region can expect to have $2 million in foregone taxes recognized as an eligible cost
($9,319 per unit).
Method 2 provides an estimate of total foregone tax revenue using a method that will better
approximate the total cost to each municipality. This method assumes:
1 The Province's worksheet calculates the NPV of 10 years of foregone revenue (assuming that the value
of foregone revenue will be the same in each year (A» with the formula:
~NO.O6]~J1-(1/«1.06)9)]}
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6.
.
The tax impact on municipalities would occur over 20 years, either through a program
requirement for full affordability over 20 years or through 15-years of full affordability
followed by a five-year program phase-out. For simplicity, full affordability, that is full tax
reduction, is assumed over a full 20-year period.
The assumed value of the affordable housing units is assumed to be constant.
Tax rates are assumed to increase at an annual rate of one per cent (1 %) as a general and
(very) conservative provision for regular rate increase pressures (including inflation).
While foregone tax revenue is calculated starting 2002, it is recognized that this will not be
realized immediately. Therefore, this analysis assumes that all units would be built and be
eligible for multi-residential taxation in 2005. This timing recognizes the time it will take to
issue tenders as well as plan, build, and assess developments. Thus, Table 4 calculates
the discounted present values back to 2005 for each year from 2005 to 2025 assuming a
6% discount rate, as prescribed.
.
.
.
Based on this method, Area Municipalities can expect to forego taxes over 10 years ranging in
value from $36,807 ($3,681 per unit) in Uxbridge to $490,129 ($8,911 per unit) in Oshawa.
Over 20 years, Area Municipalities can expect to forego taxes ranging from $61,234 (or $6,123
per unit) in Uxbridge and $815,403 (or $14,826 per unit) in Oshawa. The Region can expect to
forego $2.15 million in tax revenue over 10 years and $3.58 million over 20 years ($9,997 and
$16,632 per unit respectively).
Net Impact of Affordable Housing
The cost of the affordable housing program to each municipality is equal to the total DC grant
payable plus the 20-years of foregone tax revenue.
Table 5 presents the calculation of the estimated impact of the Affordable Housing Program on
the Region and each of the Area Municipalities. Similar to Table 4, this' table shows both the
total costs eligible for matching and the total estimated cost to the municipality. The
percentages shown in the table are each municipality's share of total contributions to units.
Using the Provincial approach, units in Ajax, Oshawa, Pickering, and Whitby would contribute in
excess of the average $25,000 per unit matching contributions while units in Brock, Clarington,
Scugog, and Uxbridge will not. The total costs per unit to the Region and Area Municipalities,
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over the 20-year period would range from approximately $30,000 per unit in Scugog and
Uxbridge to almost $43,000 per unit in Oshawa.
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8.
3. Discussion
This fiscal impact analysis assesses the cost of the Community Rental Housing Program on the
Regional Municipality of Durham and the Area Municipalities. The results of this analysis in
terms of the total costs, however, depend on the number, distribution, and mix of units.
The total cost estimates produced by this analysis should provide the Region and Area
Municipalities an approximation of the financial implications of this program. Since the total
number of units contemplated in this analysis is likely to be close to the maximum number
actually developed, the impact s.hown in Table 5 might be a more reasonable expectation of the
Region's costs. The impact on Area Municipalities is likely to display greater variance if the
actual experience develops with a different geographical distribution of units and. unit mix.
However, the costs per unit calQulated herein and shown in Table 5 provide a quick means to
estimate the cost of proposed affordable housing units.
The difference between the measure of eligible costs over 10-years and the total estimated
costs over 20 years, on both an aggregate and per-unit basis, as calculated in this analysis are
not significant. While actual experience could result in impacts that are either higher or lower
than those estimated here, there are some important assumptions that have likely cause the
total 20-year impact to be understated. In particular:
. This analysis assumes that full DC grants and tax reduction would be sufficient to'
produce affordable rents, however the SHS Inc. analysis showed that this might not be
the case in all municipalities.
.
The 20-year estimate of foregone tax is likely low due to rather conservative tax rate and
assessment appreciation assumptions (1 % and 0%, respectively).
Conversely, the impact will be lower if, in any municipality, the contributions required by the
developer are less than those assumed for the purpose of this analysis.
