Good afternoon. Thank you very much for the opportunity to be here.
I am with the Co-op Housing Federation of B.C. I'm also the CEO of Community Land Trust foundation of B.C. There are 14,500 non-profit co-op homes in the province. We're tied into a national network of 92,000 non-profit co-op homes. Our Community Land Trust holds about 226 million dollars' worth of assets in land and housing. We welcome the work of the committee and hope to contribute some practical suggestions for your consideration, which will be followed by a written brief with a few more facts and figures.
I guess I don't need to spend very much time on the link between the cost of housing and poverty. That's been pretty well established by some of the briefs I've seen. I was struck by some of that material when it dealt with the notion of how expensive poverty is. One estimate I saw was that it is over $7 billion a year to the health system. Imagine investing half of that amount in an affordable housing strategy.
In Canada today, we have four million renter households whose median income is less than $36,000 a year. One in five of those renter households spends more than half of their gross income on housing, which means they are foregoing other necessities of life and not disposable income. In B.C., we have just over half a million renter households. The median income in that cohort is just under $39,000 a year, and almost a quarter of them spend more than half of their income on housing. That's because the disconnect between housing markets and household income is systemic. In Vancouver, between 2001 and 2014, wages went up 36%; homes values went up 211%. In the last three years, the median wages for renters have increased on average 6.5%, and rents went up 11%. This situation is not improving. This is a structural issue. I haven't even included the cost of homelessness in those numbers, which some people estimate at more than $7 billion a year.
No wonder there have been repeated calls for a national housing strategy. The traditional response to that has been either capital grants or operating subsidies into new development or existing housing, either directly delivered by CMHC, or in a call to shovel money to the provinces with few or no strings attached. It might seem odd for someone from a co-op, a non-profit housing community, to be saying this, but I'm not here to ask for a return to the 1980-style housing expenditures. That just creates legacy obligations for the federal government that strand assets and equity in assets that were created 30 years ago.
What I want to suggest we do is to imagine what it would mean to redeploy the same level of investment to create better outcomes. We have a Community Land Trust foundation today that has 358 homes under construction in the city of Vancouver on land that we've leased for 99 years. When those homes are available within the next year, the average rent will be affordable to people whose income is 70% of median income and getting better over time. One in five of those homes will be available to people in the lowest-income quintile of our population. The outcome will be safe, secure, mixed-income housing, serving singles, families, seniors, and people with special challenges. They will be affordable in perpetuity because of our non-profit structure in our corporate charter. The best news about that development is that once it's rented up, the ongoing cost to government in subsidy to that housing will be exactly zero.
What if that model could be replicated on a larger scale? We're already making attempts to do that. We have projects in the pipeline in Surrey, North Cowichan, Vancouver, and we hope very soon here in Maple Ridge. I think there's a basis there for a federal strategy based on a social innovation that I think is quite remarkable.
I thought a bit about what I might suggest as a set of criteria that you might apply to whether or not the government should invest in housing, and I think you might want to think about these things. It should be uniquely federal. It should complement but not replicate what provinces ought to or are doing. It should be scalable. It has to respond to the real need and demand out there. You can't build a housing strategy around demonstration projects. It should create partnerships between government, community, and the private sector.
Above all, and I think this may be a real departure for the co-op and non-profit housing sector, is that we want to argue that the investment that the government makes in housing should be returned to the government over time. That's how we're going to use government capital to leverage that investment and attract private and community capital to the challenge of building affordable housing.
We think those solutions are available now. If you want to think of it this way, there are five major drivers to address if you want to have an impact on housing affordability. There are capital costs; that's the upfront equity that developers invest if they think they can make a 15% to 20% return after they've evaluated the risk of a particular development. There are financing costs, the long-term debt that's required to amortize the initial cost of building that housing. There's land, and in Vancouver that can be up to 40% of the cost of any new development. Then there are construction costs, and included in those costs, GST or HST and other levies. Finally, there is the cost of operating that housing over time.
The basic metric that I think you should bring to bear on this is that in order for a housing development to be truly affordable to people across the kinds of income cohorts that we're talking about, 40% of the equity in that housing either has to be given or lent to it over a very long period of time at a very low cost.
Of those factors, which are ripe for federal impact? I think there are two areas of low-hanging fruit here. One is land. Everyone talks about transferring federal surplus land into housing and no one ever does it, but in a community land trust, the transfer of federal surplus land for housing development would immediately reduce by 20% to 40%, depending on the market, the cost of developing that housing. And if it were vested in a community land trust, it would keep it affordable in perpetuity.
As for construction costs, I mentioned our Vancouver land trust development. By the time we're ready to rent up, we will have paid the federal government $3.6 million in GST. To put that in context, the cost of that debt is about $57,000 a year for every million dollars being paid in GST.
Access to upfront risk capital—long-term, patient, low-cost capital—those are the kinds of solutions that we think could be delivered. Say, you were ready to invest in short- and long-term equity funds, and a financing fund that would mature at around $2 billion a year, which coincidentally is what CMHC is now spending on ongoing federal subsidies for housing that has already been built. At maturity, a short-term equity fund pitched around the $2-billion mark would provide us with 40,000 to 50,000 affordable rental units a year, which is enough to address the estimated supply needs.
It's important that this asset be vested in a community land trust so that it would remain non-profit and affordable over time, something The Globe and Mail in its article yesterday called a speculation-free zone, which I think is a perfect way to describe the return on the investment to government in making that kind of housing strategy central to its focus.
I would welcome the opportunity to speak in more detail about this with you, but I think the opportunity exists here through financing mechanisms that are right now on the table to create a legacy for federal involvement in housing that's affordable across a wide demographic in perpetuity.
I want to thank you for your time today.
