The End of Operating Agreements
Threat To Affordable Housing
ISSUE: Preserving affordability for 200,000 Canadian households
Today, nearly 200,000 low-income Canadian households in co-operative and non-profit projects depend on federal rent-geared-to-income (RGI) housing assistance to pay their rent.
This federal assistance will soon end.
In addition to the social costs, reduced affordability will impede economic prosperity and employment growth.
Today, federal rent-geared-to-income (RGI) assistance is delivered to 200,000 Canadian households through operating agreements with the co-operatives and other non-profit and public housing providers that were developed under federal programs in the 1970s and 1980s.
Some of these agreements have already ended. Many more will end in the next two years.
As a result, affordability will be lost for many Canadian households including seniors, single-parent working households, people with disabilities, aboriginal people, new Canadians and other low-income families. These households cannot afford other housing options, yet will not be able to afford to live in their present homes without continued government assistance.
As well as housing providers, the provincial, territorial and municipal governments have called for action on the end of federal operating agreements. Housing provider groups such as the Co-operative Housing Federation of Canada (CHF Canada) believe that the federal government and the provinces must act to protect residents’ affordability.
According to FCM, the need for more rental housing has been well-documented. In 2012, the Federation of Canadian Municipalities (FCM) released a report on the alarming shortage of rental housing in 27 municipalities and urban regions across Canada. The report showed that since 2000, the number of rental units declined and the cost of renting has risen more than 20 percent.
FCM’s report showed how rental housing investments have a direct positive impact on labour productivity and mobility. Providing affordable shelter leads to long-term savings for taxpayers and society at large.
Long-term investments in affordable housing create livable cities for Canadians and grow the national economy;
Existing housing subsidies are a cost-effective way for governments to support affordable housing for people who need it; and
RGI assistance allows recipients to have secure housing, leading to positive social outcomes and government savings in health, social services and the justice system.
What can governments do to safeguard Canada’s existing supply of affordable co-op and non-profit housing?
Act together now to maintain rent-geared-to-income assistance for 200,000 low-income Canadian households in co-operative and non-profit housing;
Ensure that savings from expiring subsidies for low-income co-op households are re-invested in new long-term cost-shared rent supplement programs, to be delivered by provinces and territories (and by municipalities in Ontario).
Ensure that households now receiving federal RGI housing assistance continue to be eligible for assistance under the new rental assistance programs; and
Keep this funding stream separate from the Investment in Affordable Housing Program.
EXPIRING OPERATING AGREEMENTS: THREE PERSISTENT MYTHS
When we speak to politicians and the media about the ending of co-op operating agreements, we often get lots of questions. And some of those questions show us that the people asking them just do not understand the serious problem we are facing when assistance to low-income households ends. Here are three common “myths” we hear about the end of the agreements, and how we can show in our You Hold the Key: Fix the Co-op Housing Crunch! campaign that there is no basis to them.
This argument has been made over the years by government officials. It implies that an eventual severing of government support was an explicit intention of the original program design.
FACT: There is not a single reference to the post-operating agreement period in any document respecting program conception, design and delivery.
Not in related cabinet documents of the time, not in the National Housing Act, not in operating agreements, program guidelines or any government policy document from the time the programs were first conceived and delivered. It is clear that no consideration whatsoever was given to the distant post-operating agreement era when the programs began.
This argument is really saying that co-ops should somehow have been saving up for the end of the operating agreement.
FACT: Co-ops have had no capacity to accumulate savings for the post-operating agreement period.
They are break-even, not-for-profit operations, planning to earn just enough revenue to cover operations and create a capital reserve. In fact where co-ops have generated small surpluses, CMHC has limited their use, allowing co-ops only to add the surplus to the capital reserve or supplement the assistance available for low-income households. Co-ops have not been able to create other reserves for future use.
This argument assumes that their original first mortgages are the only ones the co-ops will ever need.
FACT: Co-ops will not be mortgage-free after their operating agreements have ended.
Almost every co op will need to re-mortgage to pay for the extensive repairs and renovations their aging properties will require. Their capital reserves will not be enough for all the work needed. In fact capital refinancing is standard industry practice for rental housing of all kinds, not just co-ops. The co ops themselves will take on the burden of new debt service, in addition to covering their increasing operating costs. But co-ops cannot do that and at the same time assume the income-support responsibility for topping up the rents of low-income residents.
Contact: Dallas Alderson, Government Relations Co-ordinator CHF Canada, National Office 1-800-465-2752, ext .245 firstname.lastname@example.org CHF Canada is the national voice of the Canadian co-operative housing movement. Its members include over 900 non-profit housing co-operatives and other organizations across Canada. More than a quarter of a million Canadians live in housing co-ops, in every province and territory.