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A1
APPENDIX A
DETAILED IMPACT
CALCULATION TABLES
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. TABLE 1
REGION OF DURHAM
"ASSUMED DISTRIBUTION OF AFFORDABLE HOUSING UNITS1
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2001 Census Population Total Housing Allocation
Municipality Persons % Units Rounded
Ajax 73,753 15% 29 30
Brock 12,110 2% 5 10
Clarington 69,834 14% 28 30
Oshawa 139,051 27% 55 55
Pickering 87,139 17% 34 35
Scugog 20,173 4% 8 10
Uxbridge 17,377 3% 7 10
Whitby 8741'\ <701 34 35
!OO 215
...- "'U¡. J41 ;jb
'Total L 506,850 i 100%, 200 2151
2001 Census Unit Mix2
Town Apt
37% 63%
0% 100%
26% 74%
35% 65%
75% 25%
9% 91%
7% 93%
36% 64%
I 227%1 573%1
ASSUMED MIX OF APARTMENT UNITS BASED ON UNIT MIX REPORTED IN 2001 CENSUS.
. FOR DEVELOPMENT CHARGE GRANT CALCULATION PURPOSES
Total Assumed Share of Total Existing Assumed Number of
Apartment Apartment Units4 Apartment Units by Size
Municipality Units Bach + 1 BR 2+ BR Bach + 1 BR 2+BR
Ajax 19 30% 70% 6 13
Brock 10 57% 43% 6 4
Clarington 22 41% 59% 9 13
Oshawa 36 39% 61% 14 22
Pickering 9 27% .73% 2 7
Scugog 10 55% 45% 6 4
Uxbridge 10 44% 56% 4 6
Whitby 'J':t ---. 3% 11 12
::J 58i 811
i -~ l 4(701 53%1 11/ 121
!Total J 139 -' I 58 811
1 Suggestéd by the Durham Region Affordable Housing Working Group.
2 Relative share of rented town houses and apartment units in buildings under 5 storeys.
3 Differs from the calculated mix to aI/ow for appropriately-sized developments.
4 Based on the 2001 number of 0, 1, 2,3, and 4 bedroom units in apartment buildings under 5 storeys.
Calculated Unit Mix
Town Apt Total
11 19 30
0 10 10
8 22 30
19 36 55
26 9 35
1 9 10
1 9 10
12 23 35
78 137 215
Assumed Unit Mix3
Town Apt Total
11 19 30
0 10 10
8 22 30
19 36 55
26 9 35
0 10 10
0 10 10
12 23 35
76. 139 215
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TABLE 2
REGION OF DURHAM AND AREA MUNICIPALITIES
ANTICIPATED DC GRANTS (2002 Rates) TO DEVELOPERS
Municipaliiy Number of Affordable Lower Tier Lower Tier Regional Regional Total
Housing Units Development DC Development DC DC
Charqe' Grants Charqe' Grants Grants
TOWNHOUSES
Ajax 11 4,930 54,230 9,194 101.134 155,364
Brock 0 2,688 0 9,194 0 0
Clarington 8 6,553 52.424 9,194 73,552 1 25.976
Oshawa 19 5,286 100.434 9,194 174,686 275.120
Pickering 26 5,943 154,518 9.194 239,044 393,562
Scugog 0 4,346 0 9,194 0 0
Uxbridge 0 4,144 0 9,194 0 0
Whitbl 12 4,026 48,312 9,194 11 0,328 158,640
Sub-Total Townhouses 76 409,918 698.744 1.108.662
APARTMENTS - Bachll BDR
Ajax 6 2,630 15.780 3.824 22,944 38.724
Brock 6 2,588 15,528 3.824 22,944 38.472
Clarington 9 3.163 28.467 3,824 34.416 62.883
Oshawa 14 2,476 34.664 3,824 53,536 88200
Pickering 2 3,021 6,042 3.824 7.648 13,690
Scugog 6 3,042 18252 3,824 22.944 41.196
Uxbridge 4 3.256 13,024 3.824 15296 28,320
Whit!)}' 11 2.602 28-622 3,824 42,064 70,686
Sub-Total Apts, 58 160.379 221.792 382.171
APARTMENTS - 2 BDR +
Ajax 13 3,453 44,889 6,508 84,604 129.493
Brock 4 2,588 10,352 6,508 26,032 36,384
Clarington 13 4,972 64,636 6,508 84,604 149,240
Oshawa 22 3,303 72.666 6,508 143.176 215.842
Pickering 7 4.029 28,203 6,508 45,556 7S,759
Scugog 4 3,042 12,168 6.508 26,032 38200
Uxbridge 6 3.256 19,536 6,508 39.048 58.584
Whitby 12 , 3.255 39,060 6,508 78,096 117,156
Sub-Total Apts. 81 291.510 527.148 818.658
TOTAL
Ajax 30 114,899 208,682 323,581
Brock 10 25,880 48.976 74.856
Clarington SO 145,527 192,572 338.099
Oshawa 55 n/a 207.764 n/a 371.398 579,1 62
Pickering 35 188.763 292.248 481,011
Scugog 10 30.420 48,976 79,396
Uxbridge 10 32,560 54,344 86,904
Whitby 35 116,994 230,488 346,482
Total 215 861.807 1.447.684 2,309.491
, As of late 2002. and as quoted in the SHS Inc. analysis.
