Affordable Housing in Ontario Mobilizing Private Capital in an Era of Public Constraint

André Côté, Manager of Programs and ResearchInstitute on Municipal Finance and GovernanceUniversity of Toronto

About the IMFGThe IMFG is a non-partisan research hub based in the Munk School of Global Affairs at the University of Toronto.

What types of work do we do? Research (e.g. academic & shorter papers) Events (e.g. conferences, speakers, etc) Presentations in Canada & abroad (Tokyo,

Helsinki, …) Roundtable convening & government advising

What issues do we focus on? Local finance and governance issues in cities in

Canada and internationally The fiscal health of big Canadian cities Recent work touched on borrowing and P3s,

housing and Section 37 agreements, transportation, etc.

IMFG’s focus on broader fiscal challenge housing poses for cities

Asked to convene public, private & non-profit sector representatives, in a neutral space

The paper: a ‘primer’ to frame the discussion

How do you create the conditions for greater private participation in affordable housing?

IMFG’s Affordable Housing Project

House prices and rents have raced ahead

Incomes have not been rising for most

Households have taken on much more debt

Nearly 20% of Toronto CMA households in ‘core housing need’ (CMHC)

A condo boom but little new affordable housing or purpose-built rental development

The Shifting Landscape

2002 2003 2004 2005 2006 2007 2008 2009 2010 20110

50000

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500000MLS® Average Residential Price, $

CanadaOntarioOttawaTorontoGreater SudburyLondon Windsor

Source: CMHC, CREA (MLS)

House prices (and rents) race ahead…

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Highest quintileFourth quintileThird quintileSecond quintileLowest quintile

Source: Statistics Canada CANSIM Table 202-0703

But most people’s incomes have not been rising…

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180Canadian Home Prices and Household Debt

Average Canadian Home Prices (Left)

Household Debt to Disposable Income, % (Right)

Source: Canadian Real Estate Association, Statistics Canada

Household debt levels have spiked…

2002 2003 2004 2005 2006 2007 2008 20091011121314151617181920 Households in Core Housing Need*

CanadaOntario Toronto CMA

%

Source: Canada Mortgage and Housing Corporation*Factors in affordability based on the 30% household income measure, suitability based on size and number of occupants, and adequacy based on state-of-repair, as well as availability of alternative housing.

Nearly 20% of Toronto households in need…

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35,000Toronto CMA* Housing Completions

FreeholdRentalCondo

Source: Canada Mortgage and Housing Corporation

*Roughly analogous to GTA, minus Burlington, Oshawa, Barrie and some smaller municipalities.

A condo boom but little new rental supply

1. Housing affordability is getting worse for many households Housing costs have been increasing faster than incomes Few new affordable units built in recent years

2. Social housing providers struggling to maintain units Huge repair liabilities: ~$850M and rising in Toronto Significant demand: 150,000 households on wait-lists across

Ontario

3. Limited scope for big new fed-prov investments Long-term trend: withdrawal from social housing field Drummond: for Ontario to address their budget crisis, a

“sharp degree of fiscal restraint [is needed] over the next few years.”

The Problem

The Moral of the Story

The old model of paying for social housing – through large-scale, direct federal/provincial subsidies – is likely a thing of the past

New funding models and sources of investment are needed – with an expanded private sector role

Onus on local governments to innovate and develop these new funding & partnership models

Looked at the US, Australia and the UK

All face similar housing affordability issues and budget constraints

Using different tools to mobilize private players US Low-Income Housing Tax Credit Model

Australian National Affordable Rental Scheme

UK austerity and the growing role for private investment

What can we learn from Other Countries?

Toronto can’t wait on other orders of government Leverage the IAH funding, and use the assets and tools Toronto has Many viable options in Private Roundtable & “Putting People First” reports Ensure housing discussion links with OP review & transportation planning

Need to present housing as a ‘win’ to the Province An opening to re-engage on the housing file Focus on enabling conditions for local strategies, not new funding ask

Deepen relationships with private and non-profit players Public and private interests are starting to align Create spaces for discussion, analysis and experimentation (e.g. piloting

initiatives)

Conclusions