Backgrounder: The Federal Community Housing Programs
Beginning in the 1950s through to the early 1990s, the federal government funded over 600,000 community housing (also known as social housing) homes through different programs. In all the programs, funding was provided through long-term (25 to 50 year) operating agreements, which set out certain obligations for the non-profit, public or co-operative housing provider. Typically the funding was in the form of direct financing, usually covering all, or almost all, of the capital (construction) cost of the housing. For some programs, federal funding also covered the difference between operating costs and rental revenues to ensure properties could operate on a break-even basis while keeping rents affordable for an agreed-upon number of low-income households. Different forms of rental subsidies were used to support low-income households.
In all the programs the federal government’s contribution as a funding partner was the key to providing affordable housing to low-income people.
The declining federal commitment
At its peak, federal funding for community housing – including co-op, non-profit and public housing, through the various operating agreements totaled $2.1 billion annually. As operating agreements have expired, federal spending has declined and today is approximately $1.5 billion annually. This is slated to reduce to $1.2 billion annually by 2020 and to $500 million annually in 2025 as increasing numbers of operating agreements reach their expiry date. By 2035, the vast majority of agreements will have expired.
How the federal housing programs work – and their weaknesses
Homes within a federally-funded housing community (building or set of buildings) are rented to a predetermined proportion of low-income households, who pay rents based on their household income. The proportion of low-income households in a given housing project may range from 15% to 100% of households, depending on the requirements of the particular housing program. The remaining households pay a market-based rent. Community housing developments range from the very large – such as Toronto Community Housing’s Regent Park with 1,800 units – to, for example, a triplex in a small community.
The duration of a housing project’s operating agreement and its mortgage amortization period generally coincided. While never formally stated, an underlying assumption at the time the programs were developed was that once the mortgage was retired, properties would generate sufficient rental revenues to cover ongoing operating costs. But this assumption failed to take into account the cost of future repair, retrofit and modernization – all needed to keep buildings safe and in good working order.
Moreover, in all programs, insufficient funding was allocated to replacement reserve funds. In some programs, no funding for a reserve fund was allocated. Additionally, construction and repair costs have risen much more quickly than the rental revenue that housing providers collect, especially with virtually stagnant income support benefits (social assistance and disability support programs) and limited wage growth in certain segments of the labour market.
Co-ops and other non-profits can’t support low-income households on their own
A fundamental assumption underlying all of the federal housing programs is that it is the role of government to finance the subsidies that make some of the units affordable for low-income people. Without that funding co‑ops and other non-profits would not be able to reduce the rents of low-income residents without creating financial difficulties that would threaten every resident’s home and the financial future of the housing community.
This is especially true today as the co-ops and other communities built under federal programs are aging and have to devote more of their revenues to covering rising maintenance and other operating costs. Most will have to remortgage their properties to carry out major renovations and upgrades in the near future.
This is why a renewed commitment from the federal and provincial governments to support affordable housing for low-income residents – in co-ops and other housing communities – is essential.