2 Average of the large and small town house rates of $3,255 and $4,797 per unit
C.N. Watson and Associates Ltd,
H:\durhamlAffordable HousinglDurham Affordabie Housing FI.doc
ATTACHMENT # R TO
to.T. REPORT # 0/-0 3
A3
TABLE 3
REGION OF DURHAM AND AREA MUNICIPALITIES
ONE-TIME REDUCTION IN TAXES (2002$) DUE TO AFFORDABLE HOUSING TAX CLASS CHANGE
TOWN HOUSES
Municipality Affordable Housing Assumed Number Total 2002 Tax Total Taxes 2002 Tax Total Taxes 2002 AJ1nual Reduction In
Assessment of Units Affordable Housing RateZ At Multi-Res Rste2 At Residantial Taxas
Per Unit (5>1 Unit)! And Unit Mi)( Ass8!ssm8!nt (Mn Tax Rate (RTI Tax Rate Total Per Unit
LOWER TIER TAXES
Ajax 140,000 11 1,540,000 1.1451 % 17,634 0.4771 % 7,348 10,287 935
Brock3 126 ,500 0 0 1.4B32% 0 0.6180% 0 0 0
Claringlon 134 ,500 8 1,076,000 0.9998% 10,758 0.4166% 4,482 6,275 784
Oshawa 135,500 19 2,574,500 1.6164% 41,615 0.6735% 17,340 24,276 1,278
Pickering 144,500 20 3,757,000 0,9013% 33,863 0.3756% 14,1'10 19,754 760
Scugog 134 ,000 0 0 0.9150% 0 0.3813% 0 0 0
Uxbridge 140,000 0 0 0.7284% 0 0.3035% 0 0 0
Whitby4 137,000 12 1,644,000 1.1230% 18462 0.4679% 7,693 10770 897
Sub.Total Lower-TIer T8)(e5 76 10,591,500 122,332 50,912 71.361 :939
REGIONAL TA.XES6
Ajax 140,000 11 1,540,000 1.7808% 27,425 0.7420% 11 ,427 15,998 1,454
Brock 126,500 0 0 1,8774% 0 0,7822% 0 0 0
ClaringtoM 134,500 8 1,076,000 1.7118% 18,419 0.7132% 7,674 10,744 1,343
Oshawa 135,500 19 2,574,500 1.7967% 46;256 0.7486% 19,273 26,982 1,420
Pickering 144 ,500 28 3,757,000 1.7542% 6:5,904 0.7309% 27,460 38,444 1,479
Scugog 134,000 0 0 1.8658% 0 0.7774% 0 0 0
Uxbridge 140,000 0 0 1.8196% a 0.7581 % 0 0 0
Whitby 137 000 12 1 644,000 1.7792% 29,250 0.7413% 12,188 17,063 1,422
Sub.Total Reqional Taxes 7& 10,591,500 187,253 78,022 109,231 1,437
Total 76 , 10.591.500 I I 309_586 I I 1 28.994 1180.592 I 2.316
WALK-UP APARTMENTS
Municipality Affordable Housing Assumed Number Total 2002 Tax Total Taxes 2002 Tax Total Taxes 2002 Annual Reduction In
Assessment alUnits Affordable Housing Ra1e At Multi-Re s Rate At Residential Taxes
Per Unit ($/Unit)2 And Unit Mix Assessment (Mn Tax Rate (Rn Tax Rate Total Per Unit
LOWER TIER TAXES
Ajax 103 ,000 19 1 ,957,000 1.1451% 22,409 0.4771% 9,337 13,072 688
8rock3 97,500 . 10 975,000 1.4832% 14,461 0.6180% 6,025 8,436 0
Clarington 101 ,000 22 2,222,000 0.9998% 22,215 0.4166% 9,256 12,959 589
Oshawa 101,000 35 3,636,000 1.6164% 58,774 0.6735% 24,489 34,285 952
Pickering 105,500 9 949,500 0.9013% 8,558 0.3756% 3,566 4,992 :555
Scugog 101,000 10 1,010,000 0.9150% 9,242 0.31313% 3,851 5,391 0
Uxbridge 1 03 ,500 10 1 ,035,000 0.7284% 7,:539 0 .3035% 3,141 4,398 0
Whitby' 103,000 23 2369,000 1.1230% 26,604 0.4679% 11,085 15519 675
Sub-Total Lower. TIer Tax8$ 139 14,153,500 16:!!,:SO2 10,751 99,051 713
REGIONAL TA.XES5
Ajax 103 ,000 19 1 ,957,000 1.7808% 34,851 0.7420% 14,521 20,329 1,070
8rock 97,:500 10 975,000 1.8774% 18,304 0.7822% 7,627 10,678 0
C larington 101,000 22 2,222,000 1.7118% 313,036 0.7132% 15,848 22,1813 1,009
Oshawa 101,000 38 3,638,000 1.7987% 8:5,327 0.7488% 27,220 38,108 1,059
Pickering 105 ,500 9 949,500 1.7542% 16,656 0.7309% 6,940 9,716 1,080
Scugog 101,000 10 1,010,000 1. 8658% 18,844 0.7774% 7,852 10,993 0
Uxbndge 103,500 10 1,035,000 1.8196% 18,1332 0.7681% 7,847 10,986 0
Whitby 103 ,000 23 2,369,000 1. 7792% 42150 0,7413% 17562 24,587 1069
Sub-Total Reqional Ta)(es 139 14.153.500 253.001 105,417 141,584 1,062
Total 139 14.153.500 422.802 176.168 246.635 1,774
Grand Total
215
24.745,000
I Assessment Values as provided by SHS Inc. Analysis.
22002 tax rates as supplied by Region 01 Durham Finance. Education rates are excluded.
3 Brock rates aS$ume development in traffic light zone.
4 Whitby urban rate in a transit area used.
5 Regional taxes include waste rales.
C.N. Watson and Associates Ltd.
H:\durhamlAffordable Housing\Durham Affordable Housing Fl. doc
TABLE 4
REGION OF DURHAM AND AREA MUNICIPALITIES
PV OF FOREGONE TAXES
ATTACHMENT #:( TO
tD.T. REPORT # 01--_(>-3.
A4
METHOD 1 . PROVINCI.A.L ESTIMATE METHOD 2 - TOTAL ESTIMATED FOREGONG TAX REVENUE
Municipality Assumed Number To1<1l A.nnu<ll Province's Method - Eligible Tax Cost Assuming Ap'preciation of Tax Rates (@ 1 % I yr)
of Uni1$ f'\.ffordable Housing. Reduction in 10- Year Pre$ent Value @ 6% 10- Year Pre$ent ValiJe @. 6% 20- Year Present Value @ 6%
And Unit Mix Assessment TaJees Total Per Unit Tolal Per Unit Total Per Unit
AREA MUNICIPALITY TAXES
~jax 30 3,497,000 23,358 182,235 6,075 195,503 6,517 325,248 10,842
Brock 10 975,000 8.436 65,813 6,581 70,604 7.060 117,460 11,746
Clarington 30 3,298,000 19,234 150,058 5,002 160,982 5.366 267,818 8,927
Oshawa 55 6,210,500 58,560 456,868 8,307 490,129 8,911 815.403 14 ,826
Pickering 35 4,708 ,600 24,746 193,060 5,516 207,116 5,918 344,568 9,845
Scugog 10 1,010,000 5,391 42,060 4,206 45,122 4,512 75,067 7,ffJ7
UxIJridge 10 1 ,035 ,000 4,398 34,309 3,431 36,807 3,681 61.234 6,123
Whitby 35 4,013,000 26,289 205,096 5,860 220 ,027 6,286 366 ,048 10.459
Suh-To1allower-TierTaxBs 215 24,745,000 170,412 1,329,499 6,184 1,1\16,2119 6,634 2,312,845 11,036
REGIONAL TAXES
.A,jax 30 3,497,000 36,327 283,413 9,447 304 ,046 10 ,135 505,826 16,861
Brock 10 975,000 10,673 33,304 3,330 89,366 8,937 148,677 14 ,868
Clarington 30 3 .298 ,000 32,932 256 ,924 8,564 275,628 9,188 458,549 15,285
O$hawa 55 6,210,500 65,090 507,812 9,233 544,781 9,905 906,325 16.479
Pickering 35 4,706,500 48,160 375.730 10,735 403 ,083 11,517 670,589 19,160
Scugog 10 1,010,000 10,993 85,761 8,576 92,004 9,200 153,063 15,306
U)(IJridge 10 1 ,035 ,000 10,986 85.706 8,571 91,946 9,195 152,965 15,297
'.'Vhitby 35 4013000 41 ,650 324942 9,284 348,598 9,960 579,946 16,570
Sllb-Tota' R.e.gional Taxes; 215 24,745,000 256,111'5 2,003,59') 9.319 2,149,456 9,991 3,515,941 16,632
TOTAlTAXES
~a)( 30 3,497,000 59 , 686 465,649 15,522 499,549 16,652 831,074 27,702
Brock 10 975,000 19,113 149,116 14,912 159,972 15,997 266,138 26,614
Clarington 30 3,298,000 52,166 406,981 13,566 436,610 14,554 726,367 24,212
Oshawa 55 6,210,500 123,650 964,680 17,540 1,034,910 18,817 1,721,7'23 31,304
Pick..ring 35 4,706,500 72,906 568,790 16,251 610,199 17,434 1,015,157 29,004
Scugog 10 1,010,000 16,384 127,821 12,782 137,126 13,713 228,130 22,813
UxÞridge 10 1 ,035,000 15,383 120,015 12,002 128,752 12,875 214,199 21,420
Whitby 35 4,013,000 67,939 530,038 15,144 568,625 16,246 945,993 27,028
Total 215 24,145,000 421,227 3,3:3:3,090 1'5,503 3,515,744 16,631 5,948,186 27,669
C.N. Watson and Associates Ltd.
H:\durhamlAffordable Housing\Durham Affordable Housing FI.doc
Total
Total Affordable Value of
Municipality Housinq Unit DC Grãnt
AH~a Municipalities
Ajax 30 114,899
Brock 10 25,880
Claringlon 30 145,527
Oshawa 55 207,764
Pickering 35 188,763
Scugog 10 30,420
Uxbridge 10 32,560
Whitby 35 115,994
T alaI 115 861.S01
Region
Ajax 30 208,682
Brock 10 48,976
Clarington 30 192,572
Oshawa 55 371.398
Pickering 35 292,248
Scugog 10 48,976
Uxbridge 10 54,344
Whitby 35 230,488
Total 215 1,447.684
Region ¡md Area Municipalities
Aj3)( 30 323,581
Brock 10 74,856
Clarington 30 . 338,099
Oshawa 55 579,162
Pickering 35 481,011
Scugog 10 79,396
Uxbridge 10 86,904
Whitby 35 346,482
Total' 215 2,309,491
ATTACHMENT #"J., I U AS
TABLE 5 J.D.T. REPORT # aL~tL3.
Region of Durham and Area MlInicilHllities
NET IMPACTS OF AFFORDABLE HOUSING PROGRAM
ELIGIBLE COST (PROVINCIAL ESTIMATE)
Eligible Total Eligible Costs
PV of 10 Years (10 yrs Tax + DC)
Foregone Tax Total Per Unit Share
182,235 297,134 9,904 38%
65,813 91,693 9,169 41%
150 ,058 295,585 9,853 40%
456,868 664,632 12,084 43%
193,060 381 ,823 10,909 36%
42,060 72,480 7,248 35%
34 ,309 66,869 6,687 32%
205,096 321,090 9,174 37%
1.329.499 1.191.306 10.192 39%
283,413 492,095 16,403 62%
83 ,304 132,280 ~3,228 59%
256,924 449,496 14 ,983 60%
507,812 879,210 15,986 57%
375,730 667,978 19,085 64%
85,761 134.737 13,474 65%
85,706 140,050 14,005 68%
324,942 555,430 15,869 63%
2.003.591 3,451.275 16,052 61%
465,649 789,230 26,308 100%
149:116 223,972 22,397 100%
406,981 745,080 24,836 100%
964,680 1,543,842 28,070 100%
568,790 1,049,801 29,994 100%
127,821 207,217 20,722 100%
120,015 206,919 20 ,692 100%
530,038 876,520 25,043 100%
3,333.090 5,642.581 26,245 100%
I TOTAL ESTIMATED COSTS I
Estimated Total Cost
PV of20 Years (20'1 ï Tax + DC)
Foreaone Tax Total PBf Unit Share
325,248 440,147 14 ,672 38%
117,460 143,340 14,334 42%
267,818 4"13 ,345 13 ,778 39%
815,403 1,023,167 18,603 44%
344,568 533,331 15,238 36%
75,067 1 05 ,487 10,549 34%
61 ,234 93,794 9,379 31%
366,048 482,042 13,773 37%
2.372.845 3,234,652 15,045 39%
505,826 714,508 23,817 62%
148,677 197,653 19,765 58%
458,549 651,121 21 ,704 61%
906,325 1 ;2.77 ,723 23,231 56%
670,589 962,837 27,510 64%
153,063 202,039 20 ,204 66%
152,965 207,309 20,731 69%
579,946 810,434 23,155 63%
3.515,941 5,023,625 23.366 61%
831,074 1,154,655 38,489 100%
266,138 340,994 34 ,099 100%
726,367 1,064,466 35,482 100%
1,72.1 ,729 2,300,89.1 41 ,834 100%
1,015,157 1,496,168 42,748 100%
228,130 307,526 30,753 100%
214,199 301,103 30,110 100%
945,993 .1 ,292,475 36 ,928 100%
5.948,186 8.258,211 38,411 100%
C.N. Watson and Associates Ltd.
1The Federal/Provincial contribution is limited to an overall åverage of $25,000 per unit. Some additional contributions may have to made in some Area Municipalities.
H:ldurhamlAffordable HousinglDurham Affordable Housing FI.doc
ATTACHMENT# 3 TO
to.T. REPORT # 01-0 ~
ADMINISTRATION DEPARTMENT
CLERK'S DIVISION
:MEMORANDUM
March 8, 2002
TO:
Neil Carroll, Director, Planning & Development
FROM:
Bruce Taylor, Clerk
SUBJECT:
Referrals ITom the Council Meeting of March 4,2002
RECEIVED
MAR 1 1 2002
CITY OF PICKERING
PLANNING AND
DEVELOPMENT DEPARTMENT
Please be advised that the Council of the City of Pickering passed Resolution #43/02, Item #3, at the
Council Meeting of March 4, 2002, as follows:
1. That Report PD 07-02 of the Director, Planning & Development on the Report from the
Regional Chair's Task Force on Sustainable/Affordable Housing be received; and
2. That the Regional Chair be advised that the City of Pickering supports in principle, subject to
further discussion and review as outlined in recommendation #3 below, the concept of Area
Municipalities being a partner in a multi-partner approach to assist in providing financial
incentives to encourage the supply to affordable rental housing; and
3. That the Regional Chair be requested to establish an Affordable Rental Housing Working
Group with appropriate Regional and Area Municipal representation to further refine, clarify
and identify specific implementation program details, for presentation back to local Area
Municipal Councils, including but not limited to the following matters:
. investigating options and implementation mechanisms, other than direct
reduction/waiving of fees, to off-set the area municipality costs attributed to an affordable,
rental unit program;
. ensuring that the costs incurred by an area municipality in waiving area municipal fees
and charges are fairly shared among the taxpayers of the Region, and do not result in an
unfair financial burden to any area municipality;
. ensuring a fair distribution throughout the Region of the maximum 100 subsidized units
per year;
. limiting the proposed area municipal participation for cost reductions/waivers to the
Region's 100 subsidized units per year (whether private or public sector initiatives);
. ensuring that subsidies result I reduced rental rates for the tenants;
. ensuring the monthly rents will not be increased beyond the target affordable rents;
. ensuring the units with subsidized production costs will remain as rental units;
. establishing a completion date for the program; and
. identifying a monitoring process for the program;
All ACHMENT # ~ TO
1.0.T. REPORT # t)/ -0 ~
- 2-
4. That Pickering Council advocates a key role for both the Provincial and Federal governments
in funding affordable housing, and urges most strongly the Premier of Ontario and the
Deputy Prime Minister to act on those recommendations of Durham Region's Task Force
directed at the Provincial and Federal Governments; and
5. That a copy of Report PD 07-02 be forwarded to the Regional Clerk, the Regional Chair, the
Clerk of each of Durham's Area Municipalities, the Premier of Ontario and the Deputy Prime
Minister.
"\~
I:J~~))'lh-
1k'~1 B. Taylor
BT:dk
Copy: T.J. Quinn, Chief Administrative Officer